First off, Brazelton Auto is still running strong (some clients thought from our last newsletter that we were shutting down Brazelton Auto!!!). I will continue to spend the majority of my time over the coming months at our new dealership, South County of Sealy CDJR. Since I’m now a “seasoned vet” from the new car franchise world, I thought I’d share some observations about this side of the industry with you. I’ve been drinking out of a firehouse now for 2.5 months. A franchise dealer adds a whole new dimension to the game. It is more different than I anticipated.
First, pricing is brutal. Our strategy is to price very aggressively; to give customers a reason to drive out to Sealy. My dealer partners are located in a small town called Gilroy, CA about 40 miles south of San Jose. Despite the small population, they sell 400-500 new cars a month. They see Sealy as a Texas version of Gilroy, and are helping us to get to that volume level. The only way to attract that sort of volume is deep discounts. We price vehicles at a material loss, hoping to make up the difference on trade-ins and the back end (finance, warranties, etc). Fortunately, it seems to be working. We’ve taken a store that historically did 15-20 units and moved 82 vehicles in March making it the first month it has ever broken even.
Much like Brazelton Auto, the success of the store is primarily determined by the people. When the discussions of this store became serious, I called our long time Jeep/Ram fleet guy, Brandon Everitt. I was interested in having him join us, but our immediate need was a good general sales manager. He put me in touch with Roel “Taco” Guerra. Two weeks later Taco was my first hire. Taco brought in a whole new sales team. Brandon joined us a few weeks later. Together they add the expertise I sorely lacked, and they deserve 100% of the credit for turning up the volume.
And I call on their expertise daily. Chrysler has a ton of programs and little ways to bring money to the bottom line, from certified pre-owned programs, to demo allowances, loaner car programs, make-ready allowances, volume bonuses, etc. I’ll be learning for quite some time but lean on these guys to get me though. I’ve spent much of my time where I can add value; used cars and the service department.
All those little programs are needed. It’s obviously a very capital-intensive industry. We stock over 200 new vehicles and about 50 used. Being $10M in debt doesn’t help my sleep at night! Unlike used cars, you have to plan your new car inventory at least 60 days out. We order new vehicles not knowing what the market or rebates will be when the cars finally arrive.
Operationally there are some similarities and differences from Brazelton Auto. We use fixed pricing on new cars (can’t go any lower), but we do some haggling on used vehicles. We stress straightforward dealings though, without the manipulation and games most dealers play. We’re trying to build our reputation while we build profitability. Like Brazelton, our people will be the core of our business. Hire the best and take good care of them, so they take care of the customers.
We have a long way to go, but I’m very happy with the progress we’ve made so far. I’m still working 12+ hours a day but can breathe a bit during the day. I look forward to the day when my time is more evenly split between the two stores, but it’s exciting the see things improve out here daily.
GONE TO THE DARKSIDE: WE BOUGHT A DEALERSHIP!
Well, we bought into and are running a Chrysler, Jeep, Dodge, Ram (CJDR) store in Sealy, Texas! Brazelton’s South County of Sealy is the name (yes, it’s a mouthful). Our partners in the deal are the South County dealerships in California, one of the top 10 CJDR dealers in the country.
Buying into a franchise dealership basically allows us to serve you better, mainly on the lending side. The trend in the lending world has been to cut off independent dealers, and we’ve lost all our best lenders over the last couple of years. Unfortunately too many sketchy dealers ruined it for the good ones. However, if you are tied to a franchise they think you are golden! So now we have access to more lenders which gives us more lending power and even more competitive rates to pass on to our customers. It will also speed up our process as well. As many of you have seen, the process of handling loans went from taking an hour or so to process to taking a couple days (at least).
Some other benefits are access to more pre-owned vehicles through franchise dealer only sales. Of course, this is only to CJDR products, but we sell a lot of used Wranglers and Grand Cherokees. We’ll also be building up the fleet department and CJDR has a great fleet program. Please let us know if you or any of your friends are looking for a very aggressive fleet program!
What about Brazelton Auto?
Brazelton Auto is still here to help with ALL makes and models with an UNBIASED approach to car buying, though many of you have known we have praised the Grand Cherokees for some time (just ask Lewis’ wife). As mentioned before, we’ll have even better lending potential with both leasing and conventional financing. Lewis will be splitting his time between Sealy and Brazelton Auto, particularly in the early stages. Bill will be handling most of the day-to-day management operations at Brazelton Auto. Hopefully you won’t notice a difference, except that Lewis might be a bit slower returning your call.
