It's A People Business
The Truck Dealer of the Year is selected annually by a team of judges at Indiana University Kelley School of Business. Candidates, who are nominated by their American Truck Dealers line representative or dealer association, are judged on excellence in business practices, industry contributions and community service.
The judges also select one Dealer of the Year Finalist, who will step in should the dealer of the year be unable to fulfill his duties. Those duties include meeting with Congressional leaders as spokesman for truck dealers, honorary membership on the ATD Committee and service as dealer-in-residence at Indiana University, where he addresses business school classes.
This year's Dealer of the Year is David A. Thompson, president and CEO of TEC Equipment, Portland, Ore. The Dealer of the Year Finalist is Glenn Bergey, president of Bergey's Truck Centers, Franconia, Pa. The Truck Dealer of the Year competition is co-sponsored by ATD and Heavy Duty Trucking magazine.
By Deborah Lockridge, Senior Editor
The 12 nominees for Dealer of the Year represent a range of businesses and a variety of manufacturers. They serve customers from the long-haul owner-operator to the small construction company and the big on-highway fleets. What they all have in common is the importance of people to their operations – customers, employees, suppliers.
"We're always looking for ways to be closer to our customers," says Dealer of the Year David Thompson, president and CEO of TEC Equipment in Portland, Ore. These days, he says, you're less likely to see truck makers trying to squeeze everything they can out of the dealer, or shippers trying to squeeze everything they can out of their trucking company. "Today people are building alliances," he says, "and I believe success is based on long-term relationships built on trust and being a best business partner to your customer."
Almost unanimously, when asked what sets their dealership apart, the answer from this year's top dealers was related to customer service. At Kenworth of Indianapolis, says President John Nichols, "one thing that one of my guys came up with – it's going to sound corny – is the 'eight-feet greet.' " If there's a visitor within 8 feet of anybody in the building – whether that visitor is in a three-piece suit or blue jeans that have been worn three days on the road – the employee is supposed to greet them and ask how they can help. "It's kind of fun, because it really surprises a lot of people."
And when asked what they liked best about being a dealer, a common thread among these dealers was the pleasure of interacting with people – both customers and employees.
On the other hand, people can also be the biggest challenge. "Candidly, they're the biggest joy and the biggest pain," Don Pasiuk, president of Peterbilt Pacific Inc. in Surrey, British Columbia, says with a laugh. "The biggest challenge is satisfying a difficult customer, employee retention, employee attraction, all those kind of things."
James Maddox, president of Tri-State Truck Center in Memphis, Tenn., points to the challenge of attracting new people to the industry. "I think we sell our industry short," he says. "I know lots of good qualified kids that are getting out of college and going to work for banks at $28,000 or $32,000 a year. They don't consider this industry, and we don't think we can go and recruit those type of people. But the reality of it is, so many of our employees are doing so much better than that. We're trying to recruit better people, because the only thing that differentiates us from our competition in the end is our people."
The 2007 ENGINES
The top challenge currently cited by these dealers, however, was related to equipment. The effect of the new 2007 emissions engines on the nominees varies significantly depending on their customer base. Thompson, for instance, says his dealerships saw very few prebuys from customers. Others say they definitely saw a prebuy from customers last year.
As Glenn Bergey, president of Bergey's Truck Centers in Franconia, Pa., says, "The last two years have been great, but the party's over." He has definitely seen a drop in Class 8 sales over the first few months of 2007, although medium-duty sales have not been affected as much.
"Of course everybody wants the other guy to try that technology first," says Walter Pharr, chairman and CEO of Piedmont Truck Center in Greensboro, N.C. "So there's going to be a sales slump here."
Peterbilt Pacific is focusing on educating customers to "reduce the fear factor," Pasiuk says. "They're concerned about how long it's going to last and how well it works, and they're very concerned about the fuel economy of the new engines – that's probably their biggest question. So we're encouraging maximum supplier warranties to transfer the risk back to the manufacturer. On fuel economy, we're waiting for reports from our customers, and so far the results have been encouraging."
At Freightliner of Knoxville and Freightliner of Chattanooga, CEO Buddie Carroll's sales force is dealing with the downturn by targeting customers who are prospects for the '07 engines.
