Changing Lanes

In a tough market, auto dealerships make quick moves to boost the bottom line

For black-owned auto dealerships, business in 2004 was a two-way street. While the auto industry sold near-record numbers of new vehicles, indicating a drive in the right direction, many dealerships were forced to shut their doors. As a result, growth in the number of black auto dealerships all but stalled.

In fact, sales for the BE AUTO DEALER 100 were downright anemic. These dealerships grossed $8.91 billion in 2004 compared to $9.03 billion in 2003, a 1.34% drop. The CEOs of these companies also trimmed payroll by 3.86%, from 12,295 workers in 2003 to 11,821 in 2004.

Despite flat sales for most black dealerships, some hot wheels took off. Purchases of crossover utility vehicles such as the Ford Escape, Honda Pilot, and Toyota Rav4 grew 16.6%. Large domestic sedan sales rose 13.9%, with continued strength expected in the consumer, business, government, and rental-car fleets. With the improving economy in 2004, business purchases boosted sales of large vans 6.6%, while more exciting minivan designs helped increase overall van sales by 4.1%.

Luxury car sales dropped 2.5% in 2004 on weak stock market performance, but BMW of the Hudson Valley (No. 77 on the BE AUTO DEALER 100 list with $36 million in sales) is one of many auto dealers making quick moves to keep sales up. At the beginning of 2004, Roland J. Walton, president of the Poughkeepsie, New York-based dealership, forecast and achieved a 20% sales increase by cashing in on the lucrative repair business. During 2004, Walton invested $250,000 to build a certified collision center, repositioning his dealership into a full-featured BMW service, parts, and repair outlet. “There is a tremendous opportunity for us in the fixed operations area,” he says. Walton expanded operations to include service technicians, counter people in the parts department, and an expensive technology infrastructure to support complex BMW servicing.

Walton estimates that the new collision center, which opened Jan. 1, 2005, will increase his dealership’s bottom line by 20% in 2005, and he expects a 100% return within 18 months. “It’s already starting to show returns,” says Walton. “There’s no question in my mind it’s going to have a huge impact on our bottom line this year and, more importantly, in the years to come.”

Gregory Jackson of Prestige Automotive (No. 1 on the list with $1.1 billion) is another auto dealer who made hard-line moves to counter a tough market. His dealership pushed revenues above the $1 billion mark by increasing its volume of fleet sales, which are generally less profitable than retail sales. But the sheer volume of these sales, along with some built-in servicing agreements, allowed Prestige to increase its sales as well as its profitability in 2004.

Dealers like Jackson and Walton, who could maneuver the changing roads during 2004, maintained their course toward profitability. But those that couldn’t fell by the wayside. Among the former BE auto dealers that no longer own their dealerships are: Freehold Chevrolet, Cobb Parkway Chevrolet, and Chandler Lee Buick-Pontiac-GMC Inc.

SHIFTING INTO REVERSE GEAR
Foreign-car sales continue to accelerate past domestic

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