So, this is an exciting time for us, and more than a little nerve wracking. There is quite a bit more to running a new car store vs our little operation! We are drinking out of a firehose right now, but we are seeing good progress already.
In mid-2018, Ford’s all new Expedition and Expedition Max came onto the market to go head-to head with GMs Tahoe/Yukon and Suburban/Yukon XL. After years of a mediocre product, the new Expedition came out swinging. It’s certainly caught the attention of our customers as well, as we have sold more Expeditions in the past several months than we have in the past several years.
So, what’s new? Everything; new sheet metal, all new interior, upgraded drivetrain, steering, and suspension. However, it shares a whole lot from its pick-up truck counter parts, so there is less worry of the first-year model issues. It’s powered by the EcoBoost 3.5L twin-turbo V6 that puts out 375 HP and 470 lb-ft torque (on the Platinum trim level it is tuned to put out 400 HP and 480 lb-ft torque) and is backed by a new 10-speed transmission that is found in the F-150s. The technology in the Ford is just about unmatched from the simple infotainment and navigation, to safety and towing features, the car can even park itself (kind of). Some of the features offered also seem to be unmatched, from the panoramic sunroof to 2nd row seats that can give access to 3rd row seats easily even with a car seat in them.
The big question from our clients is “how does it compare to the GM products” since that has been our bread butter for years? Well, there is a lot that goes into it. There are things on both that are good and bad, but Ford finally has a vehicle that is bringing a lot of clients away from GM.
On the trim levels, Ford offers XLT, Limited, and Platinum. Within the XLT and Limited trims, each have three package levels. It’s a little tricky to compare apples-to-apples, you have to compare them with certain options within trim levels, but below is as close comparison of some of the more common trim levels we sell. There are some small differences still, but this gets you close. You always have us to call to make sense of it all!
Price wise, they are neck and neck, but Ford may arguably have more bang for the buck. The mistake a lot make is thinking the Expedition is more expensive because they compare the Tahoe Premier trim level with the Expedition Platinum trim level (because they are the highest trim level for each) but remember Platinum level is comparable with the Yukon Denali.
In the end, Ford has a full-size SUV that is making an impact in this market. It’s long overdue after having years of an average product that was lacking power and appeal. Now, to see what GMs next play is!
Everyone has their gift. I consider myself somewhat of an expert at both getting stuck and getting unstuck. “If I had a dollar for every time ….”. Now a lot of times getting unstuck takes a lot of work; but a lot of times it doesn’t. Here are some low effort hints that could get you out of a jam without too much sweat;
- Rule #1 – when stuck in a hole, stop digging! If you’re tire is spinning and you’re not moving, you’re just digging a rut and making the situation worse. This is common sense can apply to so many aspects of life, but it’s regularly ignored!
- Point your front tires straight – If you have a two wheel drive vehicle and your front wheels are turned at all, you’re increasing the resistance for your back wheels to get you moving. Even if you have a four wheel drive, it’s better for all the wheels to be pulling in the same direction than battling each other. Once you’re moving, then turn.
- Rock it – Quickly shift from drive to reverse and back to get a rocking motion going. The momentum may lift you out of the rut. But remember, as soon as you stop moving, refer to Rule #1!
- Partially depress your parking brake – Most vehicles have what’s called an open differential in their axle (sports cars and trucks/SUVs with a tow package are the exception). An open differential means that power from the engine is sent through the path of least resistance. If one back wheel is on ice and the other on pavement, the ice has less resistance so that wheel will spin, and the vehicle does not move. Push your parking brake about half way down (can’t do this if you have an electronic parking brake). That will engage the brakes on both sides of the axle, but not enough to fully stop them. Now the resistance is equal. Both the tire on the ice and the one on pavement will get power, and the vehicle will move.
- Deflate your tires – this can roughly double the “contact patch” between your tire and the ground. Think of a basketball sitting on the court as it deflates. Drop your air pressure into the mid-upper teens, or if you don’t have an air gauge, to where your sidewall is about half its normal height. This works well on all surfaces, but particularly on sand. It does not work as well if you have low-profile tires.
Everyone needs at least one redneck friend. We’ve got you covered.
