A Publication of the Illinois Automobile Dealers Association How to Avoid Vol. 20 No. 3 Swimming with the Sharks CONTENTS Vol. 20 No. 3 Illinois Automobile Dealers Association 300 West Edwards Street Springfield, Illinois 62704 T 217.753.0220 F 217.753.3424 www.IllinoisDealers.com 6 IADA ChairmanвЂ™s Letter 9 You CanвЂ™t Cut Your Way to Success 12 2012 IADA-CATA State Convention 19 How to Avoid Swimming with the Sharks The ILLINOIS AUTOMOBILE DEALER NEWS is published by Media Communications Group, Inc. and is the official publication of the Illinois Automobile Dealers Association. The ILLINOIS AUTOMOBILE DEALER NEWS is published 4 times per year. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of ILLINOIS AUTOMOBILE DEALER NEWS, or its publisher Media Communications Group, Inc. Any legal advice should be regarded as general information. It is strongly recommended that one contact an attorney for counsel regarding specific circumstances. Likewise, the appearance of advertisers does not constitute an endorsement of the products or services featured by Media Communications Group, Inc. ASSURANCE TAX ADVISORY A NEW KIND OF FIRM CliftonLarsonAllen offers something different: exceptional capabilities, deep industry experience, and singular client serviceвЂ”all for dealerships like yours. 4 ILLINOIS AUTOMOBILE DEALER NEWS www.illinoisdealers.com Desmond Roberts Dealer Principal / Owner Advantage Chevrolet, Bolingbrook and Hodgkins, IL Get the Most of Every Customer Interaction At Advantage Chevrolet, ADPвЂ™s Dealer Management System helps Desmond RobertsвЂ™ team create a seamless customer experience throughout the dealership. ADPвЂ™s technology helps us get the most out of every customer interaction, in each department. And our customers have a better experience because of it. ADP also assists me with managing my overall business by helping me better control expenses. I am extremely happy with the service that ADP provides. Desmond Roberts To learn more about ADPвЂ™s end-to-end solutions, visit adpdealerservices.com /advantagechevrolet The ADP logo is a registered trademark of ADP, Inc. / В©2011 ADP Dealer Services, Inc. / 888.424.6342 / adpdealerservices.com Scan with your QR code reader on your mobile device to learn more. IADACHAIRMANвЂ™SLetter | BY JIM LOMBARDI Wishing Each of You a Profitable and Prosperous 2012 O n behalf of the IADA Board of Directors and staff I would like to dedicate this edition of our Illinois Automobile Dealer News to all of the dealer members and sponsors who made our 2012 IADA-CATA State Convention so successful. We had a wonderful group of attendees participate in the March 24-28 convention held at the Harbor beach Marriott Resort & Spa, Ft. Lauderdale FL. The convention agenda included a wonderful talk by NADA Chairman, Bill Underriner of Billings, Montana, several dealer board meetings, plenty of opportunities for dealers to socialize and discuss industry information, all topped off with an Oceanview Lauderdale Latino Style Party. I would like to thank all of our dealer members for your support of IADA throughout the year and I encourage you to consider joining us at next yearвЂ™s convention for informative business sessions, fun-filled activities and outstanding social functions. On behalf of the IADA Board of Directors and staff, we wish each of you a profitable and prosperous 2012. пЃ® Sincerely, Jim Lombardi Lombardi Chevrolet Buick IADA Chairman We have used many of the following pages to showcase photos of the Convention. I would like to offer our most sincere thanks to our sponsors who helped make this event possible. Without their generous ongoing support, the event would not be possible. 2012 Officers Chairman Mr. Jim Lombardi / 815.476.2333 Lombardi Chevrolet Buick 901 E. Baltimore St., Wilmington, IL 60481 6 Secretary Mr. Dave Taylor / 815.935.7900 Taylor Chrysler Dodge, Inc. 1497 N. Route 50, Bourbonnais, IL 60914 Vice Chairman Mr. Gary Knight / 217.443.6803 Carmack Car Capitol 3724 N. Vermilion, Danville, IL 61832 President Peter J. Sander / 217.753.0220 Illinois Automobile Dealers Association 300 W. Edwards, P.O. Box 3045, Springfield, IL 62708 Treasurer Mr. Mike Mangold / 309.467.2344 Mangold Ford Mercury, Inc. 1100 West Center St., Eureka, IL 61530 Illinois Automobile Dealers Association ILLINOIS AUTOMOBILE DEALER NEWS 300 West Edwards Street, Springfield, Illinois 62708 T 217.753.0220 вЂў F 217.753.3424 www.IllinoisDealers.com www.illinoisdealers.com Nobody Does It Better t$POWFSUNPSFQSPTQFDUTUPDVTUPNFST t3FUBJOIJHIFSHSPTTFT t&OIBODFZPVSDVTUPNFSTFYQFSJFODF t%FWFMPQBEEJUJPOBMQSPГ¶UDFOUFST Increasing your profits is what we do best! Our Total Lot Management System does this using Proprietary Processes, Certified Warranties, Sales Development Training and an exclusive Service Lane Program, all targeted at delivering your customers a better car buying experience and providing you with higher grosses. Call Today and Let Us Show You the BEST Program On the Planet! 