If you have been reading my newsletters and emails then you know I totally believe we have to change the way we have always done this business.

I frequently rave about CarMax because more often than not they outsell everybody in whatever market they are located. And, they don’t do it the old fashioned way.

One of the things that sets them apart is they show reconditioning as a line item on the financial statement. For most of you that’s way over the top when it comes to making changes so I’m not even going to get into it. I know you don’t want to hear it.

Today’s subject is about some changes the industry needs to address as we move into the most competitive environment in the history of the automobile business.

In order to determine how much you and I agree or disagree please take this little informal survey. You don’t have to click anything. Just click it in your brain.

1. Has average gross profit per unit gone up or down in the last 5 years in your used car department?

2. Do you think used car average gross profit will be trending up or down nationwide over the next 5 years?

3. Is it becoming more challenging to keep your expenses in line?

4. What do you think will happen to your bottom line if average used car gross keeps coming down and you maintain the same used car volume?

5. If your grosses have come down, what role do you think the Internet is playing in the equation?

6. Do you think most dealers are using a pricing tool like vAuto?

7. If you could get more of the right inventory is it likely your volume would go up?

8. Do you often get outbid at the auctions by the likes of CarMax?

9. Do you think that if you had an advantage with the pricing from the service department to the used car department that you would be in a better position when it comes time to acquiring vehicles when appraising or buying at the auction?

10. Can you agree that more often than not volume has a greater overall impact on the bottom line than improving the average gross profit?

I’ve just used mental telepathy to conclude the following from your answers:

Expenses are going up, gross is going down and the only way to generate a substantial bottom line is to do volume? Did I get it right?

In order to do volume in used cars you need to have a "costing advantage." By "costing advantage," I mean what’s added to the car once you get it which includes packs and reconditioning. To have a costing average you have to re-think your packs (which usually gets down to pay plans) and most important what you charge the used car department from your shop.

If you review history you know that the reason dealers added packs and charged full retail from the service department to the used car department was because sales managers worked from cost up.

In the good old days sales managers had control over gross so you could nail them with high charges all you wanted. They still got the gross you needed and you could put the money from Parts, Service and Packs in your other pocket.

This is no longer true as your sales managers no longer have control over gross as they once did. That’s why dealers are more and more becoming one-price dealers and saying "no" when the customer shows up and wants a discount.

If you’ve already dropped your pants on the Internet with a price designed to get them to show up then you have nowhere else to go. So, without saying they are a one-price dealer, many dealers are taking a tougher stand as well as changing sales people’s pay plans to match their new found pricing and marketing.

I predict within due time more dealers will become more like CarMax and not pay sales people or managers on gross. Remember as we move more towards a once-price concept the skill and pay level of the "desk managers" will be much lower than today’s market.

You just got through agreeing with me that average gross will continue to come down. Then you have to agree that the only way you will win is to increase volume. The only way to increase volume is be able to acquire more cars. Am I repeating myself?

In order to acquire more cars (like CarMax) then you have to have a costing advantage when you go to the block or your front door. So, whichever dealers can figure a way to reduce the cost to the cars once they acquire them will win.

They will win because they have more of the right cars to sell and because they will have a pricing advantage over the competition. And, no doubt they will be pushing more volume through the shop.

I believe the reality is the overall shop profits will ultimately go up for these forward thinking dealers. As the shop profits go up they can sell their cars for even less gross due to the overall volume they are doing.

That last sentence may be a stretch but the rest of this is not. I have never been so sure of something in my life as what I just shared with you.

Another little side bar of this is if you have a cost advantage it only stands to reason you will trade for more cars. If you trade for more cars you will have more new car customers coming back to you for service after the sale.

As you may know the hours per RO for a customer pay ticket comes in at 1.7. The average hours per RO for a used car ticket is 4.0. I can tell you that nationwide service departments still don’t know who their best customer is. They say they do, but they don’t. Their actions in terms of how they treat the used car department speak louder than words. By and large most dealers/owners will not explain to the service departments whose name is on the sign.

So, what’s the conclusion of all this madness? There has to be a better, more efficient approach to the charges from the service department to the used car department. "Status Quo," needs to turn into "Status No."

I know a lot of really smart new car dealers and I know that somebody is going to figure it out. If you don’t, and you don’t do it soon, others will and when they do, you will find yourself wishing you had.

