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Monday, April 30, 2007

MY TRIBUTE TO THE GREATEST “CAR GUY”

Jim Moran died at 88 on Tuesday morning, April 24, 2007. Jim Moran is a common, Irish name but this Jim Moran was a very uncommon Irishman. He was the founder of the JM Family in Deerfield Beach which is made up of several companies, the largest being Southeast Toyota. They distribute new Toyotas to all the dealers in the southeast USA. His company was just ranked the 18th largest privately owned company in America. He was a multibillionaire when he died.

I first met Jim Moran at a meeting for Pontiac dealers in Ft. Lauderdale over 40 years ago. Jim had recently moved down from Chicago where he had sold Courtesy Ford, which he built to become the largest Ford dealership in the world. Previously he had done the same with a Hudson dealership. Jim grew up in Chicago. His parents were poor but he worked hard at various jobs, saving his money until he could buy a Sinclair gas station. He began selling a few used cars from his gas station and that’s what motivated him to buy a small Hudson dealership.

The reason Jim moved to Florida in the early sixties, was his doctor telling him that he had cancer and as little as six months to live. After he sold his Ford dealership and moved to Florida, he found out his doctor was mistaken. So, Jim got back into the car business. First he bought a small Pontiac dealership in Homestead. He soon sold that for a nice profit and built the biggest Pontiac dealership in the USA in Hollywood, Florida. He set his sights on his next project to be the first Volkswagen dealership on Miami Beach. Back in the sixties, the VW franchise was the most profitable franchise around. Volkswagen turned him down, so he took the money he had planned to invest in the VW dealership, $100,000, and bought a distributorship for a Japanese car that very few people had even heard of, named Toyota. The rest is history.

Some will say that Jim Moran was just plain lucky. Nobody wanted a Toyota distributorship in the sixties. The quality of Toyotas at that time was terrible and big American cars dominated the market. He may have been lucky, but he was also very, very smart, worked very hard, and I have never known anyone so focused on success. Beyond this, he was blessed with the God given talents of extreme charisma and the ability to find, train, and motivate great people to work for him. He built a network of dealers to sell Toyotas in Florida, Georgia, Alabama, South Carolina, and North Carolina. He also built a support structure for the dealers including a finance company, insurance company, car accessory company, JM Lexus (the largest Lexus dealership in the world) and a port preparation company. His other companies are now nationwide and service all makes of cars, not just Toyota.

I like to think I had a special relationship with Jim Moran. We were both “just a couple of Pontiac dealers” when we met. I bought my Toyota dealership in North Palm Beach/Lake Park in 1975. Those were the “wild and wooly days” in the car business. Jim Moran was an advertising genius as well as a car genius. His marketing and advertising techniques were copied by the Japanese to increase the sales of Toyotas in the rest of the USA when they realized that Southeast Toyota was outselling every other region. The “Toyotathon” was invented by Jim Moran. Top Toyota Japanese management had huge respect for Jim Moran. “Moran san”, they called him. He coached them on styling and designing Toyotas to suit American taste. He often flew to Tokyo in his private Gulfstream IV or V Jet to meet with the top management of Toyota. Jim Press, the highest ranking American in Toyota and the only non-Japanese member of Toyota’s board of directors was sent to work for Jim Moran at Southeast Toyota while he was being groomed for top management. It is a fact that Jim Moran positively and significantly affected the success of Toyota in America.

This is one of literally hundreds of eulogies that will be written about this man. Most will paint him to be perfect, a man for all seasons, and all things to all people. They will write about his charitable contributions, his family, and all of them good things he did during his life, which were significant. Because I knew Jim for a longer time than most and because I knew him very early in his career, I have a different perspective. Back in those days, the rules of the game were a little looser than they are today. There were fewer laws and regulations. It was the Wild, Wild West when it came to marketing cars. Jim Moran was blessed with incredible talents, including charisma, drive, and intelligence. He was the most competitive man I have ever known, the Michael Jordan or Tiger Woods of the car business. Like all great performers, he loved doing what he did better than anything…yes anything. Everything else in this great man’s life was secondary to his becoming the very biggest and best Hudson Dealer, Ford Dealer, Pontiac Dealer, Lexus Dealer, or Toyota Distributor in the world. Underneath the smooth facade was always the rough, tough Chicago Irishman. I don’t believe it is possible to be the best in the world at anything unless you are blessed, or is it cursed, with this kind of focus and ambition.

