Down Under

Joe Herman checked his Blackberry as he stepped off a flight in Los Angeles Sunday night, August 28.

“Every other word was Katrina,” he recalls.

Herman, senior vice-president-operations for Group 1 Automotive Inc. dealership chain, was on his way home to Houston after vacationing in the South Pacific. “We didn't hear anything about Katrina while we were in Europe,” he says.

Early the next morning, even as Hurricane Katrina began battering Alabama, Mississippi and New Orleans, Group 1 executives in Houston began hatching an ambitious strategy to take care of employees, fix the damage and reopen its six dealerships in New Orleans as quickly as possible.

Talking about opening damaged dealerships, as relief workers continue to pull dead bodies from the chaos, may seem like a misplaced priority. Herman admits his wife even asked him, “Shouldn't you be focusing on humanitarian efforts?”

Many dealers, though, understand the urgency of getting their stores functioning and providing a place for their employees to work again.

“Getting our dealerships open is humanitarian,” Herman says. “We are paying those employees affected through September. But still, returning to work will help in putting their lives back to normal.

“The top priority, though, remains finding our people,” he says. Of 452 employees, 33 were still missing as of mid-September.

“You do begin to wonder about their safety, the longer you go without hearing from them,” Herman says. “We didn't hear from one general manager for three days. He had gone into the city and gotten himself deputized and was riding around in a boat rescuing people.”

Tracking down missing dealership employees is the need of the moment, says Robert Israel, executive vice president for the Louisiana Automobile Dealers Assn.

One New Orleans dealership, Rimrock Chrysler Jeep Dodge, owned by the Rimrock Auto Group in Billings, MT, is missing half of its 55 employees, and fears not all of the employees survived the storm, according to the Missoulian, a Montana newspaper.

“We're almost certain some of our people haven't made it or we would have heard from them,'' says a Rimrock staffer.

There are at least 79 dealerships in Louisiana that sustained hurricane damage ranging from loss of power to total destruction, according to Israel.

In Mississippi, at least 120 dealerships were damaged, many of them completely. In Alabama, approximately 40 dealerships suffered moderate damage.

Israel said he had yet to hear from 75% of the dealers in New Orleans 10 days after Katrina hit. “At this point, our recovery process is still at 0%,” he lamented.

Some areas already have limited electricity, although the power companies estimate it will be two months before electricity is fully restored to the city.

Group 1, meanwhile, is not waiting for services to be restored. The company obtained permission to begin limited operations on September 14, in the four dealerships located in the West Bank area of Jefferson Parish.

The two other Group 1 dealerships, in the East Bank, were under water and possibly completely destroyed.

Don Bohn, president of Group 1's New Orleans platform, informed employees that it was time to return to work if possible, saying customers already are returning and that business should be “outstanding” the next several weeks.

The hurricane destroyed almost 466,000 registered vehicles in Louisiana and Mississippi, according to National Automobile Dealers Assn.

Group 1 is expecting that emergency workers, state and local agencies, construction workers and returning evacuees will need vehicles. Also anticipated is a brisk service business.

The parish stipulated, however, that the dealerships be 100% self-sufficient. “That includes our water, our electricity, fuel and security,” Herman says.

From August 29 to Sept. 9, a cross-functional team met twice a day in Houston readying supplies needed to get the stores up and running again.

Family members, including Herman's wife, helped package supplies such as food and clothing for the affected employees. President and CEO Earl Hesterberg even spent time folding pajamas.

Herman tracked down six 500-kilowatt generators, enough to individually power an entire dealership. “We found them in New York, Florida and Philadelphia,” Herman says.

Other equipment includes fuel tanks of varying sizes and 500-gallon water tanks.

Everything was staged in Beaumont, TX, a small city outside of Houston. “You could say that became our Kuwait City,” Herman says.

The company purchased trailers that can house up to 80 people. “Housing is part of our problem,” he says. The company also has 200 air mattresses and is putting employees up inside the dealerships.

No detail was overlooked, including a doctor who was brought in to administer shots to all of the employees heading to New Orleans to protect them from potential diseases.

Once everything was ready, a large convoy of tractor-trailers and pickup trucks carrying supplies left Beaumont at dawn on Friday Sept. 9 and arrived that weekend in New Orleans.

Herman admits his people were tentative about going there because of the reports of looting and violence. “I wanted to be sure we had the best security team in place,” he says. So he contacted security expert and former New York police detective Bo Dietl, who provided Group 1 with a five-member team.

Despite getting back into business quickly, dealers in the hurricane-wracked areas are going to find the next year to be challenging. Although several Florida dealers report having great sales years following last year's four hurricanes, there are dealers who are struggling.

Pensacola, FL, dealer Warren Culbertson says he still is fighting with his insurance company about the cost of repairing his Lincoln Mercury showroom, which sustained significant damage.

“I'm still operating out of my used-car facility,” he says. “And it's killing my business.”

Culbertson says he made the mistake of trusting the insurance company. “I should have hired an independent adjustor immediately,” he says. “One of the first things dealers should do in Louisiana and Mississippi is get an outside adjustor. They may save themselves some trouble later on.”

Culbertson now has to be concerned with a second dealership he owns, Astro Ford in Mississippi. The store was under five feet of water, but was not in a designated flood zone. Like other dealers in the same situation, Culbertson does not have flood insurance.

Whether these dealers can stay in business may depend on if insurance companies characterize the damage as flood-induced or wind created. If it is deemed flood damage, dealers may be out of luck.

“Our roof is caved in and that definitely was caused by the wind,” Culbertson says. “Much of the water is from the rain that came in through the hole in the roof.”

The same company insures both of his dealerships.

Despite the problems with his Florida store, Culbertson says if the insurance company says the damage to Astro Ford was wind-induced, “I'll kiss them and tell everyone how great they are.”

Dealership Job Offers to Evacuees Might Not Be Such a Great Idea

By Cliff Banks

Car dealers around the country have rallied to help their counterparts in Katrina-ravaged areas, donating millions of dollars, providing places to stay and offering jobs to displaced employees.

But some inside the industry wonder whether offering jobs to other dealership employees will have an adverse effect later.

“People have a right to work where they want, but the dealers hurt by Katrina are wanting to get back into business as fast as they can, and they are going to want their employees back,” one state association director says. “They might view the efforts of other dealers hiring their employees as poaching.”

Robert Israel, executive vice president of the Louisiana Dealers Assn., admits it could become a problem. He urges dealers who come across displaced employees looking for work to have those employees contact their dealership employer.

Dealers in the affected states have business interruption insurance that ensures they will be able to continue paying employees through any downtime. Also, the National Automobile Dealers Assn. has raised millions of dollars for an employee relief fund to help dealers provide for their employees, says Israel.

The business aspect notwithstanding, “Our dealers are concerned for the safety of their employees,” Israel says.