TULSA, Okla. - Don Thornton strides through the wood-paneled halls of his Ford dealership. He proudly gestures to the brightly lit exercise room filled with treadmills and stationary bikes for employees and customers.
He points out quality and sales awards mounted on a wall overlooking the showroom.
He has worked for decades shaping his image of a neighborly car dealership. When he joined the Oklahoma Motor Vehicle Commission four years ago, he pressed for mandatory training in automotive law and business ethics for all dealership sales personnel.
'I'm not a crusader, but I know what is right,' Thornton said.
Now, to preserve and improve all he has built, he is turning auto retailing upside down in Tulsa, a metropolitan market of 530,000.
Thornton, 65, is CEO of Ford's consolidated dealerships in Tulsa. Last April, he and five other dealers pooled their eight stores into one company, the Tulsa Auto Collection.
Their goal is ambitious. The new group, along with Ford Motor Co., wants to cut costs, stop sales competition among Ford, Lincoln-Mercury and Mazda stores, and build a respectful Saturn-style sales culture.
The task is daunting, and there have been early setbacks. Market share dropped, staff turnover has spiked up. And many customers say they do not like one-price selling.
But Thornton is a true believer. He is pushing ahead, convinced the pain is temporary.
'It's the right way to do business. It's the integrity of it,' Thornton said. 'Customers want a better experience than they have had in the past. They want your best price up front and consistent service.
'It has taken a little longer than I thought to get it together,' he said. 'The only thing consistent among the eight stores was probably where we bought our toilet paper.'
The good news is that the Tulsa Auto Collection is on its way to hitting a major target: chopping $175 to $200 from the cost of selling every new and used car and truck by April 1999, Thornton said.
And the new venture is putting start-up mistakes behind it and is gaining momentum in building a coherent retail image, he said. The group closed one store last year and expects to generate $400 million in sales in 1999.
Still, Thornton admits the Tulsa Auto Collection failed to meet its new- and used-vehicle sales targets in September, October and November 1998. It has been time-consuming and costly to hire and train employees new to automobile selling to replace sales personnel who did not want salaried positions.
Competing Ford dealers' ads are hammering the enterprise's nonnegotiable pricing policy and capturing customers who still want to bargain.
Moreover, the sheer logistics of melding eight competing stores with different computer systems, operating practices, customer databases and salary scales into a single smoothly functioning entity is painstaking and expensive.
Thornton said he is out to gain the trust and loyalty of customers. Critics outside Ford and within its dealer network say his approach is wrong.
'Fewer dealers mean less options for consumers and reduced competition for their business, items that tend to drive up prices and weaken service,' said Jim Press, general manager of automotive operations for Toyota Motor Sales U.S.A. Inc.
Noted James Hodge, a Ford, Lincoln and Mercury dealer in nearby Muskogee who is competing with the Tulsa Auto Collection:
'Ford Motor Co. is trying to follow in the footsteps of AutoNation,' Republic Industries Inc.'s. dealership chain. 'AutoNation has not proved that they can run a dealership. Ford Motor Co. has not proved that they can run a dealership.'
Thornton is out to prove the critics wrong. But the venture's start-up last year was difficult.
Build-out orders for the 1998 model year were too conservative. They were calculated in May during the early days of the venture.
'We found out in mid-July we were running out of inventory,' Thornton said.
Similarly, the group failed to buy enough used stock, awaiting price declines that never materialized because the summer strikes at General Motors created heavy demand.
Sales improved in December, Thornton said. The group hit its forecast on new vehicles but was 'slightly off' in used-vehicle sales, he said.
Ford Division market share for cars and trucks in the Tulsa metropolitan area is below pre-merger levels, Thornton said.
He pegged the group's Ford Division car share at 11.6 percent. Before the merger, the share of the consolidated dealers ranged from the 'high 11s to the mid-to-high 12s,' Thornton said.
Similarly, the group's Ford Division share of the truck market is currently 30.3 percent, he said. Before the merger, the share of the consolidated dealers ranged from 30.2 percent or 30.4 percent to as high as 32 percent, Thornton said.
'We're going in the right direction, but we are not there yet,' he said.
Thornton declined to discuss his company's profitability, citing competitive reasons.
Within five years Thornton wants to boost sales volume to 22,000 to 24,000 new and used units annually, up from 19,000 to 20,000 sales annually before the merger.
THE BUSINESS CASE
At Tulsa People, a monthly city magazine, advertising sales representative Melissa Tawney said the Tulsa Auto Collection is a new name in the publication geared to upscale readers.
Ford dealers had advertised only sporadically. But since August, the Auto Collection has been joining Lexus, Mercedes-Benz, Cadillac and BMW in the book's glossy pages.
