Shining in the Lone-Star state: B.E. Auto Dealer of the Year.
There's something unusual going on just off I-20 in Dallas. On the third Saturday of each month, local residents begin arriving at Davis Buick Hyundai GMC in the wee hours of the morning--some even camp out all night--anxious to be the first on the lot. They're not gathering for coveted tickets m a concert or sporting event, but for the chance to purchase a car for just $5.
Of course, not all cars on the lot are so cheap--only two or three patrons will have that privilege. Prices on the rest of the used car inventory are generally slashed "to the bare bones" in this first come, first served automobile feeding frenzy. So less fortunate early birds will at least drive away with a great deal on a good car. "The $5 sale is a way for us to build a rapport with our customers and give something back to the community at the same time," says owner Richard Davis. His philosophy on selling cars is predicated on excellent customer service, which begins with building the customers' trust. For him, it's an integral part of making his dealerships "someplace you'd want to come and spend $30,000 or $40,000."
The strategy has been working since October 1996 when he purchased the Dallas dealership. In his first year, Davis turned the previous owner's $500,000 loss into a $300,000 profit. That early success did not go unnoticed. In October 1997, General Motors approached Davis about buying another dealership in nearby Garland, Texas. "Rich had already proven successful with his other stores so it seemed appropriate to offer him an opportunity to purchase the Garland store as well," explains Alan Ross, Dallas zone manager for Buick. They expected similar results in the Garland store, and Davis delivered. For the month of January, after only three months in operation, Davis Buick of Garland was the No. 1 Buick dealership in the Dallas area.
Having purchased two new dealerships in the span of a year, Davis' management prowess was put to the test. Yet, he's managed to reverse downward trends in both stores while increasing the sales trajectory of his existing Indiana dealership. His ability to keep a keen eye on the bottom line while managing threefold growth has earned Richard O. Davis, CEO of Davis Automotive Inc., the tide of 1998 BLACK ENTERPRISE Auto Dealer of the Year.
THE PROOF IS IN THE PROFITS
Davis Automotive Inc. is the umbrella for three dealerships that include Stephens Oldsmobile Honda in Bloomington, Indiana (purchased in 1993), Davis Buick Hyundai GMC in Dallas and Davis Buick of Garland. Last year, Davis Automotive Inc., grossed $64 million on sales of nearly 4,000 vehicles--largely due to his purchase of the Dallas dealership, which accounts for $40 million in revenues alone--slightly over a 275% increase from the $23 million of 1996.
"Gross revenues may indicate a dealer's salesmanship, but return on sales is the best measure of a dealer's business acumen," says Davis, who received a GM Profit Enhancement Program (PEP) award in 1997 from the GM Minority Dealer Association for the Indiana dealership. The award is given to minority GM dealers who have earned significantly higher profits than the approximately 2% industry; average during the previous year.
Davis' Indiana store garnered a 5% profit on $20 million in revenues in 1996. Although he repeated that performance in 1997, he decided to enter the Dallas dealership in the competition instead. "Being recognized by your peers for your ability to run a dealership is like winning the MVP award in baseball," says the 48-year-old Davis. "To receive the award for the Dallas store as well would be like getting the MVP in both the American and National leagues." The 14-year auto industry veteran wasn't always such a heavy hitter; in fact, he never really intended to become an auto dealer.
THE RELUCTANT AUTO DEALER
Davis didn't rise through the ranks of the automobile industry to become a dealer. He went straight from consumer to dealer. It started in 1982 with a decision to purchase a car for his wife, Francine. A sales manager from a local Buick dealership in Detroit lived down the street from him. Rather than go to the dealership, Davis decided to pay his neighbor, Dale Cunningham, a friendly visit. He eventually purchased a Buick Skylark, and the two began a friendly relationship. Cunningham asked Davis, then a salesman for Aladdin Corp.--a maker of thermos bottles and other heat-retaining food storage devices--if he'd be interested in becoming an auto dealer through GM's Minority Dealer Academy. At first. Davis was cool to the idea.
