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ldquoWersquore doing this differentlyrdquo says Battaglia
<p> <strong>&ldquo;We&rsquo;re doing this differently,&rdquo; says Battaglia. </strong></p>

WardsAuto Dealer 500 Members Confident, Profitable

Five years after the worst economic downturn in recent memory, the 500 dealerships that make up the 27th annual list recorded sales of $50.3 billion based on total revenue, up 11% from $45.4 billion in 2012.

As an elite part of the nation’s nearly 18,000 dealerships, the WardsAuto Dealer 500 reflects an overall industry that is becoming more confident, profitable and customer-centric.

Five years after the worst economic downturn in recent memory, the 500 dealerships that make up the 27th annual list recorded sales of $50.3 billion based on total revenue, up 11% from $45.4 billion in 2012. Total unit sales rose 13% to 1.5 million from 1.4 million in 2012.

These results generally reflect improved conditions at many U.S. dealerships. An analysis by the National Automobile Dealers Assn. shows total average sales for U.S. dealers were $9.7 million in the first three months of 2013, up 5.1% from $9.2 million in the same period last year.

NADA says average new-vehicle sales were up 8.9% in the first quarter to $5.5 million, with the average new vehicle selling price rising 3.4% to $31,307.

Net dealership profit before taxes in the first three months decreased 0.2% to $229,365, due largely to narrowing margins, higher-than-anticipated costs and a slight softening of the market in that period.

“It was regrettable that taxes were increased in the first quarter, but the general sales climate is strong,” says NADA Chief Economist Paul Taylor. “With interest rates at a level last enjoyed when Harry Truman was president and the average car over 11 years old, customers are actively engaged in the marketplace.”

Taylor predicts new-car sales of 15.4 million this year. WardsAuto forecasts 15.3 million units this year, 15.4 million if there’s heightened fourth-quarter sales activity. That could come from an increase in pickup sales outpacing the general market.   

Most interviewed dealers on the WardsAuto Dealer 500 agree 2013 is a good year to be in the car business. Those whose stores are not yet performing at desired levels are cautiously optimistic and making investments to strengthen their operations.

“I feel very good about the industry coming back overall,” says Tim Michael, president of Capital Automotive Group and dealer principal of Capital Ford in Raleigh, NC, No.19 in this year’s ranking with $196 million total revenue.

The store is tracking up to $200 million for all of 2013. “Attitudes are very good here, traffic has picked up, phones are ringing a lot more now than they have in the past,” he says.

With 290 employees, Capital Ford sells about 750 new and used vehicles a month, including 150 fleet sales to government and businesses in Raleigh-Durham’s vibrant Research Triangle region.

“Our business was 30% commercial, but that really shut down around October 2008,” Michael says. “It seems to be growing again. In the past six months in this area, construction has come back, there are a lot of apartments and condos being built and plumbers, electricians and painters seem to be getting back into it.”

To maintain margins and profitability, Michael’s team works to keep costs down. “We have expense meetings weekly with different departments,” he says. “As 2008 came around, we all had to learn how to tighten things up a little bit.

“CarMax is here and they are very competitive. We work hard to make sure we hire the right people from the beginning and that we support each other. There are no superstars here; everybody works hard together.” 

Capital Automotive Group holds 10 franchises in the Raleigh area. “We added a Subaru franchise in another market this past month,” Michael says. “Two months before that we purchased another Ford store. As long as we can support that growth with the right people, we want to continue to grow.” 

Processes Important

Jason Lewis, general manager of East Tennessee Dodge-Chrysler-Jeep in Crossville, TN, (population 10,825) has little patience for dealers who complain they cannot pull out of a sales slump.

Some are simply “asleep at the wheel,” he says. “It’s my opinion they’re struggling due to their processes and policies and how they’re handling their customers. The car business is as good as I’ve seen it, and I started in 1998.”

Last year was a record year for the dealership in volume and revenue.

Along with two pre-owned satellite facilities in neighboring towns, Lewis’s team generated $61.5 million in annual revenue, putting the dealership, which is part of Canton, MI-based Victory Automotive Group, at No.421 on the WardsAuto Dealer 500. “We sold about 2,800 cars last year, and we’re on pace to exceed that in 2013,” Lewis says. “Last year was up 12 % from 2011. I’m never satisfied with where we are. I always feel like we could do a little better.”  

He attributes success to maintaining a positive attitude, building and retaining the best team and representing Chrysler Group.

“What Fiat has done with Chrysler is unbelievable,” Lewis says. “The products are absolutely amazing and they continue to get better. Their attention to detail is tenfold what was going on five years ago. Chrysler is 100% behind the dealers to really help them move some cars.”  

The Tennessee store will break ground this summer on a $4 million, 22,000-sq.-ft. (2,043- sq.-m) facility and expects to add six to 10 new employees. 

Based on brand reputations alone, one may think Mercedes-Benz, Porsche, Jaguar, Land Rover and Maserati vehicles can sell themselves. But competition in the Kansas City, KS, market cannot be ignored by Aristocrat Motors, No.177 on this year’s list with $104 million in total revenue.

“When companies’ financial arms offer 0% leases, that drives business to the other manufacturers,” says Aristocrat President Marion Battaglia. “If you can lease a 3-Series BMW for $400 a month, that gives them an advantage. That’s what drives this luxury business. People will gravitate to what they can afford and what is perceived as the best value.”

Mercedes represents 60% of Aristocrat’s new-car volume. Its Land Rover and Porsche business continues to grow. Battaglia says Porsche has found a niche with the 4-door Panamera that goes up against the Mercedes S-Class and BMW 7-Series.

Battaglia says the keys to his store’s success are empowering his staff to make decisions that satisfy customers, and being involved in the community.

