Interview with Don Chalmers, Don Chalmers Ford and Bob Turner, Bob Turner Ford.
Q: How did you get in the car business?
Don: Bob Turner and I both got in the car business the same way, with Ford Motor Co. I started in Houston, Texas in 1971 and worked there for about five years, then got into the retail automobile business at Gillespie Ford in San Antonio. I was there for a couple of years and then got an opportunity to go to Seattle, Washington and buy into some dealerships there that were partially financed by Ford. I was up there for ten years and ended up with eight dealerships. I sold out to my partner and then went back to my hometown of Tulsa, Oklahoma and eventually had several dealerships there. Three years ago I got an opportunity in Albuquerque to get a Ford store.
Q: Bob, how about you?
Bob: I grew up in South Texas and after I got out of The University of Texas I went to work for Ford Motor Co. I worked for Ford in several positions and had several offers from different dealers to go into the retail end. After eight years with Ford, I chose to do that on February 22, 1966. I went into retail here in Albuquerque with Rich Richardson, who as you know is our third partner in the organization that we are putting together right now. I started working for him as his new car sales manager. I moved up to general manager and then president of the company. I was with him for over twenty-four years. Rich and I had already put together some other companies that we were partners in, but in 1990 I had the opportunity to get a Ford dealership in Albuquerque which is now known as Bob Turner's Ford Country. At that time Rich still had some involvement with me in that and we also had some other dealerships around the country. Like Don, we have had some here and some there.
Q: What about Mr. Richardson's background?
Bob: Rich Richardson came to Albuquerque after got out of the air force. He got out of prison camp in Austria and he and his wife got in their car and headed west. He saw a canyon out here near Albuquerque and really liked it. He said, "this is where we are going to live". He became a motel owner. After a guest died in the room one night he decided he better look for a different business. He got in the automobile business as a used car dealer and then in March of 1961, he became a Ford dealer here and he has been ever since. He has another dealership in Texas and his wife is a Ford dealer in Victorville, CA. Today, Ken Blewitt is running Rich's stores. Ken has been Rich Richardson's right hand man, running his dealerships for a long time. He has always been an important person to Rich as he has always identified with Rich. He and his son own a dealership with Rich. Rich is 78 years old and not in particularly good health, although I saw him today and he looked fine.
Q: Why did you decide to consolidate your Ford dealerships here in Albuquerque?
Don: Two basic reasons. One is we think we can operate more efficiently. We can cut costs, increase profits, make a better place for our employees and we can be more competitive in the market place. All of that revolves around being more efficient and lowering our costs. Reason two is the issue of having a dealership go on after our lives are over. Normally, a Ford dealership is such that when you die your heirs must sell if they are not qualified to run it. They must sell within a year. Generally they end up selling to the highest bidder who may be someone who has nothing to do with the town you have served for years and years. We want to own these dealerships for as long as we want to own them or keep them in the family. This is a way that we can accomplish that.
Q: Why consolidate now?
Don: No one knew that this was an option before.
Q: Why has it not happened before you decided to do it?
Don: It would not have been an option. Obviously, the first shoe that fell, so to speak, was public ownership of dealerships. That got everyone looking. The manufacturers, as well, decided that they too would consolidate different market places. Ten years ago I don't think any dealer would have imagined that this could happen. Now with the public groups and the manufacturers getting into the ownership of dealerships, it is inconceivable to me that dealers will not do something like this in certain markets.
Q: Change is inevitable and there has been so much in such a short time. There are alot of dealers who are concerned about it. It looks like you saw it as an opportunity to do something you could not have done before.
Don: We did not do this for any other reason than to improve ourselves. Again, if we can be more competitive and efficient in our operations and lower our costs and also keep the ownership of the dealerships within our families down to successive generations, we will have succeeded.
Q: The Ford Retail Network typically features large selection, no hassle selling, non-commission sales people and inventory-searchable web sites. How do think your group is going to compare with that?
Don: I don't necessarily like to compare that. I just know what we are going to do and what we think will work for us. We have three dealerships here that, by any standard, are very successful. All three of us are good volume, very profitable Ford dealerships. We are not looking to reinvent the wheel in each of those dealerships and throw away the equity that has been built in those names. We believe that we will continue to operate three dealerships with the three individual names on them and very frankly, with three distinct cultures that have been developed over the years. There is room in this marketplace for more than one culture. We are big volume stores and we have a lot of selection, but we will not feature one "pooled" inventory. We have three different stores. We will negotiate price and we will be competitive with each other. We believe it is the competitive spirit that will drive us to more efficient ways of doing business within each particular store and within the entire organization. We are not trying to make one company in which all stores do business the same way. We have three stores and they all have their own brand image and they will continue to develop that brand image. What we will focus on, especially at first, will be to lower administrative costs. We think we can do that without giving up any personality or culture within any of the dealerships. We believe in combining administrative functions and using the bigger buying power. Whether it be in financing, insurance, or whether it is in fringe benefits that you purchase or personnel efficiencies, we can save a lot of money.
