At Ford Motor Co.'s Tulsa Auto Collection, dealership managers now receive commissions. At most dealerships, that wouldn't be news. But in Tulsa, it's huge.
The switch to commissions for managers is just one example of the traditional retailing revival at the Tulsa Auto Collection. Revolutionary change is out. Ford now is relying on many classic dealership methods to bring Tulsa back to life, such as commissions and price-oriented advertising.
'We had to clean up the operating model and make it more retail driven. That has been the key,' said James Evans, 46, the new CEO of the collection.
In 1997, Ford set out to revolutionize automotive retailing by investing with dealers to consolidate dealerships. In Ford's vision, economies of scale would generate hefty profits. One-price selling and salaried personnel would create a respectful selling climate.
But in the real world, Auto Collection sales slumped. Dealership employees quit. Customer satisfaction scores tanked. Investing dealers walked away. Stung by the problems, Ford last fall retreated from its ambitious strategy to consolidate markets around the world. Today, the company plans merely to test new retailing practices in a handful of Auto Collection stores.
To revive the Tulsa Auto Collection, four months ago Ford hired Evans, an articulate and hands-on leader. He most recently worked at two dealership groups, First America Automotive and the United Auto Group. Evans replaced longtime dealer Don Thornton, who resigned in September after leading the troubled group since its inception.
The answer to Tulsa's troubles lies in marrying many practices from a classic dealership with the clout of consolidated stores, Evans said.
It is still too early for Ford to claim victory. But sales and customer satisfaction scores are rising in Tulsa, Evans said. The tide of employee turnover is halted. And this month, Ford begins reworking its Oklahoma City Auto Collection to mirror operations in Tulsa.
In Tulsa, general managers are back in the dealerships. Managers have returned to commission-based pay. Head count has been reduced 20 percent and most centralized staff jobs are gone. Two closed stores are re-opening.
The Tulsa Auto Collection produced a profit in November 1999, 19 months after startup, Evans said.
New-vehicle sales climbed 20 percent in November, December and January, compared with the prior year, Evans said. But the Tulsa Auto Collection's new-vehicle sales and market share have slipped so much that in calendar 2000 the operation is fighting all-out merely to return to the sales level achieved by the dealerships before consolidation.
SPREADING THE WORD
The lessons learned in Tulsa are being spread to other Auto Collections, said Barry Merrill, North American east operations regional director for Ford Investment Enterprises Corp., the Ford subsidiary overseeing the Auto Collections. Ford owns a controlling interest in the Tulsa venture.
'Jim Evans has taken the best of both worlds in automotive retailing,' Merrill said. 'He has taken the vision that was originally developed in terms of the Auto Collection concept and taken the best of the traditional retail environment and effectively molded the two together.'
For example, the Tulsa Auto Collections spends 30 percent less each month on advertising than the eight independent stores because the group now speaks with a single voice, Merrill said. The independent stores spent about $6 million annually.
But the Tulsa group is abandoning image and testimonial advertising. Instead, 80 percent of the organization's ad budget now will be spent to advertise prices, promotions and products.
Similarly, dealership managers are returning to commission-based pay. Earnings are based on individual store performance, not the performance of the entire group. But salespeople still are salaried.
No-dicker stickers remain. But the Tulsa group is more lenient on trades. The collection no longer requires that trade-ins be appraised at book value.
'If there is something we have to do on the back end of the deal, whether it is being as aggressive as we can on the trade, offering discount coupons for future service or floor mats, we will do that to make the customer feel better,' Evans said. 'But we unequivocally will not move off the price on the window.'
Evans is putting an old-fashioned emphasis on building employee morale via town hall meetings and quarterly rallies with the group's 700 employees. At a recent rally, he gave away a Harley-Davidson motorcycle.
'People were leaving in droves before. Now there is a waiting list for people to join the collection,' Merrill said.
There have been advantages to market consolidation in Tulsa, Evans said. The group offers customers large vehicle inventories. The combined capital has permitted construction of freestanding service centers that generate incremental business.
'Instead of looking at a lot of 300 new vehicles, the customer is now looking at 1,500,' Evans said.
A freestanding Ford Quality Care service center generated 450 repair orders in the first 30 days of operation after opening Dec. 27, Evans said. A second light-repair site is under construction.
E-commerce now is consolidated in one location, instead of every store. Specially trained managers and salespeople are handling up to 500 leads monthly, Evans said. Within 18 months, Internet-generated sales will represent 20 percent of the Tulsa Auto Collection's new-vehicle business, he said.
The Oklahoma City Auto Collection is being recast following the success in Tulsa, Merrill said. 'Oklahoma City is going through right now what Tulsa went through 120 days ago,' he said.
Auto Collections also operate in San Diego, Salt Lake City and Rochester, N.Y. Merrill said that, while troubled, none faced the severe problems of Tulsa, the first Auto Collection.