Special Report

Dealer 500

The Ward's Dealer 500 may as well put away the champagne bottles. As if the industry needed any more proof that the heady days of the last several years are a distant memory, the party came to a crashing halt in 2007 for the nation's top dealers.

For the first time in recent memory, the Ward's Dealer 500 is down — and it is down in all categories. Total revenue is down $3.9 billion in 2007 (from a record $62.6 billion to $58.7 billion) after posting a slight increase of $39 million in 2006.

Gone are the years when dealers on the Ward's 500 saw increases to average revenue per store by more than $10 million for four consecutive years. From 1997 to 2000, dealers on the Ward's 500 increased their average revenue per dealership from $91 million to $121 million.

Average revenue per store in 2007 was $117.5 million, down from $125.2 million in 2006.

Meanwhile, new-vehicle sales overall were down by 111,000 units in 2007 for the Ward's Dealer 500. Dealers on the list accounted for 7.6% of all new vehicles sold in 2007, down from 8.1% in 2006.

Unfortunately, 2008 likely will be much worse. Paul Taylor, economist for the National Automobile Dealers Assn., says he still thinks sales could improve the second half of this year, but for that to happen auto makers need to start putting more incentive cash on the hood in an effort to spur sales. If that doesn't work, 2008 will be a tough year from start to finish.

Dealers on the list tell Ward's that although 2007 was tough, this year is proving to be significantly more challenging. Clarence Harder, senior vice president for Holz Motors Inc. in Hales Corners, WI, a Milwaukee suburb, says all brands were hit tough in 2007 in his state.

Added to the credit challenges that erupted in the second half of 2007, Wisconsin endured a brutal winter, which likely kept people home instead of hitting the showrooms.

“My snowplow bill was bigger than it's ever been,” quips Harder, who vacations in Florida each winter.

Holz, ranked 409th on the Ward's 500, is the only domestic store in the top 20 (16th) selling dealerships in Wisconsin, despite a $5.7 million drop in total revenue.

One bright spot is the average revenue per new vehicle sold, which increased a modest $448 from 2006 to $30,500.

Although truck and SUV sales — which typically command higher prices — are down industry wide, the increase in average revenue per vehicle can be attributed to the increasing number of luxury and high line stores on the list.

Groups such as AutoNation Inc. and the Sonic Automotive Group continue to pare their under-performing dealerships, many of which include domestic and some mid-line import brands, from their portfolios.

Still, the single-point luxury brand-dealerships on the Ward's 500 took significant hits in 2007 in average revenue per store (see chart on page 29). Mercedes-Benz, which has led in that category for several years, saw its average revenue decline from $164.2 million in 2006 to $145 million in 2007.

BMW, meanwhile, increased its average revenue per store from $119.9 million in 2006 to $122.7 million in 2007, due largely to a jump in average new-retail revenue of more than $6 million.

Other premium brands, such as Toyota and Honda watched their average revenue per store decline — Toyota by more than $14 million, while Honda experienced a less severe drop of $4 million.

Part of Toyota's decline is due in part to the Penske Motor Group, which owns Longo Toyota, the top selling dealership in the world, deciding not to release their numbers this year.

“A management decision,” they tell us without elaborating.

That move leaves Fletcher Jones Motor Cars, a Mercedes-Benz dealership in Newport Beach, CA, as the top dealership on this year's list, despite a decline in revenue of $17 million.

The number of multi-branded dealerships (stores selling more than one brand) jumped from 80 in 2006 to 119 in 2007, mainly because many dealers are looking to add brands to their current stores to offset sales declines.

Also, the domestic auto makers are working more aggressively to combine brands, such as Chrysler Dodge and Jeep, with the end goal of reducing their number of dealerships to a level that's more in line with the decline in sales and production.

Despite the decline in vehicle sales and revenue, many of the dealerships on the list are continuing with facility improvement plans, which they hope will pan out if sales bounce back, sometime in late 2009 or early 2010 as many analysts predict.

In early June, the Van Tuyl Group, with 40 dealerships on the list, is holding the grand opening for a palatial $9 million Infiniti dealership in Phoenix, AZ.

Santan Honda Superstore, owned by Robert “Bud” Thurston and ranked 405th on the Ward's list, just moved into the Santan Auto Mall in Gilbert, AZ, late last year. The move, along with a name change, may account for the dealership dropping from the 389th spot on last year's list.

General Manager Monte Yocum says the dealership this year is down a little, it could finish number one in the region.

While this downturn could be one of the worst — at least on a percentage basis — several dealers on the Ward's list indicate they aren't slowing down. Rather, they are trying to put themselves in position to capture market share when the market rebounds.

Harder points to the manufacturer certified pre-owned programs which he says has helped Holz stay on top this year.

The decline in sales, though, is forcing dealers, even ones on the Ward's 500, to reevaluate their futures.

Harry Criswell (see story on page 26) says he is considering getting into used-cars in a big way depending on what happens in his market with some of the other General Motors dealers and whether he can put together some brands.

“They (GM) have committed dealers in the market areas, I'm not sure how it will all go down, but it will play a huge role on how we expand our used-car business into the future,” Criswell says.

“I just told my general manager here, Kevin Zodd, depending upon what happens here, we may be jumping into this used-car business into a huge way.

“They love it, it's profitable for us, it's a good investment for us, and no offense to the factories, but I don't have to listen to all of their requirements.”
With Derek Stark

About the Ward's Dealer 500

This is our 21st year publishing the list. The Ward's Dealer 500 is a list of the top 500 dealerships ranked by total revenue, including sales from new and used vehicles, finance and insurance and the fixed operations departments (service, parts and body shop).

We thank the many dealers who voluntarily continue to participate with us each year in putting together the list.

Although there are some dealerships that would be on the list, yet choose not to participate for various reasons, the Ward's Dealer 500 is the industry's most comprehensive ranking of the nation's leading dealers.