Driven in Downtown LA

Downtown LA Auto Group is a name that reflects the determination of the dealer who founded it.

Not too many dealers tie themselves directly to a large downtown business district, even if, or perhaps especially if, it is Los Angeles. It may be America’s second-largest city with famous spots such as Beverly Hills and Santa Monica, but the downtown area is less alluring.

In 1994, General Motors cautioned the Downtown LA Group’s founder it would be better off moving to the suburbs. But Nickolas Shammas stayed put.

 “I’m not leaving; I’m staying,” he told his wife Jeanette, then bought 27 acres (11 ha) along Figueroa St. to prove it. The south downtown area would prosper again even as its auto corridor was emptying out, he believed. Shammas thought downtowns may ebb and flow, but people always come back to the city center if it offers enough appeal.

Son-in-law Darryl Holter took that to heart when he resigned an academic position at UCLA to join the business. His wife, Carole Shammas, was a professor at the University of Southern California. She now oversees the family’s insurance business.

Holter joined the family business in 1995, three years after riots devastated L.A. after police officers were acquitted in the Rodney King beating.

The family commitment to central Los Angeles is legendary. That hasn’t changed since Holter became CEO and Jeanette Shammas assumed the presidency after Nick Shammas died of lung cancer in 2003.

Holter heads The Shammas Group which owns Downtown LA Auto Group and its seven dealerships, as well as other businesses. He has continued his late father-in-law’s vision, expanding downtown business.

In 2009, GM terminated the group’s Cadillac franchise as part of the auto maker’s nationwide dealership consolidation effort. But the Shammas family dug in deeper at their South Figueroa St. location.

“We’ve made a long-term commitment, but it was my father-in-law’s vision of where it would go that started it all,” Holter says.

Would Nick Shammas be happy with the business today? Yes, Holter says. “Our operations are making money, and we are gaining market share.”

Nick Shammas began with a Chevrolet store in 1955. The dealership holdings now consists of flagship Felix Chevrolet, as well as Volkswagen of Downtown LA, Nissan of Downtown LA, Audi of Downtown LA, Porsche of Downtown LAand Downtown LA Motors Mercedes-Benz. In 2009, a second Nissan franchise was purchased in nearby Carson.

Holter, who was raised in Minneapolis, has a Ph.D. in history from the University of Wisconsin. He founded and chairs the Figueroa Corridor Partnership Business Improvement District, a model for other cities trying to rebuild crumbling downtowns. He had the 120-business owner group up and running in 18 months, and a new auto corridor is springing up in a revitalized downtown.

Toyota and Honda already were there. Volvo and Chrysler-Fiat joined the other franchises. 

In 2011, Holter struck a deal with BYD, a Chinese electric-battery and auto firm, which is opening its corporate headquarters in LA, leasing space from The Shammas Group. 

Since Holter got involved in downtown revitalization efforts and the Figueroa business improvement district was formed, investment in the corridor has spiraled to $3 billion.

The Mercedes store has a 75% customer-retention rate based on repeat and referral customers. “It’s a people business,” Holter says. The store has sold more than 75,000 units since opening in 1970.

This year,the Mercedes dealershipis undergoing a major renovation, as did the downtown Nissan store recently.

Like virtually every U.S. dealership, Downtown LA Auto had a rough spell in 2008 and 2009.The group turned the corner in 2010, and had an excellent year in 2011.

General managers in each store are paid according to net profits. If the store makes money, they do too, Holter says. “They’re almost like part-owners.”

Chief Operating Officer Elay Sung oversees auto operations and seven general managers.

“Treat each customer as if they were your last,” Sung, a 25-year veteran, tells staffers. That means giving them a fair price and VIP treatment. Some customers indeed are VIPs, such as Hollywood celebrities.

In late 2008, as the auto industry went into a meltdown, “we had to really cut back,” he says. “We were financially sound as a group, but profits shrank tremendously.”

Auto sales in 2009 were even worse. Downtown LA Auto’s dealerships survived by managing conservatively and cutting inventory but vowing not to cut staff salaries, Sung says.

“Dealers in general have learned to manage adversity in the last three years,” he says.

Sung maintained his optimism by recalling the hopefulness of Nick Shammas who once told him, “Someday, downtown L.A. will be like Manhattan.”

Holter is bullish on future business, although he has concerns about the overall economic picture.

The Downtown auto group posted $418.4 million in total revenues in 2010, earning the No.64 spot on the WardsAuto Megadealer 100. In 2011, a banner year, the auto group reported more than $476 million in revenue, an18% increase, Holter says.

The Mercedes-Benz franchise ranks No. 21 on the WardsAuto Dealer 500 with total revenue of $174.3 million.

Holter forecasts a 15% to 20% sales increase for 2012. The Chevrolet store’s sales for 2011 jumped 67% compared with a slow 2010.

“The Chevy store is coming into its own” because of better product and fewer same-brand dealers competing against it after the network consolidations, he says.

Nick Shammas’ philosophy still guides how the group operates.

“It was important for him to find good people to drive the business and give them accountability,” Holter says. “I do it a little differently, but I follow the same basic principles.”

He’s more of a numbers man, looking at reports and analysis to measure performance. “We look to reach specific profit and sales goals,” he says. “Those are things I’ve brought to it.”

Nick Shammas bought his first dealership, Felix Chevrolet, in 1955, beginning his downtown auto empire.

In its heyday, Felix Chevrolet held the title as the highest-volume Chevrolet seller west of the Mississippi.

An enduring symbol is Felix the Cat, a giant overhead neon sign showcasing the Chevrolet facility. With freeway visibility, Felix attracts crowds, including people who take pictures of it.

The former Cadillac franchise was dualed with Chevrolet, but underperforming because Cadillac was “overdealered” in the Los Angles market, as GM explained to Holter.

Cadillac also has a harder time competing with import luxury brands such as BMW and Mercedes in southern California.

Jeanette Shammas, 91, the family matriarch, reports to work daily at downtown’s Petroleum Building, headquarters of the family businesses. She attends dealership meetings and keeps up on a daily basis.

“She shows up every day and is sharp as a tack,” says Rhio Blair, Sung’s executive assistant.

Sung adds, “She’s a truly fair and incredible woman and has a vivid memory. Despite her wealth and prominence, she will talk to anyone and is very accessible.”

Mrs. Shammas says she was always involved in aspects of the business while her husband was alive, especially in buying and selling properties at good rates.

High school sweethearts, they were married for 61 years.

“My husband talked about cars so much, I knew the business before I took over,” she says.

The family is known for its support of worthy causes. As part of her legacy, the matriarch is thinking of giving back even more.

And what might that be? “Oh, maybe a foundation,” she says. “I’ve been thinking about that a lot.”

Company Profile:

Downtown LA Auto Group

Parent company: The Shammas Group

Owner:Jeanette Shammas, wife of founder Nick Shammas.

CEO:Darryl Holter, also vice president of the California New Car Dealers Assn.

Number of employees: About 1,000 total, 750 in automotive.

Auto group 2011 revenues: $476,012,052

Other holdings: Workmen’s Auto Insurance and Shammas Realty, which manages various property holdings downtown.

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