"You've got some vocational customers, for example, that may not have been a part of the prebuy," he explains, "and you have some private business customers that are not as tuned into the engine changes as others, and this is especially true in the medium-duty market, so we'll segment some of those customers out for sales in 2007."
Most of the nominees did fairly well during the first quarter by selling a large amount of pre-2007 technology inventory they ordered last year. For some, however, that stock hasn't moved as quickly as they anticipated.
"We attempted to deal with it through a ramp-up of additional stock inventory," says Mary Ford Dolan, president of Freeway Ford Sterling Truck Sales in Lyons, Ill. "This did not have the immediate effect that we anticipated, and it caused a negative effect on carrying costs and dealership operations" during the first quarter."
Expectations are that sales of trucks with the new engines won't pick up until the last quarter of the year or into early 2008. Lingering quality concerns, these dealers believe, will dissipate quickly once customer get a few out on the road and have good luck with them.
Bergey reports that his customers have more than 50 of the new trucks on the road right now. "Our experience so far has been very encouraging," he says. "Customers report some improved operating results and excellent driver acceptance."
Similarly, Dolan says, "the initial 'on road' driveability word-of-mouth says that the engines start better, perform better, and are much quieter."
In some cases, it hasn't been the new engines' performance or reliability that has been a concern as much as it has been the significant price increase.
"For our customers, the technology is not a problem for them at all; they're pretty confident the engine will be OK. But the price is a killer," Maddox says. The pre-2007 engines dealers have in stock will hold them into the summer, he says. But after that, he predicts, "there's going to be a tremendous disruption."
Maddox is preparing for the sticker shock by building a large inventory of late model 2005 and 2006 used trucks. In addition, he says, when the dealership gets its 2008 models in, "it's going to be a good time for our salesmen to get in the trucks and go see the customers and start schooling them on what they're going to have to buy. They're going to have to buy the trucks; it's just a question of when."
At Tri-Point Ford Truck Sales in Raleigh, N.C., which serves the vocational market, President Daniel Rashid expects many customers will have to go to longer loan terms. Rashid, who sells most trucks from inventory, says his people are also taking a close look at specs to see where they can trim costs without hurting quality.
Pasiuk says factory discounting has dampened some of the price increase at his dealership. "I haven't had a lot of price objection as yet. It comes down to when customers need to buy trucks, they need to buy them. You can't fight clean air."
Dealers also have been working on getting their technicians up to speed to work on the new engines. "Just looking at one engine line, we have to send two to three technicians per shift to get them trained and certified on the new engines," explains Joe Laux, dealer principal and president, River States Truck and Trailer in La Crosse, Wis. "You have to get parts in stock to handle those engines before they come in. We've had to work with our lubricant company to make sure we have lubricant in place as well as make our entire staff aware so they can discuss them [with customers] if issues come up."
VERTICAL INTEGRATION
Another change that offers pros and cons is the increasing vertical integration of the truck business. Some fleet maintenance managers, accustomed to spec'ing trucks with parts and components that have served them well for years, are frustrated that they often can't get the same options they're used to.
"The manufacturers, in order to be cost-competitive, have to standardize their product offerings, or at least limit the number of product offerings," Thompson says. He and other dealers say that, even if truck buyers can still get their favorite parts and components, the difference of the cost between that and the standard spec will drive most fleets to go with what the truck maker has chosen.
"Manufacturers are kind of forcing the customers to use the standard truck through their costing procedure," Pharr says. While he and many other dealers try to lean on their truck manufacturer on behalf of the customer, there's only so much they can do.
"We face this all the time with our customers," Bergey says. "Our advice is to keep an open mind. Uptime's an important thing, and we truly believe that our manufacturers can build a more reliable product using quality components that are carefully engineered together."
Dealers are relying on the manufacturers of those parts and components to help make the transition smoother for customers.
"Any time there's a product that is not the exact spec the customer's using, we immediately bring the factory rep in," Thompson says. "We try to bring in the manufacturer's rep for that product and do training, or take that rep with us on a call and let [the customer] know we're using this now and this is why it's better."
Nichols says there are a lot of positive factors in the trend toward vertical integration. "Yeah, there's some things they can't get, but the overall quality, the fit and finish, the trucks have come a long way from where they were 20 years ago. I think the positives offset some of the things we're not able to get now."
