Brian Benstock is the vice president and general manger of Paragon Honda & Acura in Woodside and Queens, N.Y. His dealerships recently participated in Cash for Clunkers and the dealer-funded Automotive Stimulus Plan.
How has the downturn in the automotive industry affect your fixed operations business?
We were expecting more service business. Initially for us, this whole game changed in September of last year rather abruptly. We were expecting fixed-ops to increase as the new car business began to slow down. I think customers delayed decisions to purchase new vehicles, and deferred their decisions to get repairs. But you can only do that for so long. Now we're starting to see some increase in our fixed-ops business. We had remained stable to slightly up, and now we're seeing a substantial swing upwards.
How did Cash for Clunkers affect your sales?
It was nothing short of a massive impact. There was a tremendous amount of pent-up demand. When loggers get a logjam in a river, the only way to free that logjam is to put dynamite in the water free things up. That's what Cash for Clunkers did for us.
Did you have any concerns about the program, or were there any negative effects?
There were a couple of negative impacts. One is we're running out of inventory. People say that's a good problem to have, but it's not. Our store is like a big jet and it needs fuel to stay in the air. That fuel is inventory. During the slowdown in business, we could learn to fly with less fuel. We can't learn to fly with no fuel. Our supply of inventory went from 50 days down to about 12 days. The manufacturers got caught flat-footed, and I guess they'll ramp up as quickly as they can.
Did you have any concerns about the program, or were there any negative effects?
There were a couple of negative impacts. One is we're running out of inventory. People say that's a good problem to have, but it's not. Our store is like a big jet and it needs fuel to stay in the air. That fuel is inventory. During the slowdown in business, we could learn to fly with less fuel. We can't learn to fly with no fuel. Our supply of inventory went from 50 days down to about 12 days. The manufacturers got caught flat-footed, and I guess they'll ramp up as quickly as they can.
A lot of analysts think these types of "event" sales are what got the auto industry into trouble in the first place.
I don't think there's anything wrong with event-driven promotions, as long as they are planned out long term. You can have events that are meaningful to customers every month or so throughout the year. But it can't be same old tent sale and things that have no value for customers. You need something that resonates and has a meaningful impact on what's important to them. Whether that's a special going into winter that is geared toward that season, or something that targets some niche markets. You have to put all of your merchandising efforts and dollars behind those initiatives. You can do that monthly and have a meaningful impact.
