SDR #317: Navigating The Next Dealership Crisis

Welcome everybody to Service Drive Revolution. Today we're going to talk about the next impending crisis. We have a lot of talent here at the table. We have Gene Cliff, Christian Hoagie, Vicky Fariborz. We're having a meeting here and our virtual meeting is coming up tomorrow. So I thought when everybody was here in the office it'd be fun to have a roundtable and talk about some of these issues that are facing our industry like tariffs and arranged marriages, all kinds of stuff. And we also talk about which talk tomorrow on our quarterly meeting that everybody's the most excited about which the choices are the five love languages of parts. You're doing parts is from Venus, services from Mars and you're doing atomic habits of the service department. So the end you'll find out what we're more excited about and much, much more. Coming up on Service Drive Revolution.

The impending crisis. The impending doom. So how many crisises have we endured in our time? We had. We had 2008. Right. We had Covid. I remember one where the Volkswagen got in trouble.

Diesel gate.

The diesel gate. I had two dealers on that day call me and tell me they were closing their Volkswagen stores, like literally giving up and closing them in a panic. Remember how many clients panicked.

During COVID and lost text because they, they let. They furloughed them off.

Yeah.

What were some other crisis?

80S.

Oh gosh, you can.

80S.

Sorry.

Just a whole decade was a crisis.

Like I always felt like I missed out on that part of the, of the car business. The cocaine on the desk.

Cdk.

Oh yeah, the CDK outage.

Good job. Cdk.

I mean if you would go back, you got Oklahoma City bombings and then you had nine, 11.

Why did you look at Hoagie when you said that?

Well, just one of the. In honor of his was people.

That was just what it was. But I mean you had all these, these things that took place. Each one. What about the doom was a great one.

What about the big airbag recalls? Remember that?

Yeah, yeah. Ignition recalls.

How about the liftgate latch on minivans back in the late 90s?

Yep. The Toyotas that had the unintended acceleration.

And the Audis that blew up when.

You ran into tap the bumper. There's the Pinto. The Ford Pinto.

I remember that was my first car.

What was the Ford Pinta.

Just, just the Ford gas tank explosion problem.

I don't remember that.

Yeah, Bridgestone tires.

Oh, that's right. Forgot about that.

That's a good one. Yeah. So now we have tariffs.

Right. The.

The next impending Crisis or the next impending doom. So if. If we look back on those.

And.

You know, all of them, we have a unique perspective because we see what clients do and the ones that make it in, the ones that lose. Lose ground or lose their leverage, in a sense, by their actions. What sort of behaviors suit the ones that end up coming out ahead no matter what the crisis is? Like, what. What is it that we see?

Well, you do have to admit the tariff thing is a little out of control. I mean, like, air used to be 25 cents at the gas station. Now it's a dollar. I suppose that's inflation.

Imported.

Jeez.

I need a drum set in a similar.

Oh, my gosh.

I like it. Do you want to add anything to that, or are you just going to.

Leave it on that? No, it's going to let that soak out there.

Yeah, somebody just got it.

I think the dealers that will come out on top are the ones that will double down on what they're doing that's successful. They won't shy away from, you know, the noise, and they might lean into it, and they found success when others are in fear.

That's good.

I think the dealers that are successful will find a workaround. They're going to see it, look at it as an opportunity, and work through it and not sit back and let it happen to them. They're going to work towards it and move forward.

Yeah.

I mean, the funny thing is, is.

During COVID fixed ops got busier. Right. Because people kept their. It seems like the one thing that happens with every crisis is do you guys remember when, like, the average car on the road was, like, nine years?

Yeah.

And then 10 was like, oh, my God, the average car on the road is 10 years. And then now we're knocking on 14. Like every crisis, people just keep their cars longer. Which benefits service. There's clearly no. No tariffs on labor. Right. There might be on parts, but there aren't on labor. And so when tariffs affect new cars, it means people are going to keep their cars longer. What if we see people keeping their cars for 16 years? Like, it just seems like it works to our advantage every time.

Well, that's where the preventative maintenance comes in. And people who maintain their vehicle, they can keep it longer and they get better ROI on their investment.

Even during COVID the dealers that knew how to sell customer pay work and not just rely upon warranty or internal work, they were successful or even more successful because they found a way.

How many dealers did we have get better during COVID Oh, My gosh. It was a really big list. It was. It was insane.

Don't you also feel like the gap between the. The performers and the underperformers went, like, super grand Canyon wide?

Yes.

Yes. Huge.

Yeah.

Like.

Like the. There was a group of them that just gave up. They literally just gave up. It was like they just. One more thing. I can't handle it. I guess that's a part of it, too, is like, they're not surprised in a way. Like, they expect things to happen, and so they look for the leverage. It doesn't shut them down. It almost gets them fired up. Like, they feed off of the challenge.