877-644-4IAG (4424) www.ILAutoGroup.com Let our Super Hero Associates show you what 100 Illinois Dealers are doing to increase their business! You CanвЂ™t Cut Your Way to Success BY KURT A. KARLSON, PRESIDENT, ILLINOIS AUTO GROUP Cost cutting is often the strategy chosen for a dealership that is trying to weather economic downturns or higher costs required from manufacturers. W hile NADA tells car dealers to upgrade their facilities to increase profits and bonuses, common business sense indicates that spending money on the facility means that costs may have to be cut in other areas of the business. Some businesses make cuts to bolster their profit margins or retain market share, while other businesses seek to remain economically viable. It is always prudent to analyze spending. But too often dealerships cut costs haphazardly or across the board, often damaging a companyвЂ™s long-term foun- dation. There is no silver bullet to controlling business costs, and paradoxically, sometimes to save money or improve profits you will need to spend money. The key to determining if a cost can be justified is to ask a simple question. Will this expenditure return more money than I have invested? If you can say yes to this question, than it is a wise investment and should not be part of your cutbacks. When considering the return on your investment donвЂ™t forget to factor in the пЃ® way to success вЂ” continued on page 10 9 пЃ® way to success вЂ” continued added value to your customers, such as warranties, service and overall satisfaction. Those details alone will add to your bottom line down the road. Contrary to common perception, customers will not go almost anywhere just to save a buck. In a 4-year study conducted by BIGresearch, most customers will put service ahead of price, if you give them a chance. Customers see price as only one component of the bigger picture of вЂњvalueвЂќ that includes the service, information and follow-up they receive. Increased access to the internet and inventory programs (such as Vauto) have leveled the playing field on automobile pricing. With price out of the picture, the consumer will look to other components that are perceived as value. WouldnвЂ™t you close a higher percentage of prospects if you presented a greater value in aesthetics or warranties to the consumer? Would it be wise to invest in your inventory? Businesses that spend money intelligently make more profits. Considering that used cars produce the highest profitability to a dealership, cutting costs on the appearance and warranties of that segment of your business is not an option. According to Kelley Blue Book, aesthetics is one of the top considerations when a person buys a car. Consumers want and deserve the same con- sideration on a used car that they receive with a new car. Again, will these expenditures return more money than I have invested? A prospective buyer is going to appreciate and will pay more for a car that looks good, one thatвЂ™s shiny and clean on the outside and one that smells good and looks good on the inside. Psychologically, a used car in good condition is extremely important to the consumersвЂ™ perception of value and reflective of the overall care your dealership provides. When a warranty is added to an already great appearance, the consumer is going to get the best bang for their buck, even if they paid more initially. Cutting costs can be beneficial. However, before you вЂњslash and burn,вЂќ consider carefully if cutting a cost will decrease the value your customers perceive and the profit margin the dealership receives from that service. DonвЂ™t compromise on product quality to save money. In the long run this will damage consumer confidence and may actually constrict revenue and growth. пЃ® Kurt A. Karlson, President, started Illinois Auto Group (IAG) in 2006; it currently consists of two divisions located in the Chicago metropolitan and Central Illinois areas. The company provides a premium interior/exterior reconditioning service called the вЂњTotal Lot Management SystemвЂќ (TLM). The service turns used car inventories for new car dealers into a competitive advantage with an award-winning, nationally proven program. This is done by using Proprietary Processes, Certifi ed Warranties, Sales Development Training and an exclusive Service Lane Program, all targeted at delivering the consumer a better car buying experience. IAG promises their dealers that they will sell more cars, sell them faster and for more money besides creating additional revenue centers! For more information, call 1-877-6444IAG (4424) or visit the web at www.IlAutoGroup.com. вЂњMy focus is running my dealershipвЂ”not worrying if my business is protected or how to generate income in my п¬Ѓnance department. Zurich lets me do that.