Honda-Sony Dealer Service, Vroom v Carvana, 3 Day Workweek Host Notes

‍SUMMARY KEYWORDS

dealers, people, employees, carvanha, sony, customers, day, week, workweek, vehicles, noted, earnings, fil, honda, retail, chick fil, car, unconventional, calendars, ps

SPEAKERS

Kyle Mountsier, Paul Daly

Paul Daly  00:24

Good morning. It's Wednesday, November 9, aka the day after Election Day, which is kind of still going on. Today we're gonna talk about the heart of the Sony venture and how Honda dealers might get to service those cars, rumors Carvana and a three day workweek, I

Kyle Mountsier  00:38

really want to go to shorten it

Paul Daly  00:47

see what I didn't do there, but I would have been great if I could. Yeah, you could have a subliminal messages in this show. Just got to really be paying attention to catch them all. Well, good morning. Hope you're having a good week so far. I've just been hearing people just loving on the weather loving on the well.

Kyle Mountsier  01:04

Tell you what it is bevor eautiful. In Nashville right now. Just absolutely gorgeous. Like 50 agree mornings 78 degree afternoons, which you're like, that's so hot.

Paul Daly  01:15

Yeah, 78 actually was 80 It was 80 and Syracuse on Sunday. Oh,

Kyle Mountsier  01:19

way. Wow. That's impressive records.

Paul Daly  01:22

It's been really nice. Yeah, we had we had last night though was the first night like we dipped. It was like 26 Last night. So we got that. That really it's really sunny, though. So you get this pretty coating of frost. But I think we're pretty much done with the like unseasonably it's time to have fall now. Right, which is fine. It's the second week of November, we could do that. We can do that just in time for starting to have fall. You and I are on palm beach this weekend. To be at the modern retail conference creative track, we're gonna dodge the hurricane, the hurricane is going to hit today and tomorrow. And we're just going to swoop in afterwards. And Brian patches, like we're gonna put on a conference after that. So not not expecting to see too much beach while we're there anyway, we tend to keep our heads down and get working. But we're going to be there with dealers, industry partners, we're going to record a bunch of content coming to you live from Palm Beach, the days were there. So stay tuned. If you can't be there. If you're going to be used car week or something like that. We're going to bring you all the good stuff that is happening at Brian patches modern retail conference, for sure. So stay tuned. And we're looking forward to being with you. If you're going to be there. What else we got to talk about before we talk about things, anything else much in the in the dirt podcasts

Kyle Mountsier  02:25

and have theirs out? You know, I will say like, I think I got five texts this weekend. Like, you know, what is this end of year thing? What's this end of year thing? Oh, yeah. Well tell us for a second, we'll tell you right now mark your calendars,

Paul Daly  02:37

mark your calendar, mark

Kyle Mountsier  02:38

your calendars for the afternoon of the 20th of December. And you know we got a little we got some fun up the up our sleeves, we've got some real industry insights, some kind of like, hey, nobody's doing anything that week. So we're gonna wrap it all in a little bow, ship it to next year real quick, and just set you up for the next year with some fun, some insights, all of that. So look out for stuff like live stream calendars, or, you know, we might might let a couple people come down to Nashville. Oh, I

Paul Daly  03:07

think there might be we only go to Nashville and not let a couple of people come with us. Come on. But yeah, but you know us, we're going to swing for the fence. Again, we're going to level it up again. It's going to be a lot of fun. Definitely block it off in your calendar. Did we pick a time? Maybe, I don't know. After an afternoon of December time between one one and four. You know, you don't have anything else to do then. Anyway, let's talk about a little news. This story has been developing. And despite a proposed direct to consumer online only sales model for the joint venture with Honda and Sony. Remember, they're gonna get together they said they're going to make an Eevee. CFO, CO a techie who she said that the 1000 Plus us dealers are well situated to service the vehicles went during the company's financial results announcement yesterday. So he said, Hey, like we're doing things this way. And it's going to be this Honda Sony collab. He said the, the discussions are still going. But as we look about it, US dealers are in a really good place to service these things. So regarding the sales plan, he continued the sentiments that the sales process would be different. He said different than their current way saying it'll be something unconventional, not Sony, not Honda, but something new. And last month, they announced that these vehicles will be produced and delivered as early as 2026, which is pretty quick. Wow. They're gonna make them any Ohio plant. Yeah, they're gonna make them in Ohio, that actually export them to Japan.

Kyle Mountsier  04:37

I know the first drugs are going to Japan. Yeah, that's crazy. That is like that. That's a

Paul Daly  04:43

total paradise you so

Kyle Mountsier  04:45

export of a of a non US company craziness from a Japanese ban.

Paul Daly  04:50

Right, Japan's making vehicles in the US bringing them back to Japan. Obviously us dealers were like, Hey, what's going on? We want to be a part of it. And so I look this is going to solve one of those issues that we talked about all the time with Tesla and Rivia. And it's been part of the conversation a lot, you can sell online, you can try to go to direct to consumer, but it always breaks down when it comes to service, how are you going to get the vehicles taken care of, in the not just in the event of a recall, but people like to know there's a place where they can drive the car, that will know something about the car and be able to fix it. Know,

Kyle Mountsier  05:25

a person, all of that. Now, here's my thing. This is my whole thought thing on this because they keep saying something unconventional, something new. I just can't imagine that they are dreaming up something so unconventional, something so new that's never been tried before that it's like, wow, that blew my mind. But this is my this is my challenge. I don't know if like we can organize this or someone else or if someone's just like dreamy, entrepreneurial. Like I would almost as American dealers treat this as like in the tech or in the agency world. There's something called an RFP, so request for proposal. And it's like, almost treating Sona, Sony and Honda or whether or a major OEM or anything like that as like, what's your proposal? Like? What is the Honda dealer like, hey, we want to be a part of it. Right? Well, tell us how, tell tell the OEMs how you're going to be a part of it like get together and internal dealer council that can propose like, this is like if you want to leapfrog Carvana and room and all of these, this is how we propose to do it. It's all together. Yeah, frame but an engage. Like how cool would that be to see like a dealer Council? You know, push for proactive,

Paul Daly  06:39

be pushing innovation out there? Yeah, I mean, like, you're much more like, hey, when you put forth good ideas and people know you're thinking about it, I mean, definitely is more likely to earn you a seat at the table. From sales model table. Exactly. Yes, absolutely. From from a sales model standpoint, as I thought through this a little bit more, I'm like, well, what could they do to innovate in revenue? The PS five, you could sell the car. On the

Kyle Mountsier  07:04

PS five, you got only no hana. It's like, it's like, everybody got

Paul Daly  07:07

a VR contest. You absolutely can play games, like, um, like the PS five is like to imagine like buying a car out of PS five. But if you ever were going to do it, you ever got to do it. You're like, in order

Kyle Mountsier  07:21

to get a car, you have to stake out target for three weeks to find the PS $5 first, and then you can get our new car. No, I

Paul Daly  07:34

know. Speaking of a mess. We're clearing this a little bit reverse clearing, clearing a clearing mess, I think is what it seems like room's recent earnings call touted record e commerce gross profit per unit of 4206. Sort of like we're doing better than ever on a gross profit per unit. This is up 16%. They also noted a decrease in expenses, a net loss improvement, meaning they lost less than they did last time from 150 million to 51 million, which is substantial. Right? That's a 200% improvement. That's a marginal improvement in earnings before income taxes. And appreciation what's what's the A and EBITA earnings before interest, taxes and boy, ah weren't weren't for the other stuff. The other stuff. Tom, short, CEO of room commented, we continue to make progress on our three key objectives and four strategic initiatives as outlined during our investor day in May, we are intensely focused on improving the customer experience. And because

Kyle Mountsier  08:39

there's three star reviews, telling them, the better they are,

Paul Daly  08:43

and so like for him to get on the call yesterday or Monday, and be able to say this, it's like, Hey, we're making more per unit, we decrease expenses. We are intensely focused on the customer experience. And they added this line, which is obviously a direct shot, what's going on with Carvanha and Michigan. He's like, Oh, and as a side note, 98% of our customers received completed registrations before the expiration of their temporary ones, which is probably pretty close to what happens in like, just generic dealer world.

Kyle Mountsier  09:10

Right? Absolutely. Yeah. I mean, I will say like, it's kind of crazy, because room came out of a dealer, right? Like, yep, it was a used car dealer, Texas direct, prior to being Vroom, so you gotta believe at some point, someone's like, Okay, we, we kind of had some stuff figured out. Let's go do it like that again. And we might, you know, just crossed the bread

Paul Daly  09:35

crossed the band got a couple they got a couple of connections. You know, so it's kind of a, they also noted that they're going to be focusing less not focusing on Volume and Volume growth, but focusing on profit per vehicle. It's very similar what Carvanha said in their earnings call, Hey, we're not going to focus on volume of cars. We're going to focus on profits. After the press call or the announcement, their earnings call room saw Oh, almost a percent stock increase yesterday is still down 90% year over year, or Vaughn was down over 97%. Like, this action in that market is crazy. Like remember last week, we're like you believe Carvanha is at $14. Now it's like you leave Carvanha at $7.07. Yes, yeah. But you know, when you when you look at the situation that Vroom is in with their floor plan with their debt service. It's a very different picture than the situation Carvana isn't. Yep. And so it'll be interesting to see how like room who was kind of second to market can hold up long term. And, you know, this drama is going to continue to play out. But I felt like it was a pretty strong, a strong showing from room at least showing us that customer experience has to be focused on the profit per vehicle as to be focused on. And yeah, when you try to do something a new way, you got to be willing to be

Kyle Mountsier  10:51

flexible. And sometimes you gotta realize that there's some stuff from legacy that actually might might help your business, you know, and I think like pulling from legacy and new actually, it creates this like happy medium that customers and investors and employees are, are a lot more willing to lean into.

Paul Daly  11:12

No doubt, no doubt speaking of employers and employees, segue take this Chick fil A one, take the shift away when it's so good. It's so good.

Kyle Mountsier  11:24

So everybody is struggling to hire right now I don't care where you're at what you're hiring for technicians, employees, like frontline employees, high level employees, it doesn't matter. But one Chick fil A operator is getting a whole bunch of attention, because he's gone not from a six day to a five day not from a five day to a four day but from a from a five day to a three day work week, full time at a store. And it's working because they are literally destroying and taking out any opportunity for like any churn. So they've designed this work week, they've completely eliminated turnover in their stores. And basically everybody in the area is running at Chick fil A and I think how could they not. So basically, it looks like this. So they've got a 25 team member. And then 18 team leaders, they've got two pods that kind of switch, and they work 13 to 14 hour shifts with breaks. And then they then they flip those. And then they work two Saturdays a month and don't have to ever be on call. So what's what's cool about this is what happens is you is you eliminate this necessity for people being like, I need this weird day off or this extra day off, or I'm quitting I'm out. And so all of a sudden this structure of of employee, you know, like it always just kind of works and fits and all the employees feel comfortable and happy around their work environment. So

Paul Daly  12:50

yeah, Paul, 3d workweek.

Kyle Mountsier  12:53

Can you imagine that? Well, what,

Paul Daly  12:55

when I first read this, I was just like, yeah, how much less? Could you actually work? Right? Go to five days. And then the four days I'm like, but I personally like the return of the long workday. Because like, you know, there's there's all this, you know, around the seven or eight work summary and our work day, but when you extend that the efficiency of just what it is in your daily life and daily time dynamically changes, right? Maybe you go in it at six, and you leave at six, or you leave at seven, right? That's a long day. I have named like, just think of a lot of people work 12 hour shifts, honestly, our workers firefighters, right, 12 hour shift is the thing to actually do that. Right? Yes, all day all the time. And so like to see that go into fast food, which would would make you a little skeptical, right? Can you handle it, but when it's like, Hey, I'm working a full time job, and I have four days off. And if you've ever worked in fast food or retail to only be working two Saturdays a month is amazing. And another thing that they know what it is that no one is on call, right? So you would think like all they have to shift? No, it's because people step up to this to preserve the four day workweek. Everyone has to step up to make sure they're there, their shifts, they're preserving our own and everyone else's at the same time. Yep, people will fight for something and they will stretch for something that is equally benefiting them on the other side. And look, you know, when there's a line at the door, they've had zero manager turnover since implementing this program. And there's a line at the door for people to work there. So when there's a line at the door for people to get the job, you know, it's a good job. And you know, the people that are there are fighting to stay there. And so it's funny how it just works. The operator owner operator, Justin Lindsey said, traditionally we had used the term, the gift of time, or the phrase the gift of time to refer to serving our guests in a quick way in a timely fashion. Hey, we want to give our guests the gift of time back. So we want to be quick, he said but we always left employees out of the equation, which is kind of what prompted this philosophical change in his mind to go this way and like leave it to Chick fil A to do something in the industry. Every one says is just hopeless. Everyone says you're just going to have people who don't care, you know, serving food that is just subpar. And giving customers experience that is bad. Chick Fil A's always

Kyle Mountsier  15:09

bucked that trend. And now they're really changing the dynamic. So I've got kind of two notes out of the story, because everyone in retail is probably like three day workweek, you know, and I don't think that's the like, that's maybe not possible for everyone, especially if you're a salesperson, you're trying to maintain customer relationships, like the, the integration of the two teams would have to be so tight in like the handoff. Oh, so I think like, the first note for me is just think about your schedules. Right? Is it possible to restructure the way that you've always done it to value time of your people, right? And hey, maybe your people want to look longer or less time or whatever, but like, think about your employees and how they perceive time and figure out, are you You know, we're seeing we are seeing a lot of dealers going to afford a work weekend service and sales. So Oh, yeah. No, like, that's a possibility. So just think about your time as as a part of your business structure. And then the the next one, and this one I think is even more key is how many times do we make decisions for one subset of organization that we don't move that or think about it to the other subset? Like, oh, we need to make this change for salespeople, but not service advisors or, or frontline employees, but managers not right? And pay aside? Their there's just this perception that like care toward one part, you know, for customers, but not employees. Right. And so I thought that that was a really interesting kind of way of perceiving this from from Mr. Lindsey that says, like, hey, if if it's a core value of what we're doing, then that should be passed to everyone, no matter their status or their you know, whether their employee or customer so, just lean into those two things. Think about your time and think about like your core values being prevalent throughout your organization.

Paul Daly  16:58

You go, full stop, stop. We're getting you to rethink things this Wednesday. It's a great day to rethink things. The bottom line is, think about people. Think about people let that drive every other decision as you go today.

‍