Vol. 17 No.1
                                        January 2010




                                Jim Ziegler:
       ...
Welcome to the digital edition
     of Dealer magazine!
Just as you are trying to keep your store(s) on the cutting edge, ...
17 No.1
                                        January 2010




                                        Vol.




        ...
T ABLE OF CONTENTS
                                                                       JANUARY 2010
                   ...
T ABLE OF CONTENTS
                                                                                                       ...
E DITOR’S NOTE
                                                                                                      Cliff...
T ABLE OF CONTENTS
                                                                                                       ...
E DITOR’S NOTE
                                                                                                      Cliff...
be everywhere, see everything
                             Have you ever dreamt of having the ability to be in all places,...
D ealer MAIL

Dealer welcomes your letters and after
verification will run them signed or unsigned.
Letters may be edited f...
It took 28 years circling the globe...
to work with over 50,000 Dealers and Managers,
from many countries,
               ...
ADVOCATE
                  Riders on the Storm
                                   Jim Ziegler



I
     knew in advance th...
I had already spoken to Delta Medallion          I have 60 managers flying in for four days      truly alive when your inte...
Dealer Advocate, Ziegler (continued from P-11)

actually happen. I was scratching my head,       “At one time or another  ...
Cliff’s Notes
                        Cliff Banks

                        A Snowball’s Chance in…


W
             hat a ...
Leadership
                          Dave Anderson


                          Recommit to Personal Growth in 2010!

I
   ...
!"#$%&'()$%*+,-$)"$."#/
                                                     0+1023)$4")2')+&*$&*"'25$
                   ...
Ownership
                           Richard Sox

                           Honda Alters its Dealer Planning
            ...
with both sellers and buyers coming to us for         discussions will help to minimize disagree-            when they dea...
Ownership
                          Erin Kerrigan

                          When it Comes to Credit Today,
              ...
groups are sounding the acquisition drum.                      a Honda and Acura dealership for 40% of its         groups ...
COVER STORY
                                                           Ed Tonkin
                                         ...
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
Dealer Magazine - January 2010
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Dealer Magazine - January 2010

  1. 1. Vol. 17 No.1 January 2010 Jim Ziegler: Riders on the Storm page 10 Leadership: Recommit to Personal Growth in 2010! page 14 F&I: ED TONKIN Federales Eying Discriminatory Pricing 2010 NADA page 52 Chairman Fixed Operations: Hired any Lazy Ron Tonkin Dealerships Idiots Lately? page 20 page 54
  2. 2. Welcome to the digital edition of Dealer magazine! Just as you are trying to keep your store(s) on the cutting edge, we are doing the very same thing as we venture into a new frontier in the publishing biz. We can get this digital version in your hands 2-3 weeks faster than the print version, giving you the freshest information possible. You can click on links at the end of each article to email the author of such. And you can click on the ads to link to that advertiser’s website (and you’d REALLY be helping us out by doing just that). It’s quite intuitive…I don’t think that someone who uses the Internet to make a living will have any trouble easily figuring it out. Please let me know what you think about it… mroscoe@Dealer-Communications.com Michael Roscoe Editor-in-Chief
  3. 3. 17 No.1 January 2010 Vol. Jim Ziegler: Riders on the Storm page 10 Leadership: Recommit to Personal Growth in 2010! page 14 F&I: Federales Eying Discriminatory Pricing page 52 Fixed Operations: Hired any Lazy Idiots Lately? ED TONKIN page 54 2010 NADA Chairman Ron Tonkin Dealerships page 20
  4. 4. T ABLE OF CONTENTS JANUARY 2010 PRESIDENT AND CEO MICHAEL ROSCOE VICE PRESIDENT AND FEATURES EDITORIAL DIRECTOR CLIFF BANKS cbanks@Dealer-communications.com Digital Dealer Cover Story 248-351-2620 18 Juan Teran, Sales Director, Dewey Automotive Group EDITOR LINDA DI PIETRO COLUMNS ldipietro@Dealer-magazine.com PUBLISHER AAISP Notes GREG NOONAN 8 Embrace the Future 607-264-3359 gnoonan@Dealer-magazine.com Cliff Banks ART DIRECTOR JOE BIRCH Internet Sales PRODUCTION MANAGER 10 The Colonization of Retail ELIZABETH BIRCH Phil Sura PRINT PRODUCTION NICK THOMAS 12 Managing the Phone Conversation COVER DESIGN Rob Lange JOE BIRCH COVER STORY PHOTOGRAPHY 14 Five Powerful Steps to Chatting with Shoppers STEVE ALEXANDER Todd Smith CIRCULATION SUBSCRIPTION RICH JARRETT 314-432-7511 16 Is your Web Site Giving Car Shoppers What They are rjarrett@Dealer-magazine.com Looking For? www.Dealer-magazine.com George Nenni NATIONAL ADVERTISING SALES adsales@Dealer-magazine.com Technology Trends 607-264-3359 22 Seeing is Believing Dealer magazine makes every attempt to ensure the accuracy of all published works. However it cannot be Sandi Jerome held responsible for opinions expressed or facts supplied herein. Nothing may be reproduced in whole or in part without written permission from the publisher. All rights BDC/CRM reserved. The publisher encourages you to submit sug- gestions. Submitted materials become the property of 24 It’s Not About the Software Horizon Communications, Inc. and will not be returned. Send material for publication to 330 Franklin Rd., Suite 135A, PMB 386, Brentwood, TN 37027. The editor re- Chuck Barker serves the right to edit material; submission of material constitutes permission to edit and publish that mate- rial. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is presented with the understanding DEPARTMENTS that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice 4 Digital Dealer E-mail or other expert assistance is required, the services of a competent professional person should be sought. From 6 News a Declaration of Principles jointly adopted by a Commit- tee of the American Bar Association and a Committee of Publishers. A PUBLICATION OF ! " # # $ % & ! ' ( & " % ) DD 2 January 2010 DigitalDealer-magazine.com
  5. 5. T ABLE OF CONTENTS JANUARY 2010 PRESIDENT AND CEO MICHAEL ROSCOE VICE PRESIDENT AND EDITORIAL DIRECTOR FEATURES Advertising CLIFF BANKS Dealer Advocate by Jim Ziegler 24 Putting ‘Spiral Integration’ cbanks@Dealer-communications.com 248-351-2620 10 Riders on the Storm Into Play Jim Boldebook EDITOR LINDA DI PIETRO Cover Story ldipietro@Dealer-magazine.com 20 Ed Tonkin Sales & Marketing NADA Chairman 51 The Importance of Time PUBLISHER Management GREG NOONAN Ron Tonkin Dealerships 607-264-3359 Jack Bennett gnoonan@Dealer-magazine.com COLUMNS ART DIRECTOR F&I JOE BIRCH 13 Cliff’s Notes 52 Federales Eying Discriminatory ??? Pricing PRODUCTION MANAGER ELIZABETH BIRCH Gil Van Over Leadership by Dave Anderson PRINT PRODUCTION 14 Recommit to Personal Growth Fixed Operations NICK THOMAS in 2010! 