'They are trying to educate people on what they are doing and build their image,' Tawney said. The ads are all about image, not price.
Buying space in Tulsa People is a small shot in a big war.
Ford and Tulsa Auto Collection executives expect advertising to deliver sizable cost savings and make the new equation for business work. The goal is to boost vehicle sales by lowering prices while maintaining vehicle grosses through cost cutting, Thornton said.
Advertising is a heavy hitter.
In 1996, the six Ford and two Lincoln-Mercury stores since incorporated in the Tulsa Auto Collection spent more than $6 million in local dealer advertising, Thornton said. Now, the Tulsa group expects to spend $3.5 million annually and dominate the market with a single name.
'Before, one-half of our advertising was directed at the other guy,' Thornton said.
Ad costs have been unusually high because of the venture's launch, said Kyle McQuaid, Tulsa Auto Collection advertising director. For example, the group was advertised for six weeks as the Tulsa Experience before Ford rechristened the enterprise the Tulsa Auto Collection.
In the first quarter of this year, the group expects to begin saving 25 percent in both print and TV advertising compared to pre-merger costs, McQuaid said.
'We save money because the message is unified,' he said. 'There is efficiency in pricing and in the number of times we need to run the message.' A spokesperson for the major daily newspaper in the area, the Tulsa World, declined to comment on the advertising impact of the dealership consolidation.
MAKING IT UNIFORM
The new venture expects more savings from payroll reductions, computer streamlining, centralized purchasing, floorplanning efficiencies and a host of other items.
Payroll has dropped to 960 employees, down from 1,000 at the independent stores, and is likely to decline further, Thornton said.
Insurance rates dropped 15 percent and employees are offered broader coverage because the pool of employees is larger, he said. There are even savings for night security patrols.
'If we take out $2.5 million in advertising and $1 million through savings and avoiding duplication, that is $3.5 million divided by 20,000 vehicles,' Thornton said. 'That is $175 per unit.' He expects the venture to hit $175 in per-unit savings by April 1999, a year after beginning operation.
To do that, Thornton first must untangle the web of disparate business practices ingrained in the separate stores.
'The 401(k) plans are different. Insurance plans are different. Buyer orders are different. Computers are different. Vacation plans are different. Out of eight stores there are six different ways to book an entry,' he said.
'We've had to change some parts of the organizational structure five times,' Thornton said.
Duplicate names in computer databases have to be weeded out. Originally, the group logged 600,000 customer names into its combined computer database. After determining that John J. Smith, J.J. Smith and John Smith were one and the same customer doing business at different stores, that number has dropped to 130,000.
Some start-up costs have been 'enormous,' Thornton said. For example, the tab so far for sales training is $400,000. Legal expenses total $200,000.
Thornton, a Tulsa dealer since 1968, no longer works in a store bearing his name. His Auto Collection office is in a four-story building, five miles from the dealership where he worked with two sons-in-law.
After three decades as an entrepreneur, Thornton is learning to work with his new corporate partner, Ford Motor Co. Ford is not running the show, he said.
'I talk to Ross Roberts (president of Ford's corporate entity overseeing the consolidation strategy) about twice a month,' Thornton said. 'More if I want to ask something.'
A Ford representative sits on the three-member executive committee overseeing the company. The other members are Fred Hall, CEO of Fred Jones Cos., the largest dealer investor in the Auto Collection, and Thornton, the second-largest dealer investor.
'Ford has never, never forced anything on us,' Thornton said. 'If they have, they did it so smoothly I didn't recognize it.'
Ford has a lot at stake in Tulsa and other consolidating cities. It is combing its distribution network worldwide looking for dealership merger opportunities.
The industry already is carving costs from product development, manufacturing, design and the supply base, said Robert Rewey, group vice president of marketing, sales and service at Ford Motor Co.
'The other big part of the cost of putting a product in the consumer's hand is the distribution cost,' Rewey said. 'That is anywhere from 18 to 25 percent of the transaction price depending on where you are in the world.'
WHAT BUYERS WANT
Thornton recognizes the need to make automotive retailing more efficient. Indeed, he has a personal goal - not inked by Ford or the Auto Collection - to take $500 out of the cost of every car and truck the group delivers within three years.
Thornton is wrestling with the complexity of a new way of doing business. But his motives are simple.
'If you understand this business, you know what buyers want: 'I want to be treated with respect. I want no pressure. I want a good price. And I don't want to be forgotten after I buy.' '
Once again, Thornton used the phrase he has used so often in explaining why he was willing to pioneer a retail revolution in Tulsa:
'It's the right way of doing business.'