Carroll hopes that these closer alignments between truck makers and component suppliers will benefit both dealers and customers in another way. "I'm hoping this will eliminate the problem where we do not have parts for customers," he says. "I think every truck dealer will tell you that in the past three years, there are some suppliers that let them down in availability, and we just can't afford the lack of availability in replacement parts. I see an alignment going on right now where the manufacturers are not only looking toward the performance quality of the products, but also the fact that they will have these parts available in the ups and downs we go through."
PARTS AND SERVICE
Often called the backside of the business, parts and service is really the backbone of these dealers' operations. A well-run parts and service operation not only helps dealers stay profitable through the ups and downs in truck sales, but also brings in more truck sales business.
Jack Brabham, owner of Peterbilt of Louisiana in Baton Rouge, calls parts and service "the lifeblood" of the dealership. "We're constantly reevaluating what we're doing in regards to getting our customers in and out the fastest, whether it be stocking issues or how we meet and greet customers."
Several of the dealers noted the importance of being able to get needed parts quickly. Pasiuk notes that parts stocking is always a challenge, especially coming off a big year like last year, when a lot of parts were directed toward the factories. "I would say part of my job is to hear those parts shortage concerns and then deal with my parts suppliers and encourage them to get parts to us," he says. "I'll even take parts off of new trucks in inventory to get customers back on the road. I've done that many times."
At Freeway Ford Sterling, Dolan says, they have developed a reliable network of supplier/vendors, sometimes at additional expense, in order to ensure a readily available supply of needed parts for customers. "Price is important, but getting the part to the customer quickly is sometimes more important," she notes.
Ease of access for service customers is another key theme among the nominees. For instance, River States offers pickup and delivery, seven days a week. In the body shop – which sees a lot of trucks coming in that have hit a deer – the dealership can provide a loaner hood so the customer can continue to operate while the original hood is repaired.
Many of the dealers are open 24/7 for service. For instance, many customers of Las-Vegas-based McCandless International Trucks are in the construction business. "Because of the heat in the summertime, the construction companies start work at 3:30 a.m.," explains President John McCandless. "They like the fact that they can come in at midnight or 3 a.m. and pick up their trucks that we completed the repairs on."
At Bergey's, they've been open 24 hours since the early '70s. "I was actually working the night shift while I was in high school," Bergey says.
Mobile service is another service dealers are increasingly looking to in order to make things easier for customers. Carroll, for instance, recently added this at one of his locations. "Customer satisfaction is really what it's all about. It's an expense and an inconvenience for customers to come to you for minor repairs and warranty items. So it's an extra added-value service to our customers."
One-stop service is important for a number of the nominees. At Piedmont Truck Center, Pharr says, "when we started our business, one of the important things was that we wanted to take care of the truck from the cradle to the grave." So in addition to the usual parts and service operations, they also had a tire sales and retread facility, a remanufacturing operation, and a huge salvage yard. The salvage yard is gone, but the tire and reman operations remain. They can rebuild engines from the smallest one- or two-cylinder engines up to industrial V-12s, as well as transmissions, rears and other components.
The nominees also see an increased demand from customers who want to outsource maintenance.
"More and more of the big carriers are cutting back their shops or the technology is exceeding their capabilities, so it's driving back into us," Thompson says. Adding to the challenge, however, is that often customers handle the easier jobs, leaving the tricky diagnostics and complicated repair work for the dealer.
At Bergey's, the dealership has long pursued contract maintenance business, but they're going after more. "We recently hired an experienced contract maintenance expert to grow this part of the business for us," Bergey says.
Like other dealers, Nichols believes the demand for outsourcing will only increase as truck technology gets increasingly more complex. "It's a difficult thing for us to keep up on; it's got to be very difficult for some of those customers. I think there's more [outsourcing] business out there; I think we've just got to work harder at getting it and providing value."
Many dealers are finding it a challenge to go after more outsourcing business because of a shortage of quality technicians.
"We have had opportunities to take over a service department for the school district and some of the larger companies, but we haven't been able to do that because we can't find the technicians," McCandless says. "But we're working towards that."
