From Survival to Profitability

Marc Ikegami took a flailing Hummer store to the No. 1 spot in just two years. Now he’s vying for the magazine’s coveted F&I Dealer of the Year award. By Gregory Arroyo

When Marc Ikegami took the reigns of the Hummer franchise in Shoreline, Wash., in August 2007, he put in place a five-year plan to resurrect an ailing dealership. But it only took the store, now called Doug’s Northwest Cadillac-Hummer, two years to become the No. 1 Cadillac dealership in the state.

“It had gone through several failed sales, and employees felt a little uncertain about their future,” recalls Ikegami, a second-generation dealer. “My goal was to come in here and move very quickly to show the employees that we were here to stay.”

For the first 90 days of that year, Ikegami invested in repairs and new tools for the dealership. He also met with management daily to plot out his five-year plan to profitability.

Ikegami did achieve profitability by the end of 2007, although not by much. He also ended the year with several concerns. Gas prices were on the rise, which wasn’t good for a dealer whose No. 1 seller was the Cadillac Escalade. Ikegami moved fast as his store entered 2008, adjusting inventory and bolstering his fixed-ops department.

“I was scared. Everyone was. But we were going to keep our foot on the gas,” he says. “So, as everyone else in our market took their foot off the gas, we began to pick up market share, advertising opportunities and sponsorship opportunities that we would never have been able to lock up.”

Ikegami also swooped in on his competitors’ employees — people whom, under normal circumstances, he could never attract. He was looking for an all-star team to drive his store through what was shaping up to be a difficult year.

Keeping the pedal to the medal, Ikegami also started buying as much inventory and parts as he could from closing dealerships, which he was able to do at a discount. “We were either going to crash and burn or we were going to win the race,” Ikegami says.

The dealership finished 2008 on a positive note, but no amount of planning could prepare Ikegami for what was to come. The economy was worsening and he wasn’t sure how the rumors about General Motors’ possible collapse would play out. So, once again, he and his management team put together a three-phase survival plan for 2009.

The first phase was to cut anything that would not impact the dealership’s level of service. The second phase, which called for cuts to employee hours, inventory, advertising and staff, was tougher. The third phase called for the dealership to be stripped to the bare minimum. “The good thing is we only made it partially into phase two,” Ikegami says.

The only thing Ikegami didn’t plan for was the loss of his dealership when GM began reducing its network. Luckily, on the morning of the day the dealer letters were sent out, Ikegami received a call from his rep, telling him his store was not on the list. “If we were on that list, that was one thing I didn’t have a plan for,” he says.

‘The customer always comes first” became the dealership’s motto for the rest of 2009. The goal was to win Cadillac’s Standard of Excellence award every quarter. Ikegami says his store was successful in winning it most quarters that year.

By the end of 2009, Ikegami and his crew managed to increase sales of new vehicles by nine units, while used sales increased by 118. Things have been a bit tougher in 2010, but Ikegami had a plan for that, too.

“This year has been tougher as far as new sales, but that’s because we were doing anything we could to gain customers. Now the other dealers are doing the same,” he says. “But we knew that was going to happen, which is why our used sales are way up this year. See, for us to compete, we have to be innovative, which is exactly what we’re doing.”

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Changing of the Guard

The transition to new ownership did little to slow the progress of Midlands Honda’s online marketing and menu-selling efforts. By Jennifer Washington

Changing ownership has proven to be beneficial for Columbia, S.C.-based Midlands Honda. The dealership continues to forge ahead with soaring sales from the previous year and a consistent, dynamic online presence. Though it is one of four dealerships owned by PSC Auto Group, the team at Midlands Honda is experiencing success thanks to its own ingenuity.

The decision to work with Next Generation Dealer Services CEO and F&I and Showroom contributor Rob Hagen has helped the dealership establish a thriving online marketing strategy.

Midlands Honda also has improved its search engine performance, registering near-constant hits from Google, Yahoo! and Bing. More importantly, the store has maintained a 4.7 rating for the past 24 months on DealerRating.com.

“That’s definitely been helping with our online presence,” says Randy Threatt, the dealership’s general manager.

Most of the traffic is brought in through the search engines, but working with different social media sites and offering daily giveaways is resulting in a big response. The dealer’s Website also provides customers with everything they need to help make their decisions and their experience in the office much easier. From online credit applications to payment estimators, customers don’t have to look far to get what they need.

Threatt’s team also guarantees that it can save Internet customers at least four hours compared to a normal transaction. “We’ve found that [customers] are actually paying for the time savings,” Threatt explained. “We are valuing their time, answering their questions and not giving them the runaround they’re used to.”

The only problem with Midland’s online efforts is that new-car leads are outpacing the store’s new inventory, which stood at 29 days in August. Threatt says the challenge has forced the dealer to take on more dealer trades to satisfy customers, and adds that sales could be 10 percent higher if the store was at 45 days. Still, the dealership’s certified pre-owned sales are up an impressive 408 percent from last year as a result of the new inventory problem.

The one area the dealership’s budding online strategy hasn’t impacted is the finance office, which is headed up by Robert Carter, finance director. That’s because presenting F&I menus to every customer has been a requirement since 2007. The store also offers an annual bonus plan to ensure the policy is upheld, which pays managers 20 percent of their menu profits. Proper deal desking and the use of a declination form are other keys to the F&I department’s success.

“It’s important not only to present the menu but to provide a good explanation of the features and benefits of each product,” Threatt said. “Our F&I team does a great job of doing it exactly the same way every time.”

Hiring only AFIP-certified sales managers and finance mangers is another measure Threatt has taken to ensure smooth transactions. “We don’t want anyone to touch the deal unless they’re AFIP-certified,” he says, noting that most F&I managers at Midlands Honda have been certified for more than 10 years.

