Class of 40 Under 40 was shaped by the Great Recession
Surviving tough times is in Liza Borches' blood.
In 1924, just five years before the Great Depression, Borches' great-grandfather opened a car dealership. More challenges followed for Borches' grandfather.
In 2008, Borches, who was vice president of operations at the time, got her turn.
"I'm actually very thankful that we had the recession in 2008," says Borches, 38, now CEO of her family's Carter Myers Automotive in Charlottesville, Va. "It definitely gave me a perspective of making sure we're running lean and efficient because it's not if it's going to happen again, it's when it's going to happen again."
This year's 40 Under 40 class comprises survivors of the 2008-10 Great Recession. They saw their dealerships or other stores struggle and maybe even close. Most knew of General Motors or Chrysler dealerships that were terminated.
Riding out the severe economic downturn has shaped their views of auto retailing. Many now operate on a lean budget and prepare for another possible downturn by keeping their staff trained, inventory managed and balance sheets strong. Some also learned how to be nimble, ready to do any job in the dealership if needed during hard times.
Borches, for instance, is obsessed with having a strong balance sheet.
"I want to know every single dollar and cent and where it puts us in terms of a debt position," Borches says. "I'm not going to go anywhere near that edge of being undercapitalized."
Jason Mosley, 39, worked at a large Ford store when the recession started.
"It was tough," says Mosley, now general manager of a different store, AutoNation Ford Katy in suburban Houston. "More than anything, it teaches you to work lean. It teaches you that you don't have to have a secretary for this, a secretary for that, and three extra porters and those kinds of things — because you couldn't."
For some, the recession presented opportunity.
"That's when we were able to get ahead in our marketplace," says Steve VanGorder, 38, general manager of Jeff Schmitt Auto Group in Fairborn, Ohio.
That did not happen easily. About 75 percent of VanGorder's customers worked at GM's nearby Moraine Assembly plant. GM closed the plant in December 2008, citing high fuel prices and decreased demand for the SUVs made there.
"For us it was catastrophic," VanGorder says. "The employees here felt betrayed."
VanGorder says his team developed a month-to-month strategy to aggressively advertise and hire displaced workers to improve customer service. Rather than cut expenses, his company "attacked the market."
The result: Sales and profitability grew in 2009 and 2010, VanGorder says. In 2007, the group's five stores sold 3,176 new and used vehicles. That rose to 3,678 in 2009 and 4,704 in 2010. Today, the group has seven stores that sell Buick, Cadillac, Chevrolet, GMC, Mazda, Mitsubishi and Nissan vehicles. New- and used-vehicle sales totaled about 7,800 last year and are on pace to be 10,000 this year, VanGorder says.
The recession changed VanGorder's view on business operations. "I realized just because the market in general is going in a direction doesn't mean the company you're in has to do the same," he says.
Leo Portaluppi, 35, and his partner used the recession and Chrysler's 2009 bankruptcy to rebuild their newly acquired dealership's management and staff as other area dealerships were retrenching.
"Even during the bankruptcy, we were hiring, looking for the right people and growing our team," says Portaluppi, managing partner of Steve Jones Chrysler-Dodge-Jeep-Ram in Owensboro, Ky. "We almost ran out of inventory. One month, we had 19 cars on the ground, and we sold 30 cars during that month. It was an interesting time, but it made us all better."
Portaluppi says he is better today at managing his resources, including his inventory, to meet market demand without overstocking.
Raheem Wilson, 36, sales associate at Michael Jordan Nissan in Durham, N.C., learned to do any job in a dealership during the recession.
When two finance managers quit, leaving the dealership without any finance personnel, Wilson volunteered to be a finance manager. He knew the store could not afford to hire more staff. He calls it his "sacrifice" at the time, but today he's grateful for the experience.
"I know how to do it all," Wilson says. "I could come in and open the store and sell cars by myself without any managers if I had to."
Rahim Hassanally, 34, had owned Infiniti of Fairfield and Volvo of Fairfield in Fairfield, Calif., for two years when the recession hit.
Hassanally hails from Texas, where he remembers a steady economy. The downturn, he says, "was a huge deal."
Hassanally says he survived the recession by devoting certain percentages of his budget to specific areas such as advertising, compensation and data processing. That means he spends less when revenues are down and retains more profits when revenues are up.
"If you run it by percentages, you really can't get hurt," Hassanally says. "Even if less comes in, your percentages are still the same; if more comes in, your percentages are the same.''
Hassanally also cross-trained employees, which enabled him to do more with fewer people.
In 2010, he acquired 14 franchises that made up the former Thomason Auto Group in the San Francisco and Sacramento areas. His newly named Momentum Auto Group had 550 to 600 employees, including those at his previous dealerships and those that joined via the acquisition. Now Momentum has about 250.
"I had to right-size the business to sustain it through the economy," Hassanally says. "We tried to keep as many people as we could, but we eliminated a lot of positions." For instance, in many stores he consolidated the new-car sales manager and used-vehicle sales manager positions into one job, he says.
He says such business practices are part of his business strategy now.
"It made me a much stronger dealer," he says. "If you can survive what we just went through in the last few years, what can you not make it through?"
Borches learned the value of preparation from her great-grandfather and grandfather.
In the late 1920s, farmers were the only people with cash, she says. Each Saturday morning, Borches' great-grandfather drove a pickup around to the farms until a farmer bought it. That's how he was able to make noon payroll, she says.
In the early 1940s, Borches' grandfather stocked up on used pickups so the dealership could sell two pickups a month and stay in business while he was away fighting in World War II, she says.
Still, Borches was not fully prepared for the 2008 recession. She says she looked at the expenses and realized the dealership group was "a little too fat."
Borches cut about 75 employees across the five dealerships. She reduced advertising spending about 40 percent and consolidated vendor expenses across the stores. She also stopped hiring and training, though she now regrets axing training. "Looking back, I'd do that differently because even when you cut, you have to invest in the people that you have," Borches says.
During the recession, Borches saw dealerships close because they were unable to make loan payments to banks. But because her company's balance sheet was strong, the dealership group is bigger today, with eight dealerships in central Virginia selling 11 brands and about 10,000 new and used vehicles a year.
"My dad always says I'm fiscally conservative," Borches says. "But I never want a bank to make the decision if we stay in business or not."
Lindsay Chappell, Gabe Nelson, Arlena Sawyers, Larry P. Vellequette and Amy Wilson contributed to this report-- Jamie LaReau