THE 1998 acquisition of Chrysler was only part of the 1990s Mercedes revolution.
The decade began with the manufacturer coming to terms with its failure to attract the younger drivers so necessary to its long-term success.
BMW’s sportier image, the renaissance of Jaguar under the Ford umbrella, but most of all the entry of Lexus into the luxury car market, had put Mercedes on the defensive, an unaccustomed and certainly unacceptable position.
A transition from a product-driven to a market-driven policy was not without its tribulations. However, by 1997 new cars were on view in the showrooms, followed two years later by the stylish top-of-the-range S-Type.
From a little over 60,000 units in 1992, sales had doubled by 1997, and this year are on track for 180,000, an astonishing performance.
Nowhere in the US is this success more evident than in Orange County, California. With the first and second top-selling Mercedes dealerships in the nation and another in the top ten, the procession of Mercedes cars on the county’s roads is witness not only to the brand’s dominance but also the area’s affluence.
As if to celebrate the rebirth of its Mercedes franchise, Fletcher Jones Motorcars transfered its Newport Beach retail operation from a hotchpotch of inefficient tucked-away buildings to a modern edifice (there’s no other word).
Lying at the confluence of two major highways, it covers almost 40,000m2, 16,000m2 of buildings, 300 gleaming cars on display, a 460m2, 7.6m high showroom, 77 service bays, 31 bodyshop stalls, 16 paint and detail stalls, and so on.
The land came virtually free, from a city keen to retain property tax income, allowing the spending of $13m to create what it calls “the largest dealership in the world”.
Viewing its Palladian splendour, few would dispute the claim, although the dealership did gain unsought publicity from bedazzled neighbours across the bay who claimed that Fletcher Jones’s “new dawn” was a little too bright!
If the enormous sum seems out of kilter with the profits earned in this volatile trade, consider that in 1998 from this one site just under 3,000 new and around 1,000 used cars were sold; national average gross Mercedes profit per car is around $4,600.
Annual numbers are outstanding – $4.5m finance and insurance income, $13m service income from the 200 service jobs passing through every working day, and nearly $7m bodyshop income. Fletcher Jones is very profitable.
Newport Beach is unique. Proud of its affluence to the point of brashness, it has no time for second-best. Unimpressed by mere buildings, it demands a matchless level of service and attention. For a car dealer to rate a 93 per cent customer satisfaction index serving these well-heeled high earners is not easy, but that is Fletcher Jones’s achievement.
The CSI standard is filtered down to each worker with access to the customer. An employee’s CSI rating transcends all other criteria in assessing rewards.
Too often efficiency leads to insensitivity, I said to Garth Blumenthal, general manager. He has been in the Mercedes franchise since 1983, joining Fletcher Jones in summer 1991, just before the company acquired the franchise from the bankrupt former owner.
A recurring topic at weekly staff meetings is offsetting the perhaps intimidating appearance of the building with a courteous and congenial demeanour; courtesy is when a busy general manager apologises profusely for being minutes late for our meeting.
Certainly, he conveys the ability to combine modern and efficient business methods with an empathy for customers and staff. The 315 employees have a well-equipped gymnasium and their canteen has glorious views over the bay. While waiting for their cars, customers are offered the use of large lounge, free coffee and cappuccino bar, manicure, pedicure, gymnasium, boutique, children’s activity room, shoe cleaning and even a putting green. A restaurant is about to be added. Free storage of hardtops is also provided.
Blumenthal is particularly proud of the dealership’s preferred customer programme. Anyone buying a new or used car becomes a member; a badge on the car’s screen identifies them to the staff, and this entitles them to a daily free car wash if desired, free parking, shuttle to the overcrowded John Wayne airport, free loan car and other benefits.
Blumenthal says: “It’s not enough to have satisfied customers – we need raving fans.”
After a neck-and-neck battle over the past few years, Fletcher Jones has overtaken local rival House of Imports of Buena Park, recently acquired by Autonation, and anticipates improving its 1998 position of tenth highest volume site in the nation to around sixth or seventh this year.
From this one facility, turnover is expected to reach $275m against $223m in 1998. In October this year, 440 new and used cars were sold.
Interestingly, despite Mercedes’ withdrawal of financial support, lease deals still account for a remarkable 60 per cent of sales volume, much higher than the average dealer.
Although internet sales contribute less than 10 per cent of sales, the dealership subscribes to most of the leading internet service providers, and regards this department as an integral player in future profitability.
Speed of response being paramount, plans are afoot to provide sales staff with pocket computers, offering immediate, round-the-clock service.
Coincident with its regeneration project, Mercedes embarked on a franchise refining process, cutting the number of dealers from 375 to 300, combined with a discount reduction down to 7 per cent, limiting the dealer’s negotiating power and providing an alternative to the fixed price syndrome; this dealership aims at retaining not less than 5 per cent gross profit.
Rigorous criteria were established – jocularly known as the ten commandments – calling for exclusivity, high CSIs, intensive and ongoing training, improved corporate identification, and particularly a minimum local market penetration of 11 per cent of the luxury market.
Representing Mercedes in affluent Newport Beach could be a sinecure. Fletcher Jones clearly has no plan to rest on its laurels. Owning one of the best cars in the world brings various benefits, making one feel the member of a very exclusive club.
I have a confession to make. Since a troublesome experience with my Mercedes 380SL in the mid-1970s, the brand has not been my favourite, but Fletcher Jones offers so much added-value to the make that I find myself sorely tempted.
I began my visit attracted by a magnificent building. I left impressed by an admirable business philosophy.