вЂќ One insurance company for your business insurance and F&I product needs In 2011, more than 1,300 dealerships purchased both business insurance and F&I products from Zurich. Products such as our UnicoverВ® policy, which packages most of the coverages needed by dealerships into one policy. Or our Streamlined Selling SystemВ®, which can help you drive increased F&I proп¬Ѓt. One company for all your needs, backed by 90 years insuring dealerships. Call Jeff Dian, Regional Sales Manager, at 630-215-3892 or visit www.zurichna.com/SDA1 for more information. Visit FandIResourceCenter.com to register for our complimentary on-demand webinar вЂ“ вЂњSix Principles of Success in the New EconomyвЂќ Insurance coverages and non-insurance products and services are underwritten and provided by individual member companies of Zurich in North America, including Universal Underwriters Insurance Company and Universal Underwriters Service Corporation. Certain coverages, products and services are not available in all states. В©2012 Zurich American Insurance Company 10 ILLINOIS AUTOMOBILE DEALER NEWS www.illinoisdealers.com the next level is here are you ready? track more bring back more close more with The Higher Gear Group No ContractsвЂ” showroom, customer relationship & lead management system Our system drives a superior level of control and accountability right to the very core of your dealershipвЂ™s sales, prospecting and trade-cycle management process. And the best news: your employees will almost immediately see how it can help them become even more successfulвЂ”what are you waiting for? Call for a FREE consultation and demonstration The Higher Gear Group Schaumburg, IL 60195 tel 847.843.6800 sales@highergear.com www.highergear.com WE WILL EARN YOUR TRUST AND BUSINESSвЂ”EVERY MONTH! - Robert C. Gruen, President Showroom | Customer Relationship | Lead Management System 11 2012 IADA-CATA Dealer Conference & Retreat Harbor beach Marriott Resort & Spa Ft. Lauderdale Florida | March 24-28, 2012 Thank you IADA dea 2012 IADA-C 12 ILLINOIS AUTOMOBILE DEALER NEWS www.illinoisdealers.com aler members and sponsors for making our CATA State Convention so successful. 13 Think changing your DMS vendor is hard? Our 10-step informational guide makes switching your DMS easy Visit automate.com to download our FREE eBooks to help guide you through the DMS decision making and data conversion process @AutoMateDMS (877) 340 вЂ“ 2677 14 ILLINOIS AUTOMOBILE DEALER NEWS A Dealership Management System Designed By Car People, For Car Peopleв„ў www.illinoisdealers.com Celebrating 17 Years of Quality Service 2QH0LOOLRQ %OXH6WHHO3URWHFWLRQ3ODQV We Did It!! One M One Million illion Blue Blue Steel Steel Protection Protection P Plans!! lans!! The Little Engine That Could has been one of my long time favorite books. ItвЂ™s the American Dream we can all believe in. Recently, ForeSight processed its one millionth Blue Steel Protection Plan for dealer partners-ALL in the heart of Texas! How is it possible that a small company can accomplish such an enormous feat? ThereвЂ™s a simple explanation for why our business has doubled in the last four years without a single sales person in the field. Contact one of our dealer partners to solve the mystery! Empowering E mpowering Dealerships! Dealerships! Empowering E i your dealership d l hi by b removing i the h middle man. Currently a good portion of your money is going to two places; YOUR BANK and YOUR MIDDLEMANвЂ™s POCKET, ask us how we can remove one of those places from the equation. Next Stop... Next Stop... One One Million Million FPP!! FPP!! Our NEW GOAL O AL is to process one million ll ForeSight F S h Protection Plans (FPP). Oh, but thatвЂ™s impossible, it will take forever, and thatвЂ™s not realistic. I mean... I think I can, I think I can, I think I can, I think I can... I Know We Can!! .HY`=\JLRV]PJO7YLZPKLU[ NHY`]'MVYLZPNO[ZLY]PJLZNYV\WJVT 3948 Legacy Drive, Suite 106-382, Plano, TX 75023 вЂў foresightservicesgroup.com вЂў bluesteelprotection.com вЂў 972.542.1890 2012 IADA-CATA Dealer Conference & Retreat 16 ILLINOIS AUTOMOBILE DEALER NEWS www.illinoisdealers.com Make Plans to Attend Next YearвЂ™s Event! 