Starting from humble beginnings, growing up on a farm near Oakboro, NC, O. Bruton Smith has come a long way, evidenced by his annual inclusion in the Forbes 400.
As Chairman of Speedway Motorsports, Inc., a New York Stock Exchange-listed company that owns Atlanta Motor Speedway, Bristol Motor Speedway, Charlotte Motor Speedway, Sears Point Raceway, Texas Motor Speedway and 600 Racing, he has also been named as one of "the top ten most influential people" in auto racing by several different motorsports trade publications.
Bruton Smith started promoting various races during the 1950's, featuring the burgeoning National Association of Stock Car Automobile Racing (NASCAR). At this point, NASCAR was in its formative years, featuring relatively lax rules, a cast of rogue characters for drivers, race cars that basically came off the showroom floor and itinerant racing promoters who often skipped town with gate receipts before the on-track activities were completed.
Bruton Smith was one of the first truly professional promoters who paid good purses, tended to the needs of fans and found unique ways to promote the events he staged at the speedways he leased around North Carolina. Since then, Smith has built the 1.5 mile Charlotte Motor Speedway into what many racing insiders consider "the mecca of motorsports facilities." The largest sports facility in the southeast features many amenities, including The Speedway Club, enclosed clubhouse seating areas, more than 140,000 seats, the first superspeedway lighting system, condominium units and a large industrial park. Today, Charlotte Motor Speedway attracts more than one million visitors per year by hosting several events, including NASCAR Winston Cup stock car races and the Indy Cars of the Indy Racing League.
Bruton Smith took NASCAR and motorsports to Wall Street in February 1995 by forming Speedway Motorsports. The company was the first motorsports-based company to trade on the New York Stock Exchange . Smith owns approximately 70% of Speedway Motorsports stock.
Speedway Motorsports has been a tremendous success story. Under Smith's direction, the company built the Texas Motor Speedway in the Ft. Worth/Dallas market, which opened in April, 1997 with a NASCAR Winston Cup race. The facility features more than 150,000 seats, making it the second-largest sports facility in the world.
With more than 30 years of automotive retail experience, Bruton Smith completed a successful public stock offering of Sonic Automotive in November, 1997. Trading on the New York Stock Exchange, Sonic Automotive owns and operates 23 automobile dealerships, four independent used vehicle facilities and seven collision repair centers in the southeastern and southwestern United States.
I had an opportunity to interview Bruton Smith and his son, Scott, President and COO of Sonic Automotive, the week of the Coca-Cola 600 last May (yes, I did stick around for the racethought it might be relevant to the story).
Q: Mr. Smith, how did you get into the automobile business?
Bruton: Racing driver Curtis Turner and I built the Charlotte Motor Speedway in the late fifties. Although soil reports of the site indicated favorable conditions, dirt and boulders, it turned out to be mostly granite. The $1 million estimate to build the place turned into $1.5 million, leaving us half a million in debt. Well, Curtis and I raised enough money to cover the purse and in June of 1960 ran the first World 600 in front of 35,000 race fans, a good-sized crowd for that time. But within a year, the burden of that extra debt was too heavy and I resigned as vice president of Charlotte Motor Speedway; the track went Chapter 11.
Q: So you had to find another way to make your fortune.
Bruton: That's right. I had a good friend at Ford Motor Company, William Benton. He had talked to me about getting into the automobile business and becoming a Ford dealer. Well, I knew I had to learn about the business if I was going to get in it, so when I decided I would start in the automobile business I started on the ground floor. I started as a salesperson in 1966. I was very focused and I worked very hard. After three months I was promoted to sales manager and I was promoted to general manager five months after that. Sixteen months later I went into business with Ford Motor Company as partner in my first dealership. I bought out Ford and had 100% ownership in the store within sixteen months. We've bought some more since then.
Q: I understand that Charlotte Motor Speedway was the first North Carolina corporation to survive Chapter 11 reorganization?
Bruton: That's correct. And while I was acquiring more dealerships, I bought back stock in the Speedway. By 1975 I had become the major stockholder in Charlotte Motor Speedway, regaining control, of day-to-day operations.
Q: Scott, how did you get into the business?
Scott: Dad says he started on the ground floor, but I started on the groundliterally. I swept floors, cleaned cars, was a lot boy, you name it. When I became old enough to sell cars, I sold cars. I really enjoyed it and found that I had a natural ability for it. While everyone else was at the beach during summers, I went from college to the dealership, continuing to work my way through the departments. I eventually worked my way up to general manager of Town & Country Ford and became president and COO of Sonic Automotive when we went public.
Q: Okay. We've gotten the background out of the way, so now let me askwhat's behind Sonic Automotive's success?
Scott: That's easyBruton Smith. As our founder and CEO, he has a tremendous amount of automotive experience. He also has the public sector experience with Speedway Motorsports. That combination made him very attractive to the institutional investors.
Q: Bruton?
