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What's on Dealers' Minds

A point where you are doing stupid business Tarbox Toyota Scion and Tarbox HyundaiNorth Kingston and West Warwick, RIOwner: Ed Tarbox Q: How have used cars helped curtail the effects of dwindling new car sales? A: Used hasn't been the fallback position that it had been, it's been an extremely volatile used-car market. Most of the dealers that are doing business have been making mistakes in used cars.

“A point where you are doing stupid business”

Tarbox Toyota Scion and Tarbox Hyundai
North Kingston and West Warwick, RI
Owner: Ed Tarbox

Q: How have used cars helped curtail the effects of dwindling new car sales?

A: Used hasn't been the fallback position that it had been, it's been an extremely volatile used-car market. Most of the dealers that are doing business have been making mistakes in used cars. If you are paying a sales manager to do a deal, he's tempted to get a paycheck by over-appraising a car to make a deal, because he wants to keep the iron moving and keep the sales people happy. There comes a day of reckoning with used cars — there's nobody in the dealer consignment lanes buying these cars.

People will be trying to get out from under the inventory they've got, because the only ones that are selling are fresh ones that you buy super cheap. You still have to do business, but I'm concerned about making the right moves on the chessboard. You can't not do business but there's a point where you are doing stupid business.

Q: How did the end of 2008 play out?

A: We all got caught flatfooted, August didn't finish the way that it should have and then September was even worse, and we all know what happened to the balance of 2008. Dealers are all “over-inventoried,” especially those with those little small, gas-sippers that were sustaining us when gas was $4 a gallon. We have maybe three or four months to get off of the leftover '08s, and we are selling them at any price.

You end up making money on a couple of them, but most of them are losers because everyone is in the same position, trying to get their sliver of a shrinking market with an inventory that's overgrown. Then what happens is you compensate by putting too much into trade-ins — all of a sudden you wake up one day and say “Geez, I have cars that are 200 days old and are $400 mis-appraised.”

Q: What are some of the top issues for your brands this year, and what are some things the manufacturer needs to do for its dealers?

A: I have Hyundai and Toyota, and both are in a good position. I'm in a better position than most. It's going to be an interesting year. Toyota has always sold their products based on long-term value and resale value. They need to make sure they stay competitive, because a lot of the other manufacturers are getting down and dirty.

Hyundai is trying to move product upscale. They are trying to put some value into the Genesis brand, but it happened at an awful time — Hyundai has always been known as the economy brand, or the value brand, and now all of a sudden they're going upscale at a time when the market is needing that low-cost car with a lot of content.

Q: What do you think will happen with new vehicle sales in 2009?

A: It's going to be very interesting to see how these manufacturers maintain their market share or grow it. It's funny to watch them all react and try to determine what segments the growth will be in. Toyota got out of the full-size truck market and was going to build a plant for Prius, at least they did it reasonably quickly and said, “Priuses are starting to back up, we're not so sure that with gas as cheap as it is that this is what we want to do for 2009.” This year has a lot of question marks, as far as where the manufacturers want to go to keep their market share up.

One thing is for sure, the dynamics of what sells is going to change, and it has been for the past year. It's anybody's guess as to what's actually going to sell and what the heck will happen to fuel prices. Will people want the hybrids? Or, will they want the mini-cars? Will they go to full-size cars because gas prices have come down, or get back into the sport-utility business? It's going to be a very interesting market this year.

Q: Will you be attending the NADA convention?

A: Times are tough, and we're probably going to be sending only two people this year. You want to get the benefit of being at the convention — you get to commiserate, but also to find out what's going on in the industry. But if you send several people there, you have airfare, and hotel rooms. “We aren't rolling like we were, right?”

Q: What kind of vehicle do you drive on a day-to-day basis?

A: A Tacoma, a nice, conservative little pick-up truck. I used to drive a lot of the used cars that were aged, but my managers got tired of seeing me in those cars.

Q: Read any good books lately?