54 Hired any Lazy Idiots Lately? COVER DESIGN Ed Kovalchick JOE BIRCH Ownership 16 Honda Alters its Dealer COVER STORY PHOTOGRAPHY JESSICA SHEPARD Planning Volume System Richard N. Sox DEPARTMENTS CIRCULATION SUBSCRIPTION RICH JARRETT 6 Editor’s Note 314-432-7511 18 When it Comes to Credit 8 Dealer Mail rjarrett@Dealer-magazine.com Today, Bigger is Better 53 Dealer F&I New Products www.Dealer-magazine.com Erin Kerrigan NATIONAL ADVERTISING SALES adsales@Dealer-magazine.com 607-264-3359 Dealer magazine makes every attempt to ensure the accuracy of all published works. However it cannot be held responsible for opinions expressed or facts supplied herein. Nothing may be reproduced in whole or in part without written permission from the publisher. All rights pg. 25 reserved. The publisher encourages you to submit sug- gestions. Submitted materials become the property of Horizon Communications, Inc. and will not be returned. Full Digital Dealer table of contents on page DD2. Send material for publication to 330 Franklin Rd., Suite 135A, PMB 386, Brentwood, TN 37027. The editor re- serves the right to edit material; submission of material constitutes permission to edit and publish that mate- SPECIAL SECTION INSERT rial. This publication is designed to provide accurate and authoritative information in regard to the subject DD18 Juan Teran DD22 Seeing is Believing matter covered. It is presented with the understanding that the publisher is not engaged in rendering legal, Sales Director accounting or other professional service. If legal advice Dewey Automotive Group DD24 It’s Not About the or other expert assistance is required, the services of a competent professional person should be sought. From Software a Declaration of Principles jointly adopted by a Commit- tee of the American Bar Association and a Committee DD12 Managing the Phone of Publishers. Conversation A PUBLICATION OF DD14 Five Powerful Steps to Chatting with Shoppers ! " # # $ % & ! ' ( & " % ) Dealer magazine (ISSN 1537-6141) is published monthly by Horizon Communications, Inc., 754 Armstrong Place, Brentwood, TN 37027. Periodicals Postage Paid at Brentwood, TN and additional mailing offices. POSTMASTER: Please send address changes to: Dealer magazine, P.O. Box 16770, St. Louis, MO 63105. Subscriptions are $48.00 per year, 12 Issues per year, monthly. Back Issues, $10.00 each. Make check payable to Dealer magazine. Send to: P.O. Box 16770 St. Louis, MO 63105. Reprint Requests: (412-548-3954). POSTMASTER please send change of address to Dealer magazine, P.O. Box 16770, St. Louis, MO 63105. 4 Dealer January 2010 Dealer-magazine.com
  6. 6. E DITOR’S NOTE Cliff Banks Tell Mike to Get Back to Work T he boss, Michael Roscoe, is on hiatus this month. That’s why If dealers don’t show up at the convention, NADA will be weakened I’m writing his column – as our production manager is beating significantly in the future and will be much less effective protecting me for missing another deadline. your flanks. If dealers don’t come, vendors won’t come – vendors who Michael, who signs my paycheck, says he’s not going to write are a major source of revenue for NADA. anymore columns until you register for the National Automobile Supporting NADA is reason enough to attend. But the benefit Dealers Association Convention and Exposition this year – which extends far beyond helping an association. means, it’s up to me to write it. He’s passionate about the association The NADA convention, simply put, is for winners. The dealers and the convention (maybe a little too passionate, if you ask me – who attend are the ones who constantly are looking for ways to tongue in cheek, sort of). improve their business and make more money. They want to beat He spent his entire column last month urging you to attend NADA, their competition. which is scheduled for February 13-15 in Orlando this year. Now, it’s Every year, on the exhibit floor, my turn to take up the baton. are the latest and greatest solutions “The truth is, you I know the questions – Can we afford it this year? Is it worth it? designed to help you be more prof- need a strong What do we really get out of attending the convention? itable. And often, dealers at the Legitimate questions, true. You have to do what’s right for your convention get the first look at association in business. But the truth is, you need a strong association in Washington what’s new. I often hear of dealers fighting for your interests. And attending the convention is one way who negotiated in a vendor’s booth Washington to help NADA remain strong. at NADA an exclusive territory There is no question NADA was bloodied this year. I’ve heard the for use of a new product or solu- fighting for your criticisms that the association didn’t do enough to protect its dealers. tion, and thus, keeping it out of My opinion is, the criticism isn’t valid. Yes, we lost way too many the hands of the competition in interests. And dealerships in 2009, but there was little NADA could do to reverse their direct market. that, even though its officers and directors tried hard. And don’t forget about the attending the In the last six months, NADA has won some big battles. It, more workshops. Some are better than convention is one than any other organization, was responsible for getting Cash for others, but you will always find Clunkers off the ground. great ideas you can take back to way to help NADA It also managed to keep dealerships from being included in the your stores. oversight by the Consumer Protection Financial Agency. A quiet So, in attending the convention, win to be sure, but a big win. You probably would have seen your you’ll help an association that pro- F&I profits dwindle to almost nothing in the next couple of years if tects you to remain strong, and, you’ll come away with some new NADA doesn’t succeed there. products and ideas that will help you make more money. And for Another win is the recent legislation that grants eliminated Chrysler those of us in the great white North, the Orlando sun in February and General Motors dealers the right to seek arbitration and possible is an added bonus. reinstatement. A month ago, that legislation was dead with no chance There’s one more thing – by attending, you’ll be telling Mike to of making it to the Senate floor for a vote. get back to work…. NADA also has worked hard, going back to September of 2008, to We’ll see you on the exhibit floor at booth #582. pry floorplan capital from the banks. It was instrumental in crafting several strategies that are now being employed by various govern- ment agencies to loosen up credit for dealers. It’s slow going, but once the banks get religion, these measures are going to help dealers who need it most. Cliff Banks The question you should be asking is how can I afford not to go Vice President and the convention? Editorial Director 6 Dealer January 2010 Dealer-magazine.com
  7. 7. T ABLE OF CONTENTS JANUARY 2010 PRESIDENT AND CEO MICHAEL ROSCOE VICE PRESIDENT AND EDITORIAL DIRECTOR FEATURES Advertising CLIFF BANKS Dealer Advocate by Jim Ziegler 24 Putting ‘Spiral Integration’ cbanks@Dealer-communications.com 248-351-2620 10 Riders on the Storm Into Play Jim Boldebook EDITOR LINDA DI PIETRO Cover Story ldipietro@Dealer-magazine.com 20 Ed Tonkin Sales & Marketing NADA Chairman 51 The Importance of Time PUBLISHER Management GREG NOONAN Ron Tonkin Dealerships 607-264-3359 Jack Bennett gnoonan@Dealer-magazine.com COLUMNS ART DIRECTOR F&I JOE BIRCH 13 Cliff’s Notes 52 Federales Eying Discriminatory A Snowball’s Chance in... Pricing PRODUCTION MANAGER ELIZABETH BIRCH Gil Van Over Leadership by Dave Anderson PRINT PRODUCTION 14 Recommit to Personal Growth Fixed Operations NICK THOMAS in 2010! 