The last conversation I had with Jim Moran was his phone call to me about a year and a half ago. He had heard that I had just recovered from colon cancer surgery and called to ask how I was doing and wish me well. He reminded me about his doctors in Chicago telling him that he had cancer and as little as six months to live more than 40 years ago. He congratulated me on my dealership’s great increase in sales since I moved into my new, much larger dealership. Then he said to me, “Earl, I’ve been telling to build that new dealership for the last ten years!” We both laughed.

I am proud and lucky to have known Jim Moran. I learned a huge amount from him and I would have to say that he had a greater influence on my business life than anyone except my father.

AUTO BUYING PROGRAMS AT WHOLESALE CLUBS

Everyone is familiar with wholesale warehouse-style buying clubs. The stores always resemble warehouses and skimp on the typical amenities you find in a conventional retail department store. The products are often sold in bulk which sometime requires you to buy a lot more than you might need. Usually you have to help yourself and there are no sale people to assist you. The brands and products they buy change often because they buy large quantities of a particular brand when they can buy it a low price. You pay an annual fee to be a member. Some of the more popular and wider spread wholesale clubs are Costco, Sam’s Club, and BJ’s Wholesale Club.

In general, this concept works and prices are generally lower at these kinds of stores. It is easy to see how wholesale clubs can afford to sell products cheaper than conventional department stores. But most wholesale clubs have begun to branch out into other areas that are outside their original concept. One of these relative new areas is an “auto-buying service”. Unfortunately for the consumers, wholesale clubs are unable to buy cars from the manufacturers in bulk and pass along the savings to their customers like they do rice and TV sets. What the wholesale clubs do is sign agreements with car dealers like me who are supposed to sell you cars at a very low price. The car dealers pay the wholesale clubs a monthly fee for the privilege of being the exclusive dealer of that make authorized to sell cars to their members. The fee the dealer pays the wholesale warehouse increases their cost of sales to wholesale club members, but the theory is that the referral of members will increase their volume to more than offset this fee.

I am signed up with one local wholesale club and am in discussions with another. What disappoints me about these programs is that many wholesale club members buy cars from the dealer associates based on their trust in the wholesale club. The problem with this is that many dealers often do not abide by the prices they are supposed to quote. Dealers are supposed to have one person designated as the wholesale club member contact. But what often happens is that the first salesman who sees the wholesale member enter the showroom handles the sale. Salesmen are paid on commission and will mark up the price as far as they can get away with. Because wholesale clubs have hundreds of dealers and thousands of club members, it is impossible to police what is happening on the showroom floors during the sale to club members.

What all this means is that, just because you are a member of a wholesale club with an auto-buying program, don’t relax your vigilance when buying a car…even if it’s from the dealer endorsed by your wholesale club. There is a lot of due diligence that you must do before you pay a dealer for a new or used car. The most important is shopping and comparing prices on the same year, make, and model car you have decided on. You should get at least 3 “bids” and the Internet is the easiest place to do this. You should shop your financing separately and choose the dealer’s financing only if it is lower or competitive. You should shop the value of your trade-in separately, getting at least three bids on its value. When you have done all of this homework and preparation, only then venture into the dealership recommended by your wholesale club. Hopefully, the price from this recommended dealer will be lower, but I’m betting in most cases it won’t be. The wholesale clubs will show you statistics about the savings the club members have realized by using their recommended dealers, but these savings are from lots of people who did not do their homework, especially with competitive comparison of prices.

When you enter a dealership recommended by your warehouse club, insist on speaking to their designated representative. If he is off that day, come back when he is there. If you get an uneasy feeling about the price you are quoted or anything else regarding your visit then contact your wholesale club immediately and report it. Some wholesale clubs are taking steps against dealer fees, but some are not. The price that you and the wholesale club think you are paying often does not include the dealer fee which can range up to $900 or more. If your club does not insist that its dealers include their dealer fee (simply additional profit for the dealer) in their club pricing, they should.

Saturday, April 14, 2007

HOW TO COMMUNICATE BEST WITH YOUR CAR DEALER

As many of you know, I communicate directly with my customers. Some would say to a fault. I don’t have a secretary or administrative assistant. My dealership’s telephone receptionist never asks the caller “who’s calling” or “may I ask the nature of your call?” and she puts my calls (and the calls to all my employees) right through. If I am not in my office, she puts them through automatically to my cell phone…7 days a week. I also have four red phones in four locations of my dealership…the showroom floor by the receptionist, the service customer waiting lounge, outdoors in the service drive, and in the body shop waiting lounge. Each phone has a picture of me with the message, “Customer Hotline To Earl Stewart. The Buck Stops Here. Have We Not Exceeded Your Expectations? Please Let Me Know. Simply Pick Up The Receiver And Wait For Me To Answer.” As if all this wasn’t enough, I put my home telephone number and cell phone number on my business cards and pass them out to my new customers at our bimonthly New Owners Dinner.

