Break Even Point For The US Domestic Auto Industry

In April 2009 Ford declared that it would not need government aid and claimed that it had a plan to break even in two years. Ford has been ahead of its main rival General Motors in scaling down its business by selling Aston Martin, Land Rover and Jaguar over the past two years. GM, meanwhile, went through a massive reorganization after filing for Chapter 11 bankruptcy proceedings. GM is temporarily majority owned by US government after it invested $57.6 billion in the company.

Per the plan GM executives presented in congressional hearings the company would reach the break-even point by 2011. They further declared that they would cut costs by eliminating 47,000 jobs, closing five more unprofitable factories and cut at least $18 billion in debt from its balance sheet. It was expected that these cost cuts would allow the company to break even when the U.S. auto market returned to between 11.5 million to 12 million vehicles sold per year.

J.D Power and Associates, a global marketing information services firm, announced its projections about the new automotive industry break-even point. According to Gary Dilts, senior vice president of U.S. automotive at J.D. Power and Associates, due to cost-cutting measures such as renegotiation of union and supplier contracts, the break-even point for the domestic automotive industry will decrease by more than 2 million units when comparing current industry conditions to those forecast in 2010. Dilts explains the reason for this decrease due to the significant declines in the auto industry which resulted in lost sales volume of more than 7 million units between 2000 and 2009. This sales volume makes $175 billion in net revenue.

In automobile industry fixed costs make up a greater portion of total costs. The manufacturing plants, assembly lines and technology invested to build vehicles are some of the items forming the fixed costs. Compared to fixed costs, variable costs form a relatively smaller portion of the total costs. This puts the auto industry into a risky situation due to high operating leverage.

The definition of the operating leverage is the ratio of fixed costs to total costs. The higher a firm’s fixed costs, the higher its operating leverage. In firms having high operating leverage, small percentage changes in sales volumes result in large percentage changes in profits. This variability or sensitivity of profits to changes in sales volume put the firm into a risky position. Per the “Greater Risk, Greater Return” rule this also means more profit if demand and therefore sales volume is high.

In automobile industry since fixed costs are relatively high, during the recession times, as the demand and sales volume go down the likelihood of earnings to cover the fixed costs will decrease, i.e. it will be more difficult for the automobile companies to break even. Therefore the automobile companies start cutting the costs, especially fixed costs, like closing the unprofitable facilities, eliminating jobs. For example, GM sold its unprofitable Hummer to a Chinese company.

The car companies should increase the volume of profitable vehicles and effective advertising activities to be able to sell them to the customers. Increase in the sales volume will help in covering the high fixed costs and reach the break-even point. In August 06, 2009 Edward Whitacre Jr., the new chairman of General Motors, stated that GM needs to improve the number of vehicles sold. To do that, he said, the board may decide to move up the launch of several new vehicles.

Comparing Ford and General Motor’s Consolidated Results of Operations from Form 10-K these two companies submitted to Securities and Exchange Commission (SEC) back in 2008:

Ford (millions)

Revenue: 146,277

Cost and Expenses: 160,949

Net Income/Loss: (14,672)

Volume of Sales: 5.532

General Motors (millions)

Revenue: 148,979

Cost and Expenses: 179,839

Net Income/Loss: (30,860)

Volume of Sales: 8.144

Break-even points for these companies can be calculated using the Revenue, Cost and Volume figures above.

Ford

Average Price: 146,277 / 5.532 = $26,441

GM

Average Price: 148,979 / 8.144 = $18,293

To cover its Costs and Expenses Ford had to sell: 160,949 / 26,441 = 6.08 million cars and trucks. To cover its Costs and Expenses General Motors had to sell: 179,839 / 18,293 = 9.83 million cars and trucks. The additional sales volume GM and Ford had to make to reach the break-even point back in 2008.

Ford: 6.08 – 5.532 = 0.554 million

GM: 9.83 – 8.144 = 1.686 million

Water Softener Use In Mobile Auto Detailing

What is considered hard water and what are the degrees of hardness? Well very hard water would be 10.5 grains per gallon and 180 parts per million and above. But you need to realize that even moderately hard water of 3.5 to 7 grains per gallon and 60-120 parts per million will leave hard water spots. Slightly hard water such as 1 to 3.5 grains per gallon and 17.1 to 60 part per million will not leave noticeably hard water spots that you cannot cure with a chamois. But really as a professional auto detailer you are really looking for soft water of less than 1 grain per gallon and 17 parts per million.

What Makes The Water Hard?

