FORT LAUDERDALE, Fla. - Republic Industries Inc. has given Marshall Chesrown something few critics ever get: the chance to put his money where his mouth is.
When Chesrown sold his Denver, Colo., dealerships to Republic Industries in 1997, he became a vocal critic of AutoNation USA.
Chesrown believed the used-car superstore side of deal maker H. Wayne Huizenga's auto empire, run by a remote staff in Fort Lauderdale, Fla., was inefficient. Too many cars were gathering dust on too many back lots, waiting to be processed and put on sale.
Chesrown's old friend Michael Maroone, president of Republic's auto retail operations, asked him to move from Denver to Fort Lauderdale and shape up Republic's used-car superstores. In December, he took the hot seat in one of Republic's highest-stakes jobs.
Republic's massive acquisitions of new-car dealers, the used-car stores remain a critical part of Republic's national ambitions. The stores, now 26 in number, are a laboratory for new retail methods and a launching pad for a national retail brand.
So far, Chesrown's medicine is working, although much remains to be done.
Maroone said last week some stores were profitable for February and March, and the company expects the entire network to be profitable by year end. The first store opened in October 1996. Republic officials do not list AutoNation USA earnings separately.
PAY FOR PERFORMANCE
In Chesrown's view, there was nothing wrong with the basic AutoNation USA concept - giving customers hassle-free shopping. The problem, as he saw it, was how the stores were buying and reconditioning cars.
In Chesrown's opinion, nobody in Fort Lauderdale would know, for example, that Subaru is the fifth-largest seller in Colorado. Nor would somebody in Denver be aware that the hottest seller at the AutoNation USA store in Coconut Creek, Fla., is the Lexus ES 300.
So at least two buyers were assigned to each store. They report to a central buyer who is respon-sible for a group of Republic stores. Those buyers in turn report to Chesrown, and their pay is pegged to how well their inventory sells. The faster the vehicle sells, the better the buyer gets paid.
Chesrown discourages buyers from buying vehicles at auctions, where they pay top dollar in the bidding process. He wants them to buy 'hot product directly from really competitive dealers,' pre-ferably Republic's own dealers.
Chesrown is also wholesaling vehicles differently. When he arrived, he found vehicles that did not sell in one store would be moved to another store and priced at the same level in a kind of 'shell game.'
Now, each store bears profit-loss responsibility for each vehicle it buys. If a vehicle has not sold within 90 days from purchase date, it will be offered to other Republic dealers or AutoNation USA stores.
If there are no takers, it goes to auction. As of July 1, the number of days a store will hold a car will be cut to 75; by September, it will be 60. The goal is to have as many cars change hands within the Republic dealer group as possible.
'If you wholesale a vehicle and lose $1,500 to someone in the family, you have an opportunity to recoup that $1,500. If you sell it at auction, it's gone forever,' said Chesrown, a man with ramrod-straight posture and a no-nonsense manner to go along with his mili-tary-style haircut, neatly trimmed goatee and bass voice.
Chesrown also found AutoNation USA was reconditioning all used vehicles to the same standard and spending way too much money in the process.
'A person buying a Lexus has a higher level of expectations than a person buying a 1992 Geo Metro,' he said.
So AutoNation USA now reconditions vehicles to three different standards. The change is part of a shift in emphasis toward becoming a 'low-cost provider.'
Chesrown wants to reduce the costs AutoNation USA has in each car to an average of $10,000 and to $12,000 in each truck, including reconditioning.
'We're within $300 on the car side,' he said. Cars and trucks combined, Chesrown says AutoNa-tion USA has reduced costs an average of $1,600 per vehicle since he assumed control in December.
In addition, the company has trimmed the number of employees by about 22 people per store, Chesrown said. A typical store now employs about 100 people. Many of those jobs were salaried positions. For example, with two buyers assigned to each store, AutoNation USA no longer needed appraisers, he said.
Chesrown has what Maroone describes as 'an appetite,' mean-ing he was not content to take the money from Republic and sail off into the sunset.
Now techniques that sold lots of used cars in Denver will have to be proven on a much larger stage and judged by a demanding group of Republic shareholders.