Industry profile:
N.C. Auto Dealers
Other stories:
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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