Special Coverage

NADA Convention & Exposition

LAS VEGAS – John Bergstrom is among a minority of dealers (16%) who, in a National Automobile Dealers Assn. survey, predict profitable days in the future.

“Business is pretty good right now for us, and I believe profits will be better,” says Bergstrom. “I’m one of those optimists.”

He’s also one of those persistent types. He opened a Chevrolet store in Neenah, WI, 25 years ago after finally persuading General Motors Corp. to give him a franchise. GM had twice turned him down, saying he didn’t have enough money.

Now he presides over Bergstrom Corp., the largest dealership group in Wisconsin, with 23 stores in 12 cities. It is No.35 on the Ward’s Megadealer 100.

Bergstrom employs 1,200 people, or as he calls them, “teammates.” Their pay plans are determined by how well their individual dealerships score in customer satisfaction surveys.

“If a store is not performing well, its CSI (customer satisfaction index) usually is not where it should be,” Bergstrom says.

Bergstrom is one of four dealer panelists speaking at a J.D. Power and Associates conference held in conjunction with this year’s NADA convention here.

The other panelists, from heavy-hitter dealer groups as well:

  • Earl J. Hesterberg, a former Ford Motor Co. executive who now is president and CEO of Houston-based Group 1, a 94-store public company that ranks No.5 on the Ward’s Megadealer 100.
  • Susan Scarola, one month on the job as CEO for New Jersey-based DCH Auto Group Inc., a 25-store operation whose founder, Shau-wai Lam was Ward’s Dealer of the Year in 2005.
  • Tony Schnurr, senior vice president of the 41-store Larry H. Miller Management Co. based in Sandy, UT, and No.10 on the Ward’s Megadealer 100.

Hesterberg says Group 1 is “very decentralized,” with the home office trying to create a unified environment while leaving individual stores with a “degree of autonomy.” But there’s a limit: “You can’t have 15 different ways of accounting.”

Although many independently owned dealerships are named for and reflect the personality of the owners, Hesterberg says, “It is dangerous to be a personality-driven business vs. a process-driven business.”

He says dealership people tend to be “entrepreneurial personalities.” There are drawbacks to that, he contends. “I didn’t realize what ADD (attention deficit disorder) was before I started this business.”

After easing off acquisitions for awhile, Group 1 is “getting aggressive again,” says Hesterberg, last year acquiring stores with $732 million in combined annual revenue, while selling off some under-performing stores.

The company has more Toyota dealerships than any other franchise. It has a handful of domestic brands, some of which have been a challenge, he says.

Getting people to work as managers of under-performing domestic stores can be a challenge too, says Hesterberg. “One way to train future managers is to have them work at one of our domestic-brand stores, but often times they don’t want to go there.”

Similarly, Bergstrom says it can be difficult formulating a compensation plan for an employee doing a great job at a domestic store that is feeling the fallout of the auto maker’s hard times. “It is a lot easier at a Lexus store.”

In a publicly owned company, growth is important “because customers pay for it,” says Hesterberg. “Stockholders are in our minds every day. When you have brands that are significantly shrinking, it gets difficult.”

Schnurr says his boss, Larry Miller, started in the business in 1979 when he purchased a small Toyota dealership in suburban Salt Lake City. The firm now has revenues of more than $1.2 billion a year.

The Miller operation also promotes autonomy at individual stores. “Every entity stands on the entrepreneurial spirit of its general manager,” says Schnurr. “Every general manager earns the right to be left alone.”

He says job descriptions for every position within the company say the employee will protect the legal and financial well being of the firm and “be a teacher.”

The Miller group also runs a dealership academy for employees deemed as winning prospects, Schnurr says.

DCH’s Scarola says it is important for dealerships to brand themselves, adding that brand management is more than running an ad campaign.

Her firm stresses the values of founder Shau-wai Lam. Those include “honesty, integrity, the highest ethical standards and doing the right thing,” she says.

DCH strives for high customer satisfaction scores as well as high employee satisfaction scores, according to Scarola.

It is a “struggle as we get larger” to balance the need for individual entrepreneurial spirit with the need for business processes, she says.

There is also a delicate balance between the needs of auto makers and dealers, Scarola adds. “It is a dance between what we need and what the factory needs, and we’re dancing every day.”