Spring comes to the Detroit metropolitan area later than most parts of the country and even though it’s almost May, a palpable chill remains in the air. Just as the region begins to thaw out from a long, cold winter, at least one if its longtime residents is emerging from a deep freeze of its own. For Southfield, Michigan-based Avis Ford Inc. (No. 14 on the be auto dealers list with $86.5 million in sales), the worst is over. In fact, in the first quarter the dealership sold 645 vehicles, the best quarter in more than five years. And with Ford vehicles gaining in market share combined with a relatively steady stream of work going through Avis’ 42 service stalls and body shop, Chairman and CEO Walter E. Douglas Sr. is cautiously optimistic about the prospects for 2010.
Make no mistake about it, this is a tough business. Consumer demand for domestic automobiles started slipping in late 2005. Scores of auto dealerships were forced to reduce headcount and inventory, sell off assets, or shut down entirely. “In 2005 things kind of went off a cliff. Ford Motor Co. had no products to sell,” says Douglas, 76. “We hit some real hard times. Our volumes, which had always been somewhere between 2,500 and 4,000 units on an annual basis, dropped to less than 2,000 units. It was 1,700 to 1,800.”
Further complicating matters was the fact that several very competitive stores had opened in the region. Among them were the nation’s No.1 and No.2 Chrysler dealerships, located within just miles from its showroom. “They were offering aggressive incentives back then that were hard to compete with,” Douglas recalls, forcing Avis Ford to hunker down. “We put some of our people on four-day work weeks. And cut costs. We did what we had to do to survive.” Even with the austerity measures, the dealership barely broke even from 2006 to 2008.
Avis Ford battled back though. “We began to do a lot of the things, the rightsizing of our business, to ultimately deal with the size of our customer base,” says Mark Douglas, Walter’s youngest son, who took over as president of the company in January 2005 and runs the day-to-day operations. “So, as things begin to stabilize, we realized these are sustainable levels for us in terms of overall volume for this region, for our store. We concentrated primarily on holding on to our market share.”
Another area the company focused on was the Internet, which Edmond Douglas Jr., vice president and business development manager and the eldest son, describes as, “the lifeblood of our used car department.” Nearly 70% of used car sales are attributed to the company’s online presence (www.avisford.com). In 2009, Avis Ford sold 970 used vehicles and projects to sell about 1,000 for 2010. “The tough decisions we had to make over the last few years are starting to bear fruit now that we’re seeing an uptick in the new car sales department.”
These moves allowed Avis to weather the worst of the slowdown. And merely surviving later turned to thriving when Chrysler’s woes claimed a few of the area’s dealerships. Customers began flocking back to Avis Ford. The company also recruited a first-rate sales team, led by Sales Manager Roy Williams. So in 2009, when most dealerships were realizing continued sales decline, Avis Ford increased revenues by an impressive 15.9%. For their level of grit and the managerial acumen to bounce back from one of the hardest hit industries in the nation’s worst downturn in a generation, black enterprise has named Avis Ford as our 2010 Auto Dealer of the Year.
THE MOVE TO MOTOWN
Growing up in Hamlet, North Carolina, the elder Douglas was raised in a place far removed from Detroit. Perhaps best known as the birthplace of jazz legend John Coltrane, the rural town consists of just a few thousand residents. After earning his bachelor’s degree in accounting and a master’s degree in business administration from North Carolina Central University in Durham, he took a teaching job at then Edward Waters Junior College in Jacksonville, Florida. After a short stint in the U.S. Army in the mid-1950s, Douglas landed a job with the IRS. By 1965 he was transferred to Michigan and soon thereafter left the IRS to join New Detroit, an urban economic development coalition, in February 1972. After six years, Walter was named president of the organization on which automotive mogul Henry Ford served on its board.
When Douglas decided to leave New Detroit in 1985 for the private sector, he turned to Ford. “They seemed very, very pleased to have someone with my background. I was sort of a prominent citizen here in the city of Detroit,” he recalls. “They felt that I would be a good fit for their minority program.” Douglas was in the program a scant 90 days when he gained through unfortunate circumstances the opportunity to buy into an existing dealership. Dick Turner, who owned 49% of Avis Ford, was killed in a plane crash. The remaining stake was owned by the entrepreneur who founded the business in 1946, Warren Avis. In fact, at that selfsame location, Avis also founded what is now the publicly traded global vehicle rental giant Avis Budget Group.
With very limited experience and funds, Douglas needed a partner to raise the $3.5 million purchase price of the dealership. He turned to Ed Brown, CEO of a Ford dealership in nearby Livonia. In the agreement Douglas and Brown would pay $1.6 million up front for Turner’s 49% interest. “I had to hock everything I owned and then some,” recalls Douglas. Ford Credit loaned him the balance and Brown, who already owned a successful dealership, cut a check for his half—$800,000. The deal also called for Douglas and Brown to pay Avis $1.6 million within five years as well as pay off $300,000 in debt the duo would assume. In 1992, Douglas and Brown would complete their buyout of Avis’ majority stake. That same year, Douglas would acquire additional shares from Brown to claim a 60% majority ownership stake in the dealership.
