Brothers run lean to survive in the big city

Bruce Bendell, 58, hopes his kids won't follow in his footsteps.

He loves the auto industry but says it's getting harder to survive with ever-shrinking profit margins, growing costs and increased competitiveness.

Bendell and his brother Harold, 64 , are sons of a European butcher. The brothers built their business, Major Chevrolet Inc. based in New York City, from the ground up after buying it in 1985. Today the brothers sell nine brands from seven dealerships in New York and one in Pennsylvania.

But survival in the urban jungle of New York hasn't been easy.

Bruce Bendell spoke with Staff Reporter Jamie LaReau about his automotive career and the lessons he has learned about how to run a lean operation.

Q: You and your brother started in the auto industry in 1972 owning a car wash and auto repair business in Brooklyn. Tell me about that.

A: My brother was a school teacher. I was in college going for a degree in accounting and economics. We got involved in a repair shop and a car wash. We realized we could fix the cars, clean them up and start selling used cars. So I developed a wholesale business while I was in school, and I'd go around to dealers, buy cars, fix them up and sell them.

In the late 1970s I went into fleet operations and bought cars from big fleets. Then, I created our own leasing operations for new and used vehicles. We felt we could capture a customer coming back in a shorter period of time.

In December 1985 we bought our first franchised car store called Major Chevrolet. I had bought my first used car from them when I started college, and we ended up buying the dealership in 1985.

Had you graduated from college by then?

I graduated in 1975 from Queen's College. I now sit on their foundation board.

Why get into franchised auto sales?

It was a natural for us to go into the new-car end from our experience in leasing and used cars. At that time very few people were doing leases.

The store was doing about $10 million in sales when we bought it, and within the first two years we had it up to $150 million in sales.

How did you increase sales so quickly?

We did a lot more used cars. We did the leasing and the fleet operations.

We developed the used-car end of the business to grow more sales volume. We then acquired the Chrysler franchises. Then we bought Subaru and eventually sold Subaru.

We ended up acquiring the Kia franchise.

But by the mid-1990s you were focused on used cars, service and financing.

I go on the idea that the model is built on the manufacturer wholesales the car to us and we retail it to the public. We're retailing it to the public at a lot less profit margin today. So you have to have all the departments working, and if they're not profitable for any reason, you have to limit the expenses.

I believe if you can drive a taxi in New York City, you can drive a taxi anywhere else in the world. That's true for running a car dealership, too. Because the cost of media and real estate are so high, it's very hard to be profitable. You have to learn how to operate with a lean facility. That's always been a hurdle, and that's the only way my brother and I know how to operate.

What do you do to keep costs in check?

We centralized accounting. Instead of used cars being prepared outside, we set up a seven-day operation to service our vehicles and do what you have to do for consumers to take care of them.

It's very hard to support service and parts especially in these times when manufacturers build better-quality vehicles so you have less service coming in. So we focus on the front end of the business rather than the back end.

Is that a recent change?

That's the way we had to operate over the years.

My brother and I are first-generation automotive. It's not like we were handed something down to us. We had to bring it from scratch. We started together with less than $25,000. Our father came from eastern Europe and he didn't know anything about the car business. He was a butcher who worked hard six or seven days a week. We had that same philosophy. We started operating seven days a week. We took turns having every other Sunday off.

When my father was 65 years old he sold his butcher shop, came in and sold used cars for us. He sold four times as many cars as anyone else here.

He worked for us for 14 years until he passed away in 1995.

In 1999 you put more than 500 used cars on a lot in Queens and called it Major World. What was the inspiration?

We created a "doing business as" called Major World that specialized in used cars. We wanted to sell various brands rather than going through a Chevrolet operation, which was called Major Chevrolet, that supported the new-car operations as well.

In New York City the real estate is so high you always have to consolidate wherever you can.

Would you buy stores outside the New York and Pennsylvania areas?

At my age probably not. We had about 18 franchises and multiple brands, and we've been able to consolidate.

One of the Chrysler stores was bought out in New Jersey when GM and Chrysler went into bankruptcy. It was a Dodge franchise.

We had Lincoln in the Bronx and Queens and we sold them back to the manufacturer. That was related to location.

It's all about people and the right partners. I'll look at anything if it has the right people to run it and the right overhead. But it's a very tough market out there because the manufacturers would like to spend more money to support the brands at a time when they have consolidated where necessary and the margins are down, and the overhead in New York is very high.

Do you have children in the business?

I have three children, and I'm keeping my fingers crossed that none of them will go into the business.

My oldest daughter has a business degree in marketing and is also a singer and songwriter. My middle daughter is a human relations analyst. My son is starting his second year at George Washington University. He likes international business.

If you want to be in the car business today, you have to breathe it, love it and do it every minute of your life. It's a very hard business.

I don't believe in people being in the family business unless they want to.

After 40 years in the auto business, is it still fun?

It's not as fun as it once was.

It's so competitive and ever-changing. Your typical dealership had to operate with normal margins. Now when your warranty work is down, and it used be 80 percent of your service business, you have to learn how to compensate.

Do you see further industry consolidation?

Absolutely. We've gone through the toughest times in years, and I've been around for the oil embargoes and things like that. But everyone has competitive leases and incentives -- it's survival of the fittest.

If a manufacturer wants its dealerships to stay in business, it has got to support them. If the manufacturer wants to create an image for their brand and franchisee, they should pay for it.

The dealer can't pay that when their margins are already being squeezed.

Operating a dealership today is not easy. There's pent-up demand, but people aren't splurging anymore.

They want to get value for their money, and they depend on the local dealer to do it for them at a time when it's very hard for dealers.