"Dealerships were closing down ever day because of the oil crisis," recalls Davis. "At the time I just didn't like the climate for auto sales." Cunningham's persistence, and Davis' growing dissatisfaction with the possibility of advancement at Aladdin, slowly began to change his mind. "I didn't see myself going any further with the company because of my unwillingness to relocate," says Davis. He'd turned down several promotions because they required that he move his wife and young son, Adrian, to Nashville, Tennessee, where the company was headquartered.
After four months of prodding, Davis finally agreed to speak to someone in the Buick organization, and enrolled in the GM Minority Dealer Academy in 1983. During the two-year program, Davis's time was split between the Academy in Flint, Michigan, and Harvey Buick in Taylor, Michigan, where he applied what he'd learned at the Academy. During the last phase of the program, a dealership became available and Davis jumped at the chance.
He became the first to be awarded a dealership opportunity, in a class that included Cornelius Martin, the 1997 BE Auto Dealer of the Year. With a 15% down payment, and financing from General Motors Holding Corp., he purchased his first automobile dealership for $1.5 million. In August 1984, Davis Buick AMC (now Davis Buick Jeep Eagle) of Battle Creek, Michigan, opened for business.
In his first two years of business Davis was buoyed by the success of his dealer ship--with first-year profits of $100,000 and double that amount in the second year. However, a turning point came in 1986 when Buick changed the designs of some of its cars, including the Riviera, which was his most profitable model. "Customers didn't like the new design and my dealership suffered because of it," says Davis, who saw his Riviera sales dwindle from 50 cars a year to 12. Things got progressively worse from there.
"Battle Creek was a factory town and things were closing up, so people couldn't afford new cars," explains Derek Truss, who worked for Davis for 10 years in two dealerships. Truss, who now owns a Chevrolet/ Oldsmobile/ Cadillac dealership in Zanesville, Ohio, also believes there were too many dealers trying to serve a small and shrinking market. "Times got so tough in Battle Creek that I couldn't afford to hire a porter to dean the cars," recalls Davis, who would go to the dealership on Sundays to wash cars with his family.
"Some years I would make $50,000 or $60,000 and others I would lose it," he says. Davis recalls the immense mental and physical fatigue that running the dealership caused him. He says that the support of his wife was a major factor in his ability to persevere in an environment were he was losing money as often as he was making it. Still, he believes that his current success is built on having been able to manage the business when money was tight. "I turned in better performances as a dealer in Battle Creek than I have in stores where I'm making 10 times as much," he says.
In 1993, Davis heard of a better opportunity in Bloomington. "Lee McDaniel [director of the GM Minority Dealer Program] told me that I could work half as hard and make three times the money," he remembers. After eight and a half years of struggling with the Battle Creek store, Davis sold it back to GM for the chance to invest in Stephens Olds Honda. He hasn't looked back since.
WHAT'S IN A NAME CHANGE?
When Davis purchased Stephens Olds Honda for a capitalized cost of $900,000 down, he decided not to change its name, which had been in the community for 50 years. "When you have a good name and reputation you should stick with it," says Davis. With a customer satisfaction index (CSI) already a stellar 92%, some were skeptical that he could do any better, but he was intent on raising it. Davis' "one price, no haggling" policy on all cars (which Saturn pioneered) was just one of his innovations.
"I've had a number of customers tell me that they were surprised that the store had gotten so much better [under Davis' ownership], especially since they'd thought the store was great already," says Mark Kinser, who'd worked at the dealership for 20 years prior to Davis' arrival. Kinser believes Davis' concern and caring for the customer's happiness, regardless of the cost, was one of the main reasons the dealership was able to achieve a 98% CSI before settling at 94%. Truss attributes the high marks to Davis' contention that any expense incurred when pleasing customers would be recouped by their continued loyalty. Davis also remodeled the store and forbade high-pressure sales tactics.