54 Hired any Lazy Idiots Lately? COVER DESIGN Ed Kovalchick JOE BIRCH Ownership 16 Honda Alters its Dealer COVER STORY PHOTOGRAPHY JESSICA SHEPARD Planning Volume System Richard N. Sox DEPARTMENTS CIRCULATION SUBSCRIPTION RICH JARRETT 6 Editor’s Note 314-432-7511 18 When it Comes to Credit 8 Dealer Mail rjarrett@Dealer-magazine.com Today, Bigger is Better 53 Dealer F&I New Products www.Dealer-magazine.com Erin Kerrigan NATIONAL ADVERTISING SALES adsales@Dealer-magazine.com 607-264-3359 Dealer magazine makes every attempt to ensure the accuracy of all published works. However it cannot be held responsible for opinions expressed or facts supplied herein. Nothing may be reproduced in whole or in part without written permission from the publisher. All rights pg. 25 reserved. The publisher encourages you to submit sug- gestions. Submitted materials become the property of Horizon Communications, Inc. and will not be returned. Full Digital Dealer table of contents on page DD2. Send material for publication to 330 Franklin Rd., Suite 135A, PMB 386, Brentwood, TN 37027. The editor re- serves the right to edit material; submission of material constitutes permission to edit and publish that mate- SPECIAL SECTION INSERT rial. This publication is designed to provide accurate and authoritative information in regard to the subject DD18 Juan Teran DD22 Seeing is Believing matter covered. It is presented with the understanding that the publisher is not engaged in rendering legal, Sales Director accounting or other professional service. If legal advice Dewey Automotive Group DD24 It’s Not About the or other expert assistance is required, the services of a competent professional person should be sought. From Software a Declaration of Principles jointly adopted by a Commit- tee of the American Bar Association and a Committee DD12 Managing the Phone of Publishers. Conversation A PUBLICATION OF DD14 Five Powerful Steps to Chatting with Shoppers ! " # # $ % & ! ' ( & " % ) Dealer magazine (ISSN 1537-6141) is published monthly by Horizon Communications, Inc., 754 Armstrong Place, Brentwood, TN 37027. Periodicals Postage Paid at Brentwood, TN and additional mailing offices. POSTMASTER: Please send address changes to: Dealer magazine, P.O. Box 16770, St. Louis, MO 63105. Subscriptions are $48.00 per year, 12 Issues per year, monthly. Back Issues, $10.00 each. Make check payable to Dealer magazine. Send to: P.O. Box 16770 St. Louis, MO 63105. Reprint Requests: (412-548-3954). POSTMASTER please send change of address to Dealer magazine, P.O. Box 16770, St. Louis, MO 63105. 4 Dealer January 2010 Dealer-magazine.com
  8. 8. E DITOR’S NOTE Cliff Banks Tell Mike to Get Back to Work T he boss, Michael Roscoe, is on hiatus this month. That’s why If dealers don’t show up at the convention, NADA will be weakened I’m writing his column – as our production manager is beating significantly in the future and will be much less effective protecting me for missing another deadline. your flanks. If dealers don’t come, vendors won’t come – vendors who Michael, who signs my paycheck, says he’s not going to write are a major source of revenue for NADA. anymore columns until you register for the National Automobile Supporting NADA is reason enough to attend. But the benefit Dealers Association Convention and Exposition this year – which extends far beyond helping an association. means, it’s up to me to write it. He’s passionate about the association The NADA convention, simply put, is for winners. The dealers and the convention (maybe a little too passionate, if you ask me – who attend are the ones who constantly are looking for ways to tongue in cheek, sort of). improve their business and make more money. They want to beat He spent his entire column last month urging you to attend NADA, their competition. which is scheduled for February 13-15 in Orlando this year. Now, it’s Every year, on the exhibit floor, “The truth is, you my turn to take up the baton. are the latest and greatest solutions need a strong I know the questions – Can we afford it this year? Is it worth it? designed to help you be more prof- What do we really get out of attending the convention? itable. And often, dealers at the association in Legitimate questions, true. You have to do what’s right for your convention get the first look at business. But the truth is, you need a strong association in Washington what’s new. I often hear of dealers Washington fighting for your interests. And attending the convention is one way who negotiated in a vendor’s booth to help NADA remain strong. at NADA an exclusive territory fighting for your There is no question NADA was bloodied this year. I’ve heard the for use of a new product or solu- criticisms that the association didn’t do enough to protect its dealers. tion, and thus, keeping it out of interests. And My opinion is, the criticism isn’t valid. Yes, we lost way too many the hands of the competition in attending the dealerships in 2009, but there was little NADA could do to reverse their direct market. that, even though its officers and directors tried hard. And don’t forget about the convention is one In the last six months, NADA has won some big battles. It, more workshops. Some are better than than any other organization, was responsible for getting Cash for others, but you will always find way to help NADA Clunkers off the ground. great ideas you can take back to It also managed to keep dealerships from being included in the your stores. remain strong.” oversight by the Consumer Protection Financial Agency. A quiet So, in attending the convention, win to be sure, but a big win. You probably would have seen your you’ll help an association that pro- F&I profits dwindle to almost nothing in the next couple of years if tects you to remain strong, and, you’ll come away with some new NADA doesn’t succeed there. products and ideas that will help you make more money. And for Another win is the recent legislation that grants eliminated Chrysler those of us in the great white North, the Orlando sun in February and General Motors dealers the right to seek arbitration and possible is an added bonus. reinstatement. A month ago, that legislation was dead with no chance There’s one more thing – by attending, you’ll be telling Mike to of making it to the Senate floor for a vote. get back to work…. NADA also has worked hard, going back to September of 2008, to We’ll see you on the exhibit floor at booth #582. pry floorplan capital from the banks. It was instrumental in crafting several strategies that are now being employed by various govern- ment agencies to loosen up credit for dealers. It’s slow going, but once the banks get religion, these measures are going to help dealers who need it most. Cliff Banks The question you should be asking is how can I afford not to go Vice President and the convention? Editorial Director 6 Dealer January 2010 Dealer-magazine.com
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  10. 10. D ealer MAIL Dealer welcomes your letters and after verification will run them signed or unsigned. Letters may be edited for space and clarity. Hi Jim, in this market, but only if a customer is Another great article this month! It’s attracted to the product. If the investment always a great day when the new issue of (and it would need to be minimal initially) Dealer magazine arrives so I can get my dose were comparable between the brands, what of Ziegler and Dave Anderson. does your “crystal ball” say is the wise move? As you tend to have a good insight into Thanks for taking the time to read and various manufacturers, I have a question for hopefully reply. Looking forward to the you. I have a small empty showroom (noth- next issue… ing was taken away, I just expanded into a Name withheld by request larger space across the street with one of my import franchises). While we do a decent used car business, I’d like to consider filling Dear Reader, in the open space with something and the Thanks for the compliment! Both two opportunities that are not represented Mitsubishi and Suzuki have been severely in this area are Mitsubishi and Suzuki. Our beat up in recent years, but I am still high market (2.2 million people) is currently on the future of Suzuki. My reasoning is that represented by two Suzuki dealers and one there will be another gas crisis, and this time Mitsubishi dealer (down from five!). I anticipate it will be a more permanent price From a UIO standpoint, Mitsubishi increase. Mitsubishi has waffled so much in manager some reasons we were getting beat makes sense as there are certainly orphan the U.S. market that I am not totally confident by Ford trucks – colors and option stuff. owners in our market and the only remain- in its business plans, which seem to change He told me to leave his office and “Go sell ing point is clear on the other side of town, with every crisis. what you’ve got!” so the immediate fixed ops upside looks Suzuki, on the other hand, builds great I left – and soon left Chevy. The ship OK. Our service capacity is not a problem quality, small, fuel-efficient cars. They were was sinking then. as I have 30-plus highly productive stalls caught up in the same financial crisis all other Best of luck to you and your family – across three lines and room for seven to manufacturers suffered, especially with floor yours sounds