This year, he challenged marketing director Robert Hellweg to come up with a list of promotions that would drive sales traffic. As a result, the dealership will host events ranging from a pet-adoption day to a car show with legendary British racer Stirling Moss. A May golf expo held at the dealership drew 240 people in four hours, more than twice the normal traffic.

“The most important part in a dealership is to let your staff know that we’re doing things differently,” Battaglia says. “We’re not just sitting on our hands and hoping someone shows up.”

On the premise that satisfied employees mean satisfied customers, Aristocrat recognizes staff birthdays and anniversaries. The dealership recently matched employee contributions for a detailer whose house had burned and presented him with a check for $10,200.

'Humble and Hungry'

Energized by new products and growing sales, auto makers are looking to strengthen their partnerships with dealers.

“We have maintained a very humble and hungry demeanor with our dealers; a real can-do spirit and one of true partnership and teamwork,” says Alan Batey, General Motors vice president-U.S. sales and service.

Agendas aren’t always the same for dealers and auto makers, but “by having very open communications and putting trust in the middle of everything we do, we can do remarkable things together,” he says.

Batey adds: “Dealers need to focus like never before on customer retention, to exceed their customers’ expectations at every possible touch point, and they need to grow loyalty. Those stores that do that are, and will continue to be, very successful and profitable.

“Those stores that live in the moment and are opportunistic and don’t back it up with really great service, frankly, are going to be struggling.”

Batey encourages GM field managers to collect and share best practices with other dealers. One of those is having salespeople hold a yellow clipboard when they are meeting with a new customer.     

“It’s a real simple idea, but you can imagine when you are approached and thanked by two or three different employees, it makes the customer feel that they’re working with a store that cares about customers,” he says.

After entering the U.S. market in 1986 with a single model, the Excel, Hyundai has become a competitive force with products that rival competitors in quality and style.

Dave Zuchowski, executive vice president-national sales, uses this growth to excite his dealers.

“We show our dealers a very positive trend line for profitability and sales per outlet,” he says. “The No.1 thing we talk to dealers about is the customer experience. We have grown our volume from 300,000 to 700,000 in the last four years, and that’s a wonderful opportunity for dealers and us as the OEM.

“But if you can’t make those customers happy and keep them satisfied and coming back, then we would have squandered one of the greatest opportunities for growth that we would have ever seen.”

Zuchowski says he tries to maintain transparency in Hyundai’s dealer-council process. “We get into lots of arguments, we don’t always agree on everything, but we always have a full dialogue about it and when we decide to do something that the dealers don’t think is right, at least they know why we did it,” he says.

Hyundai appears to have sidestepped many of the issues that have gnawed at factory-dealership relationships.

“We came off stair-step incentives in 2008,” Zuchowski says. “Our incentive program is structured so that a dealer that sells 10 a month gets the same exact (per-unit) incentive as the dealer that sells 100 a month. We’ve really democratized our incentives.”

Zuchowski says he doesn’t believe in facility upgrades for their own sake, but he appeals to dealers’ self-interest to encourage them to stay competitive. “We don’t believe there’s any great value in building a huge mausoleum because you’re going to have to service that debt over time and the business is very cyclical.”

After showing his dealers the new products in the pipeline, Zuchowski asked them to compare their stores to their Nissan or Honda competition. If facilities look old or tired by comparison, do something about it, he says.

“It’s pretty easy to get your arms around how much upside potential there is and to make an investment back in your franchise,” he says. “We have 820 dealers, we’ve had over 400 major facility renovations over the last three years, and we’ve done it without the dealers kicking and screaming about it. They saw the value in it and they’re seeing the returns on those investments.”

Message to Dealers

When John Felice, general manager of Ford and Lincoln sales, talks to his dealers, the key message is to raise expectations for the auto maker’s growth. Ford sales in April rose 18% compared with last year, making it the company’s best April since 2007. Cars were up 21% while utilities and trucks were up 16%.

“It’s seizing the moment that we have right now to grow,” Felice says. “We’re off to a very good start to the year. Our market share for the first four months is 16%,” up about one percentage point. That’s fully attributable to retail-sales growth.

“Our dealers are performing very well. Part of that is a recovering industry and part is the restructuring they made during the difficult times three or four years ago.”

Ford is encouraged by economic indicators that bode well for fullsize pickup sales. The National Association of Home Builders expects total housing starts to hit 970,000 by the end of this year, up 24% from 2012.

“In grass-roots meetings with dealers, we’re anticipating a very robust fullsize-pickup market for the balance of this year and for 2014,” Felice says.

While dealers generally are upbeat, some regions of the country are still feeling the effects of the recession.

Red River Chevrolet in Bossier City, LA, opened its doors in 1926 and today ranks No.285 on the WardsAuto Dealer 500 with 2,548 units sold and $81.6 million in revenue. That is down slightly from the prior year.

“The first part of 2012 was good, but in the second half our market kind of collapsed,” says dealer principal George Fritze, whose great-grandfather started the business. “We were fortunate to go though GM’s bankruptcy in pretty good shape with the oil and gas industry doing as well as it was, but that has slowed way down. Between that and the GM plant closing here, it made a dent in our business.”

Fritze says the first quarter of 2013 was slightly ahead of last year, and he expects a boost from Chevrolet’s new Impala sedan and Silverado pickup, which outsells the Ford F-150 in his market, he says.

Red River Chevrolet was the first dealership in GM’s South Central region to have a GM-certified “World Class” technician (it now has six) and the first Louisiana store to have its finance and insurance staff certified by the Association of Finance and Insurance Professionals.

The dealership’s showroom Hall of Fame features photos of employees who have been with Red River Chevrolet 20 years or longer. Two have more than 40 years of service. One had 59 years.

“Our loyal customers and loyal employees have made the difference for us,” Fritze says.

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