CDK Outage Costs Sonic $22M, A Van For A Paralyzed Shooting Victim, Gen Z Buying Homes

Paul J Daly: 0:00

More than cars. Episode Kyle got home it I don't know. The

‍Unknown: 0:06

people really want to know who I is and

Paul J Daly: 0:09

who I be. They're pausing. We going, all right, we're gonna go anyway. Sometimes the stream yard software isn't as awake as we are. Coming a little in, a little chippy. Yesterday we meet Kyle Nathan, some of our Nashville crew is in upstate New York shooting Mohawk Chevrolets. The ending of the more than cars episode about to drop. There's a little weather. Maybe the word hurricane was mentioned two or three times, and Kyle got home in like 215 east, yeah,

Kyle Mountsier: 0:37

it was a little bit much look. I you know, coming from Nashville is not as great as like a Minneapolis or in Atlanta or Chicago when it comes to to non stops, but you know, whenever I have to do the layover, I just, I always know something's coming up. And so last night was a little bit dicey, but we're home. Life's good. Back in the seat. It's gonna be okay. Little yesterday was amazing. The Mohawk team, like, if you, if you've seen the dealership, the the like, tick tock series, office spoof, office spoof that they've put out that that is only like a subset of the energy that's present at that store at all times. True. Yeah,

Paul J Daly: 1:21

it was fun. We got to we got to hang out a little bit with a lot of people that own one owner, Andy geltcher, Nathaniel grecklick, our boy. We got to hang out with grace and Ben, who created the Office, and shoot some pickups, and Alyssa in service, like we were all over that store in the short amount of time we were there as one of those things where Nathan and I got to drive, because it was only, like, two and a half hours to two and a half hours from us. You had to fly. It was like, literally, we landed in a hot Lz, as they say in the military. We started unpacking bags, rolling audio. So we're excited to share that episode with you once it's done. We had to shoot the rest of it yesterday. It's but like, 70% through editing already, if you haven't seen the first three episodes, go to more than cars.tv check out the episodes, or just go to our YouTube channel, which is sometimes a little easier to navigate, asotube, asotu, dot, B, E, asotube, you can see in our car series, the trailers, the full episodes we've released, and all the other content that you never knew we made and you never knew you needed, But you do, but you do, but you do. What do we have to talk about? Anything else? I don't think so. Oh, yeah, we do. Coming

Kyle Mountsier: 2:26

up tomorrow, tomorrow. If you haven't signed up for the asotu edge webinar, it's a quick shot. 2030, minutes. We're going to be talking with mosaic compliance solutions about what's up with the cars rule, like, Where'd it go? What's happening is it coming back? What should I be expecting? How can I prepare? Should I be scared? Should I not be scared? All of that and more at two o'clock Eastern tomorrow, you can go to our website, asotu com, scroll down just a little bit. Register for that webinar so you don't miss it, even if, for some reason, you got a meeting at that time. Register so you get to email yes about when it came out. This one is, like, an extremely insightful one that I think everybody's just stopped talking about for the summer, but probably need to start talking about it. Yeah,

Paul J Daly: 3:07

and it'll be, it'll be fun to be on the webinar. Jim ganther is always a hoot. What a he's so buttoned up. He's so knowledgeable. He's got the voice, the best radio voice I've ever heard, and he's just got such a quick wit. I think you really enjoy your time there. You don't have to be scared. This is for people who are just proactive. Right to like to get ahead of the game and win. So get so.com right there at the top register. Join us tomorrow. We'll be there with bells on live, and you can come in the comments and heckle us all you want. Yeah, all right, speaking of getting ahead

Kyle Mountsier: 3:37

of the game and win and whoa.

Paul J Daly: 3:39

I know segway, we love stories like this. Sonic automotive experienced a remarkable 76% year over year. Increase in second quarter net income 76% getting nearly $41.2 million doubling from 23.4 despite setbacks from the CDK outage in June, the group sold 27,026 new vehicles, which is actually a little down, 25,600 used vehicles, which is up, and 16,641 vehicles at its standalone Echo Park used vehicle stores. They estimated the CDK outage actually cut their net income by $22 million that's wild. That's real wild with showing 11 point 6 million in pre tax charges for extra employee compensation. So it all comes out. I'll wash this out in the labor for all that extra work manually, other charges included 3.6 million for hail and storm damage. It was a tough quarter. Things are going on, and $1.4 million impairment for some of their Echo Park locations. In March, Sonic launched an initiative to add 300 techs in 2024 aiming to boost fixed stops gross profit by 100 million. And so far have netted 131 so they're tracking. They're a little behind. But, you know, yeah, second half of the years, when people start looking. For for new place to be. You know, it's kind of a natural refresh. So Sonic is in the fight. And I like, I like the focus

Kyle Mountsier: 5:05

on the text like, hey, that's where we're going to win. That's where we're going to serve customers. That's going to make sure that our throughput in the shop is exactly what we needed to be for used vehicles. Also honestly surprised by this article looking at the fact that their Echo Park stores account for more than, more than, like, 30% of their entire used vehicle sales. Yeah, for the group that's that, honestly, that shocked me. Um, yeah, they

Paul J Daly: 5:32

made a lot of changes in Echo Park last year, closed a lot of locations, locations, yes, yeah. People like, is it desperation or strategy? So this is kind of showing that, like it was

Kyle Mountsier: 5:40

strategy, yeah, well, and it shows the way that people are looking to shop, you know. You see Carvana rebounding. You see Echo Park doing quite well, you know, and in the used car market, that's what that's the way people that. It's clear that more and more people are migrating that way as a form of shopping, more of a little bit cleaner, optimized, digital to online to offline experience. Yeah. So pretty had a great segue.