17 ONE Call, ONE Company Your Federated representative, along with a dedicated support team, has access to a wide variety of products and services. Discover the value of being able to access all of these servicesвЂ”with only one callвЂ”using one company. Visit www.federatedinsurance.com to find a representative near you. ItвЂ™s Our Business to Protect Yours В® )HGHUDWHG0XWXDO,QVXUDQFH&RPSDQ\В‡)HGHUDWHG6HUYLFH,QVXUDQFH&RPSDQ\ В‡)HGHUDWHG/LIH,QVXUDQFH&RPSDQ\ +RPH2IILFH(DVW3DUN6TXDUHВ‡2ZDWRQQD0LQQHVRWDВ‡3KRQHВ‡ZZZIHGHUDWHGLQVXUDQFHFRP *Federated Service Company is not licensed in the states of NH, NJ, RI, and VT. В© &RS\ULJKW В‡ )HGHUDWHG 0XWXDO ,QVXUDQFH &RPSDQ\ How to Avoid Swimming with the Sharks BY GARY VUCEKOVICH, PRESIDENT, FORESIGHT SERVICES GROUP I recently earned another вЂњhonorary degreeвЂќ from the school of hard knocks. Acquiring this B.S. (not Bachelor of Science), required using a lot of big words like Insolvency, Co-mingling of Funds, and Liquidator, who it turns out is sort of like the Terminator. It started with a letter arriving at my office at FSG from the Third Judicial District Court in Utah: WESTERN INSURANCE COMPANY NOTICE OF ISSUANCE OF LIQUIDATION ORDER. It was quite a contrast to my first meeting with Western Insurance Company (WIC), less than five years before to discuss a possible business relationship. At the time, they sported an impressive A.M. Best rating of A- (Excellent). The relationship involved FSG insuring mechanical breakdown service contracts for auto dealers, and the first thing I did was to insist that all monies flow directly from the dealers to FSG. Fronting fees would be remitted to WIC and the premium would go straight into a segregated trust account held by a dealer-owned reinsurance company, one with its own Tax ID and managed by a non-affiliated bank. We hammered out the agreement. Four years later WIC was declared insolvent. By then we had set up on behalf of our dealer-clients 17 separate reinsurance custodial trust accounts totaling millions of dollars. What would be the fate of these accounts? Might they be added to WICвЂ™s general assets? Would our clients be made to circle around with other claimants like sharks, waiting for the almighty Liquidator to dole out the next morsel? пЃ® swimming with sharks вЂ” continued on page 20 19 пЃ® swimming with sharks вЂ” continued It was December 29, 2011 when the decision came down. The LiquidatorвЂ™s investigation had found that our clientsвЂ™ assets were indeed in properly segregated accounts which WIC did not control but could only seek distributions from. As such they would not be considered part of the general assets of WICвЂ™s estate. The court agreed and released the funds. Cue the scene at the end of one of those movies where everyone comes out of the courtroom cheering. You may even be thinking: вЂњGary, you came out unscathed.вЂќ Read on. Just before leaving that initial meeting, WIC asked for a good faith security deposit of $100,000. Fair enough, but I insisted the money be placed in a CD earning interest. Maybe a red flag should have gone up when they responded by offering me a CD with a great interest rate from Western Thrift & Loan, a bank associated with, you guessed it, WIC! But hindsight is always 20/20. And I certainly donвЂ™t recall giving WIC permission to cash the CD and deposit the money in their own account in 2010, which apparently is exactly what they did. Word has it the individual responsible is now retired in Hawaii. But I still feel fortunate. There was another company in the WIC liquidation that operates similarly to FSG. They did everything above board and proper, but had premiums sent directly to WIC. Ouch! Predicting Lender Acceptance is Like Predicting the Weather You Could Be Wrong Secure customer financing with confidence by submitting a single contract to several lenders at one time вЂ“ the LAW В® 553 Retail Installment Sale Contract. Retro Participation Agreement or DealerOwned Reinsurance Company? For most dealers itвЂ™s a no-brainer. Retro Participation Agreements began as a way for an insurance company to expand its market share while allowing dealers to share in back-end profits. But today there is simply a better wealth building strategy available, a Dealer-Owned Reinsurance Company. In fact, Retro Agreements have outlasted their value for all but the smallest of dealers. One of the most glaring problems of Retro Agreements is the co-mingling of premiums and reserves to pay future claims. A Retro Agreement will not prevent a Liquidator from grabbing funds and giving them out at pennies on the dollar if the Administrator or insurance company is declared insolvent. In the case of WIC, their undoing had nothing to do with the auto industry. That was the most profitable part of their business. The problem was Surety Bonds they were issuing for construction projects in states like Nevada and California. Who has time to audit every aspect of the insurance companies they do business with? That was what ratings were supposed to be for! Fifteen years ago, I entered into my first Retro Agreement. The $21,000 in back-end profits sure looked like a fine number, but it soon evaporated into the вЂњterms and conditionsвЂќ of the agreement. Stipulations such as minimum production, loss ratios and lapse in production