Biggest No-Brainer in the HIST STORY of the Automotive Industry! - - PowerPoint PPT Presentation

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Oct 11, 2022 332 likes •502 views

Biggest No-Brainer in the HIST STORY of the Automotive Industry! Frank is a principal at OConnor & Drew, P.C., a regional accounting firm that services approximately 300 automobile dealers. He has been the Director of Internal

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Biggest No-Brainer in the HIST STORY of the Automotive Industry!

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 Frank is a principal at O’Connor & Drew, P.C., a regional accounting firm that

services approximately 300 automobile dealers.

 He has been the Director of Internal Audit and Fraud Investigation at O’Connor

and Drew, P.C. for the past 13 years and has serviced auto dealers for over 18 years.

 Frank has successfully calculated, submitted, and obtained warranty rate increases

for hundreds of dealerships in a variety of states across the country including Vermont, Massachusetts and New Hampshire.

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 First passed in the state of Florida in 2008  The Alliance of Auto Manufacturers filed two lawsuits:

Connecticut – Dismissed by trial court in 2014
Florida – Alliance dropped suit

 Approximately 38 states have favorable laws on the

books

 Approximately 24 state laws include the 100 repair order

analysis

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 Signed into law several years ago  Strengthened language on warranty parts reimbursement

law

 Explicitly defines method of calculation (100 RO

analysis)

 Allows for two submissions per calendar year  Hundreds of dealers have been approved in various

states including Vermont

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1. Minimal bottom line impact
2. Manufacturer will seek retribution
3. MSRP is retail
4. Manufacturers refuse

approval

5. Waiting is not costly

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 Results in thousands of additional gross per month  Will vary based on the following:

Volume of warranty parts sales
Approved retail rate

 Maximizing rate by data analytics

Avoid landmines

 Time-sensitive nature of submission

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A quick look inside the numbers:

Sales Gross Profit Cost Potential Additional Income

Warranty Sales Currently @ 40% Mark-up Warranty Cost Dealers @ 60% Mark-up Dealers @ 75% Mark-up Dealers @ 90% Mark-up $250,000 $71,429 $178,571 $35,714 $62,500 $89,285 $400,000 $114,286 $285,714 $57,142 $100,000 $142,857 $500,000 $142,857 $357,143 $71,429 $125,000 $178,571 $800,000 $228,571 $571,429 $114,286 $200,000 $285,715

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Tactics of Manufacturers for Submission:

 Inclusion of Non-Warranty Parts in Analysis

BMW – Tires
Ford – Body Shop Repairs
Ford and Chrysler – Brakes and Wipers
Chrysler - Maintenance Services

 Requiring customer RO copy:

Hyundai

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No evidence of direct retribution

Tactics of Manufacturers after Approval:

 Recoupment – Nissan & Infiniti  Failure to pay on all parts:

BMW, Hyundai, Mazda, and Nissan

 GM – Option A versus Option C

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 Manufacturers have found ways to manipulate the law to

their benefit

 Language the law should include:

100 RO and 60 day analysis
Specify parts and repairs to be excluded:

 Maintenance services  Tires  Government fleet and body shop repairs  Accessories

Avoid the “reasonableness clause”
Include a non-recoupment clause

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 Don’t be deceived: Manufacturer’s Suggested Retail Price

is still a rate controlled by the Manufacturer

 MSRP is commonly thought of as 67% Mark-Up, however

Nissan: 49% - 55%
Toyota: 56% - 59%
Audi: 56% - 60%
Volkswagen: 56% - 60%
Mercedes*:

55% - 60% *Pays MSRP on newer models

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Approv

ved M

d Manufactu ture rers Manufactu ture rers w withou

ut A

t Approv

vals

ls

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When you fail to submit for a warranty reimbursement you are losing:

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 Obtain downloaded report (in Excel) from your operating system

containing required pertinent information

 Run advanced data analytical software to determine your ideal range of

repair orders which will provide the highest mark-up rate

 Analyze and select the qualified parts  Trace the selection to the actual repair orders to account for discounts, non-

factory parts, aftermarket warranties, goodwill adjustments, etc.

 Calculate the mark-up percentage for the selected sample  Prepare package for submission to the factory

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 The Vermont law permits a dealer to submit for a parts rate

increase twice per calendar year

 Very few dealers take advantage of this stipulation  Beware of the “Reasonableness

Clause”

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