It's just not an option for them to quit.

Yeah.

And those are the success.

No.

I remember during the COVID thing when we heard, like, one person started laying text off, and all of us had to, like, get on the phone with our clients. Don't do it. Don't lay them off. I don't care what you hear, I don't care what your golf buddy tells you. Do not lay your text off. We'll figure it out, I promise.

Well, I remember in 2009 or whatever, autonation. Well, I just. I was in it. I was in an interview with an advisor, and I told them to bring their numbers. And it's a. It was a Mercedes store that they came from a big Mercedes store. And I'm looking at the numbers and I'm like, wow, you're number one. And I go, so what happened? And they go, they let me go. And I'm going, why did they let you go? And they go, because I was the highest paid. And I go, nobody at AutoNation knows that you're the highest paid because you produce the most gross. And, like, I guess not. And I'm like, how about the second person? Oh, they let them go, too. I go, do you have their phone number? And they're like, yeah, can you call them right now? And literally hired both of those advisors. And then the best part is text came to you. So the next question was, well, how many texts are going to follow you? And they looked at text the same. Like somebody at autonation came, who knows it came from Best Buy or something. But whoever was in charge at that point of the western region had no idea that the highest paid advisor was the one producing the most. They thought they were just the highest paid. And we got a cut payroll. And so, like, just imagine being the fifth or sixth advisor on that list and you're now like, you're the veteran. Like, just think about those Poor customers, too.

So funny, I wrote down a couple things. Adaptability comes to mind, like when things are going bad or the pending, next pending doom, like their adaptability.

We kind of talked about this before, but mindset, the mindset of the people that are super successful coming out of it. I remember I worked at a Chrysler dealer.

In 2009, and we were convinced that we were the one losing the franchise because these dealers were getting letters and we were on the verge of sending out a mailer because we were convinced that the dealer down the road was going to be the one. Well, we ended up being the one. And so we had to, we had to adapt and change and transform. And then kind of the third thing I put down was preparation. Like knowing that there's going to be something. It might be this thing now, it might be this thing later, but knowing that it's going to be something and just.

Prepared and, you know, prepare my mindset and prepare to be adaptable and all those things.

Are you a doomsday prepper?

No.

You know. You know, one thing that I, I thought about when we went through Covid is I thought about how lucky I was to have the team that I had. In a sense that we kind of figured it out. Like, we just sat in a room and we looked at everything. We looked at what, how much money was in the bank, like, you know, and we kind of just talked to everybody and it, it was, it was more than anything a proud moment of just how we all kind of came with solutions and worked through it. But there was no panic, in a sense. And I think that that's a part of it too, is the dealers or the general managers or operators that have a really good team around them are way more willing to step into the challenge or the fire because they know that somebody will have an idea or even if they try, they'll learn and get better and they'll adapt. Versus all is lost and the all is lost. Usually those, those type of operators, when they turn around, there's. Everybody else is running for the door anyways. They're calling around, trying to figure out. But there's also a pattern of that, right? Like those, those guys that lay people off. The, the message that that sends to the troops lasts forever. Like, you remember when you work for somebody that, oh, times got tough and I was irrelevant, right? Like, how many, how many stores did we have that picked up talent that were so jaded because they were like, hey, I've worked here for 20 years and then I'm disposable. Because of a. Because of a virus or.

And it was so fast. Like, like, if it happened in the middle of March, they were laying people off by, like March 23rd.

Oh, they're just a panic.

It was immediate. The button got hit, and then they just say goodbye to people. It was just insane.

Yeah.

But it is.

It was polarizing. Like the.

Oh, yeah, that Grand Canyon thing is.

Yeah.

People went to the top and people went to the bottom. Like, there wasn't anybody in the middle. And it's a weird thing to. During a situation like that, to have people having record months.

I noticed it in restaurants, too.

Yeah.

Like, some restaurants just closed and gave up. And other ones were like, okay, we'll do delivery. And those ones that decided to do that had for years been collecting. You know, you started getting emails because they'd been collecting emails, and they're like, hey, we're, you know, we're delivering now. Please help us keep our team going. And like you, you were rooting for them, you know, but they'd done the work of having a customer list so they could go direct. They were. They were quick to adapt to the delivery thing, all of that.

I knew that me as a consumer, I then became more loyal to those folks that were more adaptable because I appreciated the fact that they. That they worked through it, that they.

Were about the people.

Yep. They were still there for you. And so I wanted to make sure when it all ended or the time it was ended, I wanted to go back to them to show my appreciate to them. And the same thing with the dealers that just didn't close well, it was funny.

