LOS ANGELES - Talk about a powerhouse.
Over the last Memorial Day weekend, Longo Toyota sold 565 new Toyotas and 72 used vehicles. Its adjacent Lexus store sold 124 new Lexuses and 23 used vehicles. That's a year's worth of sales for some dealerships.
And Longo does it weekend after weekend. The dealership, located in the eastern edge of Los Angeles, is a retailing machine.
In both 2004 and 2005, Longo Toyota retailed more than 24,000 new and used vehicles. That's triple what the next-best Toyota dealer sold.
Longo's Toyota, Lexus and Scion sales and service revenue broke the $1 billion mark last year.
The Longo achievement is even more impressive when one considers that it competes in the tough Southern California market, where 75 other Toyota dealerships vie for customers.
"Longo has been the flagship, the benchmark, of Penske Automotive Group," says Greg Penske, 43, president of the group.
In 2001, Penske spent $10 million on an expansion that was to meet the dealership's needs through the rest of the decade. But with the renovation barely complete, Penske already is looking at pouring more money into the stores. It is simply growing too fast.
Growth has it problems, of course, and Penske worries about Longo losing touch with customers.
"As any company gets bigger, communication is tougher and the bureaucracy builds. It's hard to keep the culture and integrity intact," Penske says.
Penske has his own customer satisfaction rating system. He thinks customers are over-surveyed, making real measurement difficult. He would ask just two questions: "Would you return to this dealership?" and "Would you recommend it to a friend?"
For now, though, growth continues at a heady pace.
Very big - and too small
The dealership has 107 service stalls, yet needs to add more. It has a five-story parking structure that can hold 2,500 cars, already outgrown. Longo's Lexus dealership, constrained by a small footprint, is ready to assume the lease of the adjacent 10,000-square-foot Wells Fargo Bank branch. That finally may give Longo Lexus enough space to pass Jim Moran's titanic JM Lexus enterprise in Margate, Fla.
"We are always thinking long term," says Tom Rudnai, 42, Longo's general manager. "We always want to be three to five years ahead of where Toyota wants us to be.
"Toyota is telling us the numbers they are looking to hit in the future. We know we have to keep growing. It's not too far down the road when we will be selling 3,000 Toyotas and 1,000 Lexuses each month. We can never build big enough," Rudnai added.
The Longo dealership sits on 47 acres. Getting away to grab a bite to eat can be a challenge. So Longo has a Starbucks kiosk and a Subway restaurant inside the Toyota dealership. The dealership does so much registration business that the Auto Club has an office as well.
Being located in Los Angeles means dealing with melting pot of residents. To reflect its diverse customer base, the sales staff speaks more than 30 languages. "Se Habla Espanol" is an easy one. But if a customer speaks the Philippine dialect of Kapampangan or the Ethiopan linguistic splinter of Tigrigna, Longo also has them covered. Longo even has a complete duplicate Web site in Spanish.
Longo's Web site allows consumers to browse the 3,000 Toyotas in Longo's inventory, get a trade-in value on their car, calculate their financing rate, order parts and arrange a service appointment.
Longo's recipe is simple, says Penske: "We want to give a guest the best experience and a convenient place to do business."
The dealership's success also reflects well on its distributor, Toyota Motor Sales U.S.A. Inc., which is 30 miles away in Torrance.
"Longo is a reflection of the diverse community it serves, and mirrors Toyota's commitment to its customers," says Jim Lentz, Toyota Division general manager.
"You don't become the No. 1 selling Toyota dealership in the country for 39 years straight without that kind of dedication to the customer."
We hobble spaniels
Longo Toyota was named for its founder, Dominic Longo. He started the business in 1968, from an abandoned gasoline station in El Monte. Longo partnered with Toyota after Ford declined to give him a franchise.
Longo was a colorful owner. He gave the OK for radio comedian Al Lohman to spoof his identity for radio commercials, carrying a Mafioso accent when "interviewed" by sidekick Roger Barkley.
The send-ups were often hilarious. Longo did not "wheel and deal." Instead, he "whelt and dealt like no one ever whelt and dealt before." The dealership didn't "Habla Espanol"; it "hobbled spaniels."
But Dominic Longo's cheery tactics extended far beyond his radio personality. He banned the salesman's hotbox for sweating the customer for a sale. Instead, he put customers and salesmen in an open bullpen. Longo thought shuttered dealerships looked foreboding at night, so he opened the service bays for nighttime work, keeping on lots of lights.