Q: Why not have one of the three stores offer one-price or "no hassle" selling to appeal to that segment of the market?
Bob: I don't see that as a scenario we would use. We believe that free trading with customers and retailing with the customers without the one-price is the best way to go, particularly in today's finance world. Margins have been decreased, so one-price, we think, will be a thing of the past. Our stores will stay competitive fighting each other over deals in the traditional way.
Don: I never want to say never Mike, because your one price scenario is interesting. I will say that it is beyond my comprehension that all three of us would ever be one-price.
That really is against the grain of what we have tried to do here. If one store wanted to do one-price in a quality way and really get committed to that, then I would say that would be fine, I am not going to throw that possibility out the door. We are successful in our market place not doing that, but that's not saying the market won't evolve in the future. There is a huge difference in a market place that has one dealer having one-price versus all of them at one-price. It seems to me there has been some backlash to all stores of one make having gone one-price, people think you have taken their choice away. I am not going to say we will never go one-price, but that is not a strategy we have anywhere in our plans right now. I tend to believe that there is more than one right way to operate these dealerships. It is not really what road you choose, it is your commitment to the road you choose. If you commit to the way that you are going to do business and you understand it and you do it in a quality way, whatever way that is, then I think that is what produces successful dealers.
Bob: Probably the greatest thing going for us is we are dedicated to the stores being competitive with one another. If we all did the same thing, that would be a little suspect to our market. We are paying our managers who run those stores in such a way that they have got to do very well in their store. I know your articles are being read by dealers and not by consumers but, we are going to fight to get every single deal at every single store, because if the guy doesn't get it at his store, it is out of his pocket too.
Q: Even though they are competing head to head, will the stores share information from a business development standpoint? You have prospects coming in and if all that data could be combined it could be quite useful in a combined car center or business development center.
Don: We will not be sharing business development sort of stuff such as prospect names. Once we started doing that, then we would not be competitive with one another. Being competitive does not mean we won't get together and share ideas of what works in a general sense. If Joe Jones shops at one store, that is proprietary information for that store, not to be shared with the other stores. What closing ratio store A has, versus store B, can be shared information. Then we can begin to set standards on the way things ought to be and what is working and what is not.
Q: How about your used car inventory? If someone comes to one of your dealerships and wants a particular car and you don't have it, however it is something that is sitting on one of the other Ford lots, how are you going to facilitate that?
Don: It is not in our plans to do it that way. Not to say that somewhere down the line something couldn't be worked out. A lot of our inventory comes from trades and how much you put in a trade ends up being a competitive judgement and so we will tend not to do that. But used cars that sell, very frankly, is an area that we will attack early on because this can go beyond the names of the three dealerships. We believe the penetration we can get in used cars is less limited than it is for one new vehicle franchise, that being Ford, and therefore we are going to be even more aggressive in used cars. I guess what that means is that we may decide to have a totally different brand development for independent used cars. If we do that, then the independent used car operation may have a different relationship with our Ford stores than our Ford stores have with each other.
Bob: We are not necessarily the typical dealer in used cars. Don has two different used car lots in addition to his store. I have two and Rich has three. We think that is one of the ways we can expand most, as well as having more service centers eventually. We are also increasing our opportunity. When the used car buyer wants to become a new car buyer, then we will have them in our seat, driving our cars. We will have a better shot at giving them the new product.
Q: Give me an idea what kind of savings you think you will have in advertising?
Don: That is to be seen. We think we will save in sheer volume. Each of us, I'm sure, has been told individually that our rates are the lowest. Therefore, none of us is being told everything there is to know. That doesn't mean necessarily one person's rates across the board are higher or lower than the others. It probably means that I am lower in some areas, Bob is lower in some areas and Rich may be lower in some areas. If we can, as well as getting some sort of volume consideration, negotiate and demand the lowest rate in every area for each store, we will have lowered the overall expense in advertising. Sheer volume will get us lower prices on financing. We have got a wonderfully capitalized company; it will be a very large company. We have already gotten very competitive bids that will save us substantial dollars over a one year period in floor time. We have not decided who we are going to floor plan with, we just know the bids we have gotten will save substantial money. We believe we will get substantial cuts and savings in the areas of insurance, such as liability insurance and medical. We will reduce the number of people processing our deals, and that is a fairly substantial saving. We do not need three top comptrollers. We need just one at the top. Interestingly enough, total employment, we think, is going to go up because of the growth and opportunity we are going to be able to give our employees. We believe that anyone who is working for us now, who wants a job, will be able to find a job with us. Yet we will still be more efficient, and the reason is growth.
Q: What are your plans regarding sub prime?