A: Nope, but I read all of the trade magazines. In fact I have a few of the back issues of stuff I'm supposed to read. When things are slower, like they are now — you are not steering the ship away from the rocks — I read the trade magazines. The ones I've really been paying close attention to recently and trying to pull all the nuggets out of them are those with the internet and CRM stuff.

“Biggest problem negativity”

Jim Bishop Toyota and Jim Bishop
Chevrolet Buick Pontiac GMC
Tuscumbia, AL
President: Brad Bishop

Q: What was one of the toughest hurdles you faced in 2008?

A: I think the biggest problem we've had as retailers was the negativity coming from media. Certain pockets of the country had tremendous difficulties and tremendous problems, others of us didn't have those issues — we are tucked away in a little corner of Alabama, and we don't have the housing slump, jobs going away in droves — but, the national media made it seem like the world was coming to an end. For us, our biggest hurdle with customers was confidence.

Q: How did you combat those hurdles?

A: In our customer waiting areas, we try to keep the TVs off of all the negative spew — we put it on an outdoor channel or sports channel, that doesn't have all the negativity. We have TVs on the showroom floor, and when our guys are standing around, we don't want them getting hammered by all this negative stuff coming from the media.

Q: Are you having any challenges with your floor plan provider?

A: The biggest thing (with GMAC) was the continuous change in programs that we saw from mid-year to end-of-the-year, curtailments on new cars and used cars, payoffs, increase in rates without any kind of notice.

Q: Will you be traveling to New Orleans for this year's NADA convention?

A: No, we are not going. I've actually never been, because it's never fit with our schedule.

Q: Obviously 2008 was a tough year on the sales side, how do you think this year will pan out?

A: I think the first quarter will probably be a little touchy — after inauguration I think we'll see a lot of positive news coming from the media. That's if the new folks do a lot of the things they say they're going to.

Q: What are some of the top issues for your brand, and what are some things you think the manufacturer needs to do for its dealers?

A: On the domestic side, it is issues with GMAC, and some of this bailout money needs to trickle to the dealers. They've imposed curtailment deals with us on our new and used vehicles, and it's put a big crimp in cash flow for us — some of that money, instead of trying to push deals with zero percent, needs to help ease up on making curtailment payments.

We need to get consumers confidence back, and in the last few weeks we've seen traffic up at both stores. I think the positive spin that the manufacturers are getting with the government stepping in is really helping. People don't think the car makers are going out of business as much now.

Q: Are you concerned about the survival of your dealership?

A: Absolutely. We are not in dire straits by any means, but if they don't put some stuff in place to help the dealers day to day — I know you have to have incentives, promotions, and all that — it could get even tougher.

Q: What vehicle do you drive on a day-to-day basis?

A: My wife drives a (Chevrolet) Suburban, and I drive a (Toyota) Sequoia.

Q: Read any good books lately?

A: No, I haven't had time during the holidays to do any new reads.

“If there are fewer consumers, it will trickle down”

Kenny Kent Toyota Lexus Scion
Evansville, IN
Managing Partner: Butch Hancock

Q: Obviously 2008 was a tough year on the sales side, what were some things you've done to compensate?

A: As far as our dealership is concerned, we felt the pinch also. When there are fewer consumers out in the marketplace, it will trickle down — no matter if you are a Toyota, General Motors or Ford store. If there are fewer people out there buying, obviously your share will be down also. As far as any uptick or increase in business, our service, parts and body shops did quite well in 2008.

Q: Were there any facility improvements you've done lately? And if so, has it helped or hurt the business?

A: We started our facility upgrade in 2007, and finished it up in early 2008. From the standpoint of the “feel good” factor, it makes all the employees and customers feel good. It also shows that we are committed to the community. Did I need the added expense? No, I didn't in 2008, but hopefully (the economic downturn) will be short lived, and in 2009 and 2010 we'll be prepared. This facility will take us into the next 10 years or so.

Q: Are you going to this year's NADA Convention in New Orleans. Why, or why not?

A: I haven't made a decision on that yet, there's a group of us that might get together and go. We have a meeting next week, and I'll make a determination then.

