March 26, 2009 • Bruce Weindruch
“Car dealers face extinction: The small, independent dealership is struggling to compete in an increasingly cutthroat auto market,” trumpeted the headline of a recent CNNMoney.com article. I couldn’t help but think back to my 1978 senior thesis at Grinnell College: “Garden of Gears. The Automobile Dealer in Iowa. 1920s & 1960s.” My goal was to talk with dealers who had remained in operation through the Post WWI “buyers strike,” the Great Depression, and WWII, so that I might isolate some common survival traits.
Thirty years ago, the future of the dealer seemed no more certain than it is today. While it was the dawn of what we now know as the mega-dealership, and we were in the near-term wake of the 1973 oil crisis, most dealers and industry analysts viewed the flourishing consumer protection movement as the death-knell for the automobile dealer franchise. In the name of “consumer regulations,” manufacturers were narrowing dealer profit margins, scrutinizing warranty practices, and more or less pushing more of the liability off on their dealers. In recall after recall, individual dealers had to notify buyers, present evidence that they had attempted to notify buyers, and finally make the mandated repairs … using their own resources to correct mistakes that the manufacturers had made in the first place.
At that time, I noted that the legendary head of General Motors, Alfred P. Sloan, Jr., had also speculated on the survival of the dealer given the squeeze of the consumer on one end and the manufacturer on the other. Like Sloan, my interviews with long-time dealers—primarily Chevrolet dealers I might add—lead me to conclude that it was the quality dealer, most responsive to the changing marketplace, who had the best chances of survival. I interviewed a dealer who, in the early 1920s, deployed his unsold flat-bed trucks as mobile demonstration and sales vehicles to take new-fangled automatic washing machines to farm wives across the countryside. Another dealer I interviewed converted unsold autos into local taxis and unsold trucks into an over-the-road trucking company during WWII.
One of my favorite characters, a car dealer and street-corner philosopher named Leo Levien who owned a thriving Chevy dealership in Ft. Dodge, Iowa summed up the plight of the auto dealer in 1978 like this: “To survive today, you’re going to have to be a quality dealer. With the government-mandated changes, within the next few years you’re going to find it very hard to tell a Ford from a Chevrolet, from a Dodge. The quality dealer is going to survive. He’s going to have to give a quality service presentation. He’s going to have to help the public.”
I just ran a Google search on “Levien Chevrolet, 10 South 25th St., Fort Dodge, Iowa.” Alas, Levien Chevrolet is no more. The only reference I could find for Levien Chevrolet was a set of Bicentennial drink coasters on eBay. However, the Chevrolet dealership at that same location in Ft. Dodge is now part of the Kemna Auto Group, a “family owned dealership for over 54 years.” So Leo’s dealership was eventually caught up in the dealer consolidation movement. But Kemna’s three dealer “group” hardly constitutes a mega-dealership. And their emphasis on “fresh baked cookies and gourmet coffee” would definitely meet Leo’s approval… wherever he might be.
I’m going to check back on Kemna Auto Group over the next year or two and see how things turn out. Will service be enough in this “increasingly cutthroat auto market?” I’d be willing to bet that history proves me and Al Sloan right about the survival instincts of the American auto dealer.