When Profits Plummet 50%

Dealerships with only one or two franchises in relatively small markets — like Extreme Dodge-Hyundai in Jackson, MI — are just as engaged in a survival struggle as those in overcrowded metro suburbs.

So says the dealership's owner, Wesley Lutz.

Although he is the only Dodge dealer in Jackson, there are plenty more nearby, laments Lutz, 52, a former National Automobile Dealers Assn. director and committee chairman.

“If it weren't for the Hyundai franchise, I'm not sure where we'd be,” he says. “Seven out of every 10 Dodge dealers in Michigan are losing money.”

Lutz, a University of Michigan graduate, heads a dealership whose modernistic building fronts Interstate 94 on the north side of Jackson, which has a population of about 32,000. A main employer in town is a state prison.

Lutz grew up in Jackson. With his father, he bought the old Wolverine Dodge 30 years ago.

“I'll be frank,” he says. “Chrysler Group has 3,800 dealers in the U.S. and should be doing the business it's doing with 2,000 dealers. I'm literally surrounded by Chrysler-Dodge-Jeep dealers in Albion, Chelsea, Coldwater, Hillsdale, Hudson and Mason. How Chrysler Group can sort that out is a big issue.”

Lutz predicts if dealers can't make money there are going to be a lot of “dropouts.” Loyal Dodge owners are the “bread-and-butter” of the Dodge half of Lutz' dealership.

“Our annual run rate is still 1,600 to 1,800 new and used vehicles a year,” he says. “But our net profit has fallen 50% even on steady revenues of about $36 million last year. Fortunately, we've been able to maintain 38 employees in 2 showrooms and a shared service shop.”

Lutz likes the dealer attitudes of Hyundai Motor COO Steve Wilhite and Chrysler Group CEO Tom LaSorda.

“They're a far cry from some of the past leaders of sales and marketing,” he says.

As Michigan's NADA director from 2001 to 2005, Lutz headed the information technology and industry relations committees and is enthused about the choice of Phillip Brady as NADA president and general manager in 2001. “Phil has opened a lot of doors for NADA, Lutz said, “having been a White House counsel in the past.”

Whether NADA should be more proactively involved in the Detroit 3 dealership reduction initiatives is a “difficult issue,” says Lutz. “I'm a personal friend of this year's chairman, Dale Willey, both being private plane pilots, and I know he's sincere about not wanting to see small-town dealers feel the crunch that's going on, and go out of business.

“But if it's impossible to make money because of so many dealers in the same domestic brands, then what are the choices?”

Lutz settled on the name “Extreme” for his dealership (his son initially came up with the moniker) because he wanted a catchy word with an “X” or a ”Z” in the title.

“Extreme is a name that sticks for the 55,000 motorists that pass by each day out front on I-94,” Lutz says.

I interviewed Lutz after LaSorda hosted about 25 of the largest Chrysler Group dealers during a gathering in Naples, FL, to discuss the buyout situation. The interview was before DaimlerChrysler announced it was selling its Chrysler unit to Cerberus.

Lutz remains optimistic about Chrysler's future. “The brand still is a great one, and Dodge truck owners are second to none in loyalty,” he says.

Mac Gordon is the dean of U.S. automotive writers. He is at [email protected].