Small fish in a big pond make a decent splash

Stewart Management Group makes its first appearance on the Megadealer 100 list this year by virtue of its sole 1999 acquisition, Hoover Toyota in a suburb of Birmingham, AL.

The Michigan-based group is among interesting players who are large enough to make the Ward's Dealer Business 100 Megadealers list, but are small compared to titans such as AutoNation Inc.

Stewart (which ranks 90th) also operates three Chevrolet dealerships in Tampa and Jacksonville, FL; plus its flagship store, Gordon Chevrolet in Garden City, MI.

"We have wonderful general managers in each location," says group president and CEO Gordon Stewart. "And that's what you need."

The company's 420 employees understand that they work for their general managers, not a corporate entity in another state. Yet Mr. Stewart, his son or the company controller visit all the stores at least once a month.

He bought his first store in Augusta, GA in 1979.

He says, "We like to take on as little debt as possible, but the most important aspect of our approach to acquisitions is the people side. We're only interested in acquiring well-staffed, well-managed stores. Money is easy to get. People are not.

"Also, we only acquire large dealerships that are selling a minimum of 2,000 new and used vehicles a year - We're not interested in stores that need to be turned around."

Another approach he espouses is to build rather than buy. Mr. Stewart's company built the Tampa store. He bought the Jacksonville store when it was only three weeks old, and the then-owner got tired of all the red tape to get the dealership built.

Mr. Stewart jumped at the chance to buy Hoover Toyota, Alabama's largest Toyota store, when AutoNation put it up for sale last year.

"The dealership has outgrown its space, so we're building a new facility," he says.

Making it in Mass. Balise Motor Sales Company in West Springfield, MA, makes its debut on the Megadealer 100 list at No.78. The company sold 19,838 vehicles in 1999 and brought in more than $302 million - a noteworthy feat in dealer-saturated Massachusetts.

With more than half a million people, the Springfield area is the third largest city in Massachusetts. It's not a small town, but in some ways it seems like one, says company CFO Steve Mitus.

He explains, "People are much more transient in the bigger cities. Here, people don't move in and out nearly as much. That's good for holding onto our employees and our customers. We do a lot of customer testimonial advertising."

Mr. Mitus attributes the company's success to longevity (the first Balise dealership in town, a Chevrolet store, opened its door in 1927) and a good reputation.

Under the leadership of third-generation dealer James E. Balise, Jr., the company is the dominant auto retailer locally, employing nearly 700 people to operate 10 dealerships in the Springfield area, one in northern Connecticut, one on Cape Cod.

The company made only one acquisition, a Ford dealership, in 1999.

"In our market," says Mr. Mitus, "when a dealer is ready to retire and pass the dealership on to the next generation, there might not be anyone who's willing to take over the business. In some cases, we've stepped up to the plate to offer a dealer an exit strategy."

He's feeling used Los Angeles-based Sage Auto Group is 70th on the 100 list. Owner Morris Schrage's Universal City Nissan in L.A. led the way as the group jumped 52% to $337.6 million last year. Its $222 million revenues for 1998 failed to make the 100 "cut" last time.

"Our three locations, including Universal and Glendale, CA, Nissan and Glendale Infiniti, set records last year as the product line really turned around," Mr. Schrage says. "But we also boosted used-vehicle sales. Used topped new, 8,445 units to 7,139.

Aloha from Hawaii It's the first year on the 100 list for Servco Pacific Inc. The eight-store group placed 91st.

Servco observes its 80th anniversary as a dealer this year Peter Fukunaga, grandfather of the present chairman and CEO Mark Fukunaga, founded it as a Chevrolet store.

With Toyota the No. 1 seller in the Hawaiian Islands, accounting for 17.6% of the 1999 market of 41,000 new-unit sales, Servco boosted its revenues to $264.7 million and wound up in 91st place on the top megadealer list.

The company also is the Toyota-Lexus distributor for Hawaii.

"Hawaii's recession has continued into 2000," says Servco corporate controller Ben Nakaoka, "but our business has continued in good fashion, thanks to the popularity of Toyota and Lexus."