The Evolution of Floyd Motor Company
November 2009, Auto Dealer Today - WebXclusive
The Aftermath of Chrysler Pulling the Plug
The town of Lake City, S.C., is home to fewer than 7,000 people, and just one year ago, the city was also home to three franchise dealerships. The local Ford dealer closed at the end of 2008, and the local GM and Chrysler franchises were victims of the automakers’ recent bankruptcies. Floyd Motor Company, a former Chrysler, Dodge and Jeep dealer was one of 789 dealers to receive an impersonal letter stating the company was terminating its franchise agreement with the dealership.
A 72-Year History
Back in 1937, Floyd Motor Company opened as a Dodge dealer in Lake City, S.C., and in 30-year increments, Chrysler and Jeep franchises were added—Chrysler in 1967 and Jeep in 1997. Jody Boswell, general manager and co-owner, has been working at the dealership since the mid-1970s. Two of Boswell’s great-uncles were the founders of the dealership, and his father, who is also a co-owner, started working at the dealership in 1947.
By the late 1980s, Boswell became a co-owner. He started in the service department, then worked in the parts department. He later started selling vehicles, eventually began buying them, and continued to work his way up the ladder to where he is today.
Over the past seven decades, the dealership has seen its fair share of economic troubles, overcome obstacles and remained profitable. Boswell noted the dealership ventured into buy here pay here (BHPH) for a four- or five-year stint back in the ‘80s as a response to prime interest rates going through the roof, and when financing “eased back up,” the dealership “transitioned out” of BHPH.
In recent years, he said, “I wasn’t selling as many cars as [Chrysler] wanted me to, but the whole economy has just gone so bad. Really, the past two or three years have been tough.” And when Jim Press, deputy chief executive of Chrysler, was urging dealers to take more new vehicles, Boswell knew his limit. “They started pushing cars on us about three years ago … and they pushed real hard for a long time,” he said, adding, “I didn’t succumb to that pressure as much as some dealers because of my father. He always taught me to stay in my parameters, and I just tried to do that. I knew what we could do and how many cars we could sell to be here and be profitable.”
The Independent Transition
When he received his termination letter in May 2009, Boswell was no doubt happy that he hadn’t succumbed to the pressure to take more vehicles, because Chrysler wasn’t planning on buying any of them back. Long before the automaker’s bankruptcy, which was announced April 30, 2009, Boswell said he saw change on the horizon. “For the last five years, I had a sense that something may happen … The smaller stores were not being treated exactly right.” He pondered “what if” scenarios. “I always said if I lost the franchise that I would continue as an independent dealer.”
He added that although he could see “the handwriting on the wall years ago,” he didn’t know when the day would come. “I didn’t expect it to come that soon, really. I figured it’d be another four or five years down the road, and actually it probably would have if it hadn’t have been for the economy … We would have had franchise laws that would have protected us … if it hadn’t been for the bankruptcy.”
Prior to receiving his termination letter, the dealership already started selling down its new vehicle inventory because news of the company’s bankruptcy had sent up red flags, but when Boswell learned he only had three weeks to sell the remaining new inventory, he still had about 15 new vehicles left. He said he got lucky after his Chrysler representative suggested he give another dealer a call. “He took all my inventory. I felt very fortunate that I was able to get rid of our cars because Chrysler said they weren’t going to buy any back.” He was also thankful he had a good rep who told him about the potential opportunity.
Boswell, had one thing in his favor as he transitioned to an independent dealer.The dealership has always had a successful used car operation. He can remember going to auction with his father as a young child to purchase used inventory for the lot. Today, he goes to that same auction to stock his lot, which usually has between 40 and 50 vehicles on it at any given time.
One hindrance he’s noticed of late is that quality pre-owned vehicles are “scarce” and priced “very high.” He admitted, “That is a problem. We’re having a hard time finding vehicles, especially late-model, low-mileage cars. They are just about non-existent.” Like always, though, he will soldier on and stock his lot with the best cars he can find. To do that, he commissioned the help of a buyer who lives in North Carolina and knows what types of vehicles he looks for. Boswell does the rest of the buying. While he’ll occasionally purchase from an online auction, he much prefers the physical auctions.
Getting rid of the new vehicles and restocking with pre-owned was only one part of the transition of becoming an independent dealer. The tougher aspects of it, no doubt, were cutting staff and closing the service and parts departments. His staff of 12 was whittled down to seven. He said it was also very difficult to tell his customers that he would not be able to service the cars he’d sold them, especially due to the fact that the nearest Chrysler dealer is about 25 miles away in Florence, S.C. On a brighter note, after being closed for two months, the service department at Floyd Motor Company was reopened in August and now services all makes of vehicles.
The finance department also had to undergo an overhaul. Chrysler Financial, as Boswell put it, “was the best thing going for us [as a Chrysler dealer].” He said of all the things he’s lost as a result of losing his Chrysler, Dodge and Jeep franchises, he misses his relationship with Chrysler Financial the most. “They were always there to help us when they could.”
He’s also realizing the struggle to find good financing sources as an independent dealer. Losing the franchises also cost the dealership a relationship with an independent subprime finance company who only works with franchise dealers, and he said, “Right now, it’s pretty slim.” He has been able to add a subprime finance company since the franchise terminations, but isn’t doing a lot of business with that company yet. Fortunately, the dealership can still rely on its relationships with a local credit union and bank, which collectively account for 15 to 20 percent of the dealership’s deals.
The real pain in financing has been due to the economy as opposed to the franchise terminations. “What’s hurt us is we did have a fairly good subprime business, and that’s been hurt more than the prime because … we’re having a hard time trying to find [credit challenged customers] financing,” said Boswell. He’s hoping to add at least one more prime finance source and one more subprime source, which he sees happening when “the economy turns around.”
Another obstacle the dealership had to overcome due to the loss of its relationship with Chrysler was finding a new service contract provider. As a loyal franchise dealer, Floyd Motor Company only sold Chrysler service contracts. Boswell’s decision to join the Carolinas Independent Automobile Dealer Association helped him choose Guardian Warranty Company as his new service contract provider, as it was on the CIADA’s recommended vendors list.
Through all these changes, Boswell kept customers in the loop. He ran an ad in the local paper to let the community know the dealership would remain open for business and sent out a mailer to his customer base with the same message. In August, he sent out another mailer to customers to let them know the service department had reopened.
What Lies Ahead
Although the future isn’t 100 percent clear for Floyd Motor Company, one thing is certain: Boswell won’t be applying for any other new vehicle franchises. He said the thought hasn’t entered his mind. “First of all, I’m enjoying the used car business, and I’ve already down-sized where I think I need to be. I’m in a fairly rural area, and after all these years as a franchise dealer, it’s refreshing to be able to be out on our own. I’m enjoying it.”
One thing he is looking forward to is increasing sales; he didn’t want to disclose his current sales figures but said he’s selling about half of what he was when the market was better. “When the economy changes, we’ll start selling more cars, and I think we’ll do fine.” When that happens, he doesn’t foresee adding anymore staff. “I don’t see getting any bigger, maybe just a little better,” he said with a chuckle.
One thing he didn’t rule out was getting back into buy here pay here. He’s not currently set up for it, but he said, “I’m not saying we won’t do it … it could be an alternative.” If the economy doesn’t improve, he might tack on BHPH to his new title of independent dealer. But for now, the new sign is up, the franchise logos have been taken down and BHPH isn’t in the mix. After his five months as an independent, it’s business as usual for Boswell and his team at Floyd Motor Company until the economy changes and helps determine the Boswells’ next move.
Vol. 6, Issue 10