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Thursday, October 16, 2008

This Week in Automotive News

Do-gooder or pariah?

Some dealers add $250 to $1,000 in fees to a vehicle's price. Earl Stewart did, too. He had an epiphany and now he rails against those fees. Dealers are angry. They say he campaigns for his own profits, not for consumers
Toyota dealer Earl Stewart uses his radio talk show to blast what he calls dealers’ “dirty little secret” -- fees that are added to a vehicle’s agreed-on price.Photo credit: MIKE HAMEL

LIndsay Chappell Automotive News October 13, 2008 - 12:01 am ET

Sunshine and sea breezes characterize the cozy auto retailing world of southern Florida. That and contempt for auto dealer Earl Stewart.


Stewart, 67, whose father was selling Pontiacs in West Palm Beach when Franklin Roosevelt was in the White House, is a pariah in his palm-treed world.

Hoping to make auto retailing more desirable for his children, he launched a public crusade against the document fees that many dealers tack onto sales contracts. Many of his retailing brethren, who say he is using the do-gooder campaign to sell more autos, wish he would just shut up.

Dealers across Florida are aghast that Stewart wants them to stop a practice he calls "their dirty little secret": charging $250, $500 or $1,000 on top of an agreed-upon sales price for vaguely labeled "dealer service fees" or "document processing fees."

But the white-haired owner of Earl Stewart Toyota in North Palm Beach does more than just want them to stop. He buys TV time to needle them about it. He runs print ads to call attention to it. He has created an Internet blog, http://www.earlstewartoncars.com/ , to vent about it.

Stewart is using his AM-radio talk show, www.seaviewam960.com/EarlStewart.asp to drum up consumer awareness of it. He is pressing the Florida Automobile Dealers Association to end to the practice.

And last year, he led a one-man campaign to get Florida's legislature to make the practice illegal. As a result, half a dozen dealers were put on the hot seat in state Senate hearings.
All of that effort was to no avail — except that most of Florida's auto industry elite are now irritated at him.

"I guess I'm not very popular with the other dealers around here," Stewart says. "I haven't lost any friends over this. My attitude is that the people who have dropped me weren't my friends to begin with."

Reflections

But if document fees were the whole story, Stewart would merely be part of a long-simmering consumer issue that flares up occasionally. For example, consumers in Missouri are suing dozens of dealers in that state and demanding dealer document fee refunds that could cost individual retailers millions of dollars.

No, Stewart's crusade is more personal.

Four years ago, at 63, Stewart found himself at the same frustrating crossroads as many other dealers. He presided over a prosperous dealership, just like the one he had taken over from his father. But Stewart's own children had no interest in taking over.

He turned to the oldest of his three sons, Stu. After majoring in anthropology at the University of Florida, Stu Stewart wanted to teach for a living. He also was interested in a career in Florida's luxury home business.

What is it, Stewart asked his son, that you don't like about the car business? His son was blunt, Stewart says: "He told me he thought car dealers sometimes have a dishonest image. And I had to admit he was right."


From left, Earl Stewart said sons Jason, Stu and Josh initially weren't interested in going into the car business. Stewart says Stu "told me he thought car dealers sometimes have a dishonest image." So he decided to alter his business practices to make the family business more appealing to them.Photo credit: MIKE HAMEL

Then Stewart had a scare. "I almost died," he says.

Pledge

Stewart was diagnosed with colon cancer. The cancer prompted him to take a hard look at his priorities. He decided to remake the auto industry — or at least his corner of it — into something more appealing to his sons.

He stopped tacking $495 dealer fees onto his customer contracts. He acknowledges that store profits initially dropped $200 a unit as a result, although they have improved since then. But a gratifying thing happened: More customers came into the dealership in response to his no-fee practice. Since dropping the fees, store volumes have more than doubled, he says.

In 2003, the last full year of charging fees, his dealership sold 2,039 new vehicles. In 2006, he sold 4,172 new cars and trucks. Through August 2008, he has sold 2,492 new vehicles.

He began to speak out publicly about what he believes is wrong with auto retailing. He recently railed in his blog about the sale of nitrogen tire refills as a deluxe service, decrying claims that nitrogen refills, at $25 a tire in some cases, are any better than ordinary air refills.

Many of his competitors have been baffled by his zeal. Even those who agree with him wish he wasn't making such a stink. Stewart is convinced that many of his critics who post anonymously on his blog are fellow Florida retailers. One of them recently chided him for criticizing his fellow dealers and of trying to be a "modern-day Robin Hood."

"The world doesn't need Robin Hood anymore," the critic told Stewart. "What we also don't need is a one-man show trying to run down every dealer on the planet for the good of his own profits."

Slander suit

In August, Stewart's campaign escalated into a courthouse fight over not only the document fee issue but his integrity. On Aug. 12, Stewart filed a lawsuit in Palm Beach County Circuit Court alleging that Ed Morse Honda in Riviera Beach slandered him in a radio ad over the issue.
The ad did not mention Stewart or his dealership by name. But according to the lawsuit, an announcer said that "a car dealer" claims in his ads that he doesn't add a "dealer fee," but "he packs the equivalent of a dealer fee — or more — in your price. Where you can't see it."
Ted Morse, CEO of Ed Morse Automotive Group and another pillar of the southern Florida industry, declined to discuss the ad, the lawsuit and Stewart's campaign in general.
Ted Smith, president of the Florida dealers association in Tallahassee, is willing to get into it. Smith's organization has been taking criticism from Stewart for years.

"Earl Stewart is a great auto dealer," Smith begins. "And I've had discussions with him about this. I've tried to make the point with him that, look, we've got enough problems with our image in this business without giving air to them in public.

"I'm glad that Earl adheres to positive pricing practices at his dealership. I applaud that. But I don't applaud him striking out at others."

What's the problem?

Smith and the Florida dealers association heartily defend the practice of adding dealer fees to sales contracts as customers wait in the dealership finance department. "It is legal and it is not a deceptive practice," Smith says.

Smith vows to fight any effort to end the practice or have legislation clamp down on it. He believes it will continue to roil the Florida industry as long as Earl Stewart continues to campaign about it.

Meanwhile, Stewart is measuring success by a different yardstick. His no-fee policy and his public stance on dealer habits helped draw his son into a management role at the dealership. Stu Stewart is now running the company's Scion operations. Stu's two younger brothers also have joined the business.

And three years after having colon cancer surgery, the elder Stewart reports that he is cancer-free.

"The general rule is that if you make it for five years, you've beaten it," he says. "But it sure puts your life in perspective. It makes you think about what you're doing and why you're doing it.
"I know a lot of guys out there depend on these dealer fees — especially right now when the economy is so bad. But I did away with them, and my business got better. I can be proud to talk to my kids about what I do for a living. That's important to me, and it's important to my sons."