like a great group. eight more. plan and retail financing. Personally, of the Jerry Haley Also, Mitsubishi appears to have two choices, I’d go with Suzuki. Cape Haze, FL some interesting products coming in the Jim gmh@freeway.net future. The downside is that the brand has been put into a position where they have Dennis Higginbotham, Dennis Higginbotham, lost nearly all of the “equity” they enjoyed Great cover story interview in the The year 1981 does not seem that long in the ‘90s, and are in a position where November 2009 Dealer magazine – I just ago when we stood under a palm tree and they need to “re-invent” themselves. The finished reading it. I thought that I recog- you lectured me about debt and told me to question is whether they can pull it off nized you on the cover. Your story nailed get rid of mine. It only took 20 years but and regain the potential they once had, it for me. I, too, worked for Chevrolet in I made it thanks to you. Glad to see you but squandered. Detroit, Denver and Wichita. back in retail. Corporate was never you. I pose the question to you as you were Your comments about factory people and Joe Bertolami pretty high on Suzuki a few years back, yet their lack of retail knowledge is so correct. President & GM the brand appears to be slipping of late. The And what they did with dealer eliminations Toyota West only thing they appear to represent is cheap was beyond criminal! Statesville, NC all-wheel-drive technology, which is useful I remember telling my Wichita zone gmtoyotawest@setdlr.com Send letters to: Dealer • 330 Franklin Rd. • Suite 135A-Box 386 • Brentwood, TN 37027 FAX: (615)-370-8181 • e-mail: mroscoe@Dealer-magazine.com 8 Dealer January 2010 Dealer-magazine.com
  11. 11. It took 28 years circling the globe... to work with over 50,000 Dealers and Managers, from many countries, CALL TO to produce the workbook and 904-26 DAY! MARC 4-7408 JACKSO H 18-19, 2010 training techniques for... SEATIN NVILLE G STILL BEACH, FL AV AILABL E! THE INTERNATIONAL USED CAR p 9 ssive rogre ates new d SCHOOL State Association Special 20 Group 1 or 2 Day Schools Available 1 or 2 Day Schools Class size limited! Available at your meeting For up to date class schedule visit: www.probac.com, email pbasics@aol.com or call 904-264-7408.
  12. 12. ADVOCATE Riders on the Storm Jim Ziegler I knew in advance this was going to be At 3:00 p.m. when the session was over, a tough marathon week on the road, my driver and I walked out of the Marriott and I was totally prepared for it, or so (first time I’d been outside). The sky was I thought. as dark as night and the snow was already No matter how you cut it, I was going swirling. Gut feeling – this ain’t good. to be scrambling from airport to airport It was absolutely necessary that we make with tight schedules. Even if all of the stars it to Milwaukee ahead of the storm for my lined up, this trip was promising to be a 6:30 p.m. flight to Atlanta, and then con- real ball-buster. necting to West Palm Beach with 45 min- concentrated on driving. Even though I anticipated there might utes to spare. I actually packed underwear As for me, this was a high-stress, white- be a bump in the road with my schedule, I and socks in my briefcase in case I made knuckled experience. never dreamed I’d have to endure the pain to West Palm but my luggage didn’t, what On top of everything else, I was on dead- of the ordeal that lay ahead of me. with the tight connection and all. line…actually past deadline to write this It started on a Monday morning, My cell phone rings; it’s Debbie. She says article. They were holding the magazine December 7. It never occurred to me it Delta Airlines just called and my flight’s for me and there was nothing I could do was Pearl Harbor Day. been cancelled. The Milwaukee airport is about it. So, I called Liz and Joe Birch who I got up at 4:30 a.m. to fly from Atlanta shut down. layout the magazine and I told them my to Milwaukee. OK, as it was, the flight was I called my client in West Palm Beach, situation. They are the greatest; no hyste- on time and the dealer’s driver was there to an old friend, Randy Wilson. Randy is with ria, they understood and felt for me. Now, meet me at the airport. We were driving an the Napleton Group. my hardship was making it difficult for hour and a half to Madison where I was set Panic was setting in for Randy and I. others too. to do a private management seminar for my We’d been planning this private seminar Finally, we made it…got to O’Hare… long-time good friend, Jason Brickl, and the series for his group for a long time. He had alive… with maybe 20 minutes to spare Balweg Automotive Group. managers coming in the morning from all before they closed out the flight. That first day was incredible… my pri- of the Florida Napleton dealerships. I checked my luggage and boarded the vate seminar with Jason and the manage- Randy said, “Have you tried Chicago plane. Had a cocktail. I felt I was home ment team at Balweg was a huge success. O’Hare airport?” free. I somehow I had actually pulled it The next day I performed a sales and leasing A quick call to Delta Medallion Services off. Now I am mentally slapping high-fives seminar for their Chevrolet ad group, the confirmed there were still some flights with myself. Badgerland Chevy Dealers. That’s when scheduled out of O’Hare. It was going to They de-iced the plane at the gate as the the wheels began to come off. be really tight. We only had three hours to storm was pounding the airport hard. We The weather reports were calling for snow, get there, but we just might make it if my need to get out fast or they’ll shut down lots of snow — not the wimpy-ass little driver can get through the storm. I told O’Hare too. dusty snowstorms we get in Atlanta once a Delta, “Book that flight, we’re on our way.” We got in line and made it all of the year. This was going to be a Wisconsin-style, Snow was swirling in heavy wet chunk. way to number three for take-off position upper Midwest, badass, full-blown winter My driver was really concentrating just to when the pilot announced we had to go storm coming in. stay on the road because visibility was ter- back to the gate for additional de-icing. Excuse me? Hey! What do I know? I’m rible. Some cars slid out and others were Double-damn! There goes my connection just an Atlanta guy who actually had to buy pulled over on the side of the road. He was to West Palm. a winter coat last weekend just to make a professional driver, but all the same, he Finally, I arrived in Atlanta at nearly mid- this trip. was wide-eyed, intense, focused and fully night…worn out from stress and travel. 10 Dealer January 2010 Dealer-magazine.com
  13. 13. I had already spoken to Delta Medallion I have 60 managers flying in for four days truly alive when your intensity level and Services and had re-booked to leave for of automobile seminars in Atlanta. Oh well! awareness is highly focused and tuned in to West Palm at 8:00 a.m. The all-day meeting This is the life I chose and I love it. reacting and adjusting to unforeseen events with the Napleton managers would only At one time or another every one of us as they come at you. start one hour late. Randy was OK about has been forced to ride through the storm it; we can live with that. and we’ve all had to scramble…making Fritz has left the building It took Delta two hours to locate my rapid-fire adjustments and snap decisions Back in October, when writing my luggage and bring it upstairs. It was some when plans fell through. We all endured November article, I wrote that I would be of the poorest customer service and the working under high stress and missed surprised if Fritz Henderson would still be worst attitude I’ve ever experienced from deadlines. Maybe it’s the only time you’re with GM at Thanksgiving. Well, that didn’t them. When they finally did get around to finding my luggage, it was soaking wet. $"#(N*/("#$+N( At 2:00 a.m. I caught a cab and asked him to take me to any cheap hotel near the airport. Everything was booked …obviously every hotel near the airport was filled %*()#(O3! with other stranded travelers because the entire airlines system was backed up. Three hotels later I finally found a vacancy. I won’t say the hotel was awful; it was sort of clean, though well worn. To give you an idea of how cheap this place was… the woman at the desk told YOUR me the room was $79 a night and then LOGO apologized for the high rate because of limited availability. HERE With only three hours of sleep and a hot shower, I suited up and went back to the airport. The flight was on time. I was able to sleep on the plane a little, which also helped. When we arrived in West Palm Beach, Randy’s driver picked me up and we drove straight to the hotel where 40 managers and Napleton partners were wait- ing in the meeting room. I walked right in to the meeting, set up my audio-visual… !"