Paul J Daly: 6:07

Sounds like Gen Z, and then speaking of Gen Z, right? But it's the last story we have one, I know. I just thought I'd drop it there, just so we know, just leave it there, hold

Kyle Mountsier: 6:17

it, put a pin in it.

Paul J Daly: 6:18

Here's a great story. Toyota of Montgomery Sutherland Automotive Group, they donated a wheelchair accessible van to Amy Dix, an innocent bystander who was paralyzed after being caught in some highway crossfire during a shootout. She just minded her own business. She was struck by a bullet while driving to work, paralyzing her from the chest down. And so this dealership stepped up and made this donation on August 5, as she returned from home for months, as you can imagine, rehabilitation and made her this, or bought her this very beautiful, customized, accessible van. I think it's a Sienna. The Brett Sutherland, the CEO, actually visited her in the hospital and expressed his deep admiration for her resilience. Emphasized the importance of, you know, the support for her and what she's, you know, represents as far as strength. Here's a quote from him. He said, providing her with the accessible van is a small gesture to help someone who has faced such tremendous adversity. After meeting her and understanding her situation, it became clear how vital the support is. We love stories like this.

Kyle Mountsier: 7:20

I mean, love stories like this. Obviously, you see Brett on social media a lot and communicating exactly what his dreams are for the group. And then you see a lot of like, Great GMs and operators coming out of or being a part of the Sutherland group. And this is just another, like, notch in the belt of auto that's, hey, look, we do things for large groups of people and individuals alike, in caring for communities in ways that like we just enable mobility and transportation, right, whether that be in a sales engagement or in donations and giving back. You see that with the vehicles for change and so many people that are a part of that, this is it's just in the fabric of our industry and, like, it's just another one of those simple reminders, like, hey, look, we're doing something really, really good as an industry.

Paul J Daly: 8:10

It's a great thing to remember, there's just not enough of it. It's there's not enough of awareness of it. I think across because when we talk about stories like this, it inspires other people to share their stories. It inspires other people to just like, be more generous. So you know how like out open handedness begets more open handedness. And I think that like this is one of those things that just shows, man, you have the leverage, you have the finances, you have the ability to make a difference. And this is just another example of dealers who are making a difference, not necessarily from a charitable standpoint, but speaking of making a difference in the housing market and

Kyle Mountsier: 8:41

leverage and finances and all those things,

Paul J Daly: 8:44

history makes me happy too.

Kyle Mountsier: 8:46

This is kind of wild. Actually. Gen Z is buying homes at a faster rate than older generations in their early years, particularly in the Midwest, which with high purchase rates in Indianapolis, St Louis and Cincinnati, kind of surprising, in my opinion. And the lowest. This is actually not surprising. Lowest in California and the Northeast. Nearly 28% of 24 year olds owned a home in 2023 surpassing millennials and Gen X at that age, and almost 40% of new mortgages in 2023 went to buyers under the age of 35 that's wild. Uh, Indianapolis had the highest share of Gen Z homeowners at 1.6 followed by St Louis and other metros like Jacksonville and Kansas City, the lowest rates of Gen Z ownership at around point 1% were in cities like San Francisco, New York City, Los Angeles and Boston. You know, a little bit of high priced living

Paul J Daly: 9:41

by a house around there,

Kyle Mountsier: 9:44

median home values for new Gen Z homeowners are exceeding 1 million bucks in San Fran Golly. Wait coming up for this one. Wild Gen Z is benefiting from a lot of remote work and lower living costs in certain areas. Is, but is obvious, obviously, still facing high student debt and even housing shortages. I know it's a weird election purchase.

Paul J Daly: 10:07

Yeah, the two, the two conversations going, first thing I think of when I hear this is that home ownership typically equals car ownership, right? There you go. So I'm loving hearing Gen Z digging in buying homes, which means they're buying cars, which means starting families, typically. And I think we're starting to see this trend like, you know, we heard a lot about the millennial generation early on saying, I don't know if I want to own a home. I don't know if I want to own a car, right? They're kind of coming back around, and we're seeing that now. But Gen Z right out of the gate is like, nope. Want a home, want a car, want a career, one family, right? It's like the pendulum always swings. And so I think this is the beginning of a really good market indicator for the auto industry, which is a great indicator like to get people into the industry. If you're in those markets, right? Any of those markets that we mentioned, what were the new ones? St Louis, Cincinnati, Indianapolis, if you have a dealer group you're in that area, take this little piece of information and just cater to this demographic who is buying a home for the first

Kyle Mountsier: 11:01

time? Well, and you look at these cities like they're mid major cities, right? They're not, they're not the biggest major cities, like mid major cities. And you see people, you see these Gen Zers, actually moving into the suburbs of these cities to be able to purchase the the types of homes that they want. So this is a very like suburban mid major play. When you look at like being in a city like that, it is definitely an opportunity to market and advertise in the correct way to a Gen Z audience that probably has disposable income at some level because of the type of work that they've been able

Paul J Daly: 11:33

to dual income, right? We're in exact right. Dual income. No kids. I mean, this is, this is the time sell them two cars and one for the weekend, right?

Kyle Mountsier: 11:42

Get him that. Evie for the weekend,

Paul J Daly: 11:43

you know? Yeah, EV's for the weekend. There you go. There's a website, right there? EVS for the weekend. Hey, we hope you have an amazing day paying attention to what's going on without around you doing the best you can to make a difference. We'll see you here tomorrow. You

Unknown: 12:00

move the light you.

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