Mid-level players find comfort zone

Media and industry analysts love to focus on the biggest of the big, therefore megadealers such as AutoNation, Asbury Automotive Group, UnitedAuto Group, VT Inc., and Sonic Automotive Inc. get most of the attention.

But the verdict on the success of the "big guys" - not-withstanding revenues anywhere from $3.3 billion to $20 billion - is still out.

There are questions. How big is too big? Are there enough high-quality people in the large organizations to manage effectively?

Dealer groups in the $330 million to $580 million range - between Nos. 70 and 30 on the Ward's Dealer Business Top 100 Megadealers list -think they're at just about the right level.

At that size, dealers say, they have enough critical mass to be competitive and are big enough to take advantage of economies of scale without putting too much pressure on financial and personnel resources.

"I'm at a level where I think we can do well and prosper, but I don't want to get any bigger," says Thomas Irwin, president of the Phoenix-based Midway Auto Group.

Midway's two stores checked in at No. 30 with total revenue of $587.87 million. The group improved its performance by 12.73% and moved up the list from No. 41.

Ray Huffines, co-owner of the Lewisville, TX-based Huffines Auto Group with his father, J.L. Huffines, is content to expand his dealer group slowly.

"We're growing steadily," says Mr. Huffines. "When you grow too fast, you don't have the personnel to do it right."

Huffines Auto Group will add a sixth dealership - a Dodge point in Plano - in late 2000 or early 2001. The five current Huffines stores brought in $458 million in 1999, up 20.51% from the previous year. The dealer group moved from 63rd to 45th on the Ward's Top 100.

Although a bit more aggressive than his colleagues (he jokes about buying every dealership in Texas), Allen E. Samuels, chairman of Waco's Allen Samuels Auto Group, agrees with Mr. Huffines that dealer groups can only expand if it has the right people in place.

"Anyone who knows me knows that I'm never in a comfort zone," says Mr. Samuels. "But you can only grow as fast as the people are available. We try to grow our own people and we don't grow faster than our people."

The Samuels organization moved up the list from 44th to 33rd with revenue of $557.17 million, up 12.99% from the previous year.

Mr. Samuels credits his group's improvement on the addition of a Ford store in Duncanville, near Dallas, and the booming auto market.

Mr. Irwin says Midway's growth came from expanded service hours, a new advertising strategy and leveraging good CSI scores.

"We approach a lot of our sales through service, so we expanded to 22 hours a day and opened on Saturday," says Mr. Irwin. As a result, Midway's 1999 service revenue was $17.3 million, up from $15.18 million the previous year.

He also says he used about half of his $4 million advertising budget to advertise the Midway brand. The other half of the budget focused on the individual stores.

"And our CSI - for both Chevy and Nissan - ranks very high in the region," says Mr. Irwin. "It's not just that we're getting good grades, but extensive comments. So we've published a book of actual comments. We even included some complaints and a how we resolved the customer's problem."

Mr. Huffines says the growth of his business stems from "continuous improvement. It's something we always strive for."

He says his management focuses on long-term benefits rather than short-term. Included are the ways he treats his employees, by promoting from within for example, and the way he treats customers, by going beyond what they expect.

The Huffines group strategy of keeping its dealerships within a 25-mile radius allows it to capitalize on advertising, especially with the electronic media.

The future looks bright for these mid-level players in Ward's Top 100.

"We're talking to some people about some (additional) stores," says Mr. Samuels. "I really just play things by ear, but if you stand still you're really going backwards. You've got to keep going."

In addition to the new store in suburban Dallas, Mr. Samuels recently completed three facility projects and has four more under way.

At Midway, Mr. Irwin says his dealerships will continue to work together, when it makes sense. For example, last year the two stores shared service department courtesy vans.

In addition to building a new Dodge dealership in Plano, Huffines built a new body shop (covering an acre) at its Chevrolet dealership in Lewisville. The business group also built a new used-car facility that is shared by the Chevrolet and Chrysler-Plymouth-Jeep-Hyundai stores.