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Industry profile: 
N.C. Auto Dealers

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Dealers push tech training program
Three dealers honored for service

Driven to Succeed

Dealers like Sam Johnson 
rely on hard work and customer
service to fuel business growth

By Lisa H. Towle

It’s a long and winding road from West Memphis Park, Arkansas to Charlotte, North Carolina; from laboring at a used car lot to owning a mega-dealership with 298 employees and annual sales of more than $164 million; from not even dreaming of owning a business to being honored locally and nationally for business skills and philanthropy. And Sam Johnson (right) remembers and appreciates every bend and bump along the way.

Like fellow members of the North Carolina Automobile Dealers Association (NCADA), Johnson understands all too well that in an industry dependent on intangibles such as consumer confidence, the resolve and management skills needed to secure growth are tempered during the down cycles as much as the up.

Starting as a car washer earning $25 a day, Johnson, the son of a sharecropper, worked his way up to parts truck driver before being made a salesman in 1965. He proved so deft at that job he was named the top Buick salesman in the St. Louis area seven years running. By 1973 Johnson was ready to make the leap to dealer-owner. Ford Motor Co., through its minority dealer development program, helped him buy a dealership. Though located in an economically depressed, high crime area of East St. Louis, Ill., Johnson doubled sales within a year of taking over the business.

Four years later, seeking warmer climes and “growth potential,” Johnson headed south to Charlotte. Again assisted by Ford, he purchased what would become his flagship store, Sam Johnson Lincoln-Mercury. Through a combination of old-fashioned service to customers and community, the use of new technologies and a “grow your own” managers program, that single store has been parlayed into S&J Enterprises. A closely-held family-run business, S&J is comprised of four Ford dealerships (including Cross Creek Lincoln-Mercury in Fayetteville) in three states.

Traditionally, new-car franchises have been one of the country’s great entrepreneurial opportunities. Two decades ago, when U.S. automakers introduced programs designed to create and promote minority-run dealerships, it was African-Americans who first leapt at the chance to become part of that particular business scene and grab a piece of the American dream.

Since then the foothold many black dealers have in the industry has become very tenuous. Increasingly, the attention of Detroit’s Big Three automakers, the major supporters of the program, is on sagging sales and loss of market share. Meanwhile, many minority dealers continue to struggle with poor dealership locations, undercapitalization and concerns about unfair competition such as that posed by large dealer groups expanding their holdings. It’s gotten to the point that the National Association of Minority Automobile Dealers (NAMAD), headquartered in Maryland, has requested a moratorium on manufacturers shutting down those dealers who are having problems.

It’s all the more noteworthy then that Sam Johnson is not alone in his success. One for instance: Reginald Hubbard of Hubbard Automotive, also of Charlotte, joins him this year on Black Enterprise magazine’s Top 20 auto dealers nationwide. In all, 13 percent of NCADA’s leadership is minority, and that, states Sheila Vaden-Williams, president of NAMAD, puts the association in a very elite group.

“In terms of a genuine interest in, curiosity about and commitment to promoting diversity, North Carolina ranks as one of the Top 10 state or metro auto dealer associations,” she declares. “Some people view diversity as a zero-sum game. It’s hard for them to understand how having others at the table is a good thing. Bob Glaser (president of NCADA) is one of the few automotive trade association executives who has said the status quo is not good enough, and who’s working hard to develop strategic relationships with his minority dealers so that his organization better mirrors his state.”

Adds Johnson: “The NCADA has made the minority dealers a part of the majority by providing the opportunity for leadership positions and keeping a close ear to the issues.”

Speed Bumps

It’s an understatement to say that over the past year Glaser and his team, including Executive Vice President Diane Turner and Communications Manager Kerry Powell, have been confronted by a host of challenging issues. First and foremost are the aftereffects of the Sept. 11 terrorist attacks on New York City and Washington, D.C. 

In the days immediately following the assaults, sales of new and used cars and trucks plunged, making what had been a tough month even tougher. However, despite the disarray in the stock market and word of production cutbacks by most of the major auto manufacturers, showroom activity did pick up.

Economists have predicted sales nationally will return to near normal levels by late this year; the NCADA says the sales of its 685 members in 2001 are on pace to rank as the third highest in North Carolina’s history.

Writing in the July issue of Auto Trends, a newsletter published by Auto Outlook Inc. on behalf of the NCADA, editor Jeffrey A. Foltz noted, “all things considered, we believe the slowdown in sales this year is a positive. It should help the market avoid a classic boom-bust cycle, where sales reach an accelerated peak and then crash precipitously to a trough.”

It’s so critical that automotive retailing remains competitive, Glaser explains, because, “In North Carolina, where dealerships represent less than two percent of retail establishments, ours is a $16 billion industry generating more than 20 percent of all sales tax collected by the state.”

Consider further that nearly 80 percent of all dealerships in the state are family owned and span several generations. The typical store has been in business for nearly 30 years, holds franchises with three manufacturers and spends nearly $120,000 annually on advertising.

“The economic impact of record sales most affects North Carolina in every little community. It’s the trickle down effect. It means dealers are hiring more people and funding more charitable causes and just being even more of a presence,” Glaser says.

The NCADA believes that the numbers taken in sum validate the franchise legislation passed by the General Assembly in 1999, which thwarted auto manufacturers who wanted to set up shop and sell directly to the public, thus putting themselves in a position to compete with their franchise holding dealer-partners.

Earlier this year another “monster battle,” as Glaser puts it, was waged in the General Assembly. It began with Ford’s Blue Oval program, an initiative many in the industry saw as a thinly disguised attempt to control dealerships and market areas.

