Automotive News - June 2, 2008 - 34

34 • JUNE 2, 2008 THE DEALER SPEAKS Fitzgerald: Dealers, consumers need alliance J ack Fitzgerald heads a large dealership group in suburban Washington. The veteran retailer says he likes to think of himself as a consumer resource. Fitzgerald’s company publishes several guides on how to shop for vehicles. His 13 dealerships, which sold nearly 20,000 new and used vehicles at retail last year, post no-haggle prices. Fitzgerald, 72, spoke with Staff Reporter Donna Harris about the state of auto retailing and his efforts to form a dealer-consumer alliance. How has the downturn affected your business? We are down 500 units from the previous year. Used-car sales are up 1,000 units, and new-car sales are down 1,500 units. Our business is healthy. We are not hurting. Our service and parts revenue was $190 million last year (out of total revenue of $646.9 million). We do what we do all the time. We can’t wait for a crisis to do something. It’s usually too late if you wait. How has your business been affected by the subprime credit crunch? We are loyal to the captive finance companies, but we expect them to buy deep for us if they want our retail business. Most have their own subprime operations. I worry about that a little for my customers. I wonder how many are pushed into subprime who shouldn’t be there. We advise our customers to shop and compare everything. You’ve tried to form an Auto Consumer Alliance between dealers and consumer advocates. Dealers would allow dealership inspections, and consumer advocates would give dealers a seal of approval. How is that coming along? It is still percolating. I hired George Rose to work on this. George used to run the consumer affairs office for Montgomery County (Md.). He used to regulate me. He’s the Fitzgerald organization’s consumer liaison and factory liaison. We have a board picked out. There are 10 board members — 50 percent dealers and 50 percent consumer advocates. We’ve agreed on a code of ethics. There’s never been anything like this. We think it is going to happen. The consumer movement is going to announce it when it is ready. Wasn’t consumer advocate Duane Overholt involved in the effort? He also was orchestrating whistleblower suits against large dealership groups. We haven’t heard much about his campaign recently. Duane Overholt and his lawyers have probably learned you make more money with settlements. Car dealers would rather settle these cases than go to trial. The publicity kills them. We investigated Duane Overholt. His lawsuits weren’t bogus. There is a great deal of pressure on dealers because of the declining profit margins manufacturers have created. Where are the dealers supposed to make a living? The problem is, dealers will are keeping their cars longer — an average of more than nine years today. Manufacturers warrant against holes from rust, not just rust. There is benefit to consumers to buy an aftermarket anti-rust compound. Paint protection offers a benefit to consumers. Toyota says vehicle owners need to wax and wash their cars once a month. Who does that? What are your net margins? Historically, our net profit as a percentage of sales runs a little less than 2 percent. Our target is better than 2 percent. Some of our stores are over and some of them are under. We don’t close stores. We don’t lay off people. Our winners are better than average, but we have got a bunch of domestic stores. You are one of the few dealers to meet international quality standards. What has that meant to your business? We do something called processbased management. We constantly look for better ways to do things. Everything we do is based on what the customers are telling us. Every person on our team, every one of our associates, has input into the process. Every employee has the opportunity to suggest ways to improve the process. The object is to be more efficient for your customers. Nothing else we do is more important than taking care of the customers. We have a process that anticipates their needs. I like to think we adjust daily. What changes have you made recently? We have an environmental management system. We are audited every six months. We look at all the ways we have an impact on the environment. We have to document everything we are doing. We have to measure how much trash we generate. We have increased recycling and reduced trash pickups. We recycle 75 percent overall. The goal is to recycle 80 percent. We are doing 88 percent at Wheaton Dodge. You just got an award for switching to a renewable energy source for your dealerships. Is it saving you money? Oil needs a competitor. That’s why we buy wind power. Not because it’s cheaper — it costs more. But sooner or later, the technology will advance, and it will be more competitive in pricing. We’ve locked into a threeyear deal on wind power. We may wind up ahead as fossil fuel goes up. How are you getting along with the factories? Some have strict building requirements for dealerships. Everybody gives me a hard time about facilities, but I am used to it. The factories want big dealers and big, exclusive facilities. Why do they want to be alone? Everybody knows you sell more in a shopping mall than anyplace else. Auto malls are the best location, and next to that is auto clusters. If you really put the customer first, you would make it easy to shop and compare. Customers like that. Customers pay to go to auto shows and look at your stuff. c CHUCK KENNEDY/MCT You’ve got several Chrysler stores. What do you think of Cerberus? Chrysler management has worked their way down to last place. I think they should stay in the investing business and not attempt to run companies. overcharge for some of these things they sell. You have offered no-haggle prices for a long time. Has that protected you against profit erosion? The difference between what I pay for the car and what the sticker says keeps shrinking. I can’t do anything about that. The protection I need is from the manufacturers. How much has the dealer discount — the spread between sticker and dealer invoice — shrunk in recent years? The ballpark average dealer discount is 6 percent, taking in little cars and big cars, both import and domestic. It is 25 percent less than it was a few years ago. The 2008 Volkswagen Rabbit has a 2 percent discount. The Toyota Camry has a 3 percent dealer discount. The Subaru Impreza has a 4 percent discount. The Dodge Caliber has a 3 percent discount. The Hyundai Accent has a 1.8 percent dealer discount. The spread between sticker and dealer invoice can go as low as 1 percent. What is there to haggle over? How much haggling are you going to do with a 1 percent profit? When did you start offering nonnegotiable pricing? In 1979. Back then, you couldn’t give away a Chrysler, with the loan guarantee crisis going on. The only way to sell cars in any numbers was a tent sale. You had to put the price of your car on the windshield. You had to stick by that price, because you’d make a pledge to Chrysler. There were rebates on the cars. We watched the customers and we could tell they really liked it. There were a lot of competitive dealers in the same place. I think they liked that, too. People like choices. It facilitates their shopping. This was an auto show that was really a sale, and it worked very well. That was our introduction to no-haggle pricing. We decided to stay with no-haggle pricing because we had been in business a long time. We had a lot of repeat business. What percentage of your sales is repeat business? About 60 to 65 percent. Customers bought from us because they liked the experience. We had to protect them against being overcharged. As you’ve said, if there is very little margin in the car, dealers sometimes overcharge in the finance and insurance department. How do you sell aftermarket items with integrity? We publish guides on how to shop for a car. We tell consumers they have to know what the finance market is and what accessories are of value to them. For example, cars are designed and built to resist rust. But we find people

Automotive News - June 2, 2008

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