Command performance: spurred by a strong consumer demand for luxury cars, the Fitzpatrick Dealership Group rules the road with its foreign imports.

AT 8:21 A.M. ON AN OVERCAST FRIDAY, Ed Fitzpatrick is putting his black 2006 BMW M5 through its paces while driving to a breakfast meeting at his country club in Modesto, California. "You need to feel the full experience," he says, pushing a button on the dashboard. In a split second, the seven-speed sedan accelerates dramatically. As he decelerates, Fitzpatrick listens to the soft, purring sound of the electronically-controlled engine downshifting automatically. He fires up a Cohiba cigar and takes a long drag on the stogie. "I just love cars," he says, exhaling billows of thick smoke.

Fitzpatrick, 64, is a luxury import car dealer with an irrepressible entrepreneurial drive. That drive also comes in the form of a 70-minute commute along the scenic highways connecting Oakland and Modesto, the prime locations for the four luxury car franchises that make up his Fitzpatrick Dealership Group: Coliseum Lexus of Oakland, Valley BMW, Valley Lexus, and Valley Infiniti in Modesto.

Fitzpatrick epitomizes the nimble players within the luxury import sector who are capturing a bigger share of a car market already slipping away from the struggling Big Three.

Spurred by a strong consumer demand for luxury cars, the company took in revenues of $141 million last year, a 12.8% increase over 2004 sales. Fitzpatrick is setting high-growth benchmarks through stronger ties with his manufacturers, efficient use of technology to enhance his customers' car-buying experience, and leveraging an effective national marketing and branding strategy. Based on this command performance, BLACK ENTERPRISE named Fitzpatrick Dealership Group our 2006 Auto Dealer of the Year.

It was a good 2005 for Fitzpatrick Dealership Group (No. 14 on the BE AUTO DEALER 100 list), and Fitzpatrick continues to reap the rewards of offering three of the industry's best-selling luxury imports: Lexus, BMW, and Infiniti.

All three brands reported record sales last year. Toyota's Lexus remained the top-selling luxury car in the U.S. for the sixth straight year with 302,895 units sold, up 5.2% over 2004. BMW sales were up 4% with 197,833 automobiles sold plus sport utilities. Nissan's Infiniti division celebrated its best calendar-year sales ever in 2005 with 136,401 units, up 4.1%.

For Fitzpatrick, selling these luxurious rides started in 1997, when he launched Valley Lexus, the first of his four franchises, in Modesto. At the time, the city offered the diversity and facilities of a metropolis but still maintained the atmosphere of a rural farming community--an uncertain environment for a seller of luxury vehicles.

"A lot of people in the car industry didn't have confidence in this area's small market," says Sheila Vaden-Williams, president of the National Association of Minority Automobile Dealers (NAMAD). "I don't think they saw the whole picture or understood how hard Ed was willing to work to make sure his business was a profitable venture." Fitzpatrick, whom Vaden-Williams describes as a seasoned dealer, went as far as researching the population and growth trend for California.

As Modesto's infrastructure matured during the technology boom in nearby Silicon Valley, Fitzpatrick's dealerships profited. Affluent technology professionals and executives with expensive tastes in cars were looking to be outfitted. "The luxury car market was growing at that time and it reflected the growth in the community," recalls Fitzpatrick. Later, he took advantage of BMW's efforts to expand in the region when the automaker designated Modesto for a new dealership. "I was awarded the first new BMW dealership in the Western region of the country in 14 years," he says.

Fitzpatrick is always looking to one-up the competition by offering more stylish cars, making the most of technology, and maximizing customer service as a way to turn those big-spending consumers into repeat customers. All of his dealerships are benefiting from national marketing campaigns by the luxury import automakers. They also rely on solid print advertising, primarily in local newspapers.

"The merchandising and advertising programs that Toyota and Lexus have are very strong and attractive to the consumers," says Fitzpatrick. He believes his strong Lexus sales performance is linked to a merchandising strategy that involves deciding how to maximize marketing capabilities and helping dealers to best penetrate a market. Jim Colon, vice president of sales and dealer development at Lexus, commends Fitzpatrick for his commitment to the Lexus brand. "Ed works on numerous committees for Lexus that are designed to enhance the Lexus experience for our customers," says Colon.

All four of Fitzpatrick's locations have access to a networked dealers management system that is connected via a high-speed T1 line. The system houses all of Fitzpatrick's accounting, payroll, sales, and customer relations management programs in a central location.

Fitzpatrick confirms that using the Internet and computers to handle customer relations management gives his dealerships a competitive edge. "We're just becoming more sophisticated and dependent on technology as we manage our businesses," he says. "My challenge is to make sure that our associates are well trained and can utilize the new technologies that are available to help us sell cars and make our customers happier in the process."

Coliseum Lexus General Manager Chris Godden, who manages the system, also touts the benefit of technology, adding that about a third of the cars the dealership sells come from customer leads via the Internet. "Most of our customers will contact us through the Internet by visiting our Web page [www.coliseum lexusofoakland.com] or through Lexus.com directly and ultimately to us," he says.

WHAT'S IN A NAME?

The weather forecast called for a mild day with another chance of showers. Residents of Northern California are already weary from the record rainfall this spring. Still, Fitzpatrick, who says it's important to drive the cars he represents, decides to put the top down on his sporty Lexus SC convertible before heading off to his Coliseum Lexus of Oakland dealership.