Basically, the idea was that Ford would pay dealers incentives for meeting certain “customer service standards.” Meeting those standards required, among other things, costly upgrades to facilities and purchase of advertising materials and signage. These were things dealers with smaller operations protested they could ill afford.

Robert J. Maguire, chairman of the National Automobile Dealers Association, weighed in on the matter, advising Ford to “take seriously those who say Blue Oval effectively could create two classes of dealers, the haves and the have-nots.” 

Both the state and national dealer associations have continued to argue that it’s an oversimplification of the issue to see the wrangling over manufacturer programs such as Blue Oval as merely spats between retailers and their suppliers. Adds Glaser: “The whole idea of fair competition is thrown out the window when the people making all the rules also control all the supply.”

The showdown between dealers and manufacturers was heated. For their part, the dealers association argued that car and truck makers are engaging in unfair multi-tiered pricing systems when they provide financial rewards for compliance with specified program criteria, calculate rewards on a per-vehicle basis, don’t provide rewards equally to all dealers, and force dealers to implement these programs for economic reasons.

This summer, legislation prohibiting incentive programs that use a two-tiered pricing formula was passed. It will take effect in early 2004. The goal, states NCADA spokesman Kerry Powell, was never, as some manufacturers charged, to eliminate all incentive programs. Far from it. For example, DaimlerChrysler’s Five Star program is alive and well as are manufacturer’s “stair-step” volume sales programs, long a tradition in the industry. The elimination of multi-tiered pricing rights a lopsided situation, he says, making dealers accountable to the customers, rather than just to the manufacturer.

“Our goal is always to keep the local family-owned dealer independent. Dealers should be the ones to decide how best to sell their cars,” states Glaser.

David Brown certainly knows how. As dealer-principal of two stores in Cornelius, he employs 200 people and runs the largest Dodge franchise (Lake Norman Chrysler Dodge Jeep) in both North and South Carolina, and the 26th largest in the country. His Customer Satisfaction Index scores are consistently outstanding, 90 percent and above. The stellar numbers didn’t appear out of thin air, though; his approach is a sweeping one.

As part of Charlotte-based Sonic Automotive Inc., the second-largest publicly traded auto dealership group in America, Brown has ready access to resources which help him manage both a $20 million inventory and the back end of the business – parts and service. He and his inventory manager meet at least five times a week  in order to assess what’s hot on the lots, what’s not and why.

Prodigious advertising, a presence on the Internet, deep discounts and tripling warranty periods are just a few of the tools of his trade. Last year Brown added a freestanding $5.1 million, state-of-the-art body shop, Lake Norman Collision Center, to his portfolio. All makes and models are repaired at the center, which is just about the size of a football field. The opening has proved timely, given the widespread concern about the country’s shaky economy.

“Instead of buying new vehicles more people are choosing to service what they have so they can keep them longer,” explains Brown.  

Adding Value

Still, despite the volume nature of his business, Brown hasn’t forgotten those hallmarks of all successful dealers: philanthropy and customer service. In addition to donating to a number of local schools and programs such as Toys for Tots and Drug Abuse Resistance Education, his dealerships contribute up to $10,000 annually to Speedway Children’s Charities (SCC). Created by Bruton Smith, chairman of Speedway Motorsport Inc., SCC benefits a range of organizations nationwide, from schools and shelters to health centers and the YMCA.  

Added value also is found in the practices of the stores themselves. For instance, says Brown, “we’ve gone so far as to take back a vehicle someone’s bought from us and replace it no questions asked if the customer feels that’s what is warranted.”

That approach is a page right out of the playbook of smaller hometown dealers, who, because they may not have a large market from which to draw or exceptionally large inventories to tout, compete by raising customer service to an art form.

The personal touch matters, insists Frank Tillman, dealer-principal of Freema Motors in Goldsboro, which sells Volkswagens and Mazdas. “Those of us in mid-sized to small markets need to try harder. We can’t always be looking over somebody’s shoulder waiting for the next group to come in, we’re dealing with the same customers over and over. If you don’t make them happy in every way they’ll stay away,” he says.

One way Freema, ranked in the top 25 percent of VW dealers in the United States, keeps its many professional customers happy is to help make their life as hassle-free as possible. For example, a representative from the dealership will go to their workplace or home, get their car, clean and service it and return it to them by day’s end. A bill is mailed. If repairs require a vehicle stay overnight, a loaner is guaranteed.

Paul White of Universal Chevrolet in the Wake County town of Wendell now deals with the third generation of customers at his store, family-owned since 1932. Like Tillman, he makes a point of being on a first name basis with as much of his clientele as possible and prides himself on offering a “low stress” environment.

At Universal, follow-up calls are made on all repair and sales transactions. Customers receive cards on their birthdays as well as the “birthday” (sales date) of their vehicle. “Games and tricks” such as bait and switch advertising are strictly forbidden. And a pledge has been made that responses to inquiries via the Internet will take no more than three hours.

The piece de resistance comes every December when White throws a party for customers, business associates and all members of the community. As guests nosh their way through mounds of shrimp, bushels of oysters and pounds of beef while enjoying live entertainment, the message is clear: People come first; profit follows service.

That’s a conviction shared by Sam Johnson, who despite his big-time presence, hasn’t forgotten his roots. That’s why a window in his office at the flagship dealership offers a view of the service department. That’s also why, even as head of a multi-million dollar enterprise, he still takes time to shake the hands of customers, pass out doughnuts, tag and yes, wash cars waiting to be delivered. Treat the customer right the first time, he says, and you may get a chance to work with them again.

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