#$%&'()* and then lectured and trained for the next AUTOMOTIVE eight hours on my feet. Then finally, I got to sleep and performed another full day with their salespeople. The next day, I worked with the other half of their salespeople in a similar session. Now, here I am relatively rested, sitting CHEVROLET in my room in an upscale luxury hotel in West Palm Beach. I just had an incredible seafood dinner and more than one cocktail All these dealers have two things in common. with the guys (No Louis XIII). Kicking They’re #1 in their market, and they work with CBC. back…all I have to do now is finish this Want to see YOUR logo here? Call us today! article. All of the notes for this article are lined out and I’ll be home with my wife 37588799979:59(;(<=>?@ABACDEFA?G and puppy tomorrow night. I am excited 1HI(J?KL(M"##(+'+(CI(ABACDEFA?G that things are going so well but I feel so !"#$%&'#()"*$+!$,%(!*-!#.%, beat up at the same time. I will finally get to rest over the week- end…of course, on Tuesday it starts all over. $/%*0*%&'#($+'#"%&,&-1(,.#!&$2&,%,(,&-!#(3456 Dealer-magazine.com January 2010 Dealer 11
  14. 14. Dealer Advocate, Ziegler (continued from P-11) actually happen. I was scratching my head, “At one time or another vision and charisma. I’m wondering if Fritz thought I had that one right. will be eating Thanksgiving Dinner at Then, on December 1, I was the key- every one of us has been Renaissance Center.” note speaker for the Massachusetts State Those are the paragraphs I wrote back Automobile Dealers Association Annual forced to ride through in October. Convention in Boston. Right in the middle Well, it didn’t take long for the second of my speech I was commenting on the fact the storm and we’ve all shoe to drop, did it? Today (December 10) that I had missed that prediction. had to scramble…making Brent Dewar has rendered his resignation, At that exact moment, a gentleman in the saying he will leave General Motors within audience raised his hand. Ordinarily, I don’t rapid-fire adjustments four months according to multiple sources. take questions in the middle of a keynote Did I not call this one? It was obvious. speech, but this time I did. He said… “Jim, and snap decisions when I liked Brent Dewar, considered him to I just received a message on my Blackberry be a friend. Actually, I felt he was one of that Fritz Henderson just resigned (ousted) plans fell through.” the most talented and in-touch managers from General Motors.” —Jim Ziegler in the company. I am gravely concerned. Needless to say…that really pissed me off. I am in no way commenting on Susan I missed it by three days. And furthermore, “I wonder how Brent Dewar received Docherty’s ability or qualification. She has I think Fritz did it on purpose just to spoil the news? Susan is no doubt qualified actually reached out to me to meet with her my accuracy stats. and deserving of the position but I’m sure when I am in Detroit. I am really looking In my November article featuring Jim many insiders were thinking Brent would forward to meeting this exceptional execu- Press, titled “Pop Goes the Weasel,” I wrote be LaNeve’s replacement. tive and getting to know her. the following paragraphs… “All of the indecisiveness and contin- All I am saying is what in the hell did In regard to the announcement of Susan ual reversals are giving me a headache… they expect Brent Dewar to do after Docherty’s promotion to replace Mark déjà vu… is Fritz the guy? No doubt that LaNeve… General Motors needs a strong leader with continued to P-56 12 Dealer January 2010 Dealer-magazine.com
  15. 15. Cliff’s Notes Cliff Banks A Snowball’s Chance in… W hat a mess. Over the next six It could be a brilliant move for GM. behind the scenes, there was little unity. months, we could see hundreds On the surface, it would play well with There were too many interests to serve. of General Motors and Chrysler Congress and with the media. Beneath NADA had to carefully balance how much eliminated dealers seek arbitration to regain the surface, it would be a Machiavellian support to give to dealers who weren’t deal- their franchises. approach and still will result in hundreds ers anymore, especially when several of its President Obama signed a law last month of franchises closing, which is what GM larger and more powerful members pushed providing that right to dealers who lost wants. Of the dealers who already have the association to focus its energy on help- their franchises because of the bankruptcy shuttered operations it is likely they will not ing surviving dealers. As a result, much of proceedings last June. be able to reopen because they won’t be able NADA’s fight occurred behind the scenes The legislation is rife with challenges. to find the necessary capital. Meanwhile, very quietly. Many of the eliminated dealers do not have GM avoids all of the costs associated with The CRDR, meanwhile, went public access to the capital necessary to ramp up arbitration. and fought loudly, putting a lot of pressure operations again. And good luck trying Even though the legislation falls far short on Congress. Although, there was some to find a bank willing to fund the effort. in providing eliminated dealers proper “bad” blood between NADA and CRDR, Without capital, there is no inventory, no remuneration, it at least gives some deal- Darvish, Fitzgerald and Spitzer served a payroll, and in some cases, no facility… ers a fighting chance. useful purpose. They could do NADA’s you get the idea. It’s the right thing to do. Far too many dirty work, providing the association with Another problem for dealers – the arbi- dealers saw their life’s work, and many cover with its surviving members who tration process could be costly. times, the businesses created by grandpar- wanted the eliminated dealers to go away. It could get real messy for GM and ents or parents, ripped from their hands A bill passed in the House of Chrysler. Both automakers have given many and handed to a competitor. Representatives died in the Senate, which of the franchises they “stole” to other deal- Somehow, that needs to be rectified. all but eliminated any leverage NADA or ers. If arbitrators end up reinstating hun- I don’t care who you are, watching that the CRDR had to force a settlement. GM dreds of franchises, don’t be surprised to happen last summer, you had to ask your- and Chrysler, wanting to put an end to the see two Dodge franchises across the street self at some point, “Is this really America?” wrangling, said they would offer nonbind- from each other. How we got to the “solution,” is just as ing arbitration based on the criteria used in It could happen. Neither GM or Chrysler messy as the solution. June to determine which franchises to close. has provided sound reasons for getting rid A snowball’s chance in you know where They miscalculated. Two weeks later, of hundreds of dealers. Nor have they is what I – and most other experts – fig- President Obama signed the legislation answered the question to anyone’s satisfac- ured NADA and the Committee to Restore giving dealers the right to seek third-party tion how they made the decision of which Dealer Rights were when they began trying arbitration. dealers to cut. to broker an acceptable resolution last Even though it ain’t pretty, what NADA Chrysler could be in a world of hurt summer. pulled off – with the CRDR’s help – is because there is evidence it went after