You can do it CarMax’s way, or you can do it your new way, but you can’t do it the old fashioned way. The pain of change or the pain of regret. You’re going to have one or the other and the cool thing is you get to pick. That’s all I’m gonna say, Tommy Gibbs

The All-Star baseball game was played on Tuesday night with the National League defeating the American League 8-0. For baseball it’s referred to as their mid-season break and it determines the home team advantage for the World Series. 

It’s sort of the same way for you. You’ve just passed the half way mark in the business year and I’m wondering how many of you and your team members have made the All-Star team? To determine if you’re an All-Star you have to certainly look at some numbers. So how are they? Parts and Service up? New Car sales up? How about total new gross?

And of course you know I’m going to ask you about your used car numbers. Are volume and gross up in used? Has your team jelled over the last 6 months? Are your key players showing good leadership and performing like All-Stars?

Here are 6 elements necessary to be an All-Star:

1. Hustle, Hustle Hustle-When I think of baseball and hustle I can’t help but think of Pete Rose. His nickname was "Charlie Hustle." As a player Pete was the epitome of the word hustle. That is the mindset you need to be successful and move your business to the next level.

You have to be determined to out-hustle the other guy, gal or business. The great thing about hustle is that it requires no God-given talent. It just requires that you want to do it. So maybe you’ve not been hustling as hard as you should. Let’s hustle a little harder. Let’s dive for some line drives. Get with it.

2. Have a Game Plan-Nothing happens without a strategic game plan. The plan has to be well thought out. A solid plan requires research, time and talking to others. Those around you see and know things you cannot possibly know. It will surprise you what you can learn from people you would normally discount as not being important or having much to offer.

Your plan should be constantly developing, growing, expanding. Adjustments are a part of the game. Those who can adjust to the changing conditions increase their chances of winning. Put the plan in place and be ready to make adjustments. Every one of those players in the All-Star Game took batting practice before the game. Part of your batting practice needs to be to look for ways to tweak your game plan.

3. Think Fast-Think fast and move fast should be your motto. Decisions and changes need to be well thought out. If you’re "up early and stay up late" you can make fast decisions that will bury your competition. In baseball, even if your team has weak areas, speed can overcome a lot. Think fast, be fast.

4. Increase Your Communication-Communication starts by listening and responding. It takes a combination of meetings, memos, emails, and phone calls to distribute information. The keys are updates and progress reports. The more information you share with your team the more progress you will see and the more your team will develop. 

The more the team develops the more wins you get. There’s a lot of communication going on in a baseball game; signs, signals and meetings on the mound. You can never communicate the game plan too much or too often.

5. Get Back to Empowerment– Years ago, automobile dealers took a page out of the airline book of customer satisfaction by allowing staff members to make on the spot decisions to satisfy customers. Our policy for years was if the customer asks then the answer is "Yes."

That’s not to say that you don’t need to have limits, but you must empower your people to "just handle it." Nine times out of ten you’re going to do it anyway, so let them handle it in the trenches. If you have talented players sometimes you have to turn them loose.

Talented base runners are often allowed to steal on their own. The coach lets them use their God-given talent. Yes, they get thrown out once in a while, but people have to make some mistakes in order to learn and get better.

6. Pick Up The Intensity-When you combine Intensity with Hustle it’s almost impossible not to become an All-Star. There’s nothing magical here. Intensity separates the winners from the losers. It gets down to the teams who are moving ahead vs. the ones who are stagnant. How much are you willing to separate yourself and your business from the competition? Show me a laid back baseball player and I will show you a player who didn’t make the All-Star Team.

Hope you made the All-Star Team. That’s all I’m gonna say, Tommy Gibbs

So, feeling kind of smug these days about your new car business? Production is up, inventories are better and you’re selling more. Ford’s doing well. Chrysler, Jeep and Dodge have never been better. GM has some great products. The imports are getting back to full capacity. Incentives are starting to crank up. Luxury vehicles are doing well as those with money are starting to turn it loose.

Nice time to be a new car dealer isn’t it? Is the new car drug giving you a nice high? Feeling really good aren’t you? I’m thinking your new car drug addiction has gotten a grip on you once again.

I wrote an article a few years ago about new car drug addiction. Many of the points I made in that article are starting to once again come full circle.
New Car Addiction can be a serious problem. Many have beaten this addiction, at least temporarily, but it’s on its way back into our business. 

New car addiction tends to take total control of the brain’s actions and leaves the user in a state of confusion, and more often than not, with a poor bottom line. Yes, you can make money with new cars, but you make even more when your team understands how to get new and used to work together in harmony.

