A struggling multi-franchised auto dealership gets back in the black

A multi-franchised auto dealership with four locations was struggling with floor planning payments in arrears, inadequate internal management reporting resulting in bad sales decisions, a multi-million dollar trust deficiency, and more than $1 million in sales tax owing.

We worked with the dealership to develop a turnaround strategy, assist in negotiations with creditors, and provide advice on operational improvements:

Strategy. We recommended consolidating two franchise locations into one. This allowed the sale of redundant real estate, which freed up working capital and allowed debt repayment.

Creditors. We helped arrange for termed repayment of government obligations. We also moved swiftly to help convince lenders to term out the floor planning trust deficiency over three years and secure alternative floor plan dealer financing.

Operations. As a result of past reporting issues, we recommended the replacement of the company’s CFO. More accurate accounting systems were developed to isolate sales and service profitability as well as inventory controls. Sales incentive programs were revised to reward profit as well as volume.

Over approximately 18 months, cash flow improved dramatically and the trust deficiency was reduced by more than half. Company ownership and most staff members were retained. In addition, improvements in the decision making around auto sales resulted in higher profitability.