Deal-making resumes at car lots
Fueled by newly acquired Nissan and a rebounding Ford, Joe Machens is in the driver’s seat of Columbia’s resurgent auto market.
The recession caused tumult in the local car business as sales of new and used vehicles dropped nearly 10 percent in 2008. Larry Estes lost the Dodge franchise, and Lou Fusz closed the Saturn dealership. Justin Perry, after selling the Chevrolet dealership to Bob McCosh and opening a new Nissan dealership, saw his sales drop 30 percent in 2009 and sold the operation to Machens owner Gary Drewing. Don Albert transferred his Buick and GMC franchises to McCosh after sales declined sharply in 2007 and then remained flat for two years. In late April, Frank Fletcher Honda gobbled up the remains of Albert’s 25-year-old dealership.
Now, Fletcher and Drewing are planning major expansions and relocations, and they have so much inventory that they’re filling nearby parking lots with their cars.
The upward trend began last year when local automotive sales increased by more than 7 percent compared with 2008. A large portion of this increase can be attributed to the Machens family of dealerships, which were responsible for more than 73 percent of car sales last year.
“The key to our success is good people,” Drewing said. “We’ve got an old saying here, ‘You either get better, or you get worse.’ And each year we try to improve upon what we’re doing at Joe Machens.”
The Columbia market’s sales leader during both periods was the Ford-Lincoln-Mercury dealership located on West Worley Street. For 2009, the dealership sold nearly 9,400 new and used vehicles, an increase of more than 11 percent during its 2008 sales numbers. The dealership has found continued success during the first four months of 2010 and has increased sales by almost 20 percent compared with the same period in 2009. Nationally, Ford sales have increased by 33 percent for January through April, according to Autodata.
“It’s amazing what Ford Motor Company has done and the turnabout they’ve made the last three years,” Drewing said.
The local Nissan dealership rebound has also been dramatic. Since coming under the Machens umbrella on Jan. 1, sales at the dealership have more than tripled compared with the first four months of last year.
“That’s been absolutely phenomenal,” Drewing said. “Nissan is a great franchise, and our expectations are quite high there.”
All five Machens locations — including Toyota-Scion, BMW and Machens Automotive Group — have seen an increase in sales for the first four months of the year, with Toyota-Scion, BMW and Machens Automotive Group also yielding increased sales in 2009 compared with 2008.
Bob McCosh Chevrolet has also seen an increase in sales for both periods, and Head Motor Company had an increase of more than 10 percent for 2009. Sales at Head Motors, however, have decreased by more than 20 percent for the first four months of 2010.
University Chrysler, which includes the Jeep and Subaru franchises, had the largest decline in sales for the first four months of the year, more than 32 percent. Owners Dave Drane and Danny Burks, however, just opened a new location, and Chrysler is projecting a 6 percent increase in new car sales nationally this year after emerging from a government-funded bankruptcy protection case.
The new location at 1310 Vandiver Drive — formerly the home of Lou Fusz Saturn — will allow the dealership to provide customers a higher level of comfort and service, Drane said, as well as a wider variety of inventory, which has just caught up following the restructuring. During the restructuring period, University Chrysler was unable to keep inventory at normal levels, Burks said. The inventory became even more depleted during the government’s cash-for-clunkers incentive program.
“Chrysler had been shut down for several months going through their reorganization,” Burks said. “They weren’t up to par on their ability to produce the inventory at that point, so it was even harder on us.”
Drane said their franchise could have sold several times what it did during the program had Chrysler been able to produce to demand.
Chrysler’s reorganization had an up side: The manufacturing company will pay less to provide employee benefits and retirement plans, Drane said, adding that the lower “legacy costs” put the price of making a Chrysler more in line with that of a Toyota.
With the flagship franchise emerging from the restructuring period and bringing production back to normal levels, University Chrysler has acquired the local franchise.
Estes, owner of Estes Motors, had his Dodge franchise taken away last June as part of the same restructuring that made it hard for University Chrysler to keep inventory at normal levels. With Hyundai as his only current franchise, Estes managed to keep sales for the first four months of the year consistent with 2009 and sold 172 vehicles during both periods, according to Department of Revenue data.
“I’ve doubled my (Hyundai) sales from last year at this time,” Estes said.
Estes also plans to expand his dealership with the addition of Mahindra, a truck produced in India. A diesel-powered vehicle, the trucks are “tough as nails” and “financially very sound,” Estes said.
Mahindra trucks recently passed Environmental Protection Agency standards, Estes said, and he hopes to begin selling them by late fall. Once the new vehicles become available, Estes said he will be one of eight or nine dealers in Missouri to carry the trucks and one of 320 in the nation.
Although Estes acquired a new franchise, another local franchise acquired new ownership. Don Albert, owner of Albert Honda, sold his Providence Road Honda dealership to Arkansas-based Frank Fletcher Motors in late April. Although Albert Honda only sold 0.4 percent less vehicles in 2009 than it did in 2008, Fletcher General Manager Mike Hodges said new ownership has doubled sales at the location during May.
During Albert’s best months, Hodges said, the company would sell about 40 new cars. Fletcher sold 83 new vehicles in May and plans to move an additional 105 to 110 in June.
Hodges said one of Fletcher’s advantages is the volume of cars it has at its disposal. Currently, the dealership has 250 on its lot and many more ready to ship as soon as space is made.
“You could call up six Honda dealerships right now, and six total wouldn’t have as much inventory as I have,” Hodges said.
The large inventory Fletcher has at its disposal allows the dealership to provide customers with what Hodges described as “aggressive pricing.”
“We don’t have to make the extra profit on them because of the volume we do,” he said. “We don’t have shareholders. We don’t have all these crazy expenses. Everything is paid for, so our overhead is very low.”
Not content with just doubling Albert’s sales, Hodges said the dealership’s goal is to eventually sell 150 to 170 vehicles a month and become the largest Honda dealership in Missouri. Fletcher has already scouted four possible locations in Columbia to build a new dealership, and Hodges said the move is expected to be complete in the next 12 to 18 months.
Drewing is also planning to build larger facilities for the Toyota, Mercedes and Cadillac dealerships. The majority of the expansion expected to be finished by next spring will be located near the intersection of 63 and Stadium Boulevard or on land the company owns on Business Loop 70.
With rising sales numbers, new locations, new ownerships and new products, dealers expressed hope for the future — tempered with caution.
“I think the car industry is on the recovery mode; it’s picking up every month,” Estes said. “Don’t get me wrong; it’s not all wine and roses out there. I think it’s going to be a tough year, but it’s going to be a year that if you watch your expenses closely and you watch everything closely, it will be OK.”