When I started working on cars I was changing oil every 3,000 miles, belts were changed every 2 years, tune ups every 12,000 to 15,000 miles (if the parts lasted that long). There was always something that needed attention. Your hood was opened 3 to 4 times a year. That gave us many opportunities to find problems you might have. Today oil changes happen between 7,000 and 12,000 miles, about once a year. Drive belts last 50,000 to 80,000 miles, and the first tune up is around 100,000 miles. Your hood is now only opened about once a year. Just like going to the doctor for an annual physical, your car needs the same physical. When we raise the hood on your car for its annual oil service, we look at everything we can. Our “Vehicle Health Report” gives you peace of mind when you get in your car. Our goal for your vehicle is to be problem free for the next year. We could change the oil and filter, check the fluid levels and add washer fluid. It would cost less but that would be an injustice to you. We pull the wheels, rotate the tires, check the brakes, belts, hoses, battery, cooling system, all the fluid conditions, wiper blades, lights, and many other things on our 130 point inspection. We won’t just do an oil change because I never want you to ask me “why didn’t you see a problem? You just worked on my car.”
Last week a customer came in with his driver’s seat not working. We checked the problem and found a seat motor not working. Upon further inspection we found water damage from the Harvey flood. This car had less than one inch of water on the rear seat floor board. The large amount of moisture in the air damaged the electric motor. So one gallon or so of water did thousands of dollars in damage one year later! As we were taking the seat apart I noticed how much stuff you are sitting on. Four electric motors, air bag on the left side, seat heater, seat cooler, wires from top to bottom, seat switch to move the seat where you want it, a computer to operate the comfort system and remember what settings you like. To think when I started all you had a lever that moved the seat forward and backward.
|Auto Imports to the US||Current Import Tariffs|
|Country of Origin||$Billions||Cars||Truck/SUV|
* currently exempt from tariffs under NAFTA.
* China recently agreed to drop to 15% in response to tariff threats.
There has been much ado about automotive tariffs and a potential trade war in the sector. The threatened increase in the US tariff to 25% would have devastating effects on the automotive sector, both here and abroad, and undoubtedly lead to retaliatory tariffs overseas. Hopefully this is a positioning and negotiating strategy, not a goal of the administration. The recently announced cease-fire with Europe with the aim to get all automotive tariffs to 0% in both directions is certainly encouraging.
Interestingly, I don’t see any winners from a trade war. “Domestic” automakers are thoroughly global company’s now, making tons of cars and sourcing parts internationally. And alternatively, almost all of the “foreign” manufacturers build lots of cars here and employ thousands of US workers. For instance BMW exports about 70% of the vehicles they produce in the US and helped lower the trade deficit in 2017 by more than $1 Billion. There will certainly be some makers who are hurt worse than others, but it’s shades of gray.
So how legitimate are our cries of unfair automotive trade tariffs? Well if you look at cars, we have every right to complain. Until just recently, China’s import tariff was ten-fold ours, and Europe wasn’t much better. But it’s a different situation when it comes to trucks and SUVs. Back in 1963 Europe imposed an import tariff on US chickens. We struck back with a 25% import tariff on trucks and SUVs. The so-called Chicken Tax has virtually eliminated truck and SUV imports ever since (with the exception of Canada and Mexico, which are exempt under NAFTA). That is why all of the foreign manufacturers plants in the Southeast part of the country make SUVs, not cars.
We hired an intern for the summer. Stuart is the 16 year old son of a good friend and hunting buddy, so we’re keeping him busy with everything from picking weeds to passing out marketing materials. Part of his responsibility is to write a blog. I told him there are two rules; 1) he’s free to write about anything he wants (which I’m already regretting a bit), and 2) it better be entertaining. Here’s blog #1! (I love how he puts a header on it like I’m going to grade it) – Lewis Brazelton
June 12, 2018
The weekend leading up to my first week at Brazelton Auto, I didn’t know what to expect. The only person that I knew there was Lewis Brazelton. Now if you hadn’t met Lewis, you be able to pick him out of a crowd with a basic description. 6’4, gray hair with a fairly sized bald spot and he is usually wearing something circled around jeans and cowboy boots. On my first day interning at Brazelton, I had the chance to meet everyone in the office. Each office had a different character working within it. The first person I had met was former “Varsity Memorial High School Cheerleader,” Bill Lang. Bill used those cheer muscles and sprung to open the door and I could tell he would eventually appreciate my helping hand. The next person I met was Debbie Morgan or the Brazelton Auto PA and speaker system. The office to the right of Debbie’s is Modi’s. The lights were mostly dim, which created a proactive vibe specifically meant for Modi. Across the hallway sat another rookie at Brazelton, Sarah. She had only started a week before I came but it seemed like she had already been working there for years. I kept on moving towards the next offices to find Brad and Gabe. If you ever want a meal plan to shed those couple of pounds, Gabe is your guy. If you are ever considering of disregarding Gabe’s meal plan, Brad is your guy. But before I had my meet and greet of the office, I met what could be known to some people as the face of Brazelton Auto; our keen and helpful receptionist, Natalie.
