Returning from lunch today with part of our AF gang, we slipped by a gas station that had signage announcing $1.99/gallon for gas. Maybe that isn't news for some of you in the rest of the country, but it's a milestone around Southern California.
We might be a microcosm of the entire nation as a state. We've got mountains and beaches; warm desert sun, cloudless skies, low humidity, and good roadways to everywhere. We have Hollywood and Silicon Valley. It's where a lot of Americans dream they'd like to be. We were "green" even before anyone mixed yellow and blue.
We're also a state with 38 million people, 34 million vehicles, 24 million licensed drivers, and more than 10,000 new- and used-vehicle dealerships, a budget that's more than $14 billion in arrears, an unemployment rate of more than 8 percent and growing daily; the site of the residential building boom that now is a foreclosure disaster for every form of lender, and more illegals, con men, and liberals than anyone so far can count.
We also have mudslides, canyon fires, and earthquakes. But, and here's the important thing, we're fairly prepared for adversity.
That begs the question: how prepared are you to meet the financial challenges that management is or will be throwing at you?
What did you budget for fuel pricing in '09? Did you fall for hedging, but unlike Southwest Airlines, got out at the right time as the pump prices receded?
Have you cushioned your CFO on the serious fall of residual values and the entailing depreciation costs surely to become a reality? Are you fully ready to document why reimbursement should not be a consideration of the financial team?
If the Big Three are forced to go it alone without federal support for loans and chaos ensues even for a short time, are you sure your management is prepared for a major loss of incentive payout? Even if Detroit gets financial aid, you can probably expect a trend toward incentives matching those offered at retail.
Are your alternate-vehicle purchase options open at what is posed as more costly acquisition?
Grant Thorton LLP's study (released in October) predicts some 3,800 dealerships "at risk" and likely to not exist later in '09. Your drivers may need to drive further for their new car, and it'll be tougher to get to a dealer for service on warranty. Also, CD fees aren't too likely to come down either. This probably spells additional costs, yah think?
I'm not a preacher, but I am an Eagle Scout and have seen a number of recessions/ depressions that have affected "fleet" for more than 50 years. I urge each of you to be prepared; use your experiences and skills to meet the challenges ahead.
And, for heaven's sake, share all this with those above. It'll make you look good.