For years, Avis Ford had been a successful franchise. But as the new millennium continued, all was not well. Avis Ford was fighting a two-front battle, flanked by a pair of high-volume Chrysler stores that had a critical mass over cheap leases. “There’s no way we could make money, and try and chase that,” says Jim Witmer, general manager and a partner in the business. With sales sliding, the company reduced its inventory from as much as 900 vehicles to as few as 300. Sales from 2005 to 2006 slipped 6.6%. Since the dealerships purchase vehicles with debt, it was important to reduce that degree of leverage. “So, everything had to be downsized, and you had to analyze everything on return, everything you [owned] had to have some sort of return.”
Another development: Detroit’s industrial middle class—Avis Ford’s bread-and-butter—was migrating elsewhere as the American automakers continued widespread layoffs and manufacturing jobs moved overseas. For Avis, employee downsizing was inevitable: In 2004, the dealership employed some 145 employees—a number that dwindled to roughly 100 by 2006. “When you cut a third of your work staff, you cut people that have been here quite a bit of time, and actually good employees. It was a gut-wrenching thing to go through,” Witmer recalls.
Maintaining a motivated sales force and keeping employee morale up in a beleaguered business and an industry in upheaval within perhaps the most distressed metropolitan area in the nation is no easy feat. Employee breakfasts, golf outings, recognizing and rewarding excellence—both monetarily and otherwise—were among the morale-boosting strategies employed. “Truly great leaders see all their employees and the successes that [the company] has had as a result of what they do every day,” points out Mark. “Yeah, you may have influenced it, but ultimately they’re the ones that are on the front line 90% of the time. I ultimately know where the true credit lies, and I make sure they understand that as well.”
While Avis Ford hunkered down for survival, much of its competition was less fortunate. And as competing dealerships failed, Avis Ford was able to acquire top talent. Among the talent the company acquired was Williams. The sales manager, who joined in April 2007, helped the company recruit top salespeople and as a result, sales picked up. “Avis Ford traditionally was a well-known store, a well-established store that was used to selling a lot of cars,” says Williams. “As the market shrank, Avis Ford sales shrank a little more dramatically. When times were good they thrived but when things weren’t so good, they didn’t and they didn’t know quite how to recover from that.”
So Williams hit the ground running. Those who didn’t have the fire and tenacity to sell product and meet sales goals were replaced—about one-third of the 18-person sales team. “People were here a long time and that’s good and bad. It’s good in the sense that people are used to seeing familiar faces when they come in and that brings confidence,” says Williams. “But it’s bad when there’s a comfort level with regards to production levels. Some people were OK with selling an average or less than average amount of cars. When I had salespeople selling a below average number of cars, it’s hard to recruit new people because they see those low numbers and don’t want to come aboard.”
The end result was a roughly 12% sales increase his first year at the dealership. But selling autos in Detroit in this environment is no cakewalk. “There were sacrifices on the customer’s part and our part. If you had customers who, prior to things going bad, were used to driving luxury, top-end vehicles, we’ve had to ask those customers to take lesser vehicles in order for them to afford it,” he says. “So if you were driving an Expedition in 2005 and they came back on lease in 2008, some of them had to take a midline car. It took us being patient and learning how to sell.”
HITTING THE SWEET SPOT
Avis Ford’s turnaround was also helped by its manufacturer’s. Ford Motors didn’t go through the bankruptcies and level of upheaval as General Motors and Chrysler, and therefore didn’t force some of its dealerships to shut down. By negotiating a major financing package prior to the credit crunch and revitalizing its product line, Ford was better positioned than its domestic counterparts when the worst of the recession hit. “Ford went out there, revitalized their products, got the jump on both guys, and they happened to hit the sweet spot in the marketplace with a couple of their models—the Fusion and the Edge,” says George Magliano, director of North American automotive industry research for Global Insight, a provider of financial analysis, forecasting, and market intelligence. “Ford was able to sell better, more volume, in a down market, and they were able to do it without as big incentives and without dumping the models into the fleet.”
The Fusion also happens to be the top selling vehicle at Avis Ford. It comes down to having product people want. “All of our data says the quality, fuel efficiency, the safety, and the smart, relevant, cool design and also best value are the main considerations when they buy a vehicle,” says Alan Mulally, president and CEO of Ford Motor Co., pointing out the Fusion was named the 2010 Motor Trend Car of the Year. “When you combine that with the fact that we didn’t take taxpayers’ precious money and we financed all these new products and the transformation of Ford on our own—the combination of products and running a strong business really contributed to Ford’s success.”
Another factor was the dealerships roots in the community. Douglas Sr. has been actively involved in nonprofits within the city for more than 40 years and currently works with more than 10 organizations, including the Wayne State University Foundation, the Detroit Symphony Orchestra, and the Museum of African American History. “Does it help business? It probably does,” he admits. “But I do it and have done it because I care for the community.”
That sense of giving back impressed Ford’s CEO, who points out that Avis Ford was also the 11th largest volume Ford dealership in the country. “His commitment to community service is incredible. It’s a nice tie to Ford because many people believe that Ford probably has the best distribution/sales stores throughout the United States because we’re in every small, medium, and large community,” says Mulally. “Usually the Ford dealer is a stalwart in the community and I think Walt and what he’s done and continues to do for the community is very typical of the Ford dealer leadership.”
Just as winter’s end brings about a time for new life, one company battled back from a long, cold recession and positioned itself for growth. There were sacrifices, tough decisions, and a lot of blood and sweat. But having turned the proverbial corner, the Douglases and their team are looking forward to some growth of their own. be