Dealer Wes Rydell, the new part-owner of a string of factory-owned General Motors dealerships in Los Angeles' San Fernando Valley, wants to boost sales with no-haggle prices. In December, the South Dakotan agreed to manage five GM dealerships in the valley in return for a minority stake in those properties.
If things work out, Rydell can buy out GM and own the dealerships outright.
If GM has any hope of gaining market share on the import-happy West Coast, the San Fernando Valley is a logical starting point. With GM's market share hovering at 20 percent in California, the automaker felt it was time to experiment. Like Ford Motor Co. and DaimlerChrysler, GM has been trimming the number of small dealerships in favor of large, centrally located stores.
Ford has been most aggressive, consolidating dealerships in Tulsa, Okla., and San Diego.
Rydell fits this pattern. With the deal in place, he has installed his own managers, announced a no-haggle sales policy and standardized service operations.
GM had accomplished much of the heavy lifting before Rydell bought his stake in the dealerships. At first, GM wanted to acquire as many as a dozen dealerships.
Eventually GM acquired nine stores in the valley, plus the rights to one franchise from a dealer. Then the automaker consolidated those franchises into four new-car dealerships - one each in Van Nuys and San Fernando, and two in Northridge - plus a used-car store in Sherman Oaks.
Although GM originally had envisioned a larger operation, Rydell says he is not shopping actively for more dealerships. With 400 employees and five new locations, Rydell says he expects to spend the next year or so streamlining the organization.
'Our job is to operate the stores,' he said. 'Right now, we are concentrating on fundamental issues. Just consolidating the culture of the various stores will take some doing.'
EFFORT MADE TO BOOST CSI
To boost low customer satisfaction ratings, Rydell no longer pays his sales force a commission based on gross profit. Instead, he has put them on salaries, with bonuses based on personal sales volume and customer satisfaction.
Rydell's venture helps GM carry out its Project 2000 strategy to trim its dealership ranks from 8,000 to 7,000 by the end of 2000. GM is convinced its consolidation strategy works. After eliminating a dozen dealerships in the Atlanta area, GM says its sales there rose. However, GM executives are not ready to endorse a Rydell-style consolidation as the wave of the future.
'It's designed for the conditions that exist in Southern California,' said Doug Herberger, general manager of GM's Western sales region. 'I don't know if you could bring that to San Francisco or Albuquerque. There is no broad-brush approach any more. It depends on the situation.'