I've been to quite a few of NADA's conventions. I think it's great to “refresh” some of the information from an industry standpoint, but a lot of what you hear is old news. It's a good time to catch up with people you don't get to see often, and sometimes hearing the same message over again makes you think about some things that you probably should be doing at your dealership — things you knew, but it brings it back to the forefront.

Q: What are some of the top issues with your brand this year?

A: One of the issues is their buying practices with credit tightening up. I'm curious to see what kind of an approach they'll have. GMAC just lowered its buying standards, and at one time they weren't going to buy anyone with less than a 700 credit score. And, now they've lowered it to 621 — they're credit requirements are easing up, and I'm curious to see if Toyota will ease up some of its credit requirements for purchasing.

Q: What do you want to try in 2009?

A: Used cars and the fixed end were two parts of our business that we really focused on in 2008. The problem with used cars, especially lately here, it seems that market is drying up. When you are not selling as many new cars, you don't have the trade-ins, so the availability of the cars has dried up some. That's an area we'll really keep our eyes on, because what we'll see this year is a severe shortage of used cars. And on the fixed end, I think folks are keeping their cars a little bit longer, which means they have to have more service and maintenance work done.

Q: With a tough 2008, what do you think the future holds?

A: I'm looking forward to a big 2009, I think it's going to be a good year. Hopefully the consumer confidence will be back — we'll be ready with inventory, with a new facility, and I really look forward to this year. I think we'll see a lot more positive than we did in 2008. I don't agree with some of the (negative) predictions about 2009. The consumer is tired of sitting on the sideline waiting to see what's going to happen — a lot of people want to jump into the market. Will it be a year like 2006, or 2007? No, but it will be a respectable year.

“Need to stay focused on customer service”

David Maus Toyota Scion
Sanford, FL
Owner: David Maus

Q: Obviously 2008 was a tough year on the sales side, even for the Toyota brand, what were some things you've done to compensate?

A: We continue to focus on customer service and have worked hard to increase our Parts and Service Department with the units that we have in operation at this time.

Q: Are you planning on coming to NADA in New Orleans at the end of the month?

A: No, I will not be able to attend the NADA this year.

Q: What are some of the issues for your brand this year — and what are some things you think the manufacturer needs to do for its dealers?

A: Toyota is doing everything they can for us. We, as dealers, need to stay focused on customer service and take care of our employees.

Q: Was there anything unique you tried in 2008 that worked well, or was a home run?

A: In 2008 we placed a new-car sales manager in the service drive to talk with our service customers. It gave them a chance to inform our customers about new car incentives currently available and additional options for their car that was currently in service for repairs.

Q: What are some things you want to try in 2009?

A: This year we are going to continue to work on Service and Parts gross and give our customers reasons to come back again and again.

Q: And, are you concerned about the survival of your dealership?

A: No, we are not. The motto of every employee at our dealership is to “Prepare for the Moment” and that's what we do every day.

“Like a roller coaster; right now we're down”

Billy Cain Ford Mercury and Cain Ford Lincoln Mercury
Commerce and Cornelia, GA
Owner: Billy Cain

Q: Obviously 2008 was a tough year on the sales side, what were some things you've done to compensate?

A: We've had to tighten our belts a little bit, cut back on advertising. But, I've not had to lay off anybody yet and hopefully I don't have to.

Q: What are some of the top issues for your brand, and what are some things the manufacturer needs to do for its dealers?

A: Ford has given us a good product and good programs, but sometimes they're a little hard to understand and keep up with — they change them so often — we've been fighting that battle for a long time.

The manufacturer probably could streamline their car lines, we've got too many makes and models. The Mercury line is repetitious of the Ford line, and I think if anything we should have an all-together different Mercury lineup, somewhat like the Mazda lineup. There's no need to have a Crown Vic and a Grand Marquis, a Taurus and a Sable, a Mariner and an Escape. And we don't need as many of the bean counters, or the white-collar guys. We have too many chiefs and not enough Indians.

Q: Are you having challenges with your floor plan provider?