CNN reports that hundreds of dealers suffer from new car addiction every year and have been known to do almost anything to fuel the habit, including increasing their floor plan limits when the drug pushers (your new car franchise) offer them special deals to take more of the drug in order to support this addictive habit.

During the last few years, many of you, out of necessity, have created a serious focus on used, fixed and expense reduction. Many of you have made the most money in the history of your business by getting off the "hard stuff." You should be fearful of the temptation of sniffing new car leather. New car leather has a special chemical in it that excites your "ego cells" and the next thing you know you can’t even spell "uxed kars."

The new car addiction is knocking on your door and your ego is screaming at you to climb up on the roof and shout "I’m number 1 in new cars sales, I’m number 1 in new car sales." What you should be shouting is "I’m number 1 in new cars sales, the factory loves me, but I ain’t making any money."

I stated in my past newsletters that there is nothing really all that new out here in the world of information found in cyberspace and beyond. Most of the things I write you already know. There are probably some things I write that annoy you because you already know them, and you don’t like to be continuously told something you already know.

I understand that feeling, but if we are honest with ourselves we all know how easy it is for the "Evaporation Factor" to kick in. The next thing you know you are wondering what the heck happened to all the good disciplines you know to be true.

So one last time; you’re going to be tempted to fall back into an addictive "New Car Drug" mode. You’ve come a long way, you’ve seen the light and the light is used cars, fixed operations and expense control. Don’t stumble back into the dark world of addictive "New Car Drug" abuse. That’s all I’m gonna say, Tommy Gibbs

I just got back from speaking at the Virginia Auto Dealers Association Convention held at the Ritz in Amelia Island, FL. I was originally scheduled to fly over on Sunday, but with Hurricane Debby lurking off the Gulf Coast of Tampa I decided to drive over at the last minute. It was a rough trip, as it took me 6 ½ hours to make what is normally a 5 hour drive.

Even with the bad weather they only had one dealer not make the trip and it was because he flies his own plane and thought better of flying into a hurricane. He’s a very good decision maker.

The three speakers on the agenda for the Monday session were me, Mark O’Neil from Dealer Track and Scott Painter from True Car. Interesting group wouldn’t you say?

Prior to Dealer Track, Mark O’Neil spent a number of years at CarMax and was a key innovator in the development of what CarMax is today.

You may also be aware that Scott Painter has been on the hot seat over the last year with dealers, state associations and regulatory bodies over the True Car approach to selling cars. True Car has made major changes in its program, and has hired a number of experts to help fix what’s wrong. They have also added an advisory board filled with some of the top experts in the field to assist them with their mission. I don’t think they have it figured out just yet, but you have to give them credit for getting "humbled up" and trying to right the ship.

Mark and Scott are excellent speakers and handled themselves well. Going from their speaking delivery to mine was like going from sitting through a Catholic Mass and then walking outside falling into an all day Southern Baptist Revival under a big tent. A bit of a contrast to say the least. I’m not saying that’s a bad or good thing either way. Just different.

The title of my presentation was "The Past, The Present and The Scary Future." Most of the focus was on the scary future. (The is a presentation your 20 Group or state association needs to hear.) When you shake it all out, the common theme by all three of us was that the consumer wants you to simplify the selling process.

They want to do more of the sales process online. They want a simple app they can access on their portable device that will allow them to select the car they want, and the price and payment they want to pay. They want it now and they want it fast. (Isn’t that what we all want?)

Now for the really scary part. Someone, maybe you, is going to figure out how to get it done. When it’s finally done it’s going to turn the automobile world upside down. Did you know that the new app "Draw Something" had 12 million users within the first 10 weeks? Apps are here to stay and they are growing at a pace that boggles the mind.

Recently one of the more forward thinking public auto groups purchased 7,000 iPads for their employees. Do you think they see the future? How about you? So, at your business today how many of your staff members have a company furnished iPad? I doubt I’m going to get very many responses on that one especially since, believe it or not, some of you still don’t have computers on the desk of every sales person.

If almost all products and services can now be sold online through the use of a mobile device what makes you think that automobiles will be an exception? Is it the new car smell that’s missing? Someone will figure that out in the not too distant future as well.

You can be a leader or a follower. Leaders take chances; they move forward and that’s why they win. Followers sit on their hands waiting for the next great thing to happen. By the time followers try to get on board, the train has already left the station.

Go Angry Birds, that’s all I’m gonna say. Tommy Gibbs