“Go West, young man” — Horace Greeley SYRACUSE — As the Civil War ended, Horace Greeley was credited with writing an editorial in the New York Tribune, instructing his readers to seek opportunities for growth by traveling westward. Philip J. Maguire, president of Maguire Automotive Group, LLC, a holding company for the Maguire […]
“Go West, young man” — Horace Greeley
SYRACUSE — As the Civil War ended, Horace Greeley was credited with writing an editorial in the New York Tribune, instructing his readers to seek opportunities for growth by traveling westward. Philip J. Maguire, president of Maguire Automotive Group, LLC, a holding company for the Maguire Family of Dealerships headquartered in Ithaca, heeded the first part of Greeley’s advice to seek opportunities for growth. He ignored the suggestion to go west and, instead, turned north to open his first dealership outside the Ithaca area in Syracuse.
Maguire [Automotive] closed the deal to buy the assets of the Bill Rapp Nissan dealership on Friday, Oct. 30, 2015, according to Frank Vanderpool, general manager of the new Syracuse dealership. “We only had until the following Monday before opening for business under the Maguire banner. That meant moving 300 cars and preparing the 716 W. Genesee St. site for customers. The team did an amazing job pulling it together. We are currently leasing a 20,000-square-foot building here, which used to be a Saturn dealership, from the Barr family, owners of Crest Cadillac and Crest Acura, and also leasing a location two blocks away to serve as our pre-owned center. Currently, we are employing 35 people,” he says.
Vanderpool, stresses that the Syracuse location is temporary. “The plan is to buy approximately 20 acres and build a 100,000-square-foot, LEED-certified facility that could [eventually] house multiple franchises, a parts department, service department, and collision center,” he emphasizes. “The size of the final building will, of course, be dependent on the number of acres we can acquire. The management team is reviewing potential sites as well as traffic patterns and demographic data. Phil [Maguire] has expressed an interest in locating the Syracuse operation either in East Syracuse or somewhere in or near the Inner Harbor. Our timetable puts us in the new facility within the next 24 months. We project selling at least 400 cars a month once the final Syracuse facility is up and running. At that point, I expect employment [in Syracuse] should reach 150 to 200.”
The Maguire Automotive Group is comprised of 18 new-car franchises in eight locations. According to Phil Maguire, “We currently employ 450 people full time in addition to some part-time people. Except for the Syracuse lease, the facilities, which encompass in excess of 300,000 square feet, are owned by two real-estate companies. All of the stock in the real estate and operating companies is owned by the Maguire family. (One contract for a facility is structured as a lease-to-purchase agreement.) For us, as well as the industry, 2015 was a good year. Maguire sold approximately 10,000 [vehicles], of which half were sold and half leased. Our ratio of new-car sales to pre-owned sales was 60/40. We’ll close out 2015 with $300 million in sales.”
Growth strategy
The expansion into the Syracuse marketplace is part of a growth strategy begun in 2007. “My dad, Tim Maguire, [who serves as the company CEO], opened a Ford dealership in Trumansburg in 1977,” continues Phil Maguire. “Dad netted $20,000 from selling his house and borrowed another $20,000 from the Watkins Glen Bank to make his first acquisition. He next opened a Lincoln-Mercury dealership in Ithaca in 1983. In 1990, Maguire bought the assets of a Chevrolet dealership and located it next to the Ford dealership in Trumansburg. My mother Frances, a company vice president, runs this dealership. In 1997, the family added a Nissan dealership. It wasn’t until 2007 that my dad and I agreed to implement a more aggressive expansion plan. It began with the purchase of the Will Cook Chevrolet–Cadillac dealership. The next year, we added more new franchises — Toyota, Subaru, Volvo, Audi, and VW. In 2009, we acquired KIA; in 2010, Chrysler, Dodge, Jeep, and RAM; and in 2011, Hyundai. Our next acquisition came in 2014 with Fiat/Chrysler in Watkins Glen; and in 2015, the Nissan dealership in Syracuse.” All transactions were asset purchases.
The decision to grow substantially was driven, in part, by changes in the auto industry. “First, the dealer’s margin on new-car sales has shrunk over the years,” he notes. “Today, 20 percent of the OEMs (original-equipment manufacturer) offer bonus programs if a dealer attains specified sales quotas; 25 percent compensate the dealer based on customer satisfaction, image, and loyalty; and the remaining 55 percent don’t offer incentives. For those manufacturers which offer incentives, we need to grow to take advantage of the reimbursement opportunities. Second, it’s smart to diversify operations. I compare that to a person’s investment portfolio, which shouldn’t be weighted too heavily in one sector or type of investment in order to minimize risk and even out-cash flow. Third, the business is financially sound. We began our rapid expansion just before the bottom dropped out of the market in 2008, but the [resulting] recession didn’t slow us down. In fact, the disruption in the industry opened opportunities for us. And fourth, there are certain economies of scale that help to reduce costs.”
