When German immigrants Bahne Martensen and Peter Adolf settled in Anchorage, Alaska, in the 1960s, operating a four-dealership, five-franchise auto group was probably not in their plans. They were master mechanics certified on Mercedes-Benz and Volkswagen, respectively, who decided to start their own import repair business after working together in another shop.
When the area Volvo dealer left the business, the manufacturer approached Martensen and Adolf with an offer: Take the franchise and we’ll waive the fee. They readily agreed. Continental Auto Group was born on May 1, 1971.
“They answered the phone, had a couple of porters. And they wrenched,” says Marten Martensen, co-principal owner with Derek Adolf, each the son of a founder. “They had five to seven Volvos in stock. If someone came in and knocked on the door, my dad or his partner would get out of their coveralls and take them on a test drive.”
In 1977, Subaru approached the pair with a similar deal. The factory starting delivering units twice a year by boat, and within a few years, they were selling more than 200 all-wheel-drive Subarus a month.
Today, Continental Auto Group counts annual sales of 4,500 to 5,000 new and used units through five franchises housed in four rooftops: Honda/Acura, Mazda and Volvo, Nissan, and Subaru.
The only franchises the partners ever paid for were Honda and Nissan. Honda joined the Continental family in 1999, the same year the younger Martensen joined the business. He worked on the Honda sales floor with Cindy Merry, who now serves as finance director and celebrated her 21st anniversary with the group on Dec. 1.
In 2017, sales director Larry Newell — himself a 20-year veteran of the group — approached Merry, then the owners, with a radical new vision for Continental’s sales and financing process. It was a big idea that brought with it a great deal of risk. But they implemented it anyway, and it has paid dividends for the group, its staff, and its customers.
Blending Sales and F&I
Newell’s idea was nothing short of revolutionary: Eliminate the F&I manager position, put one person in charge of each customer’s transaction, and offer them an hourly wage, plus bonuses. But Continental’s sales professionals don’t pull double duty. They are backed by sales managers, desk managers, and contract specialists.
“Most of our desk and sales managers are former finance managers. They are fully trained in getting deals structured properly,” Merry says. “And we have contract specialists who create the documentation for the sales professionals to present and have signed. Our sales professionals take the customer through selling the car, assisting the customer, getting to know the customer, and genuinely making recommendations based on what they’ve learned about their customers. It’s the greatest ownership experience. That’s the approach we take. That’s the approach we teach.”
The transition wasn’t instant, nor was it easy.
“It was super hard. There were sleepless nights,” Newell says. “We wondered, ‘Did we just blow up the world?’ It was hard to tell F&I their job doesn’t exist in that way anymore.”
Of the nine F&I managers on staff at the time, seven became sales professionals and two quit; one soon returned. Those already working in sales were given the choice of staying on commission or transitioning to hourly plus bonuses for cars sold, traditional F&I products sold, and high CSI scores; ultimately, they all chose the latter.
But the directors knew they were asking — and risking — a lot.
“It was gut-wrenching,” Merry says. “But Larry and I have worked together for 20 years. There’s a huge trust factor there. And we didn’t do it in a flash. We worked with the entire sales management team. We took our time, we laid it out, we did a lot of planning before we put it into place.”
The Numbers Add Up
Along with the workflow changes came a slimmer F&I product selector — credit insurance, undercoating, and interior appearance protection were among the first to go — and the end of interest rate markups.
Martensen says he was particularly intrigued by that last component. When he joined the business in 1999, he was shocked to learn “old school” F&I products could be packed into deals and points added to the buy rate.
“That always bothered me,” he says. “And selling fewer products makes it easier to sell what we believe in.”
In the nearly two years since the transition was completed, the group’s per-copy average has increased from about $1,000 to about $1,300, primarily on the strength of service contracts, GAP, maintenance, battery protection, and a paint film product Martensen says is a must in Alaska, where roads are covered in fine gravel, rather than sand or salt, each winter. Transaction times and chargebacks are down and repeats and referrals are up.
“Without marking up any rate, no undercoating, no credit insurance, and by selling only what our customers value, we have averaged $1,300 per copy with no reserve,” Newell reports. “And the customers are happy.”
We’re not turning someone over to another person after the first person spent an hour building rapport.
Newell says Continental’s system works because it reflects a new reality. In the old days, customers relied on dealers to educate them on the vehicle and every stage of the purchase, financing, and ownership process. “Our job is not to sell cars anymore; it’s to validate the decision the consumer has already made. They come in knowing they want the product.”
“All things considered, we always did pretty good with CSI,” says Martensen. “But since we made the change, we have consistently been above average. We’re not turning someone over to another person after the first person spent an hour building rapport. This system gives the salesperson more opportunity to show customers the value of back-end products.”
Martensen notes the change also benefited Continental’s recruitment efforts.
“When we advertised straight commission, we struggled,” he says. “When we advertised hourly wage plus bonuses based on volume and back-end product, the floodgates opened. It was overwhelming. And a lot of dealers here in town said, ‘Marten, what are you doing?’ I said I’m doing hourly.”
Giving Back to the Community
Christmas is “huge” in Germany and was the favorite holiday of Bahne Martensen, who died in 2003, his son says.
“My dad always said, ‘Guys, it’s our responsibility to give back,’” he says, noting sports and event sponsorships were a major focus. More recently, the group has begun sponsoring families through the Salvation Army. “More and more, we focus on people in need. That’s really fun.”
Continental Subaru is also active in the manufacturer’s annual “Share the Love” holiday campaign. Subaru donates a certain percentage of car sales to four national charities chosen by the automaker. Each participating dealer chooses a local charity for Subaru to support.
“Alaskans are incredibly loyal. We buy Alaska and support our local businesses,” says Martensen. “And Subaru has written $50,000 checks to our local charities the last four or five years to our local charities. We let our employees vote on what charity to support. Now everybody in Alaska knows it’s coming up, and different charities apply for it.”
Continental closes early on Christmas Eve. Employees and their families from all four dealerships and Continental Tire & Auto gather at one location.
“It’s a potluck. The company usually provides the turkeys and hams and people bring dishes,” says Martensen, noting attendance averages about 225 people. “It’s all voluntary, but we have a strong workforce. We have a contest based on the dish you brought. We have first, second, and third place prizes for the main dish, side dish, dessert. A lot of our employees are from the Philippines, Laos, and elsewhere. They bring some really, really great food. It’s very festive.”
The auto group’s change in sales and F&I has fueled that camaraderie during the holiday season and throughout the year, Merry says.
“The changes have eliminated animosity between the finance department and sales department. It has helped us grow better as a team,” she says. “It has taken some time, but I think our approach to being more customer-centric has helped us really get to know each other better. We have gained tremendous loyalty with our customers — and our employees.”