Hardness in water is caused calcium and magnesium ions that form insoluble compounds; sometimes iron and even aluminum. There are many ways to soften water. Some are more complicated than others; Aeration, De-Ionization or ion-exchange, Distillation, Reverse Osmosis or Softening.

Softening by use of a water softener is the simplest concept used today; water softeners replace hardness ions like calcium and magnesium with sodium or non-scaling ions. The ion exchange resin used in the process is recharged periodically with salt drawn from a storage tank. Many water treatment experts agree and Lance Winslow concurs that softening can be most cost effective when the water has as few as one to five grains per gallon of hardness. Most mobile operators will be happy with one to three grains per gallon of hardness and probably won’t even purchase a softening unit until the hardness is five plus grains per gallon. Their theory is well taken because, if the total dissolved solids (TDS) is that low, there will be little water spotting on cars anyway.

One reason to put in a water softener even if your water is 5 gpg or less is because you wish to prevent scaling in the coils of your steam cleaner or save your pressure washing pump on your auto detailing rig. On a cold water machine, this is not as important because 5 gpg or less won’t ruin a pump. More than five can over time.

Hardness also hinders soap from doing its job. You may notice that your soaps are not cleaning properly. That’s because they are cleaning the water first and combining with the compounds in the water rather than the dirt on the car. You see, the hardness in the water has a tendency to neutralize those cleaning compounds and you have to actually use more soap to offset the neutralizing effect of the hardness minerals.

With hard water, you will use more soap and the cars still aren’t clean. I encourage you to talk to your soap vendors for helpful advice on water chemistry and treatment requirements. Your soap strategy should be custom tailored to your city and the hardness of the water you put in your tank.

Most independent auto detailing professionals agree that areas with hard water will also cause a film on cars that are washed when no softener is used. They also agreed at the annual conference that the decision to purchase a softener should be based on a real water test. You might wish to contact a water treatment dealer such as: Rain Soft, Culligan, Apollo, Calgon, Rayne water Systems or the Water Man in your area. They can help you by having the local water tested or ask city water authority for information on their supply. Once your decision is made to purchase a softener, selecting the proper equipment is easy. Softener sizes should be based upon two factors: Flow Rate (GPM) and Grains Per Gallon (GPG).

Flow rate would typically be six to eight gpm (gallons per minute) with your hose at your residence. We recommend you change your pressure regulator to 90-110 PSI (Pounds Per Square Inch). This would give you approximately ten gpm. So you need a water softener that is a little bigger than the basic model.

Water softeners are basically like refrigerators; says Car Wash Guys Founder Lance Winslow;

“They could last two years or twenty years…and a lot depends on how much goes in and how often it comes out.”

This is why you should monitor softening equipment. You can test the hardness with a testing kit or just pay attention when you’re washing cars. Steel softening tanks last for years. Fiberglass units last well also. Plastic units crack. You may need to change resin every couple of years.

Chances are you will choose to rent softeners for $30 per month and let the exchange company recharge them for you. Be careful when hiring water softener vendors. Ask us for help. You may even be able to trade services for water softening rental plus make money on the account because water softener rental companies have lots of delivery trucks. In any case think on these issues when considering a water softening strategy for your mobile car wash or auto detailing business.

Technology to Aid in the Better Management of Your Auto Repair Business

Over the years, the auto repair industry has gone through a series of changes. The industry is flourishing at a fast pace as the number of vehicles on the roads is increasing day by day. The industry has largely benefited from this. Auto repair has become a very wise investment option as it gives a good platform for the aspiring entrepreneurs. However, the latest technologies prevalent in the market must be made use of for running the business successfully. Auto repair software is one such technological tool which can be used by the companies to manage their business in a better and efficient manner.

The auto repair service management software is capable of carrying out all the essential auto shop functions. This includes Accounting Integration, Quality Management, CRM Integration, Custom User Interface, Custom Pricing Options, Category Specific Customization, Custom Search Field, Collaborative Inventory Management, Barcode Scanning, Customizable Functionality, Supplier Management, Purchase Orders, Replenishment Orders Reporting, Inventory Locator, Mobile Access, Stock Inquiries Transfer Management, Customizable Fields, Vendor Managed Inventory, Warehouse Management, invoice of operations, repair orders, tracking sales and vehicle services. This software is operational on platforms like open source, Linux/Unix, windows and Mac.

