The New Frontier

Auto dealers are rethinking the way they do business and finding new solutions to old challenges

Association and CEO of Cross Road Chrysler-Jeep in Oklahoma City, Oklahoma (No. 78 on the BE AUTO DEALER 100 list with $38 million in sales). “The presence of rebates undermined the trade-in value of used cars so that a consumer might have negative equity in a used vehicle, owing more on it than the trade-in would give.”

“Dealers located in more affluent areas were able to better leverage the economic turnaround, while dealers serving neighborhoods where consumers have lower median income and lower average credit scores did not have a good year,” says Sheila Vaden-Williams, president of the National Association of Minority Automobile Dealers. “There was a huge disparity in the ability of dealers in each segment to benefit from the economy’s uptick. Furthermore, consumers needed nearly perfect credit to qualify for 0% financing,” Vaden-Williams adds. Although sales hovered near historical highs, rising operating costs leaked dealer profits.

Powell thinks rebates favored larger dealers and that smaller dealers had difficulty sustaining enough growth to be profitable. African American auto dealers often put a 20% or less investment into their stores; to get the rest of their working capital, they typically become part of an auto manufacturer’s development program. However, participation doesn’t come for free. “Compared with dealers that have sufficient access to private capital, those in buy-in programs sometimes bear up to a 10% added cost of doing business,” says Powell.

Reginald T. Hubbard says that a management system that enables hands-on control over multiple dealerships is key to long-term survival. At No. 13 on the BE AUTO DEALER 100 list with $152.5 million in sales, Hubbard Automotive L.L.C. operates a Diamond-Chevrolet dealership in Kings Mountain as well as Metrolina Dodge and Isuzu dealerships in Charlotte, North Carolina.

In each location, Hubbard meets weekly with all middle managers and staff members. He also meets with the store’s general manager, controller, and variable- and fixed-operations directors so that he can track revenues and expense indicators. Hubbard uses a computerized accounting system that is integrated across all stores to generate reports. Then he meets with key managers to analyze the reports. “We discuss an action plan and how we are going to improve those numbers,” says Hubbard. “If you continue to evaluate and measure where you are and bump that against what the standard is and what you ought to be doing, then you improve those numbers. My overall philosophical approach is that what gets measured gets done.”

For Hubbard, 2003 was neither a boom nor a bust. Because of this, he says he can’t be complacent. “It was a year that required a forward-thinking vision, looking at ways to cut expenses, and accomplishing things much more efficiently; that’s how [we] were able to maintain a profit. It was a year that if you continued to do things completely the way you always did in the past, you were going to find yourself on the short end of the stick,” says Hubbard. Of the 50 to 130 vehicles that are sold at

Pages: 1 2 3 4