A dealer with a bias toward centralization

Baltimore dealer group is known for innovation

Automotive News / March 19, 2007 - 1:00 am




With seven dealerships, Schaefer & Strohminger is a relatively small group. But the Chrysler group and many larger dealership groups cite the private Baltimore company as a model of operating efficiency and a source of ideas to borrow.

Schaefer & Strohminger CEO Joe Jankowski has a reputation as an industry maverick because of such innovations as eliminating general managers at dealerships. Jankowski, 51, discussed his business strategy with Staff Reporter Donna Harris.

You are considered a pioneer in centralizing your operations.

Back in 1992, we centralized accounting. There was no technology to do this. I had an IT person build a customized system. It was considered taboo. I was the Antichrist.

In those days we had general managers who wanted complete control over financial statements and cash flow and how inventories were handled. There are people in the auto retail industry still talking about centralizing operations and whether they want to pull that trigger.

We dramatically reduced staff. We had 38 total accounting people in five or six stores. Today we only have 15 people for seven stores. In 1997 we eliminated general managers. We have store managers who run sales in our dealerships.

Our fixed-operations people report to our two fixed-operations directors, who work for the management company. One specializes in service and body shop, and the other in parts. We used to have a formal director of sales but eliminated that position. Co-owner Dave Strohminger fills that role now.

We now have centralized accounting, legal, information technology, tax, human resources, warranty administration, fixed operations and Internet lead management.

What's your next initiative?

We just started taking incoming service calls in a centralized environment. We have Web-based service scheduling, and our entire phone network is linked to handle this. So when a customer calls, the person who answers the phone can immediately help schedule an appointment. If they can't handle the call, the customer will be linked to a service manager or adviser.

We already field phone and Internet sales leads in a central environment. Internet sales represent about one-third of our total volume. We record all incoming calls for quality purposes, and we track them for advertising sources. Each advertising source has a different 800 number, and we monitor those calls. We try to help the customer immediately.

How much have your centralization initiatives saved the company?

I couldn't tell you anymore - it's so deep in the culture. It's really a savings in personnel.

What about used cars? F&I?

We are bringing in a used-car sales trainer so we will not take our eyes off the ball.

We also are driving higher levels of finance and insurance profits. In the last year, we have moved our numbers up by over $100 a unit. We expect to add another $100 per unit this year. We are running $920 a unit now, and our goal is to be at $1,000 per unit.

We've had a really serious focus on training personnel and setting expectations. You get what you expect. We have three managers consistently selling over $1,000 per unit. And they are very customer-friendly.

You have said your focus is on selling prepaid maintenance plans.

Maintenance plans are part of a holistic approach that moves the customer from the sales department to the service department and captures customers for the long term. We have three stores doing in excess of 50 percent sales penetration on maintenance plans. The goal is to have every store sell over 50 percent of its customers maintenance plans.

We have dramatically lowered the price of the product, to $295 for three years worth of oil changes and rental cars if they bring their car in for service.

How soon do dealers start losing their customers' service business?

From Day 1. Forty-five percent of people who buy cars from us never show up in the service department for customer-pay work. After three years, 75 percent of our customers are gone.

We have high customer satisfaction. But why don't they come back for service? If 75 percent of customers are gone three years after the vehicle purchase, lots of stuff has to change.

We are going to have mandatory training over the next four months for every service adviser and manager. We are going to certify these folks, and we will give them continual feedback. Whenever customers walk into the service department, they will know exactly what to expect from that experience. We expect increased sales.

What's your goal?

If we retain 50 percent of our customers after three years, I would consider that a wild success.

Our average hours per repair order used to be 1.6. Right now it is running at 2.1. We think this program will take us to 2.5 hours per repair order.

Why did you divest your Toyota dealership?

It was in a tough area of town, we couldn't get inventory from the factory, and somebody offered us a significant amount of money for the property. We were going to have to build Toyota a new facility. So instead of putting capital in, we took capital out.

You have bought out competitors only to close the points.

We are strengthening our operations and doing more with our existing brick and mortar. On two occasions we have bought competitors and closed the points.

We purchased a Mazda store at a very good price. There are seven Mazda dealers in our market, including our two. There is not another competitor until the 15-mile radius. As part of our strategy, we studied traffic patterns. The harbor is a natural barrier between us and our competitors. And between two major interstates, I-83 on one side and I-95 on the other side, there is a swath down the middle that is about 400 square miles. We now have control over that geographic market.

There are seven Hyundai stores in the Baltimore market. The dealer who sold us the Mazda store also owned a Hyundai store within that same swath. We took that dealership and moved it 3.5 miles to an existing facility. We still have one of the only two Hyundai dealerships in that geographic area.

Your company has a long history.

It is the oldest Baltimore city dealer. It was started in 1917 by two brothers-in-law, the father and grandfather of the existing dealers.

If you question anyone in this town about our reputation, we will be off-the-chart good. Hopefully we will stay ahead of the curve so we will be here for the next 90 years.