The Maguire Auto Group began researching options back in February 2015 to expand outside the Ithaca area. “The group first looked at an open-point Honda dealership in Jamestown,” posits Vanderpool. “Since there was no dealership [extant] at the time, there was no cost to acquire the franchise. All we needed was a building and some land, and we could start operating. Maguire also didn’t have a Honda franchise, so this would be a strong addition to our brand offerings. We were in the final running, but unfortunately lost the deal to a local resident. We then pursued the Rapp deal, which offered us entry into a bigger market.”
This reporter then asked Vanderpool why he thought Maguire Nissan would be successful when there were two strong franchises — Fuccillo and Burdick — serving the area. “What sets us apart from other dealerships is our sales model,” contends the Syracuse Nissan general manager. “We post the price of every vehicle on the car, which includes all discounts and incentives. There are no hidden costs, no tacked-on fees. This avoids the haggling that our customers hate. That means our price is the lowest price available, and everybody pays the same price. If a potential customer comes in with an advertised price from another upstate dealer that is lower than our sale price, we will either match the price or offer our “5Gs and the keys” guarantee. (Translation: The car is free plus $5,000 in cash.) The bottom line is that we won’t lose a deal on price.
“I have been in the car business for 20 years, and the old-school way of selling cars doesn’t work anymore,” Vanderpool stresses. “Buyers today are armed with a lot of information before they enter the showroom. They know how much a dealer paid for the car, and they have compared dealers’ sales prices. Research on today’s buyers confirms that they want the process to be quick, easy, and transparent. It should be a pleasurable experience; not like going to the dentist.”
Vanderpool also says that Maguire’s compensation package sets the auto group apart from its competitors. “All of our sales reps are salaried. Their incentive is not based on commission, but rather on three variables: a flat fee for each car sold, total volume, and customer satisfaction. Once the sale is concluded and the customer drives away in a new or pre-owned car, the owner can return the car within three days or 300 miles for a full refund; no questions asked. In the case of a pre-owned car, the owner can even exchange it for another vehicle within 30 days and receive full value for the transaction. Also, if the customer finds a lower interest rate within three days of the purchase, there is no penalty or cost to refinance. As Phil likes to say, the buyer can’t make a mistake. We’ve created a number of safety nets and the entire process is transparent. That’s why Cars.com has rated us the number-one rated dealer (4.8 out of 5.0 stars) in New York state based on customer reviews.”
Revenue diversification
In addition to selling new and pre-owned cars, Maguire Auto Group makes money, like other dealers, from operating service departments, collision centers, and offering financing. But Maguire has also branched off in pursuit of new revenue streams.
“Several years ago, I saw an opportunity to leverage our customer relations by offering insurance,” comments Maguire. “We have thousands of people annually visit our showrooms, and it seemed like an opportunity to offer one-stop shopping. There isn’t a hard sales pitch: If our customers would like a quote, we’re happy to offer it. I became licensed as an insurance broker with the intent to buy an established agency. When I couldn’t exercise that option, I became an Allstate agent in 2012 and set up an office in one of our facilities. Subsequently, we set up an independent brokerage called Maguire Family Insurance, LLC, where the agency can represent any insurance company. Our full-service agency, which is located in the Trumansburg corporate office, employs 10 people and generates $3 million in annual premiums after just two years of operation. Both insurance agencies are a natural addition to the auto dealerships, which provide a steady stream of leads. The insurance business grows in tandem with the growth of the auto business.”
Maguire also set up a corporation in 2012 to service the parts-distribution business. “We set up Tim Maguire, LLC as a dba [doing business as] to be a vehicle for our auto-parts and after-market business,” asserts Maguire. “We are currently handling 370 aftermarket-parts brands from 18 different OEMs, and we are also a paint distributor for body shops and collision centers. We set up a call center to make it easy for our [business] customers to buy whatever they need with just one call. Our motto is: ‘One call gets it all.’ We handle the local deliveries to the Syracuse, Rochester, and Binghamton areas by coordinating our truck fleet. This is another good fit with our basic business.”
Green building
While committed to growing the Maguire Auto Group, Phil Maguire is also dedicated to LEED (Leadership in Energy and Environmental Design) certification for his properties. In October 2011, Maguire renovated the 70,000-square-foot property at 370 Elmira Road in Ithaca. The U.S. Green Building Council designated the facility a LEED Platinum building, its highest certification level. “The council based its determination on five categories: sustainability, water efficiency, energy and atmosphere, materials and resources, and indoor-environmental quality,” says Maguire. “We use rain water collected on the building’s roof to wash our cars, flush the toilets, and water the landscaping. We also installed solar panels, which generate 20 percent of our electrical consumption. In the construction process, we reused 95 percent of the building’s original structure and recycled 97 percent of the construction waste. Our lighting is 34 percent more efficient than industry standards, we use 45 percent less energy to heat and cool than a comparable building, and 95 percent of our indoor spaces have natural light, to cite just some of our sustainability practices.”