I say all this, not to brag (or maybe just a little). It might surprise you that I am not deluged with phone calls. I get quite a few, but considering I sell 400-500 cars a month and service thousands of cars each month, I doubt if I average more that 25 calls per day. Most of them are positive, complimentary calls. I believe one reason for this is that my employees are motivated to work harder to satisfy my customers because they know, if they don’t, I’m going to hear about it very quickly. Another reason is that my customers are remarkably respectful of the fact that they can call me and do not take advantage of it. Frankly, my wife, Nancy, was very nervous about this when I first started passing out my business card with my home telephone number. Would you believe that I don’t get more than 5 or 6 home calls a week? When you extend your trust to people, they almost always respect that and do not take advantage.

Of course, you are not going to find a lot of car dealers who do what I do. But here is how you can improve your communications in other ways that will allow you to get problems solved and promises kept. Always ask for the business card of every person you deal with. If they don’t have a card, be sure to get their name. This improves your service right away because the person is no longer anonymous. Ask the person for his cell phone number. There was a time when it was considered wrong to call someone on his cell phone, but that was before cell phone rates became so cheap and the cell phone became universal. If this is a critical person you are dealing with, ask for his home telephone number too. Here is a little trick that I use when I do this. I always start out by giving them my cell phone and my home phone number. Then I say “and may I have yours?” I can’t remember ever having been refused. If someone you are doing business with refuses to give you his cell or home phone number, maybe you should wonder why.

Also, make it a point to be introduced to this person’s manager. Get the manager’s business card and as many contact numbers as he is willing to share with you. When you do this, you have put the salesman or service advisor on notice that if he doesn’t return your phone calls you will be calling his boss. If you really want to have an edge, ask to meet the general manager and/or owner of the dealership. Get his telephone numbers. Now you will have everybody’s attention when you come into the dealership to transact business.

If you are a “computer person”, collect email addresses from everybody you deal with. Email is not as timely as a telephone, but it has the advantage over the telephone because it is “on the record”. When you make a request of a person by email, he can’t deny it because you have a copy of the message. I know that with Microsoft Outlook email, I get an acknowledgement every time somebody opens an email that I sent them. Furthermore you can copy as many people as you like with an email. You can send copies that the primary recipient knows about or make them blind copies that he can’t tell were sent. Someone is a lot more likely to act on your request when he knows that it is a matter of record and his boss was copied with the email.

If you can force yourself into the habit of getting names, telephone numbers, and email addresses from everybody you deal with and their managers, conducting business with your car dealer (or any other business) will be much smoother and trouble free.

Friday, April 06, 2007

CLASS ACTION SUES S.C. DEALERS ABOUT DEALER FEE

The Tallahassee law firm of Myers & Fuller is representing several car dealers that have been named as defendants in a class action suit along with almost every other new car dealer in the state of South Carolina related to the charging of dealer fees aka documentary fees, dealer prep, etc.

The plaintiff’s lawyers representing the class of consumers who are bringing the lawsuit claim that “the placement of such fees on a dealer’s buyer’s order or invoice is deceptive in that it implies that the fee is separate and distinct from the general overhead that car buyers expected to be included in the sale price for a car and that such placement suggest that the fee is mandatory”.

Readers of this column have seen several articles I have written about or mentioned dealer fees. Virtually every car dealer in Florida charges a dealer fee although it may carry some other label, like documentary fee or dealer prep fee. Several states have made this illegal and it looks like South Carolina may be next.

A particularly onerous part of the dealer fee is that dealers are legally required to “charge every customer this fee if he charges just one customer”. I supposed the lawmakers were well intentioned when they made this ruling, but like so many other well intended lawmakers, they inadvertently “bit the car buyer right in the butt”. I think their reasoning when they passed this law was to prevent car dealers from discriminating against the less informed and sophisticated buyers. In hindsight we can see how stupid this law is because it allows the car dealer to charge everybody the dealer fee, including the informed, sophisticated buyer.

Because virtually all car dealers in Florida charge this fee (My dealership is the only one I know that doesn’t), the car dealer overcomes objections to the dealer fee by saying “this is a fee that all Florida car dealers charge”. What is a car buyer to say? He has been told that everybody charges it and that it is illegal for the dealer to take it off his buyer’s order or invoice.