A: I try to finance everything I can through them. Sometimes my F & I man might want to go through other banks, but I say “if we can go through Ford Motor Credit, I want to go that way first.” When they turn one down, or if it's a condition where we can't put a customer through them, we'll go through another source to push it through.

When I first came here 25 years ago — I've been on my own now 25 years, but I've been in the Ford business 35 years — I used one of those fly-by-night warranty companies, and I did that for less than one year. They do not do what they promise, so I went away from them. You can't sell me on anything but Ford. I just got a thing in the mail where they said “they have relooked at cutting my floor plan line,” and I'm not happy with that. I stock a lot more than most. Look at my business, I'm doing good, we are making money, I'm not cash-strapped, they shouldn't be on me, they should be going after people who are in trouble. They've cut me back considerably, and I may have to look at other sources. You can't sell out of an empty basket.

Q: Are you going to NADA's convention in New Orleans this year?

A: I'm probably not going. I haven't been to an NADA convention, but I go to all of Ford's “car shows,” and stay abreast of things that way, but I've never been to NADA.

Q: What are some things you might do differently in 2009?

A: If it wasn't for our program cars and our used-car sales we wouldn't be in business, our new car sales have dried up to nearly nothing. I've been in the car business 35 years, and I have seen the peaks and the valleys, the highs and the lows, and I've told people a lot of times it's like a roller coaster ride, and right now we are down in that valley. But I think it will come back — and when it does, it may be stronger than ever.

Q: What do you drive on a day-to-day basis?

A: I like the trucks, and I drive an MKX, a little program car. I don't drive new ones. I drive the MKX and a Lincoln Town Car sometimes. I like the luxury cars, but I don't drive a new one — I'll go and get a low-mileage car, put a few thousand miles on it and then sell it.

Q: What are some things that worked well for you last year?

A: We've done really well with our program cars, it's helped a lot. We hired a guy from a different dealership that really believes in the certified program, and we began to certify a lot of cars.

Q: Read any good books or magazines lately?

A: I read all of the dealer magazines. I try to read all of those, when they come in I put them in a stack in my office and try to read a few articles every day.

“Experience will carry weight”

Braman Honda
Palm Beach, FL
General Manager: Mike Rodriguez

Q: What type of role did used-car sales play at your dealership last year?

A: Our new car sales were decent until about August, and in September we saw a big drop — after gas prices came down, our sales slowed down. We are concentrating more on our pre-owned side, and we've noticed that even though our traffic is off, more people on the pre-owned side are trying to buy vehicles under $10,000.

We also are concentrating more on our service department, trying to grow that business. Even though we have had normal growth there, we are doing more mailers, and working on our data bank.

Q: Are you concerned about survival?

A: No, not really. We've done reductions like nearly every other place. Will it be enough to maneuver through these difficult times? Nobody can predict that, but I think we have a great brand, which is Honda. The auto maker has taken all the appropriate steps, like lowering their production substantially for the first quarter of this year. It comes down to the people you have at your dealership. The last few years anybody could have sold a car — now you have to have experienced staff to get through these difficult times.

Q: What are things the manufacturer needs to do for its dealers?

A: Honda was a little bit slow to react with the remaining 2008s. I believe they could have acted quicker — and like every other bank, they've slowed down the way they are buying deals, they've changed the way they are buying business. They need to step up a little bit more with that.

Q: Anything unique you're going to try in '09?

A: We are changing a little bit of our advertising (philosophy). During difficult times, everybody seems to be lowering their budget, but we on the other hand are looking to increase it more and change our approach. We've been here for 25 years, and we have been the No.1 store locally, so we are letting them know we are here for their automotive needs.

Q: What vehicle do you drive each day?

A: Obviously Honda; I drive a Pilot.

Q: Read any good books lately?

A: I'm reading a book on economics by Peter Schiff. He predicted this would happen with the economy four years ago. Everybody thought he was crazy.

Q: Are you heading to New Orleans for this year's annual convention?

A: Yes, I'm planning to attend this year, but I haven't for the last four years. I was out of town, or the timing didn't work, but this year I am planning to attend.