Don: It will be a store by store decision. All three stores at this time have a little bit different philosophy. There is room in this market place for all three of them.
Q: How is Zia's management structured?
Don: The way the deal was put together is that each of the dealerships has a seat on a board of directors. There are three directors with three votes. I am going to vote for myself to be on the board of directors, obviously. Although Rich will be at every board of directors meeting, he is going to appoint Ken Blewitt as his representative on the board. He really looks out for Rich's interest and has an important part in this as a member of the board of directors. If something does happen to one of us, such as me getting hit by a truck, my family will still own the stock and will not have to sell it back. They will have an opportunity to pick someone to be their seat on the board. In my particular case, I don't have anyone in my immediate family that is qualified to be on the board of directors because, by agreement, nobody can serve that has not been a metropolitan dealer or general manager of a metropolitan dealership.
Bob: With at least ten years of experience.
Don: So this company will always be ruled by a three person board of directors of experienced automobile people who will be given the direction to make the proper decisions for Zia Auto Group, not necessarily in the best of interest of an individual family. I would anticipate that if something happened to me, my wife would find someone who is a close friend, maybe a twenty group member, who would represent her on the board of directors. We will have quarterly board of directors meetings to make sure that the group is being operated to the satisfaction of the board. It just so happens that to begin with, the CEO is on the board of directors. That does not mean it is always going to be that way. As a matter of fact, if something happens to me and we need someone to step in temporarily until the board of directors decides whom they could find to be the CEO of this company, the next CEO could be promoted from within, or come from another part of the country.
Bob: We have taken months and months to try to get every "t" crossed and "i" dotted. We are satisfied that we have a good agreement with three very experienced car people.
Q: How did the three of you come to agree to consolidate your three stores?
Bob: Each of us has had the public companies make runs at us. We have also had people who have asked us if we would be interested in becoming a part of a retail group. When we would have lunch together, we would talk about what the business is going to be like ten years from now. That starts you thinking and if you are really dedicated to this business and you want it to keep going for as long as it can, you end up thinking about you can do it. I don't know who was first, but it made sense to all of us to do what we are doing, to make sure that we put together an organization that is valuable today and five years from now and ten years from now. We have been trying to figure out how we can get ahead of things instead of just tagging along and following the cycle.
Don: I would say none of us can really remember who brought it up first because I think it was already on everybody's mind. We did not invent the larger concept of looking at a market and consolidating and looking for efficiencies. The only thing we have done is refined it to our liking. It would be surprising to me if there was even one Ford dealer in a metropolitan market that has not thought about some sort of different way of owning his dealership. The concept of trying to consolidate and to take advantage of efficiencies has to be on every dealer's mind.
Bob: I think another important thing is that we are all very loyal Ford dealers. Don worked for Ford Motor Company. I worked for them and Rich has been a Ford dealer since 1961. We being Ford dealers, and wanting to stay Ford dealers, and to grow with Ford had a lot to do with the way we did it.
Don: We have had other franchises too. We like to be independent thinkers, but the Ford logo is tattooed on our navels.
Bob: It is important to us because we truly believe that Ford Motor Company, in that same five, ten, twenty year thing that we are looking at right now, is the one that is going to be the leader and we want to be hooked up with the leader.
Q: In what other markets do you think a consolidation such as yours could work?
Don: I am not going to tell you where I think it will happen next, but I'll tell you it will pop up. It will pop up most likely in the market place where there are two or three dealerships that are owned by the same dealer. What we have done here is a little bit more difficult because it is not single dealer ownership. For a market to do what we are doing, I think you have to have a small number of dealers and you have to have people who are thinking "how best can we improve the total". I think it is an unusual accomplishment for three dealers to get together, but we were all highly motivated to do this.
Q: In your opinion, what would you say is the most number of dealerships in a market that something like this could conceivably make sense?
Don: It could make sense for a large number amount of dealerships, but would it get accomplished is the big question. Five or six would be the maximum, in my opinion.
Bob: I would say three to five. It depends on the individual dealers involved. Are they interested in the long range involvement for their families, and/or are they interested in getting together and doing the very best job they can? Are they interested in just their individual gain or loss? We happen to be fortunate in that, we have three dealers who think a lot alike. Our obligation is not only to the factories and to ourselves, but also to our communities. All three of us, here in Albuquerque, are very heavily involved in community activities. There are a lot of things you do have to agree on to make this transaction work. We have been fortunate in that we have now waded through the mud and muck of it and we are now walking on dry ground. We feel very good about where we are going.
Don: We think we are going to be very successful and if people see that, it would seem that other dealers would look at the same concept. We don't have an equity interest in the concept, we are interested only in doing what we want to do.
Q: Hypothetically, if there were seven Ford dealers in this market and four of them did not think like you, but three of them did, could you still see doing what you are doing? Does it have to include everybody in your market?