Like, we had advisors that would go out and deliver cars during that time. Right. Like, we had a lot of clients delivering. And I remember listening to the owner of Craig's on Joe Rogan, and.

We.

We would order from there during COVID and they literally would have the waiters deliver it, and he would, like, say, like, you know, tip them and all that. And so you would tip the. The waiters who brought it to you. Like, you would tip them if you were in the restaurant. And it kept everybody going. It was a really smart strategy.

In a sense, but very similar.

Sorts of, you know, mindsets from restaurants to. To auto. It was the, you know, the winners and the losers kind of had the same outlook.

And I think it's the ability to be creative in a time when people are doing things the way they've always done them. I was at a store where we started doing.

Services mobile, and we started taking cars to people's homes to do, walk around so that they might buy cars. Whereas some stores were just saying, well, well, if customers can't come here, how are we going to survive? Or parts stores delivering on a more nationwide level as opposed to a more local level. So I think the creativity on how we're going to succeed differently than how you may have in the past might be one of the tools.

It's a short game or a long game. So those guys that got rid of, you know, the technicians.

Like, where are they at now? They're the ones scrambling, saying they can't hire versus a long game of, you know, to your point, the guys that, whatever it was 23rd March, like, oh my gosh, we gotta, we gotta do this thing now versus the long game is we're gonna get, get past this. This is just the next thing.

You know what the other irony behind that is too? Those same people that are like, they decided in five days to let Tex go, it will take them seven months to decide on a pay plan change.

Yeah, for sure. They're not sure about anything.

Completely agree.

But they love to panic. But they're going to panic.

Pull that button.

There are those that they operate out of fear and they're those that they see that as an opportunity. And I think the teams that are nimble, like you were saying earlier, creative, they already have a structure in place by collaborating and be ready for the next thing that happens and having those systems in place that you can talk amongst yourself and be ready to see what's the best way to, you know, set the course. Those are the ones who are successful versus the ones that do the knee jerk reactions and just out of fear.

At a dealer in Chicago. And one of the things that they did is they would deliver pizza to the frontliners, to the fire departments, to the hospitals and pick their cars up and bring them back and work on the cars and then bring the car back. And again, from what they say, they have a very, very loyal following now. And because they still needed their cars worked on and they just couldn't get out in the midst of all that.

Kind of figure out who's going to be there for you and who's not. Yeah, yeah, that's great.

Yeah, that's a great kind of service mentality too, like very much in the spirit of hospitality, taking care of people. So there's been a thing in our industry forever that that's a cousin to this is change and how adverse to change we are as in, as an industry. Like I remember in my 20s, I was going in to fix a store, and the HR department had made everybody, as a requirement, read who Moved My Cheese. And so when I came in, everybody was like, you're the guy who. They made me read that stupid book, like, I'm not gonna change anyways. Like it was, you know, but, you know, there's all these. We talk about change, but in a sense, we're like the slowest industry to change in a dinosaur in a lot of ways. Well, why do. Why do we think that is? Like, what is it about our industry that creates this, like, adversity to change when. And, you know, in a lot of other industries, they're looking for it, they're trying to innovate and trying to improve. What is it about us that keeps that from happening?

I think it's ego. And I think ego can get in the way of the possibility of change and that the idea of change could include.

My ego being bruised in that I might not be able to succeed in the new way of doing things. So by keeping things as archaic for as long as possible, I have control over those things, and thus my ego is not bruised.

I also think that I hear at dealers the common phrase of, oh, that's just the way we've always done it. And people don't present change in a very good fashion because they don't show employees or such how they can be a part of it. And so there's not a lot of buy into it. And change is good. Otherwise we would just all be, you know, walking around killing dinosaurs and not doing what we're doing now. So I think it's all in the presentation. It can always be the garbage can lid.

But isn't it funny how a lot of times they wait until they have to, like, remember that book we read called Change or Die? And how people, like, literally wait until they're dying of heart disease or whatever it is to change the way they eat or to change their. Their habits? Doesn't it seem like that with. With our industry, they could have it so much better, but they just, they. They're. They're almost sadistic in the way that they want the chaos instead of changing.

Don't fix it.

Right?

It's like, but it's broke. It doesn't have to be that hard.

Yeah, well, they attach their identity being able to manage through the crisis. Right. Like, that's the thing. I think that really the automotive industry, in comparison to many other industries, it's got this crazy, like, legacy entitlement of it'll always be there, and everyone will wait for us in the business. So, like, that is one of the things that I think allows complacency, failure for creativity, and just more than so many other industries where literally they'll make the decisions as a whole and everybody agrees with each other, which make no fricking sense whatsoever. And it's like everyone's like, oh, yeah, that's a good idea. We should. Let's not talk about this thing. Like, I. I know you brought it up a bunch of times, but when you were going to do a speaking thing and it was like early 2010s, I think, and you wanted to talk about, like, Tesla and disrupting the industry.

