The National Automobile Dealers’ Association has commissioned a study to examine the return on investment of factory-mandated facility image programs.
The study, conducted by former McKinsey and Company partner Glenn Mercer, will include confidential interviews with industry experts, dealers, factory representatives, attorneys, CPAs and brokers who are experienced in dealer finances and valuations, according to the NADA.
“Its findings will be of use to dealers and automakers by moving the debate away from opinion and assertion toward objective facts and data,” said NADA chairman Stephen W. Wade.
Speaking to the Automotive Press Association in Detroit on Thursday, Wade said dealers hit hard by the recession need less financial pressure, not more. Now in the recovering economy, dealers being pressured to upgrade facilities have to know the investment is worth it.
“Each year dealers collectively invest billions of dollars in facility upgrades, much of it mandated by the auto manufacturers,” he told the crowd.
“These costs have a significant impact on dealer balance sheets, in many cases severely straining them and in some cases even persuading a dealer to leave the business rather than commit such large sums. Surprisingly, little hard evidence exists as to the ROI – the return on investment – either to the automaker or to the dealer.”
He said the issue is generally absent of solid economic arguments such as, “Updated stores sell X more cars for every one million dollars invested, or “CSI scores soar when a facility is upgraded.”
As a result, the facility image decision is often based on subjective factors, such as opinions, pressure and personalities, which is no way to guide such spending.
The study should be completed by the end of this year.