"We haven't lost a nickel in that store since we opened it," Davis boasts. He is one of only three African American Honda dealers in the U.S. and consistently ranks in the top 30 of over 1,000 Honda outlets in the country. "Davis is an outstanding businessman and he understands the value of good customer service to the overall long-term success of his business," says Gary Russo, Midwest zone sales manager for American Honda. Russo estimates that Davis has grown the business at least 50% in the last five years.
"Our vice president of sales operations visited [Davis] and said to whatever extent he wants to grow with Honda, we would support him," adds Russo. Unfortunately, Honda had no plans for additional stores in Indiana when Davis was ready to spread his wings and take on another dealership. Having paid off his loan for the Indiana store, he set his sights on the Lone Star State. In early 1996, Davis' lifelong friend and fellow auto dealer John Powell mentioned that a dealership down the road from him was for sale and Davis let it be known that he was interested.
A TWO-TIME WINNER
In October of 1996, Davis purchased Carl Sewell Buick Hyundai GMC, and left Kinser, now general manager, in charge of the Indiana store. Davis anted up 15% of the store's $6 million price tag, and secured the rest through GM financing. The plan included an $800,000 lot expansion. "I had one of the best truck inventories in the Dallas area and no one could see them," says Davis. Once the expansion was completed, anyone who passed the dealership on I-20 could see its inventory. And they came. In 1997, he was fifth in national sales of the GMC Yukon, and trucks accounted for nearly 50% of all new vehicle sales.
Davis also brought a tighter accounting system with him. "We definitely run a tighter ship now that Rich is here. Having him on the premises lets us constantly revise our goals to meet our needs," says Mel Warren, general sales manager. Warren also worked for the previous owner and can attest to Davis' control over unnecessary expenses. He was able to achieve much of the $800,000 turnaround of the Dallas dealership in the first year of business by drawing in the reins on overtime and other expenses. For instance, the hands on manager restructured the rent, with the help of GM, to cut payments in half and also reduced the monthly bill for trash removal by half.
Davis was just beginning to feel comfortable with the Dallas store when the opportunity in Garland presented itself. "If I hadn't accepted the challenge of running the Garland store as well, I would have had to deal with a direct competitor in an adjacent market," he explains. The store was in disrepair and had only 10 new and four used cars on the lot. In just a few months, Davis has turned the store completely around and is looking forward to bringing it back to profitability.
Davis practices economies of scale by featuring both dealerships in radio and print ads. In another cost-saving move, accounting for both locations is handled in the Dallas store, cutting down on personnel and making it easier for Davis to keep an eye on the books. The biggest boost to the Garland store's profitability will be the construction of a new Buick flagship store to replace the 40-year-old Garland facility. Scheduled to break ground this summer, the store will have crucial highway visibility and Davis is anxious about the prospects.
PAVING THE WAY FOR OTHER DEALERS
In addition to selling cars, he devotes much of his time to advocating for other minority dealers. Throughout his tenure as an auto dealer, Davis has been active in the minority dealers program--notably as president of the GM Minority Dealer Association from 1994 to 1997. "Being president has been one of the high points of my career because it has given me the chance to give back to the program that has been so instrumental in my success," he says.
Davis has also taken a more direct role in developing African American auto dealers. "I owe just about everything I have to him," says Truss, who began working for Davis straight out of college. Once Davis became aware of Truss' desire to own a dealership, he trained him in all aspects of the store and eventually sponsored his application to the dealer academy. Davis beams when he speaks of Truss' November 1997 purchase of a dealership. Davis' next protege is his 22-year-old son whom he'd like to see follow in his footsteps. "At least, I hope he will," says Davis. "After all, you can't push a rope but you can pull it all day long."
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|Title Annotation:||Black Enterprise 100s: Architects of the Next Millenium|
|Author:||Muhammad, Tariq K.|
|Article Type:||Cover Story|
|Date:||Jun 1, 1998|
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