I forgot to mention that I am also 16 years old and have no working experience at all. Yet my dad and Lewis behooved me to work at Brazelton Auto. I have been working here for about two and a half weeks and it has served as a tough but ethically rewarding job. As I said earlier, each office holds a different character. That is what makes each and every one of those people an integral part of the team that has created and keeps on progressing this company. For instance, there has never been a time where we haven’t all had lunch together or with someone else in the office. Everyone has a role here business related or not and everybody feeds off of each other’s energy in the office. That is what makes this company special; the employees. I can’t wait to continue the rest of my summer here at Brazelton Auto where I’m understanding how to work and sweat, while also finding ways to have fun with the people working around me.
I can’t blame my parents. They raised me right. Growing up in Memorial and Tanglewood, all my friends have real jobs. Professionals. But I’m getting ahead of myself.
I started my first company at 15 years old (landscaping), so of course bought a used truck to go with it. Seems like I spent as much time under that truck as in it. I rebuilt motors and swapped out the tranny, suspension, interior, etc. For fun we’d go out to Addicks dam and get stuck in the mud.
Eventually I went off to college. I graduated with a degree in Beer and spent the next two years cowboying on various ranches in Texas and Montana. Eventually I caught a slight case of maturity and decided I needed a real education, so went back to school for my MBA. That decision was a real encouragement for my flabbergasted father, but it turned out to be more of a head fake when I slipped into the car world.
In grad school I took an Entrepreneurship class. We were required to build a start-up business plan and present it to venture capitalists. My concept was basically an inspection and certification program for used vehicles. This was in 1990, before anyone had ever heard of a certified used car. After grad school, I raised some money and started that business. It survived, but never thrived. My first sign of trouble was in a meeting with the patriarch of a well known local dealership group. I got about half way through my pitch on how our inspections would help him sell more and better used cars. He stopped me and said these words I’ll never forget; “Why the f*&% would I want to know what’s wrong with my cars?”.
I’ve basically been standing against dealer mindsets like that ever since. Basic questions about the industry just wouldn’t go away for me. Why was the car buying process so painful? Why does the dealer/buyer relationship have to be antagonistic? Why does it take 2+ hours to do the documentation after you’ve agreed on the deal?
I sold out of my first business, and for a short stint ran the largest leasing company in Houston. Then in 2002 I hung out my shingle for Brazelton Auto. Leasing allowed us to handle new cars as well as used. I was determined to do it differently. From the very beginning we instituted two policies that were foreign to the industry;
- Flat fees
- No commissions
I’d argue for the first time in the industry we elevated the relationship over the transaction. You see all dealers will say they want to earn your business forever, but in reality very few car buyers stick with one brand of vehicle forever. Realistically, the dealer knows you will probably not buy that brand of vehicle again the next time you’re in the market, so they had better get what profit they can from you while they can. Contrast that to Brazelton Auto. We handle new and used, any make or model. If we do our job right, you should come back to us forever for all of your vehicles. So we’d rather make a little on each of your next 20 cars, than as much as possible on your next car.
One other thing reinforced this relationship focus; I didn’t have money to advertise in those early days. I sent a letter out to everyone I knew, describing what I was doing. A few people started calling, then a few more. It was all word of mouth. Even today, 93% of our business is repeat or referral. Basically all of our clients know each other. That’s great news, unless we screw up! Word spreads awfully quick and we don’t want to tarnish our reputation. Which is not to say we don’t screw up occasionally, but when we do, we bend over backwards to rectify the situation.
So those are our roots. Fortunately, our client base has steadily expanded. We did branch out in 2012. We left our small, rented office space and purchased a new facility that allowed us to 1) add a full service department and 2) keep some of our best trade-ins as inventory. Our service department certainly added to the scope of our offerings, but we brought the same template we’d grown up with;
- All makes & models
- No commissions (most people don’t realize service advisors are commissioned salesmen)
For better or worse, I learned the car business on my own. I made plenty of mistakes, particularly early in my career, and most of them were expensive lessons to learn. But that independence also allowed me to stay outside of that dealership mindset. Today we’re hardly that one man show we used to be. I’ve been blessed to work with a great team of friends who share my vision for client service. Of course, none of this would be viable at all without our great group of loyal clients who not only sustain us with their business, but grow us with their referrals. Thanks to all who have been a part of that!