Volvo has spent three years rearranging its small network of dealers in the Dallas area, with results so promising that the area has become a model for other markets around the country.
All three remaining stores in the Dallas region -- down from four before the reorganization -- are now among Volvo's top 10 U.S. sellers. Four years ago Dallas had no dealers in the top 10.
The process meant shutting down what had been Volvo's best-selling store in the area and relocating two other dealerships. One store is doing so well in its new spot that it jumped from 36th place among Volvo stores four years ago to No. 1 today.
The turnaround in Dallas is part of Volvo's Network Transformation Program, which involves closing underperforming dealers in the top 40 U.S. markets.
"We went out across the country with resources and worked with retailers to consolidate the number of outlets we had in the United States," says Doug Speck, CEO of Volvo Cars North America. "Behind this was the strategic belief that we had too many."
Speck declined to say how much Volvo has spent to close stores. And the effort is far from finished.
In 2007 Volvo had 365 U.S. dealers. Today the number is 311, and Speck says he would like to see that cut to 275. The Dallas project is the model for three major reorganization efforts under way in Phoenix, Atlanta and Los Angeles.
"We made a big bite and still have room to go," he says. "Our brand is more comfortable in the 275 range and is trying to balance the needs of the company with good coverage while also understanding the need for our dealers to be profitable.
"We started by analyzing the major markets in the country," he says, "comparing our outlet count and location to major luxury brands, and came up with a preferred strategy."
Dallas was one of those markets.
"It is a market where we historically struggled to achieve average market share for many, many years," says Speck.
In early 2008 Volvo had four dealers in the Dallas-Forth Worth area and one open point. Company studies said it only needed three, and that three of the four existing dealers were in the wrong places -- areas with declining incomes.
Speck says three of the dealers had "less than spectacular facilities," and none of them had "enough potential to make the money it took to justify potential investments in the brand."
So Volvo stepped in. The automaker:
-- Closed Volvo of Richardson, located 10 miles northeast of downtown Dallas and in a poor location. The store was owned by the giant Phoenix-based Van Tuyl Group.
-- Negotiated the sale of Volvo of Dallas in Carrolton -- another location Volvo did not want to be in -- from Sonic Automotive to Van Tuyl. A 50,000-square-foot dealership was erected in Frisco, near the upscale Dallas suburb of Plano.
-- Moved Volvo of Irving, which was between Dallas and Fort Worth, to downtown Dallas, where it was renamed Park Place Volvo. Owner Ken Schnitzer built a new 35,000-square-foot store.
-- A third store, Autobahn Motorcars in Fort Worth, stayed where it was, but has been helped by the shift of Volvo of Irving to a new location.
Speck says closing Volvo of Richardson was "a risky decision." The store was the largest at the time in the Dallas region and was selling about 800 new vehicles a year.
But it was the best way to pursue "what we perceived to be the right long-term strategy," says Speck.
"It was the No. 1 [Volvo] dealer in the Dallas market, but we wanted to rearrange and have the right number of outlets in the right location."
Van Tuyl, the new owner of Volvo of Dallas, bought a vacant Chrysler-Jeep-Dodge dealership and spent millions to turn it into a Volvo store. At its new location in Frisco, Volvo of Dallas now sells more new Volvos than any store in the country.
Speck says the dealership was on course to sell more than 700 new vehicles in 2010, up from 327 four years ago, when it ranked 36th. In 2009, Volvo of Dallas was Volvo's No. 2 store.
Park Place Volvo opened its new showroom in Dallas in 2009. The store ranked 40th in 2007 at its old location, selling 299 new vehicles. Today it ranks ninth and was expected to finish 2010 with sales of about 500 new Volvo, Speck says.
Autobahn, which is owned by John Chase, has also benefitted from the closure of the Irving store because the competition is further away. Autobahn ranked 43rd among Volvo stores in 2007, but through November was eighth nationwide with sales of 421 new vehicles.
"Half the potential of Irving goes to Park Place and the other half now goes to Autobahn," Speck says.