The three years following 2006 were anything but courteous to Courtesy Chevrolet. The San Diego dealership hit rock bottom in 2009 — the worst year for car sales in California since 1975. But, like most of the Golden State’s dealerships, Courtesy’s prospects began to improve in 2010. As of the start of November, the dealership was already 300 percent ahead of last year in terms of profit, and it’s expecting bigger things next year.
Total retail units sold at Courtesy are up 31 percent, with new-vehicle sales up by 45 percent and used up 15 percent. The finance department’s profits are up by 34 percent. Even the dealership’s body shop is up 22 percent ahead of 2009. But Courtesy Chevrolet’s comeback story is far from complete. In many ways, it’s just beginning.
“We’re climbing out,” says General Manager Jack Grimley. “But the whole market is ticking up and we anticipate a bigger uptick next year. We just need a little help from the economy.”
As Grimley says, the entire San Diego area is on the comeback trail. In the first nine months of 2010, drivers bought 63,491 vehicles in San Diego County, up 12.7 percent from last year, according to the California New Car Dealers Association.
Even more promising is that Detroit’s Big Three automakers have increased their market share from 28.7 percent last year to 30.7 percent this year. And although domestic brands don’t crack the top 10 list of popular cars in California, Grimley says new models like the Chevrolet Cruze will definitely grab the attention of his customer base.
“We sold our first Cruze in less than 10 minutes of it being out on the lot,” he says.
The Long Climb
Courtesy Chevrolet is one of two stores owned and operated by William Gruwell, who, along with his former business partner, the now-deceased Edward Fitzgerald, purchased the location in the early 1980s.
The group’s flagship store, founded in 1955 by Fitzgerald, is located in Phoenix and is one of the top selling Chevrolet dealers in Arizona. It houses 325 employees on an 18-acre facility. The San Diego location is spread over five acres and claims a staff of fewer than 100, but the dealership is far from being a second thought.
With a major shopping center down the street and the Mission Valley Shopping Mall just next door, Courtesy sits on a prime location. Grimley has yet to experience the holiday rush, but he has heard horror stories of the traffic nightmares ahead. He says it will be a welcome sight, especially after what the local economy has experienced in recent years.
Things have been bleak since consumer spending hit record highs in 2006. That year, retail sales in San Diego County peaked at $47.8 billion, housing prices hit all-time highs and unemployment fell below the 4 percent mark. Since then, the jobless rate has climbed to 10.6 percent, consumer spending has dropped 17.4 percent — the biggest decline since 1935, when the country was in the midst of the Great Depression. Retail sales have fallen an astonishing 25.6 percent.
“We definitely went into a little boom in 2006,” says Ted Fregoso, the dealership’s customer satisfaction manager. “Then, in 2008, you saw the big crash. A lot of dealerships were lost, but we rode out the storm.”
The biggest loss for the Mission Valley Auto Circle family was Bob Baker Ford. A staple in the San Diego area for decades, the dealership tried to stay open as a used-car lot after it lost its franchise agreement with Ford Motor Co. in October 2007. The lot, which is next door to Courtesy, now stands empty. Across the way is John Hine Mazda, which lost its Dodge franchise in June 2009 and its Pontiac tag this year when General Motors shuttered the ailing division.
More than 300 California new-car dealers have shut their doors since the recession took hold. It’s unclear exactly how many dealerships were lost in San Diego, but, according to a commercial real-estate information site, the vacancy rate for properties where new and used cars are sold sits at nearly 5 percent.
Grimley won’t say how bad things got at Courtesy, but says his employee count is down. In fact, the dealership was without a general manager when he arrived nine months ago. Since he’s been there, the dealership has added six new people — many of them hired into the sales and Internet departments.
Breaking Down Walls
Grimley began his career in 1973 and has spent 15 years in F&I. He describes himself as a “compliance guy” who has heard and practiced every new-fangled process that has come along. He even spent seven years at one of the first Chevrolet dealerships purchased by AutoNation, Lou Grubb Chevrolet in Peoria, Ariz., and is more than familiar with the pressures of working for a publicly traded company.
Still, he says, no matter how much things have changed, one thing remains constant.
“I’ve been through one-price selling, no-hassle, a public company — everybody had a new idea,” Grimley says. “But you know what? You still have to be face-to-face with the customer to sell that car, because no matter how much research they’ve done online, they still want to feel comfortable with the people they’re dealing with.”
That’s one of the reasons compliance and customer satisfaction are big with Grimley, who proudly says customer satisfaction in October was 29 percent ahead of last October. Grimley attributes the improvement to the team mentality with which his staff operates. In fact, getting every department — or “silo,” as he likes to call them — to come together was one of the first orders of business after he rebuilt his sales management team.
To foster that team mentality, Grimley installed a payplan for his sales team that pays staffers on F&I and sales gross. In fact, both departments are paid on the same percentage.
“Most dealerships will have three or four silos, where each department operates independently,” he says. “What I try to do is get everyone working as a team, because the key to success of any dealership is to bring those silos together.”
