Article

Dealer puts Faith in GM and Succeeds

August 2007, Auto Dealer Today - WebXclusive

by John Carroll - Also by this author

Back in the mid-90s, Raymond Palacios had the kind of resume any CPA would have been proud of. As a vice president for Perry Homes, one of the biggest homebuilders in Texas, he had 12 solid years of career experience and a great track record at a growing company.

But there was something missing—something big.

“I really had the itch to go out and start my own company,” recalled Palacios. “That was the bottom line.”

Always the company insider, Palacios wanted the kind of company that would let him mix with customers.  About that time, he picked up a copy of Hispanic Business magazine and read about one of the dealers who had completed the minority dealer development program run by Chrysler.

Something clicked, and Palacios picked up the phone. That call started a three-year odyssey that ultimately took him through the NADA Dealer Candidate Academy; classroom lectures followed with on-the-job stints at several dealerships. He learned the business along the way, but one of the most important lessons he received during his education was the need to stay flexible. If an opportunity came up to learn something new about the business, he grabbed it. And when the call finally came that offered him a chance to buy into his own dealership, he wound up taking it—even though it was a long way off the path he’d mapped for himself.

“There’s a great shortage of minority dealers,” said Palacios, the only surviving member of his class of five would-be minority dealers in the program. That was true a generation ago, when some of the big car manufacturers first started to recruit minorities. It’s true today, when new opportunities are increasingly few and far between.

But for a select few like Palacios, the journey has been rewarded with success.  In the end, he owns two solidly profitable dealerships. He’s also blazed a path he hopes other minorities will take, committing time and experience to mentoring other entrepreneurs interested in tackling one of the toughest challenges in business.

This is for Real
Chrysler liked what they saw in Palacios, but didn’t have much to offer at the time he called. Palacios ended up contacting General Motors, which also recognized the business savvy he displayed on a trip to Detroit to meet with company officials.

In April of 1996, he got a call from Detroit. He could pack his bags and prepare to head out to the Dealers Academy in July.

Palacios realized that his dreams were turning to reality. With a family and a good job, the $3,000 monthly stipend that GM was offering (it’s now $5,500 a month) would require some serious sacrifices. He looked around at his corner office and the secretaries and thought about his company car and a salary that was many times over what he was being offered to start at the bottom of the car business.  

“Honestly, when they called I paused for a second and thought, ‘Goodness gracious, this is for real.’”

In the end, he opted to say goodbye to the corner office and his vice presidency position, choosing the GM program and a shot at his own dealership.

“I wasn’t born wealthy,” said Palacios, “but I had faith that things would work out. If I lost everything, we could make it back.”

After the academy, Palacios went on to work in the business, running the used car side of the business at Charlie Thomas Chevrolet in Houston, Texas, and later taking on a troubled GM store in North Houston that a dealer had vacated. That gave him a close-up view of how a great dealership operated, and the flip side of what happens when everything goes wrong.

He spent a year at the store followed by a few months helping GM handle internal financial controls at some of its bigger stores. As a CPA, it was something he was already well versed at.

Then he got his next big call from GM. There was a Cadillac/Oldsmobile dealership available in El Paso. Palacios already had a clearly defined region he wanted to stay in, marking out a grid in Texas that included the big metro areas of Dallas in the North, San Antonio to the south and Houston in the southeast.

“My world ended in San Antonio,” said Palacios. “It didn’t go any farther west. But I had been in the program going on three years and that was the first call I ever got. I said, ‘Let me see the dealership.’” 

Manna from Heaven
The day after the announcement on Oldsmobile, some of the helpful people at Motors Holding started to look into a liquidation plan for Palacios. Other dealers began to drop by, circling the store to see when the closeout sale on the inventory would start.

Palacios was four years away from his big career move, looking at starting all over again. Getting another dealership would take more time and meant moving his family again to a destination unknown. He decided to stick it out.

That’s when some good things began to happen for Palacios. Cadillac, always the slow end of the operation, began to start delivering some significant sales growth. Used cars were making gains as well, and he put in extra effort to make sure he was bringing in the kind of inventory that consumers in the West Texas town were interested in.

“The Lord smiled on us,” said Palacios. “We grew in 2001 and kept growing. In 2002, our third year, we applied for a new Hummer franchise. At the time, Hummer was the H1, which was better than nothing. I then saw a picture of this new product, the H2, and said we had to go after that. We had to compete with everybody in El Paso, and after they narrowed it down to three dealers, we secured it. It was a good fit for Cadillac, so we were awarded the franchise in 2002.”

“That was like manna from heaven,” recalled Palacios. “We had a profitable, good operation; number one in customer service.”

His customer service ranking remains the dealership’s key indicator for success. Palacios doesn’t doubt for a second that he owes that to his employees.

“Employees are always number one, with customers a close second. We have to take care of employees, show them respect and dignity. You treat every employee with respect and you have happy employees who are dedicated and will take care of customers.” That’s not just a throwaway line from a management seminar. He backs it up with cash.

“GM gives out bonuses. We always distribute it equally to all employees every quarter. Sometimes they can get checks for thousands of dollars.”

Palacios’ El Paso operation is still relatively small by most franchise standards. “We’ll average 80 new and used sales a month,” said Palacios. “But it’s still a million-dollar store.”

In dealership business, success breeds new opportunities for success. A Chevy/Cadillac franchise in nearby Las Cruces, N.M., became available in 2004. “That’s another blessing,” he said, that accounts for about 145 monthly sales. Now he has both of the Cadillac franchises in his region, which gives him a big advantage on the service end of the business. Gaining a Chevy franchise also gave him a strategic advantage, adding a lineup of cars that now caters to every family budget.

Growing the Business
Palacios isn’t done growing the business, either. He’s focusing a lot more of attention now on growing his used car business.

“For every new vehicle we sell, we’ll sell 0.75 used,” says the dealer. “We’d like to be one to one, but we’re not there yet. We’re expanding the special finance business now. That’s the opportunity in this market.”

To hone his used car strategy, Palacios is staying focused on processes and training.  “It’s a lot of training, and we’re changing the process of identifying special finance customers immediately. We have to identify them sooner, put them in the proper vehicles, and that means making sure we have the proper inventory.”

In his territory, that means bringing in vehicles that sell in the range of $9,000 to $12,000. “The issue is making sure it books out right,” said the dealer. “It’s easy to get vehicles under $10,000. Getting them financed is the issue; vehicles that fit a customer’s payment and vehicles a bank will finance.”

Palacios already has a list of 18 lenders that he works with, and he’s swiftly become familiar with which deals fit a particular lender’s criteria. “Every finance group has their own specialty.” But he can already count on one advantage that many used car dealers never consider: Once you have experience handling Cadillac customers, you can bring that same customer-service style into the used arena with great effect.

“The whole process needs to be altered somewhat, but everyone is treated like a Cadillac customer, regardless of what they’re looking for. Everybody,” he repeated for emphasis, “gets Cadillac treatment.”

 Vol 4, Issue 6

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