Q: How do you think 2009 will play out?

A: Every expert is saying we are going from 17 million to 11 million car sales, so now it's going to rely on your staff, having an experienced staff so you can maintain your market share and try to grow it a little bit — experience will carry a big weight.

“Make sure we can offer a great deal”

University Kia and Riverchase Kia
Huntsville and Birmingham, AL
Managing Partner: David Brady

Q: Obviously 2008 was tough, even for Toyota. How are you compensating for that as a dealer?

A: We actually had a record year, if the media would have just shut their mouths we never would have known we were in a recession here. In August here someone said we were in a recession and the public started responding to it.

What we did was trimmed expenses, we cut back on personnel, we renegotiated our contracts on advertising and got substantial discounts from our radio and TV stations, and we focused on doing things right — working every deal for every cent that's on it.

Q: What are some of the top issues for your brand, and what are some things you think the manufacturer needs to do for its dealers?

A: The manufacturer is giving us tremendous support right now, I couldn't ask for anything more. I'm probably not your best interview, because Kia unlike other manufacturers is really stepping up to help their dealers right now.

For example, normally our dealer cash is around $1,000 — we have up to $3,500 in dealer cash on certain '08's, and along with that they gave us up to $5,000 on rebates — there's $8,500 laying out there on a lot of these '08 models, so we can get rid of them by February to clean out our inventory.

Kia has really got its hand on the pulse of the market right now, and they are helping us out quite a bit.

Q: Was there anything unique you tried in 2008, perhaps focusing more on the Internet?

A: It's funny that you should bring up Internet. We didn't focus on it until probably the last quarter of the year, and we've really got involved with it since then. There will be continued focus on the Internet in 2009. We are going to make sure that we can offer the public a great deal — people are looking for a deal, and that's what is going to get them out to purchase a vehicle.

Q: Are there any good books you've read lately?

A: Not really. When you are in a market like this, you are not playing nearly as much golf and you are spending a lot of time worrying about your business.

Q: What do you drive on a day-to-day basis?

A: I'm driving an Amante. I'm pretty high on the Kia brand right now. They have a lot of exciting things in the works, and as it stands right now every car that we have in manufacturing will be redesigned by 2011. We have a lot of new product coming, and we have a new factory that's coming to Georgia, opening up in November of this year. It's bringing a lot of excitement. At a time when other manufacturers are pulling back, Kia is going full steam ahead, and we think this is going to be a great year.

Q: Will you be traveling to New Orleans for this year's NADA convention?

A: I typically don't do it, because it coincides with one of my 20 Groups, and I get so much out of that group — we have some great dealers in it. We really focus on coming up with some good game plans for our stores.

“I'm cautiously optimistic”

Jimmy Gray Chevrolet.
Southaven, MS
Owner: Jimmy Gray

Q: How did things end up at the close of 2008?

A: In a tough market, I'd say we did pretty well. My new sales were off about 18%, but the main thing we did was focus on fixed-opps and used cars, especially in the fourth quarter, when everything was going on with the bailout, and new car sales took a dive. The main thing we needed to happen was to get credit going again, getting GMAC back in the game is a big piece of the puzzle. They are buying a lot deeper.

Q: What's your outlook on this year?

A: It won't be easy, but we were profitable in 2008 and I don't think it will get any worse. I'm cautiously optimistic.

Q: What do you drive to and from work each day?

A: A Chevrolet Tahoe.

Q: Read any good books lately?

A: No, but I've been reading too much auto news lately.

Q: It's been a few tough sales years in a row. What are some of the things you are doing at your dealership to help compensate?

A: We started a (Business Development Center) almost two years ago — we are still concentrating our efforts on the BDC, but putting more emphasis on continual fixed opps, along with improving our BDC.

Q: Will you be heading to New Orleans for NADA's annual convention?

A: I'm going this year, but I'm embarrassed to say it's my first year. I think with everything going on in the market, it's important to hear from our manufacturers about all the issues. If you can come out of it with a couple of good ideas it could be the difference in being profitable, or not.

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