often hold dealers captive or open loopholes that swallow their profits. It was an important lesson, and five years ago I got to apply it by insisting on full dealer-owned reinsurance in our relationship with WIC. I hate to think what would have happened if we had settled for a Retro Agreement. It shows that вЂњhonorary degrees,вЂќ while expensive, can turn out to be worth every penny. пЃ® Gary Vucekovich is President of ForeSight Services Group. ForeSight empowers dealerships and auto groups to capture more profi t and build long term wealth by reducing complexity and removing middlemen. To learn more about how ForeSight can help you, contact them at 972-5421890, E-mail: garyvucekovich@yahoo.com or visit their website at www. foresightservicesgroup.com. For more information, contact your local Document Consultant or call 800.344.0996. 20 ILLINOIS AUTOMOBILE DEALER NEWS www.illinoisdealers.com REACH YOUR TARGET AUDIENCE AFFORDABLY Find out how targeted advertising can produce real, measurable results for your organization. ADVERTISE AND GET RESULTS Don F. Brown, Advertising Sales 801-746-4003 don@spectruminkpublishing.com 21 Accounting New/Used Car Advertising Woodward & Associates, Inc. ............................................ Page 2 CliftonLarsonAllen ............................................................. Page 4 WIPFLi.............................................................................. Page 14 AutoTrader.com ................................................................ Page 23 Banking/Finance Harris N.A. ......................................................................... Page 7 Customer Relationship Management The Higher Gear Group ....................................................Page 11 Dealership Buy/Sells Woodward & Associates, Inc. ............................................ Page 2 Dealership Compliance Parts Department Services/Equipment AutoSoft ............................................................................Page 11 Reconditioning Services/Lot Management Illinois Auto Group .............................................................. Page 8 Telecommunications Call One ........................................................................... Page 21 Transportation/Internet ShipCarsNow ................................................................... Page 22 Reynolds & Reynolds ....................................................... Page 20 Dealer Management Computer Systems AutoSoft ............................................................................Page 11 Dealer Management Systems Auto/Mate Dealership Systems ....................................... Page 14 Dealership Marketing & Sales Solutions ADP .................................................................................... Page 5 F&I Training/Products Foresight Services Group ................................................ Page 15 Insurance Federated Insurance Companies .................................... Page 18 Protective ........................................................................... Page 3 Zurich American Insurance Co. ....................................... Page 10 Internet Call One ........................................................................... Page 21 RAIL DELIVERS OVER 70% OF NEW CARS IN AMERICA. WE TREAT YOUR USED CARS LIKE NEW. SAFE, RELIABLE, AFFORDABLE, AND EASY AUTO TRANSPORT. Visit us at NADA, Booth #3072 for a chance to win up to 50% in auto transport savings. www.shipcarsnow.com 866-207-3360 22 ILLINOIS AUTOMOBILE DEALER NEWS A Union Pacific Company www.illinoisdealers.com Illinois Automobile Dealers Association 300 West Edwards Street Springfield, Illinois 62704 PRSRT STD U.S. POSTAGE PAID SALT LAKE CITY, UT PERMIT NO. 508 THIS MAGAZINE IS DESIGNED AND PUBLISHED BY MEDIA COMMUNICATIONS GROUP 801.746.4003 Visit our re-designed www.IllinoisDealers.com For all your online membership needs Log on to the new member only area using your unique вЂњdealer IDвЂќ вЂ“ the IADA Membership ID printed on your annual membership statement. Please call the IADA office if you need assistance. The new design provides: вЂў вЂў вЂў вЂў вЂў вЂў вЂў вЂў вЂў вЂў вЂў вЂў A simplified new look sporting a clean and crisp multi-column presentation making navigation much easier New VB.NET templates allowing much quicker downloads for members A member login feature extended to employees of dealerships Current legislative issues Member directory (dealership information may be updated online) Frequent dealer industry questions IADA member services Dealer members in the news The easiest way to contact your elected officials Important industry links Easy way to contact IADA staff And many more functions www.IllinoisDealers.com is an informational community site for the automotive industry of Illinois.