You'Re talking about nada.

Yeah.

And you're literally speaking nada.

And literally be nice to you. For some reason you were told that.

Not to talk.

Like, how I just.

Not to talk.

But you're not to talk about Tesla. Tesla.

And then I said, why?

And they said, because the dealers don't want to hear it.

It's not a popular subject.

Not a popular subject. Which is exactly the problem with the industry.

Yeah.

We'd rather, you know, put the head in the sand and wait as a.

We don't want to be uncomfortable.

What if we took something like a disruption of Tesla and turned it into an advantage for ourselves? Like so many things that Tesla is doing now as a car company. If we would have started trying to figure that out 15 years ago, like, we could be in a different spot. Is an industry.

Yeah.

The last CEO of Blockbuster thought, you know, what we need to do is we need to sell. We need to create home theater at home. So we got to sell popcorn and liters of Coke or Pepsi or whatever it was that was his idea to save. It was just double down on the.

Thing and late fees.

Yeah.

Need more late fees.

Yeah.

CEO of BlackBerry had the same thought. Right. We need to stick to physical keyboards when everyone obviously was going towards touchscreen. And that was the cross that he was willing to die on.

Yeah. No crackberry. No more.

I don't know.

I miss my old BlackBerry.

I like my BlackBerry too.

Yeah.

Is it the wheel or the.

The wheel.

Yeah.

Yeah.

See, you could have done the wheel but had the other part digital, maybe. I don't know.

Yeah.

Maybe It's a hard problem to solve.

Kind of piggybacking on two things that I already said because I. I wrote both of them down. Tribal. The whole tribal thing. It's always been. It's always. It's just the way or that's the way they're doing it. Control definitely wrote that one down. And then the last one I wrote down because it's super fascinating to me is we kind of wait to the things like engulfed. We see a little spark, you know, a little, A little flame that we could probably really stomp out. But we wait to that damn thing is like in six alarm fire. And you know, then we decided we want to do something.

I think that you're right because look at the whole CDK situation that happened. I bet you dealers aren't prepared for it to happen to Reynolds or Techeun because it's going to happen again. And. And that's one of the things that I would tell my dealers when all that was happening, especially the ones that weren't. Cdk, adp, whatever you call it now. I said you need to be prepared for this. Do you have handwritten tickets? Do you have time clocks? Do you have time cards? Let's get in front of this instead of behind it because the day that it happens, everybody's going to panic and then everybody wants to stop business. Oh, we can't work on cars.

Think about the dealers that were successful at the CDK thing. Like I think about one, one of our clients in particular, that they still, you know, almost experienced growth during that time because they just figured it out.

Oh yeah, that's true. We had people get better.

Yeah. It's crazy. But it was a choice that they made to, to do it versus well, because the.

I think what you're talking about is the fact that the cdk, like they weren't able to rely on the computer. So what they did is like we're handwriting, we're having conversations with customers. We're asking them questions about themselves and about their car. Like it brought back the customer experience to where. I think that's kind of what's happened is, is that like over the last decade we just pile like one software program on, then another software program. Like they're trying to fix the fact that we don't do a great job of taking care of customers with all these software programs. Well, the software programs go to crap and then we're back to having conversations with the customer. And then they just kind of remembered that afterwards. Like, oh, wait a minute, it was way easier to like sell and present when we made friends with the customer. Like, who ever would have thought of that?

But by God, get tablets. Yeah. Yes.

Because you don't want to have to look the customer in the face.

Yeah, that'll make it better.

So the advisor can just be down here the whole time? Yeah. Any. Anything else you guys want to talk about that you're seeing out there?

No, I think just in these situations, the only thing I would add is, you know, one thing we talk about from time to time is just the perspective we get. We're on the outside looking in. We're looking at all of our clients, financials and results every month. And so we have the unique opportunity to have a great perspective and see what it looks like with. With great clarity. And I think as you unpack all these different things, people that are adaptable, people that make the decision, that are more apt to change all of those things, is.

They are conditioning themselves to focus on what they can control. If I focus on what I can control, whether we're in a time of crisis or not.

They'Re focused on what they can control. And that has more to do with our outcomes than anything else. And then when crisis comes, I don't know anything else. I've already conditioned myself to only focus on what I can control. And then there's no panic in that. It's just, you know, everybody else is buying into the fear and jumping off the ship or whatever. And you know, and know, you.