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The Diesel-Powered Dealer

Auburn (Wash.) Volkswagen's Matthew Welch is fiercely loyal to his customers, his staff and the VW brand. He's also a tireless advocate of diesel powerplants.

July 2013, Auto Dealer Today - Feature

by Tariq Kamal

Matthew Welch is the owner of Auburn Volkswagen in Auburn, Wash., a suburb of Seattle. He’s also a supreme advocate of the brand, and he turned that passion for the marque and the power of clean diesel into a promotion five years ago that grabbed headlines, as well as the attention of forums and even the OEM.

It was July 2008. Gas prices had hit a record $4.11 per gallon, thrusting the Toyota Prius into the spotlight and ushering in the gasoline-electric hybrid era. Welch had nothing against Toyota's hybrid, but he was suprised that it was dominating the fuel-economy conversation. "I Just felt the alternatives were not being talked about," he says.

So Welch hired a camera crew to record a vehicle shootout of sorts to prove that Volkswagen’s turbodiesel powerplant shouldn’t be over- looked.

“We wanted to back up what Volkswagen said these cars could do,” Welch told the Auburn Reporter in a July 17, 2008 article. “We had fun doing it. We’re thrilled with the findings.”

A DEALER IS BORN

Welch was born and raised in the Seattle area and grew up driving Volkswagens. In 1992, he had his first opportunity to sell them. After attending the University of Nevada, Reno, he got a job as a salesperson at a BMW/Subaru/Volkswagen dealership in Bellevue, Wash., which is also part of the Seattle metropolitan area.

He became the dealership’s No. 1 salesperson after less than a year on the job. He had thrown himself into the car business with full force and wanted to learn every aspect of dealership operations, from sales to service to F&I.

“When I was selling then, I was looking at credit applications,” he recalls. “I just loved the people.”

Welch was likely headed for a management position when his dealer decided to sell his Subaru and Volkswagen franchises and focus on BMW. Welch took the opportunity to join another store, Carter Volkswagen in Ballard, Wash., where he managed the sales department for 12 years. Each year, Carter was No. 1 or 2 in the state, selling at least 400 new Volkswagens every year. The peak was between 1998 and 2001, when the dealership sold between 700 and 800 units.

In 2006, a new opportunity presented itself. Roger Vermazen, the former owner of Auburn Volkswagen, had just sold his Subaru franchise and was looking for a buyer of his VW operation. Vermazen and Welch struck a deal: Welch became Vermazen’s general manager and bought an ownership stake. Over the next six years, Welch invested more and more into the business until he became the owner.

Welch continued his winning ways during his tenure as Auburn’s general manager. The dealership went from 425 new vehicles sold in his first year to 1,100 in 2012.

“We put together a good team,” Welch says. “And VW’s increased production in the last few years has certainly helped.”

Welch says that 70 percent of his new-vehicle financing goes to Volkswagen Credit. The rest is shared between credit unions and customers who arrange their own financing. The dealership also works with five finance companies to finance used-car and creditchallenged customers.

Welch describes Auburn’s penetration rates for F&I products as “decent, in the middle,” and he hopes to improve those percentages with the help of United Car Care Inc. (UCC), a training and product provider based in Greenwood Village, Colo. He credits the firm’s training director, John Vecchioni, for his help with “anything I need,” including weekly training and recommendations for structuring the dealership’s sales and finance processes.

“We value our people so much, we want to give them every opportunity to grow,” Welch says. One such opportunity lies in the parts and service department, where service advisors are incentivized to look for opportunities for trade-ins as well as product sales. The program also helps to offset another problem the dealership has experienced in recent years.

“The service team is getting better, but revenue is down,” Welch says, noting that warranty work has slowed as the quality of the vehicles has improved. “New Volkswagens come with three years of free maintenance. Few customers even need it.”

Welch is responding by directing some of his marketing dollars — 75 percent of which go toward digital marketing and search engine optimization — to regain that lost revenue. It’s another example of the dealer’s knack for spotting a great marketing opportunity.