Don: I think it is more possible to do it the way that we are doing it with our philosophy. You all have to want to do it and do it from the position of strength. We are not doing it because we have to do it, we are doing it to take advantage of an opportunity. If the strongest dealers in the market place were going to do it, then everybody would follow. We each have a very successful Ford dealership in this market. It is not a defensive move.
Q: If there was a fourth Ford dealer in this market, and he did not want to be involved, but the three of you were still as committed, do you think it would work and would you have gone ahead with it?
Bob: I don't think it is absolutely necessary, but I would hate to be that fourth Ford dealer. It would be highly competitive and like Don said, we are not talking about three dealers that are just inching along. We all have a tremendous market penetration already. We have a lot of repeat business and we have good reputations.
Don: To answer your question Mike, if Bob Turner and Don Chalmers could agree to do this and Rich Richardson didn't want to do it, I would be hesitating.
Bob: We have an advantage. As a lot of dealers know, Rich and I have been partners a long time and Don and I have been partners in different things too, so we were the right ones to do something like this first.
Q: What if you had a Nissan or Toyota franchise and you had a Pontiac and GMC franchise and Mr. Richardson had a couple other franchises?
Bob: We are Ford people and one of the things we agreed to with the stockholders, is that we won't bring a non-Ford dealer into our organization. If we make other acquisitions, they will be Ford or Ford products.
Don: Mr. Richardson has two minor foreign franchises, Kia and Subaru, they are not a part of our deal. We think we will be stronger focused on Ford.
Q: Any reason Chevy, Chrysler or any other make dealers couldn't do this?
Don: No. I will tell you I got a call today from a Chevrolet dealership asking me how we put it together.
Q: What has been Ford's response to this?
Don: They are very positive about it. We are waiting for final approval, but they are having us sign papers and submit things and they seem to be more focused on how they are going to do it, rather than whether they are going to do it. We have gotten oral responses that are very positive. I saw a quote in somebody's article about Ross Roberts saying that he believes it is inevitable that dealers will consolidate on their own.
Bob: If it is a good group of dealers, the factory will encourage it in the future, and certainly they will if we do a good job. We feel they are very favorable. But we did not know what to expect when we first approached Ford with our concept .
Q: Who were you meeting with at the time?
Bob: The regional manager and marketing reps.
Don: Within twenty-four hours we had word that Detroit had a similar positive attitude.
Q: You have had some advantages, such as having been in business with each other prior to this venture. What should other dealers do and not do as they begin to explore this for themselves?
Bob: The first thing is to watch us for a while and then come see how we are doing. I think it depends on what those dealers are doing now and where they want their stores to be down the road. They have to decide that. We don't want to discourage them or encourage them. We feel very good about what we are doing and we are going to make it work.
Don: You don't have to be clones of each other, but there has to be a basic agreement on how to run a dealership. I would not want the cultures to be identical among these three dealerships, but they cannot be so different that they don't agree with the way another dealer in the group does business.
Bob: When we first sat down to talk about this we asked, "how is this going to be good for the consumer? What is this going to do to our customer body?" We also asked, "what about our employees?" We didn't talk about what it is going to do for us first. If it does not satisfy the customer first you cannot succeed, and if you cannot help employees grow in the business, it is not going to work. For us, those were the first things we talked about, our customers and our employees, then we worked out the rest. If dealers are in it just for their own personal gain or dominance and they don't necessarily care what happens to their employees or customers, they will not be successful.
Don: We wondered how we could take advantage of the efficiencies, yet still remain competitive, because that is good for the consumer. We also wondered how we could grow to benefit our employees. We realized if it is good for them, it will be good for us as well.
Bob: One of the things we kicked around was how are we going to make the general managers of the competing stores hate each other during business hours and still play golf with each other. You have to have people who really want to go for the throat in our business and it is very important to us to be able to keep that.
Don: We know that if we lose the competitive spark between the dealerships, we will lose a huge amount of the benefit we are trying to gain in this. That is our philosophy. I am not saying that this is the only philosophy that will work, but it is our philosophy.
Q: What do you see as potential stumbling blocks that may come up?
Don: When business is good, it is great, and when business slows down, you get tested. I played this through in mind of what can happen. We have tried to anticipate all those potential circumstances. I think we are prepared for all the bumps in the road. Everything has not gone smoothly to get to this point, but I really believe we are committed to make this happen.
Bob: We have all had bumps already and that is why we are going to get stronger and stronger in the used car business. When the economy goes down, that doesn't mean it has to go down in our stores. We all know if the economy weakens, the used car business gets better and new drops off. If we have a well-balanced machine running, we are going to take advantage and maximize at any given time according to the economy. We have got three strong car people here, that is a real plus for us. We are going to have bumps, but we are going to skid right over them and keep going.
Q: Well, God bless you and good luck. We're all rooting for you.