Florida did pass one law to protect the consumer against the dealer fee. This law says that the dealer must include the dealer fee in advertised prices (The price a salesman quotes you is not considered an “advertised price”). Many dealers don’t know about the law or simply ignore it. You can pick up the PB Post any weekend and find several car ads with prices that do not include the dealer fee. In the fine print at the bottom of the ad, it will say “plus dealer fees” or in some cases tell you the amount of the dealer fee. Florida law also provides a loophole in this law, which was the subject of my last column. The loophole is that dealer group ads don’t have to abide by the law!

Dealers who do understand the law and wish to abide by it have figured out a way to get around it. They simply pick one car of a particular model and advertise that price including the dealer fee. You don’t know that there is only one car available with the dealer fee included in the price. The only disclosure is a number along side the car like #2668A which is supposed to let you know that this is the only car available with the dealer fee included in the price. That innocuous number is the stock number of that particular car. There is usually another “gotcha” which is “price good on date of publication only” in the fine print. The ad often says something like “25 others available and similar savings”. The reason it says “similar” and not the “same” is because they add the dealer fee to the prices of the others. The chances are that the car they advertised is not the right color and equipment for you and, even if it were, the chances that they will have it there when you arrive are slim and none. If the odds aren’t already stacked totally against you, the sales people are often not paid any commission or a very small commission on all advertised cars. How easy do you think it will be to buy that advertised car from a salesman who can make a lot more money by selling you one without the dealer fee included?

The class action suit in South Carolina is symptomatic of the rising consumer awareness around the country. Today’s consumers are more educated and sophisticated than ever before. They are also less tolerant of being taken advantage of. Call me a “cockeyed optimist”, but I think it won’t be long before we see a law in Florida to protect car buyers from the dealer fee.

A LOOPHOLE IN THE DEALER FEE LAW

If you are a reader of my columns, you know all about the “dealer fee” scam perpetrated on car buyers in Florida and other states where it is still legal. This fee ranges from $495 to $995 and even higher. It is profit to the dealer but is printed on the buyer’s order, disguised as a “fee” meant to be confused with legitimate state, local, and federal fees, like sales tax and license fees.

Virtually every dealer in Florida adds a dealer fee to the price he quotes you on the car. In fact, when questioned, many dealers’ justification is that “all dealers in Florida charge a dealer fee”. Strange as it may seem, Florida law prohibits a dealer from removing the dealer fee from the price he gives a customer. If he charges one person a dealer fee, he must charge all people. This is also the rationale you might hear if you object which, is “Florida law will not allow me to remove the fee”. The way to counter this objection, when haggling about the dealer fee, is to tell the salesman to reduce the overall price by the amount of the dealer fee and leave the dealer fee alone.

The only control placed on dealer fees by Florida law is for advertised prices. This law says that an advertised price must include the dealer fee. Dealers get around this by advertising just one vehicle at an advertised price with “many more at similar savings”. If the one car that is advertised is already sold, the dealer can sell you one just like it and add back the dealer fee.

Unfortunately, I recently discovered that there is a loophole to this sole law to protect the car buyer from dealer fees. The loophole is that lease payments and prices advertised by multiple dealers in the same ad do not have to include the dealer fee. This means that if a manufacturer advertises a price on a new car listing several dealers, the dealer fee can be excluded. When I inquired about this, I was told that this is to permit manufacturers and distributors to advertise the same car priced from multiple dealerships. I was told that they cannot include the dealer fee because each dealer fee is usually different. That doesn’t sound like a very good excuse to me. Ads including multiple dealerships usually include the names, phone numbers, addresses, and Web site URL’s of each dealer. Why not list each dealer’s “dealer fee”? You know the answer as well as I…they don’t want you to know there is a dealer fee, much less the amount of the dealer fee.

The reason for the law requiring that advertised prices include the dealer fee is very clear. It is to prevent the consumer from being fooled into coming in on a low price and then charged a higher one. If that principle applies to one dealer’s ad, why doesn’t it apply to multiple dealers advertising in one ad? To comply with the same law applying to one dealer, all multiple dealer ads would have to say is “price plus tax, tag, and dealer fee” and beside each dealer’s name list his particular dealer fee. This would also encourage dealers to lower their dealer fees and even eliminate them entirely.

Because I don’t charge a dealer fee, when my dealership is included in an ad with seven other South Florida dealerships, I have the lowest price but the reader of the ad cannot know that. The ad says “plus tax, tag, and dealer fees” in the fine print at the bottom of the ad, but does not disclose the amount of the dealer fees for each dealer. The uninformed prospective car buyer can pay up to $995 more for that advertised car than he would pay at my dealership because the dealer fee amounts are not disclosed. Does that sound right to you?