THE ‘TDI CHALLENGE’

The promotion that put Auburn Volkswagen on the map was Welch’s “TDI Challenge.” The year was 2008 and the dealership had just re- ceived its first shipment of the 2009 Jetta TDI, a 2.0-liter turbodiesel that delivered an Environmental Protection Agency-rated 41 highway miles per gallon. It went on to win Green Car of the Year honors while being priced well below the $36,500 Prius.

Welch was sure the Jetta could beat the Prius’ fuel economy in a real-world test. So he set aside a Jetta TDI and arranged for an off- the-lot 2008 Prius, two chase cars and a camera crew. The plan was to drive from Seattle to San Francisco, a distance of just over 750 miles.

The Jetta TDI made the trip on one tank of gas and averaged 50.5 miles per gallon. The Prius, which was decorated with stickers stating that “The Jetta TDI Gets Better MPG Than This Car,” clocked in at 48.2 miles per gallon and ran out of gas in Redding, Calif., more than 200 miles short of the finish line.

“So we got basically the same fuel economy, and [the Jetta] was much more fun to drive,” Welch says, noting that the Jetta offered more comfortable accommodations as well. “After a couple hundred miles, nobody wanted to ride in the Prius.”

The investment paid off. Welch was interviewed by multiple media outlets and his website traffic spiked. He says that Prius enthusiast chat rooms were “going wild” with charges that the contest was rigged. “We honestly were not trying to beat up on the Prius,” he says. “We were just trying to show we had a way better option.”

Three years later, it was the Volkswagen Passat TDI’s turn. Welch pit the 2012 model, built in a LEED-certified factory in Chattanooga, Tenn., against the latest Prius. This time, he decided to use two cars and put four people in each. Once again, the diesel engine prevailed, burning more than 50 miles per gallon in a larger vehicle.

“The Passats did even better than the Jetta,” Welch says. “We passed 800 miles on the Golden Gate Bridge, and neither car’s fuel light was on.”

DIESEL FINANCING

Welch says the public’s appetite for diesel has changed since the first TDI Challenge. “In 2008, there was still a bit of a perception problem,” he says, noting the tide turned after the diesel-powered Jetta and Passat began winning Green Car awards and low emissions ratings.

“Two employees leased TDI Passats yesterday,” Welch says. “They’re going to save about $200 a month in fuel. And if you can go 700 miles on one tank, you’re filling up half as often.”

After two decades in the business, Welch says he can’t recall a single customer who bought a diesel and switched back to gasoline. The only barrier remaining, he says, is the cost: Diesels are priced at a premium and incentives are hard to come by. “When you see $199 per month, sign-and-drive lease specials, that’s not a diesel,” he says. “If we can get some kind of subsidized lease program for diesels, we can promote them as a better alternative to hybrids.”

Welch says that, to this point, his manufacturer has had little reason to incentivize, noting that Volkswagen is able to sell every diesel engine it builds. But after multiple discussions, the OEM is beginning to warm up to the idea, and Welch fully expects a subsidized leasing program for Jetta and Passat TDIs within the next few months.

CUSTOMER SERVICE AND OUTREACH

The YouTube videos of Auburn VW’s 2008 and 2011 TDI challenges have racked up tens of thousands of hits, but Welch isn’t stopping there. He posts new videos regularly and he is surveying customers to identify “points of frustration” with new-vehicle technology. Once the results are in, he plans to address the five most popular topics in a series of how-to videos.

Auburn also has a robust website, as well as a presence on Facebook and Twitter. Welch believes the key to digital marketing is to present the dealership in a positive, consistent manner that translates to every medium.

For Welch, the focus is on faith and customer service. Auburn Volkswagen’s delivery specialist, Loren Williams, has been with the dealership for 10 years. Williams personally delivers more than 75 percent of all vehicles sold and leads the store’s weekly Bible study. “We call him our MVP,” Welch says.

Welch and his staff also participate in events in the Auburn com- munity, including an all-faith pancake breakfast in May. Welch’s goal is to be a good citizen and a trusted dealer, and he’ll take any opportunity to spread the word about his favorite brand.

The Volkswagen lineup now includes a gasoline-electric of its own: the 2013 Jetta Hybrid. Welch is proud of the new vehicle, but he says there are many more TDI sales in Auburn’s future. “We’re seeing people come in for a hybrid and drive off in a diesel,” he says.

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