Maguire’s commitment to LEED certification is not confined to the one Ithaca property. “I spent a lot of time studying sustainability and LEED certification,” he says. “I am convinced it makes good sense from its environmental, economic, and social benefits. The auto group is starting a three-year renovation project on all of our properties plus building the new Syracuse store. I estimate the cost of the Syracuse project at $7 million to $10 million, and each of the other properties at $2 million to $5 million. While I can measure the ROI in certain areas such as energy, I know there is also a payback by providing the staff with an environment that is both pleasant and cuts down on health-care costs. All of the properties may not qualify for a platinum certification, but they will all be LEED certified.”
U.S. car and light-truck sales in 2015 reached a record 17.5 million units, fueled by cheap gasoline, rising employment, and low interest rates. The 2015 sales generated $570 billion for the industry. According to Kelley Blue Book, the average sale price of new cars was $34,428. At this point, 2016 is forecast to be another banner year.
Still, making money in this environment is challenging. According to the 2015 summer issue of the Appraisal Journal, the average auto dealership profile (2013 figures) showed sales of $41.4 million, a net profit before taxes of 2.2 percent, and an average net worth of $3.2 million. Most owners of the 17,000-plus dealerships nationwide are either individual or family owned, with a few publicly traded companies such as the Penske Automotive Group, Auto Nation, and Berkshire Hathaway. Net profit on new-car sales averaged less than $100 per vehicle; pre-owned vehicle sales netted $110; and service and parts posted a net profit of $300. The largest profit by far was generated from finance and insurance revenues. Of the six largest publicly traded auto dealerships, the average finance and insurance revenue per vehicle was $1,219.
Even as the auto industry is enjoying a boom, Maguire is mindful that any number of external events can upset the apple cart. “What will be the impact of the Fed raising interest rates?” Maguire ponders. “What world crisis will impact our sales? Will self-driving cars and car-hailing services like Uber and Lyft totally disrupt the industry? As more people take up residence in urban areas, will the demand for cars decrease because of the availability of public transportation or fractional ownership? Will the glut of late-model cars coming off leases flood the market and depress new-car sales? How long will gasoline prices at the pump remain low? Will Tesla’s attempt to sell vehicles directly to the customers ultimately cut out the dealerships?”
Big picture
Maguire takes the many concerns in stride. Where others see potential problems, he sees opportunities.
“I’ve moved away from the day-to-day operations of the business to spend more time thinking about the big picture,” says Maguire. “I am able to do this because the management team at the auto group is very experienced and works well together. Tom Blair is the CFO, Austin Foote is the director of variable operations (sales), Bill Hamelin is the director of fixed operations (parts and service), and Gene Beavers is the director of the collision centers. Frank [Vanderpool] and I had worked together in Seneca Falls even before we both joined Maguire 15 years ago. Frank is now a stockholder in the Syracuse company to ensure that the Maguire business model functions well as we spread out geographically. I know that our customer-centric way of doing business and our reputation put us on the path to top $500 million in sales within five years.”
Despite long hours worrying about the business, Maguire finds time to slip away to a 400-plus acre pied á terre located on the east side of Seneca Lake. “My wife, Nicole, and I bought the property back in 2008, because it was a beautiful piece of land with 2,500 feet of lakefront. The previous owners grew table grapes. Nicole and her sister continued the business for three years before selling it to Spiech Farms, a competitor from Michigan. But we also have approximately 75 acres of vinifera grapes on the property, which are handled by Doyle Vineyard Management for sale to vintners. My arrangement with Doyle is to take a percentage of the sales.”
Maguire, 40, is a graduate of Northwood University, a private business school in Michigan, where he earned a master’s degree in automotive marketing and management. “I understand the people, passions, and processes that convert a dream about vehicles into actually placing one in a customer’s driveway,” opines Maguire. “I also understand business models, supply chains, and financial strategies needed to run an automotive group. My love affair with cars began as a kid when I was drawn to the revival of muscle cars. After all, autos are much more than a means of transportation: they signify freedom, a sense of independence, and even our own personalities. That’s why I’m convinced that the American love affair with cars is enduring. My dad’s original dream was to own a gas station and just work on cars. Obviously, his dream has grown exponentially. I don’t see a limit to our potential to expand that dream.”