Bruton: I think people are the key ingredient behind our success. My first goal was just to get a dealership; as my business grew, I realized I needed more and more good people. I know most dealers try to hire, groom and promote from within, but one of the things I'm most proud of is the large number of people who started as salespeople and are now dealers themselves.
Q: Some say that the opportunity to become a dealer is less today than it's ever been with all of the consolidation going on.
Bruton: I don't know about that. If someone really wants it, there's still a way because there is plenty of money available. There's more money available for this business than there are quality people.
Q: How does Sonic Automotive hire, groom and promote people?
Bruton: We recruit people. We recruit good people. Then we train them. I'd much rather take someone moldable than a so-called "recap", someone who has been around for years, has all the bad habits. They're really just taking up space and picking up a check every week.
Scott: The quality of the team we have in place is attractive. Winners want to be around winners. Stock purchase plans, options for key personnel, 401K plans, employment contracts - all are instrumental in our recruitment of good people. Once we bring them on board, we have a training center where we train everyone from sales representatives to the title clerks, F&I personnel, service writers, body shop adjusterseverybody. Our people are trained in a manner which we think increases their job satisfaction. We don't fling our people into positions or situations they're not trained or prepared for. They not only have the training and preparation, they have the confidence to do the job.
Q: What does it mean to be one of your dealers?
Scott: Bruton originally operated each of his stores individually, each with autonomy. When we started the two-year process of going public, we were looking to maintain a single-mindedness about the importance of people or, more specifically, the importance of good people. We've been able to attract some very good dealers who have operated for years with strong management in place. That is key to Sonic's success. When we buy a store, typically everyone stays, except for one particular dealer who wanted to exit the business. Typically we look for dealers who want to remain active. Even if they don't want to be active in the day-to-day operations of the dealership, but they have something to contribute, we greatly encourage that. We typically enter long-term employee agreements with the management teams.
Q: So a successful dealer, who has answered to no one and called all the shots, now is accountable to a corporation? C'mon.
Scott: I know, I know. Early on I was concerned with how I was going to be able to communicate with successful dealers who have been in the business for 15, 20, 25 plus years. But what really happens when a dealer joins Sonic is they're exchanging their stock in their one to five or so dealerships for stock in a group with 23 to who-knows-how-many dealerships. Our stores' operating functions have remained autonomous, but financial functions have been consolidated. Floor plan is centralized, cash management is centralized. TV, radio and newspaper are negotiated regionally. The value of their equity in their dealerships can never have the value it has within Sonic. Once we finalize negotiations and have an opportunity to spend some time together, we come to understand each other's management style.
Q: There's a lot of talk about "branding" out there; Republic even talks about branding their new car stores as Autonation stores. Why are your stores not branded as Sonic stores?
Bruton: I don't think that that's necessarily the thing to do. We've bought a lot of dealerships where they had a great name, they had great relationships with their customers and they had name recognition with the public and high QCP. Why would we want to tinker with that just to put the same name on our dealerships? If it's not broken, don't fix it. I don't think that a public company itself is going to sell a lot of cars. It still boils down to a dealership's relationship with the community and a salesperson's relationship with a customer. That doesn't mean we won't change some names. There will be cases where we change a name, but not for the purpose of corporate branding.
Q: Bruton, you mentioned a "salesperson's relationship with a customer"what is your opinion of selling cars through the Internet?
Bruton: A car is the second-largest purchase a person makes and people want to buy from people. I don't think most people will ever prefer to get on the Internet and buy a car not really knowing who they're dealing with. I believe that most people will always want to come to a dealership and deal with a person, a person they can pick up the phone and call. This may change over time, but quite honestly, I hope it doesn't.
Scott: We signed on with one of the largest online car buying services for a few years. We found that they delivered us the exact type of customer which we would least want to work with. The grinders, "show me your invoice," practically fleet buyers - plus, many folks would take our quote elsewhere and buy from the first dealer who would beat it - and we're paying the Internet buying service for the privilege. We're working on bringing Internet sales in-house, so we have the control.
Q: Bruton, what are you most proud of as a businessman?
Bruton: I guess being able to give something back. I believe that we've been able to help people grow, whereas if somebody has talent and desire, we've been able to help them and their families by helping them achieve - both in our automobile and our racing sectors. I'm very proud of that.
I'm also very proud of what we've been able to do with a charitable foundation we started, "Speedway Children's Charities." We've helped over one hundred organizations in different states do a better job in helping children. We raised $1.3 million last year and we're on task this year to do better than that. We have approximately 700 volunteers throughout the states which we serve to hold our costs down to the point where 83% of the money we raise goes directly to kids. We provide clean audits to document this so that contributors will know that 83% of their money goes where it's needed, straight to the children. I don't know of any other charitable organization as big as ours that can hold their costs at 17%and it's all because of the effort and commitment of our volunteers. I'm proud of every one of them.
Q: What's the best thing about being Bruton Smith?