Threatt also attributes his store’s success this year to positive attitudes and a daily focus on all the store’s processes. Keeping employees motivated and providing them with daily training also helps keep everyone focused on the store’s goals.

“We want to make sure customers make the right decision, and we want to answer all of their questions,” Threatt says. “Based on that repeat-referral business, that’s what I feel makes us No. 1.”

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Continuing a Legacy

Riverside Auto Group founder Robert Dagenais has passed on, but his legacy lives on through his three sons. By Gregory Arroyo

Riverside Auto Group might not have the national recognition of some of the larger dealer groups, but it’s a household name in the Upper Peninsula of Michigan. And for the Dagenais brothers, who took over the 44-year-old operation after their father’s passing two years ago, there’s just no room for errors.

Matt Dagenais, who operates Riverside with brothers Tim and Paul, says being the big guys in their neck of the woods makes them a target for regulators.

“We own and operate seven dealerships, a bank lending institution and real-estate companies, so if regulators are going to come in here and start looking around the Upper Peninsula, they are going to pick on us,” he says. “There’s no question about it, we are the visible target. That’s why we prefer to be the poster child instead of the example.”

That’s just one of the many reasons Riverside Auto Group is one of the magazine’s 2010 F&I Pacesetters. The more one hears how this seven-store group operates, the more clear it becomes that the operation has found the balance between being aggressive and being customer-centric.

From the selection of the group’s F&I menu and CRM system to its decision two years ago to reinsure its service-contract offering to provide more flexibility on claims approval, Riverside goes to great lengths to make sure the customer experience is top notch. Finance sources are even subjected to regular evaluations to make sure their terms fit the group’s market, a practice that even the credit crisis didn’t impact.

Even when the brothers hired Tom Wilson, the group’s F&I director, two years ago, they made sure he was, as they say, “marketized.”

“We do national recruiting, but to fit in our organization, the person we hire — whether it’s the F&I director, used-car manager or service director — has to be marketized enough to talk to that rural customer and be hands-on enough to deal with our employees,” Dagenais notes. “We are definitely a ‘show-me’ organization from the top down, not a ‘tell-me’ organization. We’re that way because of the training we got from Dad.”

Dad is Robert Dagenais, who started Dagenais Enterprises in 1966 when he purchased Riverside Auto Sales in Escanaba, Mich. Despite everything the dealer group has experienced the last two years, the passing of the family patriarch in 2008 was the hardest pill to swallow for the three brothers. It’s one of the reasons why being named as a 2010 F&I Pacesetter is a welcome recognition.

“The last couple of years have been the most challenging, frustrating and educational years in the car business that any of us have ever seen, and it all started with dad passing,” Dagenais says. “We went into the downturn of the industry, the manufacturer bankruptcies, the termination of franchises, the arbitration fights, the Cash for Clunkers program — all that stuff was history-setting.

“Yeah, there’s been some sleepless nights, but we’ve always been proactive in everything we do,” he adds. “That was just something that Dad was very adamant about.”

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Quite a Collection

Michigan’s Suburban Collection finds itself among the nation’s top F&I performers for the second time in three years. By Brittany Swanson

Despite some major setbacks, Suburban Collection in Troy, Mich., is about to have another successful year. In fact, August will be the most profitable month in the Collection’s 60-year history in terms of financial services income.

The dealer group once managed the No. 1 U.S. Saturn dealership and suffered a major blow when General Motors Co. closed the marque’s doors in late 2009. All seven of the group’s Saturn stores were shut down as a result of Saturn’s closure; three of them permanently.

Three of the buildings were converted into AutoStar standalone, used-car facilities. The group’s former No. 1 Saturn store is now a Chrysler-Jeep-Dodge-Ram dealership.

Against the odds, Suburban Collection managed to finish July down only 50 units, according Gary Allgeier, the company’s director of finance.

“I would say that we rebounded well,” Allgeier says. “It was probably because we were able to reallocate some of the key personnel from those stores into other stores. No question, that was a blow. It was a punch to the gut that nobody anticipated and nobody welcomed.”

Allgeier attributes the group’s continued success to a number of adjustments made in the last year. There’s a new focus on internal promotions and extensive training for salespeople and finance managers. Suburban’s Internet department also has been making major strides in conjunction with the group’s growing focus on e-commerce.

But, Allgeier says, one of the most important changes is the implementation of a faster and more aggressive professional feedback system for the company’s finance managers. The group has begun recording all financial transactions and reviewing those videos with managers and their peers to provide critiques. Implemented in April of last year, these reviews take place once a week. Sixteen of Suburban Collection’s 46 dealerships are now participating, and those stores now average $200 more per vehicle.

“[With this system,] we’ve accelerated that learning curve to the point where we can take a brand-new person and, within 90 days, they’re an expert,” Allgeier explains. “We have had another record year this year, so we expect that to be just another piece of the puzzle to keep moving forward.”

Suburban Collection also has improved the learning curve for its financial managers by creating a lender matrix. It provides instant access to information on where to direct contracts.

“We basically bucketed all the buying parameters so that someone on their first day would know where to send a deal. It helps to educate and give somebody on their first day the knowledge that it would typically take an experience financial manager a year to figure out,” Allgeier says.

Suburban Collection’s heavy investment in training and internal promotions has allowed the group to build residuals instead of constantly retraining at a base level. This has helped to develop a strong focus on product sales and the development of new products within the group, resulting in a “product sale explosion,” according to Allgeier. This explosion is the very reason why August will be Suburban Collection’s best month yet.