April 20, 2015
Dealership Employees, Payrolls Top Pre-Recession Levels
Dealerships added to their employee count for the fifth year in a row last year, causing the average store's payroll to rise sharply above its prerecession level, reports Automotive News. The average new-car dealership employed 64 people in 2014, up from 57 in 2013 and a steady 53 in 2005-08. That lifted the average dealership's payroll to $3.6 million in 2014, up 5.9 percent from 2013 and 38 percent from 2005. Those are among the findings of NADA Data, the National Automobile Dealers Association's annual report on dealership sales and financial trends, released this month. Dealers paid one of the highest wages for any retail trade in 2014, the report said, an average of $55,000 per employee. Total payroll for all dealerships was $58.11 billion. But despite bigger payrolls and total expenses that rose 4.7 percent at the average dealership, increased new- and used-vehicle sales, as well as additional service business, helped keep net pretax profit margins – net pretax profits as a percent of sales – at 2.2 percent for the third straight year, the report said. For more on NADA’s latest data regarding dealership employment and profits, click here.
BMW Recalls More than 91,000 MIni Coopers Over Air-Bag Sensor
BMW of North America will recall 91,800 Mini Coopers because of a faulty sensor that might not trigger the front-passenger air bag during a crash, the National Highway Traffic Safety Administration (NHTSA) said Saturday. According to CNN, the agency said the sensor in a detection mat might not recognize there is a passenger in the front seat and the air bag wouldn't deploy during an accident. The affected models are 2005-2006 Mini Cooper and Cooper S vehicles manufactured between January 5, 2005, and November 28, 2006, and 2005-2008 Mini Cooper convertible and Cooper S convertibles manufactured between January 5, 2005 and July 31, 2008. BMW will replace the detection mat for free, the agency said. The recall is expected to begin May 1. Owners may contact Mini customer service at 1-866-825-1525. In a report BMW sent to the federal agency, the automaker said it estimated 10 percent of vehicles have the defective sensor mat. The company wrote it had received one report of an injury possibly connected with the defect. For CNN’s coverage of BMW’s recall of certain Mini Cooper models, click here.
FCA Puts the Squeeze on Dealer Profits
Fiat Chrysler is squeezing U.S. dealerships' profits by increasing vehicle invoice prices – but not the corresponding sticker prices. According to Automotive News, dealers now will pay 1 percent more for the Chrysler, Dodge, Jeep, and Ram vehicles they sell, or $300 on a vehicle with a $30,000 invoice. The increase is part of a larger effort by FCA US to boost profits. The automaker's corporate profit margin is half that of General Motors and one-third that of Ford Motor Co., says an analyst. The National FCA Dealer Council was informed this month via a conference call from Reid Bigland, FCA US' head of sales. Bigland said the price increase was effective immediately, according to people on the call. Notably, both Fiat and Alfa Romeo brand vehicles were exempted from the pricing move. The narrower spread between the invoice and sticker prices does not mean that dealers' profit potential is evaporating. That's because factory payments to dealers such as dealer holdback, dealer cash and cash incentives for achieving sales goals significantly reduce the true cost of the vehicle to the dealer, boosting profits. For more on FCA’s strategy to increase vehicle invoice prices, click here.
3D Printers Offer New Dimension in Manufacturing
Developments in 3D printing technology are revealing significant opportunities for automakers to cut costs and time while having more freedom in design, reports WardsAuto. From fabricating entire structures to specific parts, 3D printing can create most components of an innovative automobile and in the future could build an entire car. Later this year, Phoenix-based Local Motors is preparing to release the design of a highway-ready, 3D printed vehicle, Chief Financial Officer Jean Paul Capin tells WardsAuto. He adds it likely will be electric and include four seats. This follows the company’s 3D printing of another vehicle, the Strati. “The Strati is more proof of concept,” Capin says. ‟It doesn’t mean we can’t bring it to market, but it would be brought to market as a low-speed electric vehicle. The applications are multiple – it could be a fleet vehicle, such as in a car-sharing program.” Local Motors is working to obtain government certification for the Strati by next year, he says. Local Motors uses a fused deposition modeling process to print the structure of vehicles with an innovative feed system using pellets of material instead of filament. Find out more about how 3D printing is changing auto manufacturing here.
Millennials Embrace Cars, Defying Predictions of Sales Implosion
In recent years, it has become widely accepted that millennials don’t like cars. Turns out the doomsayers may be wrong. Millennials – also known as Generation Y – accounted for 27 percent of new car sales in the U.S. last year, up from 18 percent in 2010, according to J.D. Power & Associates. According to BloombergBusiness, they’ve zoomed past Gen X to become the second-largest group of new car buyers after their boomer parents. Millennials are starting to find jobs and relocating to the suburbs and smaller cities, where public transport is spotty. Millennial car buyers are emerging at a pivotal moment for the industry. Boomers’ share of new auto purchases peaked in 2010 and will only go down from here, according to John Humphrey, senior vice president of automotive operations at J.D. Power. The employment rate for 25- to 34-year-olds held at 76.8 percent in March from the month before, the highest level since November 2008, according to Labor Department data. After lackluster growth throughout most of the recovery, wages are also starting to pick up for millennials. Find out more about millennial car buying trends at AIADA’s Auto Summit next month, featuring Gen Y Guy® Jason Dorsey. Read the rest of BloombergBusiness’s coverage of millennial car buying habits here.
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