First, the two didn’t agree on the end- pretty impressive. dealers the business centers didn’t like. I game. NADA favored arbitration while For those of you entering the arbitration know of at least three who were eliminated the CRDR, led by Tammy Darvish, Jack process the next several months, I wish you because they fought back on some issues in Fitzgerald and Alan Spitzer, were adamant Godspeed and good luck. recent years. the automakers restore all of the eliminated Send us an e-mail and let us know how Despite the challenges, lawyers tell me (stolen perhaps is a better word) franchises it’s going. they are swamped with calls from elimi- to their rightful owners. nated dealers who want to move forward Darvish asked NADA’s board of direc- with arbitration. tors for money in June. It refused. Darvish, Meanwhile, Chrysler is hinting it might Spitzer and Fitzgerald ended up putting fight the legislation in court. Don’t be sur- their own money – hundreds of thousands Cliff Banks prised if GM announces all of the fran- of dollars – behind their efforts. Vice President and chises it slated for elimination are eligible After a public spat, the two organiza- Editorial Director for reinstatement. tions agreed to form a united front, but Dealer-magazine.com January 2010 Dealer 13
  16. 16. Leadership Dave Anderson Recommit to Personal Growth in 2010! I highly recommend that you make this the People skills. Efforts to improve your take in responding to a provocation, if only year you work harder on yourself than ever people skills will take a giant leap forward by a few seconds. It is normally the instant, before. This is because last year left little once you start caring more about people. impulsive, unthinking response to events, bad time for many leaders to upgrade and expand I know, I know. The economic times have news, offensive remarks or unpleasant situ- their personal capacity because they were so you worried about money. But the more you ations that you must apologize for and take busy with the emergency of the moment. become obsessed with money, the less you you forever to live down. They lost focus on the importance of lifting tend to care about people! Improving your their own lid so they could in turn elevate the people skills means that you engage others Discipline abilities of their team. That being said, what by asking more questions and listening to Discipline is the fourth area for personal is your plan for personal growth this year? I their answers. You take the time to connect growth and it is the one that ties the other three can promise you that you won’t automatically with them rather than expecting them to together. Without a greater level of discipline, grow because growth must be intentional and chase you down in order to build or sustain you won’t consistently make the right charac- life won’t just come along and improve you. A a relationship. It also means that you learn to ter choices, connect with your people, execute plan for personal growth has numerous poten- motivate them as unique individuals rather priorities or control your emotions. Frankly, tial components. With respect to the space than as numbers. It also helps if you reinforce people without greater levels of discipline have allowed, I will focus on four areas of personal them by bringing closure to the things they do no one to blame but themselves because disci- growth that hold great potential for increasing well rather than ramble on about what they pline can be developed. You’re not born with your abilities and credibility. missed or could have done better. or without it. The catch is, you won’t develop Working within the disciplines of priorities. greater levels of discipline until you first get seri- Character To pull this off, you’ll need to decide exactly ous enough about what you want to accomplish Building a strong character means more than what your priorities are. Hint: it’s probably and to begin making yourself do more of what being honest and forthright with others. Strong not the crisis of the moment. In fact, if you’d you know is important, even when you don’t character also covers ground like a strong work spend more time on your genuine priori- feel like doing those things. In other words, you ethic, remaining teachable, persisting in the ties, you’d probably have fewer crises of the need more and bigger “whys.” Once you have face of difficulties, meeting deadlines and moment! Next, you’ll need to decide what to a big enough “why,” what you must do and keeping promises. These aspects of character stop doing so that you’ve got time to execute how you must do it becomes easier. are built or diminished with your daily deci- the non-negotiable disciplines you’ve identi- In order to take your organization to a higher sions, and these decisions are rooted in values fied as priorities. Finally, you’ll need to catch level in 2010, you must first elevate your own you’ve chosen and embraced long ago. Building yourself more quickly once you get off track performance. Organizational excellence begins character means that you do what is right and and begin to major in minor things, and make with personal development and sacrifice from not what is easy, cheap, popular, proximate or quicker adjustments to realign your activities the leader, and addressing these four aspects for convenient. It also means that you do what is with your priorities. personal development is an essential place to right regardless of the cost. Without continu- start your journey. ing to make the right character choices, you Emotional maturity will nullify the impact of your talent. In fact, a Publicly controlling your emotions, admit- Dave Anderson is president of LearnToLead, strong character protects your talent. If you’re ting mistakes, listening to criticism and consid- a sales and management training organiza- not sure what your character blind spots are, ering points of view contrary to your own are tion. He is the author of 10 books, including, ask those who know you best and don’t shoot all part of emotional maturity. Over the past “How to Run Your Business by THE BOOK: the messenger when they answer. Believe me, year or so, economic upheaval and increased A Biblical Blueprint to Bless Your Business.” they have the answers. pressure on the bottom line has squeezed the Dave has spoken at the NADA Convention worst out of many leaders. They wear their for the past 10 years and is a panelist on Competence attitude on their sleeves, publicly complain MSNBC’s Your Business. I’ll narrow the scope of suggested compe- and blame and overreact to the insignificant. tencies to upgrade to that of people skills and Since the pressures bearing down on your abil- If you wish to discuss this article with working within the disciplines of priorities. ity to make a profit aren’t likely to disappear other dealers, or with the author, please Without a doubt, your ability to accomplish anytime soon, it would be wise to practice go to the “Discussion Forums” at www. much of what you aspire in the coming year choosing responses to situations that enhance Dealer-magazine.com and enter the will depend greatly upon your ability to get your personal standing with your team rather “Leadership” forum or e-mail him at things done through others and to maximize than tarnish it. One of the best methods for danderson@Dealer-magazine.com. and manage your time each day. accomplishing this is to increase the time you 14 Dealer January 2010 Dealer-magazine.com
