A strong used-car operation and a thoughtful succession plan are among the keys to Ourisman Automotive Group's longevity, says Mandell Ourisman, 84, chairman of the group and a second-generation dealer.
He has put his two sons and stepson in charge of managing the multistore operation that sells 16 brands in suburban Washington, but he remains active in the business.
Ourisman Automotive Group ranks No. 24 on the Automotive News list of the top 125 dealership groups for 2010, with revenues of $697.5 million, up one spot from its ranking in 2009.
Ourisman spoke with Staff Reporter Mike Colias about the group's longevity and how the business has changed.
Q: How did you get your start in the business?
A: I went to work for my father as a kid, a teenager. My dad was a colonel in the U.S. Army. His store, Ourisman Chevrolet, had the largest allotment of Chevrolets in the country after World War II. He died in 1956.
How did the operation evolve?
After my dad died, we were attempting to hire some talented management people. One in particular came to our showroom and met with me. He was interested in coming to work for us, and he was very good. Trouble was, he looked in the showroom and saw three of my sons working. He said, "My goal is to rise in the organization. Goodbye."
We started expanding around then, in the early 1960s. As the kids all graduated college and went to the General Motors dealer school, three of the boys have since taken over the operation of all 16 locations.
Tell me about how you implemented your succession plan.
Two sons and one stepson are running 95 percent of the business. I'm dealing with results and the monthly figures. They're running the retail operation -- John Ourisman, Robert Ourisman and stepson Daniel Korengold.
What has been the biggest change in selling cars?
The biggest change has been computerization and the use of the Internet to sell cars. It used to take 10 to 12 days to do a financial statement at the end of the month.
Now you do it in a day or two. In terms of how we sell cars, the biggest difference is that more people need more time spent on financing the purchase to see if they qualify. We spend as much time trying to get them qualified for an approved loan as the sale of the car itself.
What about the service side?
Service has grown tremendously, especially the body shops we specialize in. The most important thing is to get complete satisfaction of the customers so they're happy and they'll come back. The customer retention piece is very important and has grown over time.
What's the most noticeable change you have seen since the General Motors and Chrysler bankruptcies and downturn?
During the downturn, a typical scene would be a husband and wife coming in to buy a car because their old car was worn down. The man would have maybe $1,000 in cash with him and a trade-in worth $4,000. So that gave him a total of $5,000 down, he believed.
Then the dealership would get into the title of his trade-in, and find out that, while he had $5,000 in actual available cash and trade, he owed $6,500 on the car. So he'd end up going back to the service department and negotiate to spend his $1,000 cash on fixing up his old car.
The service departments were busy during the two-year downturn, but the sales departments weren't.
How has your organization emerged from the downturn?
The economy in greater Washington is relatively good compared to the rest of the country because we have 350,000 federal employees in greater Washington. They don't get laid off from work. That is one big plus. Competition is more or less the same as it was. There are fewer dealers, but it's probably going to approach what it was before the two-year downturn. So I think the competition has remained very strong.
The advertising is very aggressive. The key is financing. All the cars are better cars than they used to be, there's no question. But getting people financed is the biggest factor.
Has profitability returned to pre-crisis levels?
I think we're over the crisis, and I think the manufacturers are doing a better job turning out good products.
They don't want to see a dealer with a 100-day supply of cars. Maybe 45 to 60 maximum is acceptable. But they don't want to get the dealer in trouble by loading them up the way it might have been years ago.
Do you think the production and pricing discipline that the manufacturers, especially the Detroit 3, have shown since the downturn will last?
I don't think they'll slip. I think they recognize what they went through with the dealers. I don't think they'll go crazy and overbuild again. Hopefully the manufacturers' union problems will remain calm. One problem will be the price of gasoline. That's another reason not to overdo it and build too much.
How else are the manufacturers operating differently now?
They're more reasonable than they used to be. I'd have to say that the toughest manufacturer by far was General Motors. But they're all more reasonable now.
In what way?
Well, years ago, General Motors would say: "We want you to redo your building and redecorate the store." If we didn't jump into it fast enough, they would come in and audit our service department to check our warranty work and see if we were charging correctly.
We always were, but some dealers got hit pretty hard with that. That's one example. Also in those days, you dared not think of another franchise other than GM when you were a GM dealer. It was not going to be allowed. And now, of course, that's completely different.
That issue of facility overhauls has flared up again as sales improve.
I think that's true. General Motors now has a push for upgrading stores that haven't been renovated in the last few years. Our original store, Ourisman Chevrolet in Marlow Heights, Md., is going to have to spend about $2 million to upgrade. We won't have trouble doing it, but it's expensive.
There has been a lot of talk about the changed culture at GM. Do you buy it?
I think it's good now. I think all of them are more dealer-friendly. The new General Motors chairman is outstanding. I think they couldn't have made a better choice. I think he'll position GM in good shape for the future.
What big uncertainty remains for a dealer?
The overall economy is the only uncertainty. With the government overspending the way it is, that very well may hurt the overall economy. But there's one happy note: Americans' love affair with the automobile still exists. They buy not only out of necessity but out of desire.
What franchises are hot right now?
We have pretty well stabilized at our 16 locations. We don't have the very expensive cars like Cadillac and BMW because we're more into volume sales. We're very happy with those.
We have relatively new Hyundai and Kia franchises. Those are very popular brands right now. In general, we've been able to find a combination of good locations in growth areas of metropolitan Washington.
What are a few keys to your longevity and success?
The ability to retail used cars and trucks is most important. Because if you have a weak operation on used, then you're not going to sell as many new because you can't be as competitive on the trade-in allowance.
So a strong used-car operation will determine a strong new-car operation. If you pile up used cars, some dealers can go broke, and some did in the last couple of years. And reputation. Those two factors are vital to selling more new cars.
Well, I've had dealers ask me many times about the success I've had with the kids running the business. Rule No. 1, and it's required, is that the boys should have ownership in each of the dealerships. Not separate but as a group. So they'll all pull together and help each other as necessary.
Whereas some families have started second-generation dealerships and have given one son two dealerships, a different son two, and a third son two, with all different ownership. Then they're in competition with one another. It's not good for one family to be battling among themselves. So our dealers pull together and have meetings and work with each other. I think that's a very healthy way to face the future.