Article

Surviving Mass Deployment: Uncontrollable Business Swings Are Difficult, But Not Impossible For Budget Car Sales

October 2007, Auto Dealer Today - WebXclusive

by Jennifer Murphy Bloodworth - Also by this author

Imagine how your business would be affected if almost half of your customer base left town. That’s exactly what happened in the small community of Hinesville, Ga., which is adjacent to Fort Stewart—a 280,000-acre army base.

In a community of over 50,000 people, roughly 20,000 have been deployed, and Kevin and Karyn Thomas, owners of Budget Car Sales in Hinesville, (along with the rest of the community) are anxiously awaiting the soldiers’ safe return. Fort Stewart covers almost half of Liberty County, which is where Hinesville is located, and accounts for a major percentage of the county’s population.

While this severe lack of customers may seem like an anomaly to most dealers, Thomas and his wife aren’t strangers to the situation. Fort Stewart has deployed massive amounts of troops multiple times since he’s owned Budget Car Sales. He said “This is the third time in the last five years that we’ve had to deal with this. We’ve kind of learned how to prepare ourselves and maintain through these times.”

Before joining the automotive industry, Thomas was stationed at Fort Stewart where he was a soldier for four years during peacetime. Honorable discharged in 1996, he moved around the state but ultimately decided to call Hinesville, Ga., home. Prior to opening his own store in June of 2000, he’d gained experience selling vehicles at other dealerships. He said, “The first job I got when I got out of the military was as a car salesman, and I didn’t think I would stick around very long. I just thought it was a good job to grab, and it got in my blood.”

Recalling the first mass deployment his dealership survived through, Thomas said, “The sales numbers dried up literally overnight, and we weren’t prepared … We didn’t know what to expect; it was devastating. We actually had to lay off about 70 percent of our staff just to maintain.” Before the deployment, the dealership sold approximately 70 vehicles per month, and afterwards, sales slumped to about 20 per month. That forced him to layoff 10 of his employees. “What I’ve learned is to operate on as tight of a budget as I can and not to lock myself into any long-term things that I couldn’t get out if need be,” he explained.

Thomas now pays closer attention to different aspects of his business so he can keep a tight budget, and he’s even been able to add at least six staff members back. “I learned to just really watch my expenses and make sure that I have enough people employed to get the job done but not too many people that if things were to tighten up I’d have to let people go,” he said.

To counter slow sales, Thomas is trying to expand his market area. He’s preparing to launch an infomercial that will be seen by consumers up to an hour and a half away from his dealership. He’s also beefing up his Internet presence. While he lists vehicles on AutoTrader.com, the dealership also has a newly-designed Web site to attract buyers.

The Promised Land
Once you’re in the minority program, there are no special deals for minorities. If GM calls you with a dealership opportunity, said Palacios, you still have to come up with the 15 percent stake that Motors Holding is looking for as a minimum. Then you have to pay back the other 85 percent from earnings in about seven years.

When he went into the dealership in El Paso, it didn’t take long for the accountant to spy the sources of all the red ink staining the budget. “The dealership had been struggling for five to six years,” said Palacios.

Palacios’ auditing work for GM proved instrumental in pinpointing the operation’s potential. Competitors in the business were doing well in the same neighborhood. He also had a real ace in the hole, he felt, with the Oldsmobile franchise.

“Oldsmobile was going to be our bread and butter,” remembered Palacios. “It was going to take us to the Promised Land.”

He made the deal to buy the operation on January 10, 2000 and moved in without much money to spare, but a can-do attitude that the cash-strapped dealership hadn’t seen in some time.

“We made it. We turned a profit in the first 3 weeks, and this dealership had lost a million bucks before that. We had a good customer base in Cadillac and good service business. For me, failure wasn’t an option. I invested everything I had in that store; it was a must-win situation for us. I let everyone know that we were going to win.”

