With his stake in United Auto Group, the former Bates Worldwide chairman also joins a new breed of investors who are buying up family-owned dealerships and turning them into professionally managed operations, clamping a corporate discipline on costs and customer service.
Mr. Spielvogel's marketing know-how-and respectability-can transform Manhattan-based United Auto, said founder and principal investor Marshall S. Cogan. "We are bent on changing the way the consumer sees the dealer," he said.
Mr. Cogan, a well-known dealmaker who has bought and sold companies such as Knoll International and Color Tile, founded United Auto as EMCO Motor Holdings in 1992 with two other investors.
Today the $615 million network employs 1,200 people and operates 41 franchises-selling virtually every make but Mercedes-at seven sites in New Jersey, Connecticut and Rockland County, N.Y. Last year's sales made it the eighth-largest dealer in the nation, with revenues this year expected to hit $650 million.
With Mr. Spielvogel on board, the plan is to double sales and extend the dealership's reach nationally. That can only be done through aggressive franchise buying, and Mr. Spielvogel said several acquisitions are already in the works.
Acquisitions are the easier part of the strategy. Changing the selling culture of auto sales people is much harder.
Dealers have been trying to change their huckster image ever since auto manufacturers began to pay attention to buyer satisfaction, said Mark Schienberg, exec VP of the Greater New York Automobile Dealers Association. But many haven't bought into the idea that satisfying customers can sell cars.
United Auto is one of a new class of megadealers that proliferated in the 1980s as car buyers demanded one-stop shopping and dealers struggled to offset their dependence on a single make or manufacturer.
Mr. Cogan and his counterparts are riding powerful industry winds. Booming sales, massive consolidation and the inability of the nation's 23,400 dealers to will their hard-earned empires to sons and daughters are attracting sophisticated investors. Investors like Warburg Pincus Ventures are putting money into this $400 billion business that Wall Street has long shunned.
"It's a consolidation play," said Donald L. Keithley, a partner with J.D. Power & Associates, an Agoura Hills, Calif., auto researcher and consultancy. "Mom-and-pop outfits are being purchased by more efficient entities that see the synergies."
Even as new owners slash expenses and boost productivity, the improving quality of U.S. cars and thinning margins on new vehicle sales have turned dealerships into marketing driven businesses. The more profitable service side, not price, is the new battleground. Many dealers are struggling to find an alternative to the eye-it, try-it, buy-it pitch that has been the formula since the 1930s.
Enter Mr. Spielvogel. His mission, he said, is to turn United Auto's dealerships into supermarkets where consumers can buy any make of car, new or used, and get any kind of part or service-all delivered with an eye toward satisfying the customer.
To that end, he intends to add new products and services and change the way salesmen are paid. He has no plans to move the ad account from Zimmerman & Partners, Fort Lauderdale, Fla., but said he wants to use new, more cost-efficient database marketing techniques.
"We're going to bring a brand management approach to every stream of revenue," Mr. Spielvogel said.
United Auto's deep pockets mean Mr. Spielvogel can afford the marketing and ad dollars necessary to change the price-is-everything image and begin to brand products. The company's first attempt in that area is the Security Blanket, a guarantee on all used cars sold on its lots that is so far unique in the industry.
There are already new models of auto dealers out there. At Saturn Corp. dealerships, where the price is the same for all buyers, sales people are encouraged to see the competition as other makes not other Saturn dealers.
Still, industry observers say changing dealer mentality and the hard-sell image won't be easy in a business where only 50% of consumers buy from the same dealer more than once.
"They've earned the rap they got," said Eric Hood, a consultant with the Dohring Co., a Glendale, Calif., automotive researcher. "It's hard to undo."
Mr. Cogan said he has no illusions about the difficulty of the task. "We have to change the culture to meeting consumer expectations," he said.
Ms. Messina is a reporter with Crain's New York Business.