The glue holding Grimley’s team together is Fregoso, who also serves as the dealership’s compliance manager. He’ll even help out in F&I during peak times, but his main role is to make sure customers leave happy and stay happy. In many ways, Fregoso sets the tone at the dealership, which currently has an “A+” rating with the Better Business Bureau.
“Sometimes we forget that people like to be treated like human beings and not like numbers,” he says. “And in order to make that happen, our salespeople have to know what they’re talking about. That’s especially important now with the Internet.
“Personally, I don’t like to call our people salespeople; I like to call them sales consultants.”
That’s why every used-car customer is handed a folder containing a vehicle’s Carfax report, book-out sheet, repair order and inspection sheet. It’s a practice Grimley installed this year to combat the pricing wars taking place online.
The name of the game, he says, is selling value, which, so far, hasn’t hurt the used-car department’s profit per vehicle retailed. In fact, despite the dealership’s high spend on reconditioning, the department’s PVR is up over last year.
Tanya Charles, Courtesy’s Internet sales director, preaches the consultant’s mentality to her staff as well. She knows she’s competing with three to four other dealerships on any given deal. That’s why you’ll only find former salespeople manning her department.
“A lot of dealerships thought you could just put techie people out there at an hourly rate and they would sell a car. That’s the way the cycle began,” she says. “Dealerships quickly figured out that wasn’t going to work, so they started putting salespeople in there. Now we’re on to the cycle where we have people who know the techie stuff and how to sell.”
The department is manned by five employees who handle leads from a variety of sources. At least a third of the dealership’s prospects come from GM, but leads are also sourced from microsites, pay-per-click advertising, Cars.com and AutoTrader.com.
The department also employs a no-haggle strategy. Charles says that doesn’t mean the dealership has to sacrifice profits, but it does mean her staff needs to work quickly and with confidence.
“The skill set is different when you’re working a customer on the phone versus on the showroom floor,” she says. “You do have to be able to use the same word-tracks you use on the lot, but you have to be able to communicate and hear what you can’t see in person. The tricky part is you have to accomplish what takes 10 to 15 minutes on the lot in about 15 seconds on the phone.”
Entering the Office
Finance Director Djibrill Rashid knows a thing or two about selling value. In fact, his two-person F&I department’s 67 percent acceptance rate on service contracts is a direct result of selling value.
“Most of the vehicles on the lot are new — the Equinox, the Camaro and the Cruze,” says Rashid, who sources his service contracts from CNA National. “So, customers feel there’s more value in having added coverage on those vehicles as opposed to vehicles with a little history.”
The economy also has helped, as Rashid says buyers are more inclined to lock in parts and labor costs at the time of purchase rather than get caught off guard down the road. The new menu the dealership installed earlier this year also has played a role in the department’s success, but listening to Rashid describe his selling tactic makes it clear why the department is running such impressive numbers.
“I prefer not to sell a service contract if the customer doesn’t see value in it,” he says. “I tell them, ‘If I push you today, I confuse you today.’ I just want them to be clear on what they’re buying so they can tell the next person, ‘These are the reasons why I’m going to keep it.’ Customers really need to have an intelligent response and they have to feel confident about it.”
Courtesy does offer GAP insurance, several layers of theft deterrent, including LoJack, and an appearance product, but service contracts are the store’s bread and butter. The dealership’s monthly charge-back rate sits at around 8.5 percent, and Grimley thinks they can do even better.
“It really should be at 7 percent,” he says.
Rashid says customers aren’t the only ones getting back into the game; lenders also are more willing to deal these days. Ally Financial is one finance source that has stepped up for Courtesy in recent months, followed by Wells Fargo. In all, the dealership works with about a dozen key lenders, including two credit unions, US Bank, Chase and several others. The dealership also recently became a Diamond Dealer with Capital One.
“In the past, you couldn’t get a loan if you had a foreclosure. Now you can,” Rashid says. “It just seems like lenders are willing to work with customers a little more these days.”
Jim Radogna, president of Dealer Compliance Consultants, was impressed with what he saw at Courtesy when Grimley called on him to perform a compliance audit on his F&I department. What impressed him most was the dealership’s commitment to compliance.
“The F&I department was putting up some very impressive numbers, but Jack wanted to be absolutely certain they were operating ethically and that no shortcuts were being taken,” says Radogna. “He installed a comprehensive compliance program and modified sales and F&I processes to be more transparent and customer-centric. The results speak for themselves; their F&I averages have actually increased.”
Courtesy is looking good on paper, and the 50-year-old store is about to get a facelift as well. In January, work will begin on a renovation project that will bring the location up to speed with Chevrolet’s new brand image. The new look won’t hurt walk-in traffic, but Grimley says his dealership’s people-first approach is what will really drive business in 2011.
“Just treat people the way you want to be treated, and that goes for both customers and employees,” he says. “It just makes business so simple. The other thing is, don’t complicate things. You tend to want to do that from time to time, but the key is to let your people excel at what they do best.”