From Wall Street to Main Street

NORWALK, CT - "I didn't know anything about this business before I got into it," says Wall Street broker-turned-auto-dealer Marc Blitzer.

He's president of Devan Motors in Norwalk, CT. In February of 1996, Mr. Blitzer and partner Jonathan Brostoff took over a dealership that had been losing money.

Mr. Brostoff's father was a Buick dealer for 22 years in New York City. So the son had the auto business in his blood, although he was working in the real estate business.

He wanted to be in something more exciting and started looking to buy into an auto dealership. Mr. Brostoff looked at about eight dealerships before coming across the Acura store in Connecticut. But he needed a partner to swing the deal.

He put the partnership proposition on Mr. Blitzer's desk in August, 1995. At first glance, the store, then called Higgins Acura, wasn't such a hot prospect.

It had run into some financial difficulties and seemed to be running on autopilot. Mr. Blitzer looked at the numbers. They were not good, showing losses for a few years.

In addition, Mr. Blitzer, 33, worried about his inexperience in the auto retailing business.

He was working in the Wall Street area at Bierbaum Martin, Inc., a London-based firm. His expertise was in interest rate derivatives and he had been at the job since 1987.

"My market was created as a tool to hide money," Mr. Blitzer says.

Derivatives are considered off-balance sheet items. "In the end I was dealing in a hedge product," Blitzer says.

He was tiring of that pressure in particular and the pressure of Wall Street in general.

"My job aged me before my time," he says. "I was yelling and jumping over desks."

Besides, he always wanted to own his own business. In fact, Mr. Blitzer says he had been looking for a new business for a few years.

He thought about becoming a CPA like his father, but ultimately didn't find that prospect exciting. So he was ripe for an offer to get into a business with a degree of excitement and the promise of profitability if handled right.

But after carefully analyzing the expenses of the auto store, Mr. Blitzer concluded that the numbers were not good. Losses for the last few years made that even more obvious.

Yet after assuming sales of the same number of new cars, Mr. Blitzer saw possibilities for turning things around. He noted some expense cuts that could help trim losses.

For instance, the dealership was spending $60,000 annually on loaner cars from Enterprise Rent A Car. An Acura loaner program could cut that expense in half.

The prospective buyers also saw there were some salaries not necessary to the operation of the business.

In addition, they saw a big upside in the used-car business. The store was having a tough time with that. Used-car sales were averaging only three units per month.

But what ultimately convinced them to buy the dealership was the potential of the service and parts business.

They saw that as a cash cow. That's ultimately proven to be the case.

Mssrs. Blitzer and Brostoff bought the facility and opened under new management on Feb. 1, 1996. The new Acura RL and CL had just been introduced. So there were new products to sell.

What's more the two new owners revamped the salaries of sales personnel so they were making a good living with incentives to sell. Then they focused on the back-end of the business.

One of their first innovations was to offer free oil changes for the lifetime of new cars that were purchased. The oil changes were a $10,000 per month expense, but they brought customers back to the dealership for service - a routine that would not end with the expiration of warranties.

Instead of hiring people to wash cars, Devan Motors contracted with an outside company to perform that task. The partners also hired a couple of porters whose duties included complimentary pickup and delivery of vehicles requiring service.

They also renovated the service department, painting and retiling the facility. They built new counters where customers were interviewed about their car problems.

The partners draw only minimal salaries, less than what salesmen earn.

But Mr. Blitzer stresses that he is not in the car business as an ego trip. He is in it to make money. He says that, unlike his Wall Street job, he eagerly goes to work each day.

"I have yet to have a day where I said I didn't want to come to work," he says.

One important reason for that: "I feel much more in control here," he says. "And I didn't want to live in Manhattan any longer. I wanted more of a suburban environment for my family."

He notes that his dealership is actually five or six businesses in one.

New-car and used-car sales are the most important, but ironically not profitable at this point. The dealership loses money on new-car sales and only breaks even on used-car transactions.

New-car sales are climbing at Devan Motors. In 1995, before the partners bought the business, the dealership sold 359 new and 38 used vehicles.

In 1996, new-vehicle sales rose slightly to 387 units and used-car sales climbed to 109. In 1997, new-car sales increased to 416 units and used-car sales to 127 units. The 1998 results were about the same as the prior year, but grosses are getting smaller, Mr. Blitzer says. Devan Motors makes 50% of its profit from service and 50% from parts sales.

The dealership is not yet making money on financing cars, but Mr. Blitzer thinks it eventually will.

Devan Motors does not have a body shop, and that is a potential profit source if and when the dealership creates one.

Despite the lack of profit from car sales, Mr. Blitzer feels that the franchise turned around almost immediately because of the restructuring he and his partner did.

"We made good money for the first two years and we haven't taken it all out of the business," he says.

He says he and Mr. Brostoff earned a 50% return on their investment in the first two years of running Devan Motors.

Are they prepared to sell out to one of the consolidators and make a big killing if the offer presents itself?

Mr. Blitzer confesses at some point, if the numbers were attractive, they'd entertain such an offer.

Otherwise, "I'm here for a good long time," he says.