Bruton: Meeting wonderful people and having a good time. It's hard not to when you enjoy what you do. I've been fortunate to be blessed with four wonderful children who have never caused me any problems. I'm so proud and pleased that my sons have followed me into my businesses. What father wouldn't be proud to have his sons interested in what he does, enough to follow in his footsteps? Besides Scott, my son David just got out of college and he's decided that he wants to go into the automobile business. My son, Marcus, works with me at Speedway Motorsports. My youngest is 15. She rides horses - jumpers - in competition. She's doing great and we're all extremely proud of her.
Q: Last question, Bruton. What advice would you give to your fellow dealers and aspiring dealers?
Bruton: Stay focused. I sincerely believe that anybody can ac hieve their goals if they stay focused on them. At times, people threw jokes at me, kidded me for what I aspired to. But that didn't bother me. I knew what I wanted, I knew where the goalpost was. I worked harder that anyone around me and stayed focused. As for aspiring dealers, I suggest they follow my example - the room at the top of the automobile business is great and there's more room at the top than there is at the bottom.
John Palmer Sub-Prime Cuts Special Finance Is Still Growing And Here To Stay
On June 18th and 19th, over 500 dealers, managers, lenders and other sub-prime industry participants attended a special finance seminar and trade show, put on by Dealer Marketing Services, entitled, "Maximizing your Profit Potential in Special Finance." Some of the most salient items and issues discussed are as follows:
Lenders predict more shakeout and consolidation to occur as lenders get bigger and more efficient. Consensus is what will continue to grow, but with fewer players.
Six of the nation's biggest and most profitable special finance lenders were represented on a panel discussing the current and future state of the industry. Participants included Jim Bass, President of Auto One Acceptance Corporation, Ed Pettit, National Sales Manager of Triad Financial, Bob Nelson, CEO of First American Acceptance Corporation, Tony Fiduk, Vice President of Household Automotive Finance, Jim Pollak of Tranex Credit Corporation and Duane Kaylor of California Bancorp System.
Highlights of the panel discussion included:
· Very large national banks are buying up the previous independent sub-prime finance companies, freeing these companies from the task of constantly raising money, but at the same time imposing a new and more stringent set of standards and controls
· To lower the processing costs of an application, more and more special finance lenders are turning to some form of credit scoring. None of the panel members thought credit scoring could ever handle 100% of applications, but some thought it could be used to approve or decline up to 40% of applications with the rest needing an analyst to review and decide
· The panel stressed the need for a dealer to choose three to four lenders and get to know their credit programs to avoid "shotgunning" a deal to multiple lenders. They stressed lenders needed to strive to obtain a 10% application-to-funding ratio to hold down costs. Dealers sending in 100 applications and only funding one to two contracts with a lender run a substantial risk of being cancelled by that lender.
· Minimum income requirements average 1,500 a month, and a cosigner generally would not help unless it was a spouse.
· Most lenders on the panel did offer a first time buyer program and most offered some type of rate participation as well on some tiers
· Most lenders are moving to a multi-tiered program to handle a broad range of different customer
Dealerships continue to set records for special finance profits, but stress the need for a separate department and specially trained salespeople.
Dealers and managers from five dealerships which have some of the most profitable special finance departments in the country, were represented on a panel discussion. Panel members included:
1. Nick Reinhart, President of Reinhart Ford in Ephrata, PA. Nick is in a small town of less than 10,000 people but sells over 70 special finance deals a month at over $3,000 average gross.
2. Ron Boukair, President of Performance Pontiac-Nissan in Syracuse, NY. Ron is averaging 220 retail units a month - 25% of his volume comes from special finance and 40% of his gross!
3. John Arthur, General Manager of McKinney Dodge-Chrysler-Plymouth in Easley, SC. The store is brand new, but went from zero special finance deals to over fifty in just two months.
4. Steve Hall, Director of Special Finance for Passport Auto Group in Alexandria, VA. sells 130 retail used cars at Nissan dealership, 110 of which are special finance.
5. Helmi Felfel, General Manager of Harrelson Mazda in Charlotte, NC. Helmi's group took over the store just a few months ago when it was averaging a less than 90 total retail. In May it sold 293 units, of which 150 were special finance.
Highlights of the panel discussion included:
· Average gross profit for a special finance deal was over $2,800 per vehicle, about 40% higher than a conventional deal
· Three of the dealers were getting the majority of their special finance leads by using television, especially infomercial, and the other two used direct mail as their main advertising source
· All the dealerships stressed the importance of maintaining a separate department. Ron Boukair said his dealership allows all salespeople to sell special finance customers and the increase in special finance sales where offset by the decrease in the rest of this retail business as the salespeople went after the higher gross deals. When he separated departments his total sales went up by almost 50 units per month immediately.
· The dealers were selling approximately 85% late model used vehicles and 15% new vehicles.
· All the dealers on the panel had been using computerized systems to work all their special finance deals as well as assisting in managing the entire department. They all reported their average gross profits increased after automating by as much as $1,000 per vehicle.