Auto University Article

Username:

Password:

Forgot Password?

Current Articles List

Ma & Pa's Big Mistake!

It really has only been the last ten to fifteen years that the 'Mega-Dealers'

have taken a stronghold of the dealership network in North America. When you consider that our industry was formed in the early 1900's by entrepreneurial Pa's and Ma's, twenty years ago it would have seemed ludicrous to look at the automotive dealer network as anything but hard working, single point retail stores with a very personable flair.

So what happened? The answer is really rather simple - Poor planning!

As so many small and potentially medium sized business owners can attest to, the owner/operator is an intrical part of the day to day operations of their business. They determine the values and business practices of their namesake operations, and keep a close watch on every transaction, every nickel and dime, and the customer, if need be, can actually speak with the owner if they had a concern with, or wanted to praise the operations or an employee. The staff of yesteryear's dealerships were loyal to the owner and he was loyal to them, in fact it was a family, where even the detailer had the opportunity to express his opinions to the dealer, and they were heard.

But as many small businesses that are successful, there are many more that are not and the auto dealer is certainly not exempt from that rule. One would think that a Big 3 Dealer in the 50's and 60's had a proverbial license to print money, however, it would shock many to know that many failed very quickly and had to sell out. The timing here is key, the 1950's and 1960's were the years that automobiles became less transportation and more of a cultural icon, a family member, a lifestyle, a statement or even celebrity. North Americans fell in love, and nowhere else in the world, then or since experienced the automotive industry in all its glory as those Big 3 Dealers from the 50's and 60's. A Big 3 Dealer from that era, a young go-getter, would have been, at best, in his early to mid twenties in age. The mid to late 1970's took their toll on the Big 3, with gas prices, the import companies and their small fuel efficient vehicles had arrived and taken away a ton of market share and by the mid 1980's, even though that same dealer still owned their dealerships, they weren't the cash cows they once were. Realize too, that these guys are now in their late 50's early 60's and have worked virtually every single day since the 50's. Many dealers simply passed on the operations to their children, sure there was a legal purchase or transfer of ownership, but very few 2nd generation dealers have the enthusiasm, charisma or drive as their parent. As the old saying goes, 'Those who earn it - Deserve it, Those who inherit it - Kill it.' That's not to say that there aren't 2nd or even 3rd generation dealers that are successful, but the statistics don't lie, and very few actually survive.

With so many dealers all reaching the age of retirement around the same time, from the mid 1980's to about 2010, virtually all 1950's and 60's original dealers will have retired. Due to this fact, obviously there has been and will continue to be a huge shift in auto dealer ownership. Many of these current dealers have seen their dealer friends pass on the operations to their children, only to see the business and all its worth gone in a very short time, and that leaves the question wide open in their own minds - "Should I sell my name, my love, my heart and soul, my heritage, blood, sweat and tears or see it fall to pieces?"

The answer, as we all know, has become quite obvious, they've sold. Not so much because they wanted to, but because they had not planned years in advance to get out of the business. They have been hands on operators, doing it themselves as they have for the past fifty years and woke up at 60 years old, realizing that they have no plan on how to get out. The children have worked in the dealership, maybe, but have not learned how to 'own' the operation and subsequently, Pa decides that the Public Company's or the Mega Dealer's check book is too hard to resist, considering the alternative of course, which is the quick deterioration of the dealership and all its worth through children who, by no fault of their own, simply don't know how to 'own'.

The other unfortunate reality of today, is that the costs for an individual involved in owning and operating an automotive dealership are huge, and the return on investment hardly seems worth the effort for those who don't LOVE IT. The Mega-Dealers have effectively reduced their overall operating costs, by the consolidation of operations, management and staff, as well as decreasing expenses, by the incredible buying power that merits huge discounts based on volume from suppliers and of course media expenses. They have managed to maintain a decent ROI, which would be virtually impossible for a new Ma or Pa, not even factoring the competitiveness of today's marketplace which one wonders how long Ma and Pa can compete.

The only recommendation I can make to those dealers - Start planning now, better late than never! To those new dealers, learn from Ma and Pa's Big Mistake!

Here's to those incredible individuals who built this industry and the hopes that a few of them can keep it!