Dealer Groups are transitioning to new profit centers to effectively handle their cash in today’s low ROI environment


Dealer Groups are transitioning to new profit centers to effectively handle their cash in today’s low ROI environment

Category : Miscellaneous

Unusual conditions in the macro environment have created or contributed to several meaningful changes taking place.  These would include – greater uncertainty about America’s five year economic prospects, lower cost of capital and ownership, relative outperformance in capital gains from productivity and efficiency, fortress balance sheets as executives prefer to invest in themselves then return capital, disjunctive global economic growth and structural unemployment.

The low interest rate environment has given American Consumer a confidence to spend and the liquidity to do it.  Central Banks actions, globally, and public spending, domestically, have create a floor under the average middle class American Consumer spending habits.  The evidenced for this boost in confidence and enticement to spend is evident in sales, profitability, and ultimately GDP of Americas economy.  American Consumers are purchasing or replacing items at a greater frequency and willing to purchase items at listed prices verses waiting for a discount.  Some of the economic indicators that reflect the flow of relatively less expensive capital from Central Banks to American Consumers purchasing behaviors are:  auto sales (five year high), home sales  (reaching 6 year high) , durable goods orders (up three of the last four months), and corporate retailor (Apple, etc.).

Tailwinds, low borrowing costs and stronger family balance sheets, are creating a unique opportunity for Auto Dealers.  Notwithstanding recovering from previous years, this period of liquidity is pivotal to future success. Auto Dealers who have been doing better recently, need to form a strategy which will endure across the broad range of five year economic outlooks. Auto Dealers can do several things such as expand their offering, catch up on differed construction or maintenance, and augur their strategic investments into growing markets. We utilize the case study of one of the largest and most successful organizations to illustrate what they are doing.

AutoDealer Group, Inc.

AutoDealer Group, Inc. in a privately held corporation that was founded in 1997.  They employ approximately 3,300 people, are domiciled in Atlanta Georgia, and are currently using this unique credit cycle to transition from a recipient of market dynamics to creating their own markets.  Autotrader Group sells approximately 390,000 new retail units, 235,000 used units, and 650,000 total units a year.

Sanford H. Schwartz, is the current president of Autotrader Group, Inc. He is a lifelong time industry leader and recently took the top spot in April of 2013.  His experience and leadership are transforming the organization, its current market positioning, and laying the ground work for two large profit centers on many innovative firms radar: DIGITAL MEDIA and SOFTWARE SOLUTIONS. 

Two Growing Profit Centers

Mr. Schwartz is making several changes within the organization to more efficiently and effectively capture a substantial market share of digital media and software solutions.  These new profit centers have been growing sequentially for years.  In order to continue growing, AutoDealer Group acquired Bitauto Holdings Limited in the fourth quarter of 2012. 

This acquisition is emblematic of the transitions taking place within the businesses core competencies.  One large example would be the corporate name change from, “, Inc.” to “AutoTrader Group, Inc.” in June 2012.



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