Dealer Flies High After Passing Up Aviation Career

“Get along with your franchisor” or find another business for yourself, says Fred Anderson who became a dealer after considering a career as an airplane pilot.

Lillie Guyer, Correspondent

May 31, 2011

7 Min Read
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As a 21-year-old college graduate, Fred Anderson had a choice in 1970. Go into the dealership business or fly airplanes as a professional pilot.

General Motors took a chance on him, and his life has never been the same.

Chuck Green, then a Chevrolet zone manager, knew the Anderson family well and offered the young graduate a spot at a Chevrolet-Oldsmobile store in Canton, NC, a tiny rural town. The position was as the dealer operator. The former dealer there was going under.

Anderson went for it, with help from his father Andy Anderson, who had opened a Chevrolet-Oldsmobile store 10 miles (16 km) away in 1955.

They purchased the assets and capitalized the Canton dealership with $100,000.

“But we were soon running short of cash and had to add $25,000,” Fred Anderson recalls. “This was a small paper mill town with massive environmental problems, but that’s still a cheap way to get into the car business.”

Today, a typical dealership costs about $3 million to open, according to industry data.

Fred Anderson has gone on to open more dealerships and create Anderson Automotive Group, a family business with 452 employees across North and South Carolina.

Fred Anderson and son Michael at new Kia store.

Meanwhile, Fred Anderson’s son, Michael, is in line to succeed him as dealer operator when that day comes. He now heads up sales and marketing activities as a vice president. A succession plan for other key officers also is in place, including John Lowe, the current president.

The group operates eight dealerships in large and small towns.

“We’re spread across the Carolinas, with stores in Raleigh, Asheville, Charleston, Columbia, Sanford and Waynesville,” Fred Anderson says.

The group represents Toyota, Scion, Nissan, Chevrolet, Buick, Dodge, Chrysler-Jeep and Kia brands.

“We enjoy a good relationship with all of them,” Fred Anderson says, expecting total revenues of $350 million this year. “But that depends on how quickly Japan can recover from the crisis there.”

The company is on the Ward’s Megadealer 100 and individual stores, including a flagship Toyota dealership in Raleigh, are on the Ward’s Dealer 500.

During the economic downturn, Anderson’s group faced rough patches, Fred Anderson says.

“Staffing went down about 20% in late 2008 and early 2009, but we have been adding employees since then,” he says. “We have restored about half the jobs that were lost.”

Much of the hiring of late has been for recently acquired Kia and Toyota stores.

The GM and Chrysler post-bankruptcy restructurings in 2009 forced a rethinking of the business.

“We took immediate and significant action,” Fred Anderson says. “Anyone, any department or any dealership that was not productive was eliminated. That meant closing a marginal small-market GM store that had been impacted by local economic contraction and by GM’s decline.”

The group also “reluctantly” closed a new Kia point in a small market, he says. The store had potential but not enough to make the cut.

“On the GM side, there was mass confusion,” Fred Anderson recalls. “At the time of the bankruptcy, we had just worked through the closure of one of the two GM stores we owned in the same area and consolidated the franchises with the surviving store.”

The decisions involved GM’s market rep management and Anderson finally got approval to consolidate in a 2-year-old facility on a major highway situated across from a new WalMart Superstore in Waynesville, NC.

“Unfortunately, the consolidation was completed at year-end and affected the balance sheet, while our sales had not had time to show the results of the consolidation,” he says.

That put the store in jeopardy when GM began a post-bankruptcy dealership-reduction plan.

“Our second appeal, created at considerable expense and trouble, was accepted. The facts were on our side and our case was presented brilliantly, but the intervention of our congressman may have been the deciding factor,” Fred Anderson says.

His Chrysler Jeep Dodge franchise survived the massive government-ordered Chrysler restructuring that took out 789 franchise dealers in 2009.

The group’s management structure is built around partnering with general managers to give them a sense of ownership.

“I know other dealers think that tracking stock, earned value analysis or other stakeholder programs work well with less trouble,” Fred Anderson says.

“It’s my opinion that there is no substitute for having an owner in the dealership every day. We use tracking stock and an EVA program for our management people to give them an ownership mentality.

The group’s diverse dealership locations allow it to measure the pulse of market conditions for a widespread area.

“Through April, the unit volume was up 33%, and we felt the market had considerable momentum,” Fred Anderson says. “We had a good April, but we also felt a little pullback in the market.” And Toyota’s disaster-related inventory issues have slowed sales.

Kia and Nissan are tracking according to budgets. Toyota stores are running behind, but Fred Anderson says that is of small consequence, all things considered.

“Toyota is the biggest part of our business, but we are more concerned about the devastating effects of the disaster in Japan,” he says. “Our hearts and prayers go out to the Japanese people who have suffered far more than we have or will from this disaster.”

A 2010 acquisition is Toyota of Charleston, SC, formerly West Ashley Toyota. A new facility is under construction.

The group eyes potential revenues of about $65 million from that outlet.

Anderson has a “must-keep” set of marketing principles. “We strive to allow our advertising to reflect who we are,” Fred Anderson says. “We value consistency and believe in doing what we say we’ll do.

Advertising and marketing are about building a brand over time. Keeping that in mind, we usually manage to do the right thing. It’s not so complicated.”

Employees who don’t fit into the company culture “always manage to weed themselves out,” he says Further expansion is in the works for the dealership group that has the “ability and desire to add first-tier franchises in large or intermediate markets,” Fred Anderson says.

“Small groups of dealerships that could be purchased together would be of even more interest. We target stores with $50 million-plus in annual revenues.”

Fred Anderson’s second dealership venture was a Nissan store in 1980. Considering the Japanese brand’s growth, it was a good move, but not “because I had any idea of what the future would bring,” he says. “The opportunity to buy our second store happened to be a Nissan dealership.

“We operated it with lower inventory levels, higher grosses and a much more dealer-friendly attitude at the manufacturer. It didn’t take a lot of genius to figure that out.”

In 1987, he met to discuss business opportunities with the late Jim Moran and Al Hendrickson of Southeast Toyota Distributors, the world’s largest franchised distributor of Toyota products. Its dealers in Florida, Georgia, Alabama, North Carolina and South Carolina account for 20% of Toyota’s U.S. sales.

“Our experience with SET and (Toyota Motor Sales U.S.A.) was so good, we purchased three additional Toyota stores,” Fred Anderson says.

Today, his award-winning Toyota stores enjoy high customer-satisfaction scores.

After taking over the Chevrolet-Olds store in Canton, Fred Anderson later moved it from its downtown location to a new facility on the interstate where it became the largest-volume GM dealer in western North Carolina for decades.

Its success provided the capital and people to grow the company, Fred Anderson says.

He tells a story of how his father became the parts man for a small dealership after World War II. Andy Anderson quickly built up a large wholesale operation and reaped the economic benefits.

The dealer loved the additional business, but was “shocked at my dad’s paycheck. That dealer made the wise choice to leave the pay plan alone and later partnered with my dad in the family’s first dealership.”

This taught Fred Anderson that “we succeed through the success of others.”

That is lesson No.1 for him. And lesson No.2? “Get along with your franchisor” or find another business for yourself, he says.

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