David Kelleher began selling cars when he was 24, shortly after finishing his undergraduate degree at the University of Pennsylvania. It wasn't his intended career path -- he had wanted to go to law school -- but the industry grabbed hold of him and never let go.
"I worked every job on the front end coming up. My first job was with a large group, Potamkin, in Springfield, Pa., and by luck, I was assigned to a Chrysler dealer. I fell in love with the company, and in 2005, I bought my own dealership," says Kelleher, who this year succeeded Alfred Flores as chairman of the Chrysler National Dealer Council.
Kelleher spoke with Staff Reporter Larry P. Vellequette.
How was 2011 for your dealership?
We were up 49 percent in my store. I sold 683 new cars in 2010, and I did 1,018 in 2011. We had projected pretty darn close to that, and it went past our expectations. We not only reached our goals saleswise, but we also reinvigorated our brands. 2011 was a huge transitional year for all of us.
What surprised you, productwise, last year?
On the good side, I thought the Grand Cherokee had stabilized at about 9,000 units a month, but I was wrong. That vehicle just kept getting stronger and stronger. I had stabilized at 18 a month, and last month I sold 34 of them. In fact, the strength of the whole Jeep brand surprised me.
On the downside, the slowness of the Fiat launch was a surprise. [Chrysler-Fiat CEO Sergio] Marchionne doesn't miss his mark much. If he's said 100 things to me and the dealers, 99 of them have been right. But what wasn't right was the Fiat launch.
Why didn't the Fiat launch go as planned?
Part of it was that we opened up with a partial dealer body. They didn't get the dealer body ramped up as fast as they had hoped to. The emphasis in the market came off of fuel economy and that small-car platform. But gas was running [low], the economy's coming back a little bit, and it took the emphasis off. I think the 500 was received well. I just don't think the market was where they thought it would be.
Do you think Chrysler's U.S. retail sales projection of 1.4 million units for 2012 is accurate?
I think their projections are conservative. This year, I think the dealer body is going to make the investment and will actually exceed what Chrysler thinks we're going to do. The market is going to come back quicker than what it was expected to do. I'm projecting new-car sales at my dealership at 1,450 this year, up from 1,018 in 2011. My customers are excited about these cars.
What are the hidden jewels in the product line?
The 300 has all of a sudden reached that culture that I thought it was going to hit. The Durango is also starting to get there, and I think that car is just going to start to fly. I'm in the dealership all the time, and I know when cars are a hit. For some reason, the Durango just hasn't caught the public's eye yet.
What will having the Dart on the lot do for dealers?
Having the Dart is more than just having a great small car. What Dart does is enter us into a segment where Chrysler has historically not participated. The last time we had a mover in that segment was in 1995 with the Neon, and then only for a couple of years.
Dart is going to give us an opportunity to bring in the young, first-time buyer, the second car in the family -- some of the segments where we weren't a competitor. These to me are baby buyers that matriculate through the product line. It gives us the opportunity to harvest a young buyer that we can groom into a legacy buyer.
What is different about being a Chrysler-Dodge-Jeep-Ram dealer now from when you started?
I became a dealer during the Daimler administration, and then stayed during Cerberus.
I think we had to wait to earn a trust level with our third partner, Fiat. They're saying some of the same things that their predecessors did, but they're actually following through with it. Those two administrations were very difficult to the dealer body and the trust level, and these guys are repairing that relationship.
Chrysler suspended its Dealer Standards program for the first quarter and will overhaul it. What needs to happen with it?
I'm a big believer in this type of program. I struggled with this program for much of its tenure, even though I reaped the benefit of it. I also struggled with the fact that I knew my corporate partners weren't getting what they hoped out of it.
I would love them to listen to us on what needs to happen. I'm a huge believer in rewarding great behavior, but I think this was a flawed program that was put into action very quickly and without input from the dealer body. But I'm 100 percent committed to helping them fix it.
What was wrong with the Dealer Standards program as it was?
There were flaws in the program, and certainly flaws in the dealer body. We had shifts in their demands quarterly. If they want that, we need to put on the table everything that they think is best practice, and then implement that.
I think if they use our input, we can help them solidify best practices and you'll see those sales metrics move right up. They put their money on the market, and I appreciate it, but I too want to see those metrics move up.
Should the future Dealer Standards reward system differentiate as it did between large and small dealers?
It really needs to. You're never going to have a perfect system in a staggered payout, but the investment that it takes to achieve standards is really relative. It's much more expensive for a large store.
Are mystery shoppers a valuable tool?
I opened up in June 2005 and by February 2006 I had hired my first mystery shopper. I'm a strong believer in mystery shoppers. Sometimes we saw that the data that was represented during the mystery shop wasn't accurate, but that's a different story that we can discuss. They're incredibly valuable. If somebody says that mystery shops are taking up too much of his people's time, then he is missing the big picture. What are his daily costs if he has poor sales or service practices and doesn't know?
Would you like to see a return to greater leasing?
I think leasing is essential to the business model, but I also think rogue leasing caused the auto bubble that popped on all of us. Leasing has to find just the right pitch to maximize its value. I think we're a little low right now, but I think we were too high before. I think the proper pitch hasn't been found yet. I'd like to see it level at the right place and not negatively impact the market as it did in 2007 and 2008.
Did the 2008-09 downturn teach Chrysler dealers anything about the used-car market?
Chrysler dealers are survivors; we've been to hell and back seven times. We know how to react to that. I think dealers will remember how we had to survive with used cars, parts and service, and we learned an important lesson from that. Because of the growth in our market share, I'm starting to see some really great cars come in on trade. I haven't had to buy cars at auction for three months because of the quality of used cars that are being traded in for our current product.
What does your dealership need more of right now?
My immediate challenge as a dealer is to make sure that I have the skeleton in place to achieve my goals. I'm going to need another manager and probably two more salespeople on my floor, just to handle the projected volume. What I need from Chrysler is more Grand Cherokees. We're potentially losing sales because of production constraints, and it won't be too long before we're seeing it in other lines.
What do you think about Chrysler's current incentives? Would you change anything?
We look at the issue of incentive complexity regularly. To some extent, there's little you can do; you need to be complex to be competitive. But I'm going to ask them to do what they can to simplify incentive programs as much as they can.
What do you hope to accomplish during your one-year term as chairman of the dealer council?
My No. 1 job with the dealers is to reinvigorate the feedback chain. Feedback goes really well when things aren't going well, but it dries up when things are going great. We've got a unique window here where [the factory] is willing to listen to us. I need feedback from 2,300 dealers, and not just the 20 on the council.
I think we also need to continue to work on franchise profitability, to protect the value of our franchises. I'd like to see us become top 5 percent in profitability, so that we can garner the type of franchise value that comes with it.
What will it take to increase franchise value?
Our relationship with the manufacturer is the key to it. There's a fine line. These guys share their data with me, and I think we have very productive conversations about the value of the franchises. I'd like to move that another four or five percentage points. Valuable franchises attract better dealers, and that works for both of us.
You visited Chrysler headquarters and the Detroit auto show in January. What was the one thing that you saw or heard that excited you the most?
I have so much trust in this management team. They work so hard and they're so focused, that we're in very safe hands at this point in time. These guys are inspirational. We're going to see a relaunch of more product. They're not done yet, and we don't know when they're going to be done.