  17. 17. !"#$%&'()$%*+,-$)"$."#/ 0+1023)$4")2')+&*$&*"'25$ You need wingmen to win! In Never Fly Solo (McGraw-Hill), former combat decorated fighter pilot and leadership speaker Lt. Col. Rob “Waldo” Waldman shares a flight plan for success in business and life. Whether you are a seasoned executive, entrepreneur or new to the business world, your success depends on the mutual support of trusted partners to help you maximize your potential. Fighter pilots call these partners wingmen. Waldman shares a message that is both human and business critical: we all must overcome the missiles of adversity and change and we can’t do it alone. YOU’LL LEARN TO: ! Commit to the core wingman values of integrity, service and excellence ! Transform relationships with colleagues into interdependent partnerships for success ! Take courageous action and ask for help when adversity strikes ! Communicate effectively in high stress situations Order online at www.neverflysolo.com. Available in 100% of Waldo’s advance purchase profits will be donated to veterans! bookstores everywhere. The Wingman’s clients include BG Products, Bank of America, Koons Toyota, Michelin, Shell Oil, Home Depot and many more. If you would like Waldo to speak at your company meeting or if you want to sponsor his “Never Fly Solo” book tour, call 1-866-925-3616 or e-mail info@yourwingman.com !"#"$%&'(%)*'*
  18. 18. Ownership Richard Sox Honda Alters its Dealer Planning Volume System Why this matters to Honda dealers W e have received reports from our ratcheted up a dealer could unknowingly important result of meeting planning volume Honda dealer clients that Honda set himself up for a new “minimum” facil- is being eligible to receive Honda’s President’s has altered its system for assign- ity requirement. In addition, if a dealer’s Award. Dealers informed us that the morale ing planning volume goals to its dealers. planning volume is not consistent with the of dealership’s personnel is impacted by the Historically, Honda issued planning volume realistic sales expectations for the dealership, dealership receiving the award and that the objective(s) to its dealers on an annual basis. the manufacturer is likely using the planning award is a critical component of their advertis- However, dealers are now receiving updated volume to demand that the dealer unnecessar- ing campaigns. planning volume objectives on a quarterly ily expend precious capital to meet arbitrary As you have read repeatedly in this basis. Why is this important to Honda deal- facility requirements. In some cases, the dealer column, dealers who don’t believe their ers? Among other reasons, a dealer’s planning may not be able to meet the manufacturer’s assigned planning volume is reasonably volume is integral to Honda’s calculation of facility requirements without moving to a attainable must respond to their manufac- the dealer’s facility requirements and meeting larger parcel of land. If suitable land can be turer in writing objecting to the planning planning volume is critical to receiving the volume. Dealers should request the details of highly sought-after President’s Award. how the manufacturer arrived at the dealer’s Let’s take a step back and look at the “[I]t appears that planning volume and then respond to any definition of a dealer’s “planning volume.” component of the manufacturer’s formula Planning volume is generally understood to be Honda is penalizing that is erroneous. the number of new vehicles a dealer is expected its high performing to sell within a given period of time. Typically, a GM franchise buy-sell activity dealer’s planning volume is set annually by the dealers by continually picking up manufacturer based upon the manufacturer’s Since the “old” General Motors sold its assessment of the availability of product and increasing those assets to the “new” GM, the dust has begun to the sales opportunity available within the settle somewhat with regard to which dealers dealer’s market area. dealers’ planning are remaining in the market and which appear In contrast, a dealer’s expected sales perfor- to be going away. Even with dealers who are mance is the number of vehicles a dealer must volume . . .” going forward with GM, we are beginning sell in order to equal the manufacturer’s sales —Richard Sox to see an interest by some in selling their GM standard, which is generally based upon the franchises. As has been printed here and else- performance of other same line-make dealers where, during the bankrupcty proceedings old within the dealer’s zone, the dealer’s state, the GM offered (as part of the reorganization of found, the dealer will undoubtedly experience dealer’s region or nationally. Expected sales the GM dealership network) “participation a higher monthly overhead. performance is a function of the performance agreements” to dealers with whom the new Honda’s move to quarterly planning of other dealers and is typically assigned as a GM desired to continue to do business after volume objectives is troubling for its dealers percentage of the average performance within the bankruptcy sale. These agreements set in that the increase is coming more often and the designated territory (i.e. 90% of same line- out new rules and guidelines by which these is coming in significant percentages. In fact, make dealers sales performance in the state). retained dealers were required to operate as a it appears that Honda is penalizing its high Dealers must pay attention to the manu- member of GM’s dealership network. In par- performing dealers by continually increas- facturer’s assignment of “planning volume” ticular, the participation agreements required ing those dealers’ planning volume. Honda for several reasons, not the least of which dealers to agree to comply with undisclosed views a dealer’s increased sales volume in the is that facility guidelines are based in large requirements with respect to image and facil- prior quarter as an indication that the dealer part on planning volume. Manufacturers use ity. GM is finally getting around to sharing is capable of selling even more cars the next planning volume to determine the amount of with its dealers these image requirements, as quarter. But, for the dealer whose sales are showroom space, service space, parts storage GM field representatives contact dealers to flat or declining, Honda presumes a lower space, service stalls, customer parking space, discuss GM’s expectations as to both image planning volume for the next quarter. Honda’s inventory parking space and overall acreage and facility. calculation of planning volume is clearly unfair a dealer must have to properly accommodate Over the last few weeks, our dealership and becomes an unattainable goal for its highest expected sales and service customers. transactions partner, Robert Bass, has seen an performing dealers. Obviously, if planning volume is being increase in GM dealership buy-sell activity, Honda dealers tell us that one very 16 Dealer January 2010 Dealer-magazine.com
  19. 19. with both sellers and buyers coming to us for discussions will help to minimize disagree- when they deal with automobile manufacturers. representation. In structuring these dealership ments later during the buy-sell process. buy-sells, we have stressed the importance If you wish to discuss this article with of understanding GM’s dealership network Richard Sox is a lawyer with the firm of Myers other dealers, or with the author, please initiatives. These initiatives, found most recently & Fuller PA, with offices in Tallahassee, Florida go to the “Discussion Forums” at www. in GM’s Essential Brand Elements incentive and Raleigh, North Carolina. The firm’s sole Dealer-magazine.com and enter the program, will impose financial burdens on a practice is the representation of automobile deal- “Ownership” forum or e-mail him at dealer, and, as a consequence, will affect the ers in their quest to establish a level playing field rsox@Dealer-magazine.com. economics of a transaction. GM’s EBE incentive program contains a major emphasis upon facility image, facil- ity size and exclusivity. Putting aside for the moment whether state franchise laws will limit GM’s efforts in this regard, a buyer of a GM franchise must factor in the expected cost of changes to the dealership facility in order to qualify for the EBE incentive monies. Without the incentive monies, the buyer could be placed a competitive disadvantage against a dealer in the market, which does qualify for the EBE incentives. GM is sending out its designated architectural firm to meet with dealers and begin the process of draw- ing up plans, which will result in a qualifying facility. If the potential buyer intends to keep the franchise at its current location, he or she should ask to review any facility plans that have been approved by GM or, if no such plans have been created, have GM’s architec- tural firm perform a review of the facility and provide preliminary expectations for the facil- ity. Likewise, if the potential buyer intends to relocate the GM franchise then it is imperative that he or she have a clear understanding of what GM will require at that facility. Apart from quantifying the cost of any required facility renovations, a buyer must be careful in agreeing to purchase certain dealership assets such as furniture and signage. GM’s new image requirements may render the furniture or signage obsolete. GM’s image/facility elements should be considered by both seller and buyer. When setting their price, sellers should be realistic and take into account GM’s image/facility costs; buyers will bear the burden of those costs and therefore they should build that cost into the price set out in their purchase offers. Understanding GM’s image plans at the outset of buy-sell discussions will contrib- ute to productive negotiations. The parties will quickly learn what they can and cannot live with in regard to the change in economics as a result of GM’s image/facility plans. Early Dealer-magazine.com January 2010 Dealer 17
