As Automakers Move to Eliminate Franchised Car Dealers, the “No Jobs” Debate Continues over the future of the US Economy

The US-based National Automobile Dealers Association says employment at franchised new-car dealerships topped 1 million people last year after falling during the Great Recession in 2009. These businesses employed 1,008,800 workers in 2013, a n increase of 3.4% from the previous year in a recovering US light vehicle market that saw sales increase 8% to 15.6 million units.

Not coincidentally, the survey comes as automakers are redoubling efforts to sell vehicles online as a way around traditional middlemen, namely NADA members, which of course raises the end price of a new vehicle to buyers.

As jut one example, more than a third of GM’s 4,300 U.S. dealers are enrolling in “Shop-Click-Drive,” an online internet-shopping tool that could eventually displace traditional auto salespeople. It lets consumers choose a specific vehicle, get estimated pricing, review available incentives, learn about and choose financing and insurance products, get information about their trade-in and apply for financing, all online.

Leaving aside the purely economic ideology, and patently falsely-named ‘free market’ theory, oft proposed by tenured – as in a protected job for life for academic types – this raises, yet again, critical social and public policy issues of where, oh where, is the US economy going if all jobs are computerized? Computers don’t by cars. Worse, computers are made offshore.

New-car dealerships employ an average of 57 people, and have an average payroll of $3 million (2013), up 3% – another indicator of how frail the US recovery – if you can call it a recovery – is. Total payroll for all new-car dealerships was $53.7 billion last year.
“The economic recovery is continuing, and we expect a stronger housing market, improving job prospects and continued low interest rates for auto loans to boost sales this year,” claimed NADA Chief Economist Steven Szakaly.

New-car dealerships on average had a net, pretax profit of 2.2% in 2013—unchanged from the previous year even though the car market came roaring back. As a percentage of total sales, the 2.2% figure includes sales in the new- and used-vehicle departments and service and parts sales. New-car dealerships on average had a net, pretax profit of $923,248, up 10.5% in 2013. Nonetheless, there are more profits at three times the job creation rate. Total revenue at new-car dealerships reached $730 billion in 2013, an increase of 8.8%.

“Profitability at new-car dealerships remained flat in 2013,” Szakaly claimed. “Fierce price competition—whether from online research, a network of competing franchised dealers or compelling new vehicles—continues to dominate an industry with slim retailing margins.”

Gross margins on new-car and light-truck sales continued on a downward path in 2013—falling to 3.8% compared to the previous year.

Sales in the service, parts and body shop at new-car dealerships increased 4.8% 2013. Warranty work performed by new-car dealers totaled $14.4 billion in service and parts last year but NADA did not break out the increase, virtually all of which is from fixing defective or safety related recalls on vehicle

Yet another aspect of the jobs versus money conundrums appears in the data. New-car dealers spent $7.6 billion on advertising in 2013, up 6.1%. Dealerships on average spent 33% of their advertising dollars on Internet ads, up from 26.5 % the previous year. Television advertising accounted for 21% of dealership spending, a slight increase.

About Ken Zino

Ken Zino is an auto industry veteran with global experience in print, broadcast and electronic media. He has auto testing, marketing, public relations and communications expertise garnered while working in Asia, Europe and the U.S.
This entry was posted in news analysis, sales and tagged , , , . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *