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[Music] today we're going to talk about disruption or rather the myth of disruption and as Sam said a little bit of a continuation of the of the exchange last year between Glenn Mercer and Gail Pollock here I know both of them very well known them for years count both of them as good friends of mine so but I could I could have predicted that one last year in fact I actually got into it with Mark O'Neill and he was still president at Cox a year and a half ago at the consumer Bankers Association about the same topic while we were on stage on a panel and he got pretty pretty fun I should say a little bit of a knockdown conversation but anyway so also if you have questions feel free to add raise your hand and ask if you want during a very conversational you won't throw me you might throw me off track but we'll get back on pretty quick so feel free if something comes up feel free to ask in we'll go down that path I'm here for you guys make sure so 2017 you remember this article Bob Lutz iconic figure in our industry writes this article or column in automotive news 2017 just the good times goodbye everyone will have five years to get their car off the road herself or scrap his opinion 20 years this industry's going to hell in a handbasket how many of your dealer dealership folks here today you guys are done 20 years it's over all right according to Bob Lutz you're not going to exist the buff books are gone you know Motor Trend automobile shows like the Grand Tour or Jay Leno's Garage guys like me were all gone there's there won't be any need for us that's according to Bob Lutz and he says that within five year that that five-year there's gonna be a five year period from the time the government decide it's that driverless vehicles are safer than human drivers is gonna be a five year period before two hundred and seventy million vehicles are gonna be displaced five years all right well we'll get back to that some other comments here through the years car dealerships could be out of business within a decade that was rethink X out of California in 2016 maybe there's 2017 I think there's 2017 this outfit in the California came back and said dealerships are done in ten years so yeah secures left according to this guy death of the card yet of the auto dealer one analyst this is George Adam Jonas from Morgan Stanley he says he has said that the number of dealerships is going to shrink down to ten mega fleet managers within ten to fifteen years all right so that so this is what what investors on Wall Street and so-called experts and analysts in our space and even executives in our space have been talking about I think last year probably Dale made pretty clear there his his assessment of where dealerships are going to be you know Cox automotives perspective you know they they mean there may be some equivocation on the timing but for them I mean what Mark O'Neil said to me are said to us on the you know on stage was ten twelve years fifty percent of all new car sales are gonna be the private art to fleet based companies that's going to push down the number of dealerships from eighteen thousand a day to about nine thousand then according to Dale you know he's changed his tune of Dale says it was saying last year twenty to thirty maybe manager owners of these mega fleet companies would maybe nine thousand rooftops but owned by only 20 to 30 of you guys he's since 200 to 300 I don't know I mean I we're talking about some pretty drastic numbers here and did this this is on Wall Street in in like I said and some segments of the industry this is considered a done deal like this is this is happening and there's nothing stopping it why why why this downturn dealerships oh let me just say to even a Glenn Mercer who's not as drastic are not even close has said that by 2025 we're going to see about a two thousand numbered downturn reduction in the number of dealerships from the eighteen thousand a day eighty thousand five hundred today to about sixteen thousand five hundred by 2025 so even even on this those circles in nad a there's some expectation of a downturn why well it all comes down to ownership it's all it's all about the autonomous vehicle essentially and these right handling companies they they'll tell us that Millennials don't want to own vehicles we're all going to be driving or running around in pods in 10 to 15 years cars are gonna come pick us up they're gonna pick us up take us to wherever we're going and it's all gonna be self-driving private ownership is on the road to becoming a rarity John Zimmer the founder of lyft said in 2016 that within ten years there will be no private ownership in major cities so he said this in 2016 so were seven years into that prediction you know Mary Barra not really talking about dealerships as much but has said said in 2016 that this industry was going to change more in the next five years than it hasn't fifty-four four years into that I'm still waiting to see that change I haven't seen it we're still driving combustible engines we're still driving and buying cars like we have for 50 hundred years so but but it's all but but this whole predication our mind said that that this industry is going to be disrupted and basically eliminated is based on this mentality that we're going to be in this utopia of self-driving vehicles and it's all going to happen when our last consumer Bankers Association again a year going March the event I referenced a little bit earlier someone from California one of the city counts at one of the mayor's got up it said no one under the age of 8 years old is gonna need a driver's license so I I don't know what world these folks are living in I'm sorry I just said there's no rational reality in which that is going to happen so I will admit that there is some uncertainty in our industry right now and where where is that me look for more in the century we've known products have been the same yeah gas steering wheel brake driven by human for a hundred years more than a hundred years manufacturers are unchanged the same names for GM Chrysler Cadillac Lincoln they're all there you know we've had some change in ownership some some have come and gone but for the most part the manufacturers are still the same distribution model remains unchanged and I'll tell you it's fascinating I I have some copies of these old trade magazines trade books going back to the 1920s 19-teens and some of the articles if you take the headlines you could take those same headlines and put them in trade magazines today and you wouldn't know it they were talking about the same things about how to sell used cars how to service how to mind your customer database to advertise sure the tools have changed but some of the topics and and things that have remained the same I you know Cheryl Miller was just named seeing on president of auto nation I was reading through some of their SEC filings dating back to the mid 90s late 90s and because I was doing a lot of interviews regarding that about about her being named CEO I'll tell you the same issues that auto nation was facing back then are the exact same issues they're facing today it's it was uncanny I mean it 20 25 years ago and you wouldn't you wouldn't know the difference reading through those filings obviously the buying experience is pretty much the same and the ownership models haven't changed by car and we've added leasing into the into the picture but that's that's it that's really the biggest change that we've seen in 30 40 years I love this slide now if you guys can see the picture on the left but all the way the truck on the left but launched in 1917 the Ford Model T pickup went on the sell 1.8 million over the next 10 years was one of the best selling vehicles at that time the Ford pickup today the best selling vehicle the Ford f-150 pickup so that tells you how little things have really changed in our industry and I think I think one of the one of the points to be made here is that the auto industry is unique and really moves at a glacial pace really does and and there's various reasons for that but it but it is a unique it it is not bookstores it's not blockbuster it's not other retail network or retail stores it's not movies it's it's buying a car it's the biggest second biggest maybe the biggest purchase and a person's life huge down payments you're trading in vehicles there's financing there's all sorts of things that going into that purchase and that make it unique not to mention that the whole manufacturing process and the fact that manufactures have to keep their plants running we're seeing that right now in u8 the UAW the strike of General Motors that's all really because GM came outlet in November and said they were closing five plants that's so yeah there's precedence for n reasons for the OEMs to keep those plants running and driving incentives to keep those sales pumping because they have a massive employ force that they have to keep employed that they have to keep working but what we don't know today I surprised you know I probably should put that in quotes cuz I don't like I think we have a good idea but we don't know what the propulsion system is gonna look like in ten years will it be some kind of battery breakthrough we'll see you know that it's so far there's nothing that's promising on the horizon so what we have today is just a will see some more efficient batteries you know per kilowatt hour is coming down that cost is coming down significantly but still that's that's a huge impediment to evey sales really taken off because they can't main factories can't build them profitably they can't sell them for profits so that's there's a very little marketing and support that goes into the sales of those you know maybe we don't really know who the manufactures will be well Apple by Tesla you know you know you have all those well Amazon buy by a manufacturer today to just you know Amazon just broke just broke a couple hours ago I think Amazon just placed an order for a hundred thousand vivianne minivans that's the Evy the electric vehicle minivan but you know that's not gonna start till 2021 they're not you know they won't get the full sow hundred thousand until 2024 it's still five years out there's still a lot of unknowns there but you know a what's the distribution model look like will you guys still be around customers buy cars will have big online well they still go to the dealerships you know what's what's gonna be the ownership experience subscription you know there's often a lot of things that are in play that we don't fully have the answers to but I'm gonna dispel some of the myths or some of the hype surrounding the destruction of dealerships and this so-called idea that private ownership is going away and it's really the two questions really I think for us and I think 20 years is a good good barometer as far as time because look at I mean who are all gray-haired we're gonna be gone in 20 years probably out of this you know retired hopefully or nearing retirement well people still buy cars from dealers so the first question is private ownership here's the truth right healing is driving up ownership this is data for the American Community Survey from the Census Bureau this is actual government data and this is 2006 to 2016 and you can see that 2 car households has gone up significantly and really from the advent of uber and lyft into our space so John Zimmer talking about the end of private ownership in the large cities well NASA we aren't seeing that and actually you know the multi multi car households are going up I have some data here it's not up there but this is the most recent data nationally for car households with four cars nationally have gone up from eight point one eight point or eight percent in 2013 to over nine percent in 2017 that's for households with four cars just in the Columbus market alone has gone up from four point three percent 25.6% you look at two car households it's gone up from 4.4 percent in Columbus to two for our 44 percent I'm sorry forty four point three percent to forty five percent in in Columbus just from 2013 to 2017 so the exact opposite is happening from what these folks have been predicting all right this is a you know the number of how number households by number of vehicles within those households so the number of households without a vehicle has decreased significantly meanwhile the large cities in every single large city the rate a vehicle ownership has gone up it's not going down in fact New York said you had to put a moratorium last year when your moratorium on right hailing licenses because it was good that just the traffic congestion was getting too crazy and that was all because of right healing the impact right healing is having is not negative on ownership it's making it it's driving it up a and B the the negative impact is on the is on car rental business travelers that has been decimated it's obviously hurt taxis but it's also driven down ridership on public transportation public transit significantly we're talking probably three percent over last there's been a continued 3% decline each year for the last three or four years so this is what the real data is saying we're not talking customer surveys what people you know what people think they might be doing this is actual data LMC Automotive has data is showing that this whole move from sedans cars to SUVs larger vehicles is actually been driven by Millennials they're the ones driving that that switch from the cars to the SUVs Millennials it all comes down to when they have kids that's the line of demarcation once you have kids that changes the whole dynamic of how a person views vehicle ownership so this is the Columbus market I just don't say that to me the future looks pretty good 32,000 household 9% of the market do not have vehicles actually in this market but over the next 30 years we're projecting to see a population increased to 1 million people that's that's pretty good we if you're looking at the future of you know how many how many cars you're going to sell I think your your dealer you're looking at a market that's growing and probably significant increases in car sales over the next 30 years and this is not uncommon I mean this is true for other metro areas such as Columbus this is this is this isn't just one area of the country so the future looks good I've threw up some customers survey data that actually shows that kids Millennials Generation X or Z whatever that is I get screwed up with these generations but you know 92 percent of Generation Z has said they plan to own a vehicle 92% all this talk also about driver licenses driver's licenses I think AAA we see this data out there often at least I do that talks about 16 year olds not getting driver's licenses and that's used as evidence for kids not wanting to own cars well the fact is by the time they're 25 everyone's got a driver's license it's they're just delaying it a couple years but again by the time of 25 it's the numbers are you know indicate that everyone that the numbers are changed from you know 20 years ago is the same percentage of people I have driver's licenses so again the data does not support at all the idea that private ownership is going away one of the things that I want to talk a little bit about is this subscription-based services I call it free to use the term flexible ownership because I think that's where it's going to be less about subscription and more about flexible ownership again too soon to know the impact Fair is raising a lot of money in California you just raise another 500 million this week 100 million a couple weeks ago they have a and they own the inventory so they have to keep raising funds to to to buy that inventory but right now they're focused on growing goober and lyft I mean the their relationship with uber drivers they just bought Ford's subscription program canvas let me backtrack they bought the assets I think there were about 3,000 cars some employees that they wanted to get bring into the fold and Ford was really winding it down don't be surprised if within the next year you see fair by mavin which is General Motors peer-to-peer subscription rental whatever they call it but they're basically what's going on as fair is trying to buy talent there's ver little talent right now in terms of people that understand the subscription market or who are working on it so they're buying these companies to bring in the talent essentially and in DES and frankly those companies aren't really moving the needle at all either from the manufacturers side so I will tell you probably I would call this right now we're in the driveway in terms of subscriptions you know we've seen some dealers that are offering it but it's not going to take off and it's not going to become a reality until the banks get involved and become convinced that they can make money with subscription-based services if the banks don't figure this out or if they if they remain skittish about the residual impact hit that they could take this thing never gets down there's out under the street really it's I'll be dead in the water and what I will know within a couple years is oh they're just now starting to have those conversations but it's all gonna be tied to me it's all based on what the banks do and what they decide it was the same way with leasing historically we had a few dealers that we're dealing and playing with leasing 30 40 years ago the banks got involved they looked at it they figured it out and figured out how to get products to the dealers that the dealers could sell to the public to the consumer and and now we've seen this 25 30 percent of the market depending on you know the year but it's it's all gonna come down to the banks but again subscription-based services will only be part of the landscape it's not gonna overwhelm or displace ownership it'll be part of the landscape will probably expand our access to vehicles to people today that don't have access to vehicles people that can't get a loan military folks that that are short term college students so you'll have a segment of the population that that this is going to be attractive to but I don't know that it's gonna over take basic car ownership the number the numbers just don't work as my brother-in-law it was telling his son where where he was walking through this concept of of subscription services he told that he told my nephew look just take that extra money and pay off the car loan in two years you own your Honda free and clear if you're doing a subscription you own nothing yeah you got you got a vehicle that lets you own and then you can stop making payments on it you're done as opposed to if you're if you're subscribing you got to keep making those payments so he he saw through some of the financial implications for consumers pretty easily anonymous vehicles still in the testing Faye's and i think the people that are actually building these autonomous vehicles are now starting to temper their enthusiasm John craft check ahead of way mo has told cities he has said it multiple times don't get rid of your parking structures just yet the founder of Cruz which General Motors owns now said in 2017 on stage and I have a recording of him saying it that it'll be 30 to 35 years before autonomous vehicles could really realistically become a consumer play so even the folks that are really pushing this understand the technology the technology problems and challenges that they have what we will see you know we'll see some ad we'll see some impact on the commercial I definitely not definitely not on private ownership and not on the dealership businesses but you know fleet commercial urban mobility applications definitely public transit makes a lot of sense and very tightly geo controlled areas but beyond that it's anybody's guess but it's not going to be ten years it's not going to be 15 years it's gonna this is going to be much farther down the road so again if you're a dealer rest easy I mean you driverless cars we're not going to put you out of business any time soon you know we still buy from dealerships I put this slide up because it's absolutely true i dealerships are not going away we know the model and it is strengths and uniqueness of the model state franchise laws and some are stronger than others but but the APA this the association's are pretty pretty good in clever savvy about making sure their their position to protect their flanks in fact just today in New Jersey Jim Appleton sued Tesla because their Singh Tesla's violating the state franchise loves I think Tesla has tried that has opened a gallery that extends their there their dealership allowance buy one and they're calling it a gallery in the Appleton whose the state director of New Jersey is saying no that's not a gallery you're still selling cars out of there so but that that's a battle that's going to continue to be fought as being it's been fought for six years now and musk has made very little headway he's made some limited a head away but nothing that's going to upset the applecart force manufacturer dealer relationships look we just heard on the I manufacturers keep a tight control on who owns their stores hey and how many stories like you know yeah I mean there's a certain public dealer group that's you know right now maxed out it with Mercedes can't buy any more Mercedes stores you know when Honda but acquired DCH five years ago now yeah I guess it was about five years ago they had to sell a couple Honda stores in Texas just to get their numbers align their numbers would manufacture guidelines so I we've talked about this I mean I've been writing about this for over 20 years about this changing and there's been no change and how the manufacturers view ownership of their franchises you know some private equity has come in but they've always been I mean that there's nothing new there that's I mean they were in the in the 90s when the public's reformed that was all driven about private equity money so so there's nothing new there may be some new players but but nothing has really changed the complexity of the car purchase we talked about that before you know this is these guys just can't figure it out Outsiders 2000 with the evident of the internet we get a car order and a 23 year old guy out of Texas saying he was going to absolutely decimate the dealership business and show dealers how they were you know how they were gonna operate he was out of business within a year BP a couple of years ago I was at a conference with one of the BP executives and he just blasted the dealers in the audience and said look I you know I I we don't need your help we're going to show you how it's done and we're gonna we're gonna take this world by storm four months later BP was out of business part of the reason is they were they were a literally rent leasing huge warehouse space in Texas and he had no vehicles they were leasing air and they were paying top dollar again they need to stay there they were shown the door I some of the ones shift technologies Lithia invested in vroom AutoNation invested in they're partnering with dealerships they're become they're moving closer to the dealership model as opposed to the not dealership model so the outsiders did it every single time they either take on a dealership model or they become rather they partner with the dealer are become much closer to the dealer or else they go out of business and historically we we have seen that time and time again through the years so what about the potential threats so we talked about vroom and shift while they're partying with dealers is like I said Khurana that's a car dealership it's a car dealership but a slightly different distribution model but unless you think that's a strictly online deal that's a call center business I've seen data that shows that that indicates it takes as many as 15 touch points between a customer and a carvanha employee before sales consummated either by email or phone 15 touch points that's on an online sale that's just an off site sale now that now they're growing and and I think the threat that the impact on the car dealers right now is there is just how they're they're pushing all their inventory to auto trader cars like our gurus and present and their inventories getting pushed to the top of the list and it's making it harder for franchise dealers to to to get their vehicles and in front of the consumers eyeballs you know they've cut these deals with the with the third parties reportedly and that's creating some angst with some of the dealers bother than that I don't the impact isn't isn't something that's gonna put car dealers out of business in fact it's probably gonna hurt independent dealers used car dealers more and you know in Colorado doesn't have a new car franchise so it's not a new car play it's strictly a used car play Amazon there's a lot of talk about them getting into the business I don't think they're getting into the consumer direct or selling cars to the consumer there's no indication of that it's all based on Alexa being inside the dashboard being inside the car so they're looking at data customer data getting control of that a and B it's an avid digital advertising play so they're going after Google in facebook on the digital advertising play so you're going to start seeing a lot more from Amazon over the next year so about with digital advertising solutions that's if they can figure out how to execute well but that's a huge market for them that DC and that's where they're going to be cost very little investment for them whereas if they were going to get into this selling and distribution of vehicles I mean it's just it's a nightmare Tesla you know we'll see you know they're having a lot of issues with their service the average time last year the average amount of time a Tesla vehicle in the service department was 46 days so if you had a Tesla that needed service kiss it goodbye for a month and a half average so there's a lot of work they need to do on that and I don't know how he does it without closer to a dealership model and we've heard that some rumors that they are very quietly looking at piloting with a couple dealers we'll see we'll see what that how that plays out electric vehicles yeah this is the one I think we're probably represents the greatest potential impact on your business from a service side and you know my friends at any DEA will poop who the idea that there's going to be really any negative impact on service from electric vehicles but the early data shows otherwise that that these cars can go forever without coming into the service department you know maybe the tires are gonna be an issue but other than that we're not seeing much much work you know Tesla being the outlier because it's a there's so many other issues and Tesla doesn't have a they haven't been able to manufacture enough parts to keep up with keep up with accidents so to speak and fender benders and those are much more complicated to repair just because of the sensors and the chips involved so you know you hit a Fender on Tesla on a Tesla it could cost you eighteen thousand dollars to repair so the insurance companies are just now figuring that out too so again that's another thing that we're going to have to see just from a purchase perspective yeah I don't I don't there's a lot of projections by Evo yems they're throwing a lot of money into it right now but again we're not seeing any movement from the consumer it's still between 11.5% ownership of true electric technology and on that yeah there's Tesla but they're the only ones so I think Elon Musk has muddied the waters in terms of us being able to really gauge what true customer demand is a B 48% of Tesla sales happen in California so that you know California is the market I had a Porsche dealer call me last we got in the Northeast concerned because you know they're worried about the launch of the tank on coming in which is Porsches Evi vehicle everyone's writing glowing providing glowing reviews about but they did the same with the Audi e-tron which launched March April I guess that was going to be sort of a bill that was going to be more of a build order model from a distribution perspective I I did a quick search in CarGurus last week of the Audi e-tron 1077 Audi e-tron were sitting on dealer lots nationally according to car doors 362 of them had been sitting there for over 70 days again there's a very little demand and the Porsche deal I was talking to you said that they're they're very concerned because they don't want to be saddled with having three or four of these sitting on their lives not moving and they're seeing what's happening with the Audi so again a lot of questions about a lot of questions here and I don't think we have the answers yet connected vehicles are another one that I think potentially are going to impact you guys everyone's talking about having next three to five years I'm attending a symposium in Detroit next week to talk that's talking about connected technology and forge strategy how they're partnering with comp using this see the V X vehicle to everything technology that's going to be reliant on 4G and 5g as it starts rolling out but but the whole focus there is cutting down pedestrian deaths so that that's that's where for in Qualcomm are playing ball right now they want to cut down pedestrian deaths they aren't really looking at the data GM is looking at how did they come on Tice all this data that supposedly is going to be flowing through that connected vehicle I say this for you guys it's gonna fundamentally change the relationship or how the OEM interacts with the customer because they're gonna have all the data on the vehicle they're going to have all of that data and they're gonna be able to marry that to the customer data via the phone so they're gonna hit all that data that's locked up in your Reynolds in cdk systems it's going to become much less important that this is the question that I don't think the industry is looking at are considering yet there's some pockets Arizona Montana Oregon North Carolina and I think Hawaii have Walt passed or in the process of passing laws governing how data within the dealership DMS can be used and we certainly handcuffing how Reynolds and CDK control that data but there's not been any from what I could see and the people I've talked to and I've read the laws there's been very little discussion around what happens when that connected vehicle comes into the comes into the market so that's just something that you know your state associations you have to be looking at heart and and start preparing and learning and being educated about this now because it's to me that that's the one thing that that that is going to change that relationship it's going to provide that that manufacturer the ability to communicate directly with that customer and be able to push them to whatever dealership they want regarding service and you know there could be some dealers left out in the cold here so I did I'm just saying it that from a legal perspective I think that that's where some of the much of our efforts have to have to be today again me you know I maybe I maybe I'm being too dire to negative there but I see the potential for that happening you know we talked about that day than just the amount of data yeah depending on who you read or which study you see it could be as much as 30 terabytes of data each day to the cloud that's each vehicle so there could be 4.5 billion terabytes of vehicle data uploaded to the internet every day we're saying by 2020 it's it's gonna be more like 2023 2024 but that's just imagine that the amount of data and managing that how to manage that data is going to be where where I think a lot of the lot of the innovation is going to come in to play let's talk a little bit about dealership consolidation this is 2013 to 2017 data I compiled I have spreadsheets for each year going back to 2013 obviously I don't get the financial data because you guys will not give it to me and if you did you probably wouldn't tell me the truth either and I do have a different answer from the buyer and seller and how much said that sale was or transaction was but we can see that 2015 seemed to be the peak year that blue number represents rooftops the green number is actual transactions and the old number is yellow the reason that number was so high in 2015 was that was Brookshire's acquisition of the 80 some stores that vein Thailand so otherwise has been pretty consistent going back to 2013 however this yea the number has declined from the same period in 2018 21% number of rooftops the number of transactions is down by almost 30% this year so I think we've tracked through August January through August 131 different transactions accounting for 288 rooftops so that's that's where we are last year through the same period it was 184 transactions with 292 dealership rooftops so it's it's for the most part consistent we have some ups and downs I think going back to 2013 but I did I put this data up I don't know if we can really look at it from a year-to-year perspective I break it down in the periods actually and I think what we're seeing right now is a period of time but there's some uncertainty certainly with the Trump administration you know we talked about why allow first of all let's look at the public group activity it's down last 20 months 40 acquisitions and only 56 and I mean 56 divestiture so they're right sizing their portfolios let's use the one that's still doing all the buying for the most part that does not include Penske or group ones international place that's strictly us-based but why it's slowing down right now probably some concern about the trade policy's from Trump I think we're seeing that impact it's still very difficult to get these big deals across the finish line and you know I hear rumors occasionally of large deals in play and they never seem to get across the finish line again manufacture involvement is really I think probably the primary reason for that you know that we've seen quite a few still gross as many as 10 now that have gotten the in trouble on this this whole selling out of trust or getting over their skis will probably continue to see that although some of that is starting to work its way through the market now we may see some more Nissan fall out Lechner and Fenton you know two big us well Fenton was a big us group they sold their Nissan soars left there had a cut on the East Coast had somewhat of a convoluted investment strategy investor strategy and he ended up having to dismantle his thing Rieger dikes you guys heard that story of what's been going on in Texas last year you know they just they pulled the wool over Ford's eyes but they I think they were able to do that because the CFO of the company had spent nine years as an employee at Fort credit and reportedly hatched this plan you know at the dealership and really I'd destroy that dealership one not so funny part of the story but when the story first broke and he brought in a stalking horse bidder was Camden associates out of Dallas - he was gonna pay 25 million for the whole group while Camden Camden is now been selling out of trust and they're gonna have to sell their dealerships so the this stuff is a little more I think a little more common now than what it was a couple years ago prime motors this is the GPB owned group some of you know about I don't know if you've heard about that story but GPB big investment quote-unquote investment firm out in New York City significant trouble with the law right now because they've not provided accurate earnings to their investors so they have to go back and restate their earnings I think going back to 2000 in the 16 or 17 and they keep putting it off putting it off they were just rated by the FBI in March February they just fired David Rosenberg who was the CEO Rosenberg brought them in and then he saw what a what a house of cards that that is now but Rosenberg filed a lawsuit against GPB we're talking 60 some stores involved now I mean now they're selling us on their back down the 56 but no one knows how this is going to play out it is the electricity just fired Rosenberg your CEO on Monday it says this is gonna be a huge mess to work through and I don't think you know I'm sure there's plenty of manufacturers and lenders right now who are who are not happy with what's happened up there GPB focuses on these high yield high risk investments and talk quote/unquote guarantee about an 8% return each year which they can't hit and we're talking thousands of investors so instead of a few institutional investors it's the everyday Joe throwing some money in through a broker dealer and and so there's a lot of people that are losing money right now apparently hence the investigations by the state attorney general the FBI is involved like I said so are we gonna see more of those probably not I think that was really based upon a really wacky investment strategy by GPB so this isn't that that's not going to be coming well madam I actually ran into the same thing their investor same thing same kind of investments didn't have the cash to provide momentum and then they went that whole thing got blown up last year late last year manage your cash flow and don't get over your skis on this on selling out of trust you got to stay you know if even if it means you pull back on sales that's you're gonna get caught you're never going to you just at some point you're gonna have to pay the piper and yeah with like I said we're seeing that more and more I'm not going to read through all these we will send the presentation to you guys to all of you these are some kind of long-term trends that we're seeing in the market the and I think service will be the next frontier for innovation in our space we've seen it on F a knife in tech related products it's really going to be service but that's not gonna happen until the connected vehicle comes into the play so we're in this kind of no-man's land of waiting to see how that impacts are waiting for that technology to catch up to what we can do one of the things that we're seeing is on the used-car side on the auction side ACV auctions I mean they've been getting a lot of press lately that's an interesting model or to get these guys out of New York there's mixed there's a mixed bag in terms of results there probably have to work on their processes in terms of titling and pickup and delivery of the vehicles but it's it's giving dealers in in it and expand an opportunity to eliminate wholesale there's I just launched this year recently in the last couple months car offer Bruce Thompson out of Dallas Texas on Bruce is the guy who founded American Auto Exchange which came before V Auto and American is so he came up with that whole concept of used vehicle inventory management with dealer Seiken owns now but he's want to came up with that idea he's been in the industry for 30-some years he's a he's an inventor the developer his product just now is that he's launched in the last couple years car monks car offer which is ostensibly a trade desk for dealers in their inventory used car inventory so let's say I own a dealership and if I'm on his platform then it will know through the use of AI artificial intelligence they'll be able to determine which vehicles I need on my lot which ones are going to drive the most profit and sell the fastest and for all the other dealers on that platform it will survey all of their inventory nationally and it will be able to create an auction-based 24/7 auction based environment for those vehicles so yeah he's building some critical mass and he's got a couple of public dealer groups on it now I think he's at about a hundred rooftops he told me last week so that's the union I think the technology is there today for that kind of scenario probably wasn't there five years ago three years ago but today it is I'm talking I'm talking green positively about it I will tell you that he just pulled out of sponsoring my event in Austin so you know I might have a bone to pick with him but he's not paying me to give a commercial I'm saying that this is where some of this ACV auctions I mean trade Rev which is owned by car you know obviously Manheim's playing in the space there's there's a lot of room I think on the used-car side for us to take some of these costs out of the system and make it a much more efficient marketplace and that technology is there today that is very promising there's gonna be some fits and fits and starts with it in some failures but like overall it's gonna become just a mainstay like aviato has become let me talk a little bit about real quick about some M&A activity on the vendor side you know cars.com did not get sold I don't know if you've been tracked following that but that was that a publicly traded company announced in January that they were doing a strategic initiative to find a buyer to take it private that did not happen and that was because of the activist investor that was in play there kind of screwed up a deal that they had and I'll tell you the car auction was the buyer and that deal was pretty much done and then the activist investor screwed it up Ezrin result cars.com stock price has gone from twenty eight dollars to eight dollars this year and really went from nineteen dollars to eight dollars in a matter of minutes when they announced this announced their earnings second quarter earnings it's starting to bounce back up a little bit you know I would say at some point I would be very surprised of cdk doesn't get sold in the near future the stock price is at a point where it could be attractive to someone and I would say that would be the buyer would likely either be a Vista equity which owns dealer socket or it could be Salesforce I really think that the play for Salesforce is cbk in Salesforce is actually looking very hard at getting into the automotive space and going direct to dealers with their technology so your you may hear a lot about them in the near future you'll start seeing the articles in automotive news and elsewhere Reynolds and Reynolds that's another one that could be sold I think the likely buyer would be a Vista Equity Partners again which owns dealer socket this is just raised sixteen billion dollars so they have the cash there's going to be some movement my point is there's going to be some movement over next two to three years I think is really going to impact the landscape here we're gonna see one of the third-party providers get sold I'm hearing Edmunds may be pretty far along in the process of getting sold certainly the other companies like Auto web which is former out of I tell TrueCar these are all companies that likely will be at some point picked up by someone impact cdk global selling their digital operations we'll see who ends up with after that that could change the landscape on the website part of the business so and that's going to impact it that's gonna impact the dealers yeah we don't I don't think I read a I try to cover the M&A side from the vendor side because I really do believe that the impact it does impact the dealers for example cvk was spun off in 2013-14 actually an activist investor got in they they cut their entire service customer service infrastructure completely decimated it to get their margins up dealers were left holding the bag it was it was a from year for the last five years it's been it's been a nightmare of your cdk dealer it's been very hard on the surface side that was why it was it was an activist play to get the margins up because they wanted to sell the company you know uh you know we all saw the impact when Cox bought dealer track right there was there was a huge impact there so so these plays I think it's important as you're selecting vendors and looking at various partners to use you got to understand that landscape because it will impact your business at some point knowing who's gonna be partnered with who who's gonna buy who so that's I spend a lot of time on my reports writing about that type of type of coverage GM UAW strike if you ask me two days ago I would have been a lot more positive but now that GM has eliminated has pushed the health care costs off to the UAW that's sort of indicating that they're batten down the hatches and they're getting ready for a long haul so we'll see I mean something could break but right now I'm not hearing anything from my sources in Detroit the day that that anything is closed plus the UAW scandal you know when your present is rated at gunpoint House is rated and it's at gunpoint a few days before the negotiations start that certainly throws everything into a into an uncertain bucket I would say so I almost forgot this is the most important piece for you guys today this is the next big thing this is the next big investment play I'm telling you you're gonna want to be you're gonna be writing checks after you see this we started with the scooters we got the bikes we got uber we have honestly shareable strollers now in China however suber shareable shoes fractional shoe ownership you left but we already have a model that works the bowling alley all right bowling shoes so this is courtesy of my friend Glen Mercer it's his idea I stole it so I have at it but anyway we'll email you this presentation we also have spreadsheets from this year January to August of all the dealership by cells and the vendor M&A activity for this year that Sam will email to you later so great thank you Sam [Applause] [Music]