Today's truck technicians are an unusual breed, Nichols notes. "They have to be very strong in not only the wrench, the mechanical side, but also the electronic side, and they have to be willing to do a lot of pretty detailed diagnostics, and yet still get pretty dirty and pick up some pretty heavy pieces."
"It's always going to be a challenge to find not just good people, but great people," Laux says. "It takes great people to be willing to work Saturday and Sunday and be master-certified."
Nearly all the finalists work with area high schools and vocational schools to grow their own mechanics through training, apprenticeship and mentoring programs.
"You have to raise your own mechanics and pray to the Lord that they stick with you," Brabham says.
For instance, at McCandless International, they are putting more emphasis than ever on their long-time apprenticeship program. "I feel it's really the only way we're going to get qualified mechanics," McCandless says. A regimented training schedule includes both home study and time at work using computer training. "Then we pair them with our better-experienced technicians to learn what a journeyman mechanic is. I have 13 apprentices at the present time. Some of them have been with us about 18 months now and they're right below journeyman status; they can do most jobs."
Providing excellent working conditions is vital in keeping those technicians, as well as attracting them in the first place.
Maddox, for instance, notes his shops are a stickler for cleanliness. "For the most part our facilities are really, really clean, even the shop. That end of the business is dirty at best, but there's old dirt and there's new dirt."
At Freightliner of Knoxville and Freightliner of Chattanooga, the service facilities are air-conditioned. "It's a big space to air condition, and it does cost money," Carroll says, "so it's an economic commitment to make that happen." Not only has the investment made technicians happier, he says, but they're also more productive.
IS BIGGER BETTER?
Many in the industry see a trend toward large, multi-location dealerships as the wave of the future. TEC is a prime example, with its 11 locations along the West Coast including $52 million worth of real estate and one of the country's largest areas of responsibility. Thompson notes that it's as much work to start up and run a small market as it is a major market. He believes you can't afford to operate smaller markets as stand-alone dealerships.
"I think the economies of scale are very, very real in a multiple-point operation," Thompson says. "Insurance, data processing, the cost of your money – when you're borrowing larger amounts you can certainly drag a lower rate down."
Bucking that trend is Rashid's Tri-Point Ford Sales. In 1994 he took over a dealership that had gone out of business five times and made it a success by focusing on a niche market and worrying more about the bottom line than about ever-increasing sales numbers.
"We know all our customers on a first-name basis, so they feel comfortable dealing with us," he says. "In this area, if they don't know you, they won't buy from you."
The market is mostly vocational, so Tri-Point keeps 30 to 50 dump trucks in stock at all times, with three basic sets of specs that meet most customers' needs. "A guy can come in at 9 a.m. and be driving it by noon. And with the construction market, they always wait until the last minute."
"I actually think we have the advantage as a small dealership," Rashid says. "When you get into multiple stores, there's no direct ownership. Here, it's me, the door is always open, and we can solve a lot of problems quickly."
CHANGING CUSTOMERS
One thing that was unanimous among the Dealer of the Year nominees was that they enjoy the ever-changing nature of the business, the fact that each day has its own challenges. Laux describes it as a jigsaw puzzle where the picture changes every day.
"I think [compared to] 15 years ago, you have to be much more proactive for the customer," Laux says. "You have to look at not what's convenient to you, but what's convenient for the customer. Being open seven days a week is not convenient for us, but it's convenient for our customers. Picking up and delivering, parts deliveries, things that make it convenient for them, because they're looking to maximize that asset utilization and maximize uptime and they're looking at their costs."
Nichols says customer expectations these days are higher in every part of the business – parts, service sales. "The bar's been raised. People expect more. I know I do.
"I think the customer we deal with today has never been more sophisticated," Nichols says. "We have to make sure we are hooked up to them, that we know what their needs are. We have to go to them, go to their locations, e-mail them things. They're a lot busier; they don't have the time to spend at the dealerships. And I think we have to be more than just a truck or parts supplier; we've got to keep them up to date with information on what's going on, provide insurance, provide financing. Our role has expanded."
As manufacturers go through tremendous upheaval and paradigm changes, Dolan says, "Dealers that stick to the basics of great customer service in all departments, effectively control costs, and actively look for ways to expand their business will thrive. It's a back-to-basics approach, but with a much more aggressive eye to the future."
Truck Dealer continued