Compared to his other three Valley-branded locations, Fitzpatrick regards the Coliseum Lexus of Oakland dealership as his crown jewel, and with good reason. Coliseum Lexus, which sold 901 new cars in 2005, generated $58 million in revenues, reflecting Lexus' record sales performance that year. Valley BMW generated $36 million, while Valley Lexus and Valley Infiniti grossed $35 million and $12 million, respectively.

The Coliseum Lexus dealership sits directly across from the Oakland Coliseum, home to the National Football League's Oakland Raiders and Major League Baseball's Oakland Athletics. The stadium's proximity is a marketing bonanza for the dealership. The sign above the Coliseum Lexus entrance acts as a billboard for 220,000 drivers who pass by each day on Highway 880. "That's why it's called Coliseum Lexus. It tells you right away where it is," Fitzpatrick says.

Whenever Fitzpatrick shows up at any of his dealerships, he immerses himself in the daily operations. For an executive who is constantly juggling his time between dealerships, one might expect him to be a highly aggressive, workaholic type. But Fitzpatrick is a humble man who is quick to give credit to his staff. "I'm a hands-on manager who prefers to run the day-to-day operations. But I also delegate a lot of responsibilities to the managers at each location," says Fitzpatrick. His multitasking shifted into high gear at the Valley BMW dealership as he held a conference call, answered e-mail, and discussed contracts with his office manager, Wendy Mandes. After lunch, he's off to Valley Lexus to finalize a print ad campaign and discuss payroll matters with the parts and service manager.

In addition to overseeing a company with 160 employees, Fitzpatrick is president of the Toyota-Lexus Minority Dealers Association. He works closely with Toyota Motor sales executives and NAMAD as an advocate for increasing the number of minority dealerships and addressing the challenges they face. Fitzpatrick, who encourages stronger ties between the dealers and automakers, commends Toyota and BMW for their commitment to expand the number of minority dealerships.

"Our association would like to see more minorities owning dealerships," he says. "Toyota was one of the first companies to sign an agreement with NAMAD to achieve the goal of 15% of minority dealerships. We're approaching 100 ethnic minority dealers right now."

Fitzpatrick believes the next generation of young minority dealers needs to become more active in politics and economic issues that affect all dealerships. He explains that "the same laws that are going into effect for our neighbor dealers are the same for us."

He points to the example of California's Car Buyers Bill of Rights, a bill that Gov. Arnold Schwarzenegger signed last year giving used-car buyers new rights and protections. According to the new law, which goes into effect in July, a buyer is permitted to return a used vehicle priced at less than $40,000 to a dealership within a two-day cooling off period after the sale, for any reason. Dealers can charge as much as a $250 fee for the return option.

"We were looking at legislation that would have had a very negative impact on our ability to sell used cars," says Fitzpatrick who as chairman of the California Motorcar Dealers Association pushed for a more dealer-friendly version of the bill. "[The return option] is like an insurance policy that consumers can purchase for a nominal fee--depending on the cost of the car--so if they are dissatisfied, they can bring it back within that two-day period."

Fitzpatrick, an Ohio University graduate with a history degree, was a former school teacher before pursuing a career in the automobile industry. He started out in the car business in 1968, when Chrysler hired him as a sales management trainee in Los Angeles. But it is his teaching experience that shapes his desire to provide opportunities and support for budding high school students and graduates interested in technological careers within car dealerships.

"We have different programs with BMW where they train young technicians," explains Fitzpatrick, who notes the program's graduates are in high demand among car dealers. Young people attend BMW's Phoenix-based training schools for one year. After graduating, they are qualified by BMW to be a level-one technician. "We actually buy those technicians," says Fitzpatrick "It costs us $9,000 for a trained technician. We become an outlet for them, and they provide us with the technical knowledge to work on our cars."

SUCCESSION PLAN

Fitzpatrick understands that operating a successful dealership means finding the right balance between business, pleasure, and family. His wife Bertha, 59, who reminds him that family is a priority, already planned his "semi-surprise" birthday dinner later that evening (a family member slipped up and revealed the surprise).

"Some of us are getting older now and we're looking for the next generation," says Fitzpatrick, who believes there are a couple of ways to prepare for succession. One way is by choosing competent family members to carry on the business; the other is to look for talented young men and women interested in the car dealership business.

Fitzpatrick already made a solid investment to ensure the future growth of his company. He hired his sons Sean, 30, and Ryan, 28, as assistant managers at two of his Modesto dealerships. Sean, the assistant parts manager at Valley BMW, says his father has a great vision for the company's future. "My goal is to learn as much as I can about the business in order to help him run the operation," he says. As the assistant general manager at Valley Lexus, Ryan describes his father's management style as demanding, but fair. "Working with my father allows me to have a better understanding of the auto industry and gives me a greater appreciation for what he's accomplished."

For the Fitzpatrick Dealership Group, expansion plans are already in the works. The Valley Lexus site is set to relocate to a newer, bigger facility in Modesto. Once the planning stage is finalized, the new $11 million dealership is expected to open in summer 2007. Fitzpatrick says much of the company's future plans depend on what his sons want to do with the business. For now, all roads are pointing to a profitable outlook for this luxury import dealer. "I'm proud to be a car dealer," says Fitzpatrick "I've been a domestic car dealer and I enjoyed that relationship. I'm a luxury import dealer now and I truly enjoy this side of the action."

--Additional reporting by Cliff Hocker

Sales *   Founded 1986

2001      $47.5
2002      $63.5
2003      $112
2004      $125
2005      $141

Staff   Founded 1986

2001    48
2002    100
2003    122
2004    130
2005    160

* IN MILLION OF DOLLARS

Note: Table made from bar graph.