Less than a year later, though, Oldsmobile was gone, a relic of GM history and Palacios’ business plan. The Promised Land looked further away than ever.

One staple of Budget Car Sales advertising is a 3-month, 3,000-mile warranty on every vehicle sold. However, this warranty work only accounts for 10 percent or less of service traffic, most likely due to the 120-point inspection all vehicles undergo before hitting the lot. While sales aren’t exactly flourishing at Budget Car Sales, the service department has seen an increase in business since the latest deployment. Service Manager Dave Winterrowd has service appointments booked a week in advance, which keeps him and service technicians busy.

When soldiers begin returning home, Winterrowd said with a chuckle, “I think we’ll have to expand or we’re going to be working eight days a week. That’s the way I see the future. Right now there’s a lull in our sales department and most other service departments in the area. Other car dealers are feeling a little crunch. Like I said, I’m scheduled up through next week, so we must be doing something right

One reason for the influx of service traffic may be a result of the mass deployment. Winterrowd estimated that 30 percent of his current customers are women whose husbands are deployed. Another reason may be his philosophy. He said, “We like to take care of our customers; we’re not satisfied until they are. We put forth every effort to ensure they are comfortable with their car.” That comfort level is most likely what’s keeping his appointment book full.

Even though many of Thomas’ potential customers are overseas for now, there are still advantages to having military personnel as a large part of your customer base. According to Thomas, it’s “a lot easier” to get military personnel financed because essentially they have a contract with the government that determines how long they’ll remain in the military. Finance companies equate that into steady, long-term job with a guaranteed paycheck, which is why some finance companies choose the military as their niche market.

There are two ways Budget Car Sales will finance military personnel: through one of three different finance companies Thomas works with that have programs specifically designed to cater to first-time military buyers or through buy here pay here. The buy here pay here military customers are especially convenient to collect from because the dealership schedules they’re payments to correlate with the once-a-month government pay cycle.

Although Budget Car Sales has taken quite a hit, the dealership has learned to stay afloat through these though times and has seen marginal improvements in sales since the first deployment five years ago. In June, the dealership sold 27 vehicles, which is better than the 20 per month it was selling immediately after the first deployment. July was even better with 46 units sold.
 
For Thomas, this deployment is about much more than slow sales. Some of his personal friends and “tons” of his customers, many of which are friends, are away fighting for the country, and he hopes the next year will bring them all home safely. According to Thomas, all 20,000+ troops are expected home by next May, with the first groups returning in February or March. These groups returning home to the Hinesville area consist of thousands of people, so sales should begin to climb significantly by the end of next winter.

While the dealership will be happy to see the soldiers return, there is no guarantee that they’ll be home for good. Considering this deployment is the third in five years, the chances of a fourth deployment are quite real. While Thomas isn’t planning for a fourth one, he simply said, “It’s just all about keeping expenses in line, having a plan and working your plan whether they’re here or not—and ultimately just believing in your ability to do well no matter what.” Thomas and his dealership personnel have learned to maintain through tough times, so they now know that they can and will survive a fourth deployment if necessary

Vol 5, Issue 9

Your Comment

Please note that comments may be moderated. 
Leave this field empty:
Your Name:  
Your Email:  

Blog

On-the-Point

Jim Ziegler
Objects in the Rearview Mirror

By Jim Ziegler
The past is right behind us and the future is coming fast. The Alpha Dawg plots a course for your store’s success and shares advice for Elon Musk, Johan de Nysschen, and pre-owned managers.

The Big Talent Drain

By Jim Ziegler
The Alpha Dawg tackles the shortage of talent in the managerial ranks and reflects on Amazon’s rumored foray into vehicle sales, the imminent used-car correction, Hyundai’s plan for the Genesis brand, and the untimely passing of Tammie LeBleu.

A Faster Horse

By Jim Ziegler

Strangers in the Mall

By Jim Ziegler

Opening Observations

Over the Curb