  20. 20. Ownership Erin Kerrigan When it Comes to Credit Today, Bigger is Better T here seems to be a growing divide in this country between the big and the small. Big banks are getting bigger (see Chart 1), while regional and small banks are closing (120-plus at last count). Corporate bond issuances hit record levels in 2009, while private companies had difficulty obtaining any form of debt. Is the market telling us that bigger is better? Chart 1 Source: Wall Street Journal *Top 10 Banks: JP Morgan Chase, Goldman Sachs, BofA, Morgan Stanley, Citigroup, UBS, Credit Suisse, Deutsche Bank, Barclays Capital, RBS If you look at our industry, the answer is a resounding “yes.” While many small dealership Chart 1 groups are struggling for survival, the largest groups have turned the corner on the Great Recession. Most have returned to profitabil- ity. Many have recapitalized with fresh debt and equity. This past fall, Sonic Automotive raised $172 million in convertible debt and $94 million in equity, while Lithia Motors raised $46 million in equity. All of this occurred when only 14 dealers were able to obtain a mere $16 million from the Small Business Administration’s loan program! To be clear, the debt that public compa- nies have been able to raise is not necessar- ily a reflection of their lower risk profile. In Chart 2 fact, speculative-grade companies, or those with “junk” credit ratings (Sonic Automotive included), issued more than $123 billion of on average since March 2009. No private As you can see, AutoNation and Penske new bonds in 2009, compared with just dealership group can say the same about their Automotive Group (the two largest public $48 billion in 2008. It seems big companies value. In fact, most have seen values drop dra- dealership groups) trade at nearly double the are believed to be less risky than small ones. matically as earnings and multiples decline in blue sky multiple of their smaller public rivals. Why? Unfortunately, the answer is circular. tandem. Sid DeBoer, CEO of Lithia Motors, Even at these very high multiples, the largest Small, private companies are often perceived commented to Automotive News, “This is the companies continue to attract strong investors as riskier because they typically have less access reason I went public…being public gives you (Bill Gates purchased an additional $18 million to capital; however, they have less access to access to equity capital. Privately held com- of AutoNation’s stock in November and now capital because they are small and private. panies have to find debt to grow.” This is the owns about 13% of the dealership group). The public equity markets provide addi- reason many believe more private equity capital tional evidence of the preferential capital treat- is needed in our industry. Chart 2 ment received by large companies. Public deal- Chart 2 further reveals the premium being Public company blue sky multiples ership stock prices have increased over 400% placed on larger companies’ equity value. Armed with capital, public dealership 18 Dealer January 2010 Dealer-magazine.com
  21. 21. groups are sounding the acquisition drum. a Honda and Acura dealership for 40% of its groups will be a force to reckon with as they Lithia announced that it intends to buy 2006 listing price. expand their market share and invest in new $400 million in revenue in the near term In conclusion, I return to my original ques- technologies and systems. and grow its dealership network by 10% tion. Is bigger better? While today the answer In the end, when the credit markets nor- annually. Similarly, in addition to committing is yes, in the future it will depend on market malize, profitability, rather than size, is what $150 million toward capital expenditures, conditions. If the debt markets reopen for pri- will really matter. Until then, remain nimble. AutoNation plans to make several acquisitions Auto retail is evolving. The dealers that are this year. Dealership consolidation may be the ready and willing to accept the evolution will theme for 2010. “When the credit be the most successful. Is this good news for private dealers who are looking to sell? The answer is probably markets normalize, Erin Kerrigan is senior vice president of AutoStar, no. Today, the public dealership groups do profitability, rather a leading provider of long-term capital for auto not intend to bid up blue sky values. They dealers. AutoStar counts among its clients North are taking a very disciplined approach to than size, is what will America’s largest public consolidators and pri- valuation. Lithia is aiming for a 20 to 40% vately-owned franchise dealers. after tax cash on cash return on its acqui- really matter.” sition. To achieve that level of return, sell- —Erin Kerrigan ers will be paid roughly two to three times If you wish to discuss this article with their net income for the purchase of their other dealers, or with the author, please entire business, including blue sky, working vate dealers, the capital playing field will level go to the “Discussion Forums” at www. capital and fixed assets – hardly a home run off – making credit access less of a competitive Dealer-magazine.com and enter the price. As further evidence of the challenges edge. Furthermore, it is likely manufacturers “Ownership” forum or e-mail her at associated with selling to a public dealership will continue to prefer the private dealer to ekerrigan@Dealer-magazine.com. group today, AutoNation recently purchased the public. However, the public dealership Start e New Year With Marketing Solutions at Work! INCREASE REACH DRIVE BETTER RESULTS REDUCE PRINT COSTS CUSTOMER JOURNEY Attend a FREE webinar, and receive an iPod Shuffle®! Call Now 1-866-391-0888 www.fullcirclesolutions.com *O er expires 3/31/10. O er valid while supplies last. Dealer-magazine.com January 2010 Dealer 19
  22. 22. COVER STORY Ed Tonkin NADA Chairman Ron Tonkin Dealerships Incoming National Automobile Dealers Association Chairman Ed Tonkin is a second-generation dealer from Portland, Oregon, who says he wants to help reshape NADA into a more efficient organization and involve more of the 62-plus directors around the country in board meetings, plus find a way to more effectively reach out to the organization’s 19,000 dealer members. He steps up to lead NADA following a year of historic industry turmoil and says the organiza- tion will be deeply involved in grappling with ongoing negotiations with manufacturers over the fallout from the GM and Chrysler bankruptcies, lobbying for dealers surrounding issues such as CAFE, proposed IRS tax code changes and Congressional Legal and Regulatory proposals, in addition to working on easing continuing floorplan and working capital challenges for dealers. Recently, we spoke with Tonkin about his career as a dealer and his agenda for NADA in 2010. 20 Dealer January 2010 Dealer-magazine.com

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