During Dominic Longo's ownership, the dealership moved twice and eventually owned 11 vehicle storage lots for inventory. When Longo died in 1985, the dealership was selling more than 12,000 units a year from a five-acre site. His heirs sold the franchise to Roger Penske, Greg's father, soon afterward.
That's when the real growth began. Roger Penske bought a nearly abandoned shopping mall where the bustling 605 and 10 freeways intersect. He ripped the guts out of a Sears store and created a monster.
Is there a secret recipe to Longo's sales success? For one thing, the Longo lot is so large that it often makes it hard for a customer to walk away. After all, if it requires a golf cart to see the 300-odd Camrys in stock, it's a long way back to a customer's own car.
Still, a dissatisfied customer can always walk, so Longo takes every effort to make him want to stay. And to come back for repeat business.
Respect is key. All the interest rates and incentives available are posted at every table. Dominic Longo's no-hotbox rule is still in force. Moreover, they are not referred to as customers; they are "guests."
"It's an open atmosphere. We don't want it to be like a visit to the dentist," Rudnai says.
Longo also realizes some customers are so overwhelmed at the time of purchase that few details soak in. So every couple weeks, Longo hosts a "new owner event" that instructs customers about the finer points of their vehicles. Customers also get valet parking, a buffet lunch, a car wash and a certificate for a free oil change in the future.
Despite servicing 500 cars a day, the personal touch continues into the service drive.
Waiting for a "guaranteed 30-minute oil change" can seem interminable, so Longo eases the pain. The Toyota showroom offers free wireless Internet access. Customers can also watch large-screen TVs in the waiting area. A pod of monitors plays the latest Nintendo video games to occupy kids, while adults can listen to Sirius radio on complimentary headsets.
If a service job is going to last more than three hours, Longo will give free movie tickets and a ride to the local cinema. If a service customer wants to walk around, he is given a pager and a call when his car is ready for pickup.
Continuous improvement is a mantra at Longo. When the dealership realized it was doing a high volume of quick-lube business, it established a separate cashier for those quick-to-pay customers who don't need detailed explanations of the charges.
If a service customer has a loaner car for a major service, and the job is finished well ahead of time, Longo will return the customer's car and retrieve the loaner. In traffic-clogged Los Angeles, that's a big deal.
Greg Penske calls Longo a college, where top mid-level performers are often sent to bigger positions at other Penske holdings. Whereas some dealerships see annual turnover approach 50 percent, Longo sees just 8 percent of its employees leave. Any voluntary turnover rate of less than 10 percent is considered excellent, according to The Conference Board, a private industry information clearinghouse.
Not that everything Longo touches turns to gold. Before the Subway, Longo had a convenience store on site. The store sold candy and magazines but not alcohol or cigarettes. The idea bombed.
Also, greeting customers as they left the service area - but before they got into their repaired cars - did not give an accurate reading of how satisfied the customers really were. And in a rare cultural misstep, black-and-white checkered flags posted around the dealership offended Chinese customers, for whom the colors represent death.
Challenges from Chitty
Penske also knows an opportunity when he sees one. When he saw that Dick Chitty - the man who pioneered Lexus' vaunted customer service initiatives - was retiring from Toyota, Penske pounced. At the 2003 dealer meeting when Toyota Motor Sales President Jim Press announced Chitty's retirement, Penske cornered Chitty and offered him a job.
When Chitty asked what the job would entail, Penske says, "Looking around."
Obviously, it involved much more than that for Chitty, who is executive vice president of operations for the Penske Automotive Group. Penske had just cherry-picked one of the foremost experts in knowing what makes customers tick. Chitty works half the year based from Longo Toyota, the other half in partial retirement in Florida.
Of course, when Chitty walks around, he sees things that others do not. Chitty's changes at Longo include giving service drive valets a daily printout list of customers, their appointment times, vehicle model and color. That way, the customer can be greeted by name upon arrival. Also, Longo's service database now allows the customer to deal with the same service writer for every appointment.
The little things keep people coming back.
"Customers are expecting efficient service," says Chitty. "The key part is that they also expect a relationship with people they like, trust and respect. We don't give them a reason to go anywhere else. It's a business relationship."
Such attention to customer details means that 80 percent of Longo customers buy their next vehicle from Longo, the company says.
For all Longo's success, Penske and Rudnai are circumspect about the future. And they are realists about how large a business they operate.
"There are 18 million people living between San Diego and Santa Barbara, so for us to sell 24,000 Toyotas a year is nothing," Penske says. "As Los Angeles traffic gets tougher, and other dealers expand and get better, we're going to have to find new ways to bring customers back."