This system also provides a number of computerized jobs including preparing service schedules for standard repairs, insurance claims management, cost tracking, customized functionality and reporting, maintenance scheduling, receivable tracking, accounting integration, customer user interface, parts sales and parts pricing, contact management. The working of the software is done by the optimization of the applications. The software makes your work more convenient by helping in various other tasks like scheduling of customer appointments, tracking of repair work completed and making service history estimates and quotes. Moreover the usage of the software reduces inventory requirements and costs and computerize your warehouse and remove inventory problems. Furthermore, more orders can be delivered with a considerably less amount of laborers. The reporting options in the software also enhances the operations and disseminate the important data through multiple shop locations. The customer database and customer invoice history will be easier to access as the search options are very specific and encompass a lot of categories.

Though many softwares are available online, they are not spam free. So your systems must be well protected before installing them. Purchasing them will be the best option as they are available at reasonable rates. The usage of the auto repair management software will definitely synchronize your business and increase the business prospects.

Choosing A Local Auto Body Repair Company

Ah, you have been in accident! Not a favorite experience of many people. Whats even worse than the actual fallout of the automobile accident itself is getting your vehicle repaired.

If you go through a reputable and ethical auto body repair shop you will end up with an automobile that drives and looks just like its was never wrecked. If you go through a shady company you will have a substandard vehicle that will have a really low re-sell value in the future. Here is what you can do to prevent the latter from happening.

Make Sure The Estimate Includes Factory Parts

How can one body shop give you an estimate that is half the cost of another? The answer usually is that one will use aftermarket parts that cost half the price.

This is very important to know! Aftermarket parts are usually not high in quality and many times do not fit exactly like original ones made from the actual manufacturer. Shops usually have to play and bend aftermarket parts to work and they do not usually last a long time. They can also compromise a car’s tolerance to withstand another wreck. A bumper for instance made by the manufacturer is made to withstand a certain impact. Its made to bend and crumple a certain way so that the people in the car absorb as little shock as possible. An aftermarket part may look genuine but it is probably made out of inferior materials and its threshold is a lot lower.

Demand that original parts be used to rebuild your car.

Check the Better Business Bureau for Any Complaints

Look up a company in the BBB and see if any complaints have been filed in the last year. If so try to inquire why. If a certain business has high stars and a high satisfaction rate then you have a good idea of what company you are dealing with.

Ask For A Couple References

Ask them to supply you with the name of recent customers who they have serviced. Call them up. See if these individuals were happy with the work that was performed for them. If an auto body shop is hesitant to supply with at least three names then I would go somewhere else.

Warranty

Any service like this should stand behind their work and offer some type of guarantee. They should back all their parts and labor with a warranty that lasts at least a year. If something falls off or if the paint fades after only a month then you want to make sure that they are willing to fix their mistake.

Ask To See Pictures

Ask a body shop to see some before and after photos. Do they have experience in doing the work you need done? Have they ever worked on your type of car before? What is the worst wreck they have fixed? These things are good points to keep in mind.

Aftermarket Auto Parts Are in High Demand and Very Popular

There are countless products on the market that can be used to modify a car. A vehicle’s performance can be enhanced with the right parts. As such, many car enthusiasts are modifying their vehicles and making them as unique as possible. They’re doing this by buying performance car parts from aftermarket companies at lower prices than those of the original manufacturers.

Some of the many different parts that can improve a car’s performance and speed include: high quality brakes, rims, nice steering wheels, superior batteries, etc. Each of these, and more, can be ordered as aftermarket auto parts. Just as long as they order from a good company, vehicle owners can use these parts to perfect their cars and trucks, thus making them superior in every which way to all the other vehicles on the road.

It’s not nearly enough for them to have a good vehicle, even if it’s brand new and luxurious, they still want to enhance it even more with performance car parts. Some have average or even old run down cars that they want to improve. Since they might not be able to afford brand new, sleek vehicles, they will order the best, quality aftermarket auto parts they can afford.

Many of the parts they can install themselves. However, there might be a few that they’ll need professional help with. The project may take some time to work on if the owner wants the best upgrades possible. Just as long as the owner can afford to do so, he or she can pay professionals to install the performance car parts to get the job done more quickly.

To find the best deals on car parts the owners can look online. There are plenty of resources, tips, and guides on choosing the right items. There are also price comparisons and reviews about all the aftermarket companies out there. Obviously, not all aftermarket auto parts are created equally, therefore it’s extremely important that vehicle owners evaluate their options before buying. After all, nobody would ever want to order the first parts they see on the internet without doing research first. If the parts are cheap, they’ll not only look ugly on the car, but they’ll increase the chances of causing an accident.

In summary, performance car parts are in high demand these days. Everybody feels that they must have the fastest, best looking, and superior performing vehicle out there. The demand for such parts has made aftermarket companies very successful, and by the looks of things, they’ll be staying in business for a long time to come.