Welcome to Car Dealership Guy “From the Show”—15 questions. 15 answers. The best insights from our latest CDG Podcast interview, featuring guest host Matthew Haiken.
Today’s guest is Laddie Stern of Stern Auto Group.
Stern is the Founder of Stern Auto Group, a 20-store empire he has built over 65 years in the car business.
He started as a wholesaler for his uncle before buying and scaling the Skyline and Hatfield auctions into the country's largest privately held auction company, then returned to grow a new car group alongside his son Jonathan.
Matthew Haiken: You got the jet, you got the boats, you got the most gorgeous cars, but every morning you're at your desk. What are you doing? Why don't you just enjoy your toys?
Laddie Stern: "Because I love working. I love the deal. I'm a junky deal guy. I would do it almost for free just to do the deal."
Haiken: How'd this start?
Stern: "Well, I've been in the car business 65 years. Went to work for my uncle, and when I came out of school—I guess in '62, '63—we were wholesalers. New car dealers only sold new cars in those years. They never focused on the used. And we really controlled the used car market in New York and New Jersey. We're the largest wholesalers in the country. So for us it was a piece of cake. We'd take the trades in, we'd sell them all over the country."
Haiken: Did you always know you wanted to work with your uncle?
Stern: "No. I came out of school and I went to work for a friend of mine, his father was very well connected, got me a job at Catalina Sportswear... had a fight with the guy, I left that. Then I went to work for a jewelry company, they wanted me to travel, I quit that. I had another job, I quit that. My mother said to me, 'Listen, I hate to say it, you're not smart enough to do anything but be in the cars. There's no other, you got to be in the cars.' And it was like a fish to water. I loved it. Loved the action. I loved the whole idea of it."
Haiken: Where was the office based out of your uncle's operation?
Stern: "Jerome Avenue. Strictly wholesale, dealer to dealer."
Haiken: Tell me about Jerome Avenue, because some people don't even know what it was.
Stern: "It was the hub for used car wholesalers. There's a dozen of us—small guys, medium guys—and they would have buyers all over the country buying cars. In those years there's no computers. The odometers, you could change. I mean, the whole game was a completely different game. I remember a buyer sent a car in with 95,000 miles, a beautiful Pontiac. We cut the car back to 45,000 miles. Guy walks in, buys the car, thought it was an original 45. We cut it back to 25. The whole idea was very strange in those years, and then it became very sophisticated—new car dealers realized they got to be in the used car business, and the auctions really took over the game."
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Haiken: When you were getting settled with your uncle, were you stationed on Jerome Avenue, or did he put you on the road to buy cars—visiting new car dealers?
Stern: "I went on the road to buy used cars... you were like a fly on the wall at new car showrooms. Of course. But you learned a lot doing it for 65 years, you do learn a lot."
Haiken: How did you get into the new car business?
Stern: "I wound up buying a deal in Long Island, a Chevrolet store that went broke."
Haiken: How'd you get approved? You had no track record as a new car dealer.
Stern: "In those years, if you… knew something about the car business they'd give you a shot. Different times. There's no computers the way they are now, there was no checking the way they are now."
Haiken: How'd you get the auction deal, Skyline?
Stern: "Partner was in real estate business and we bought as a real—I remember we paid $12 million, it was unheard of. And the interesting part of it was the people who ran it, ran it like a mama-and-papa store—they posted the fees on the walls, so a guy buying a car realized how much the fee was. The first thing I did was rip those signs down, like Las Vegas. I wanted to run it like Las Vegas. And we became auctioneers. We wound up being the largest privately held auction company in America. We wound up selling it to ADT, which spun it off to Mannheim. They're still my tenant there."
Haiken: How did you learn how an auction is run? Did you just know because you were a wholesaler, or did someone mentor you?
Stern: "We bought it as a real estate investment first. Then we realized what a cash cow it was—we get it from the buyer and the seller, we don't have to pay the buyers unless we have the titles. It was scary, unbelievable. So I wound up buying that auction. I wound up buying the biggest auction in Pennsylvania. I bought one in Kernersville, North Carolina. Biggest mistake I ever made in my life was selling the auctions and staying in new cars. I should've sold the new car stores, stayed in the auctions. But we did okay in the auction business."
Haiken: I'm sure you've been through a lot of tough times. Can you tell me about some of them?
Stern: "September 11th, 2008... ‘08 to ‘10 was very tough. We all survived it, but we learned a lesson—cash is king. You can't be in the automobile business without having money."
Haiken: Did you just learn that in '08, or did you know that as a wholesaler?
Stern: "I knew it in Norway when I was a new car dealer. I swore to myself I'd never be in that position again—I'd never be tight. When I sold my auction business, I changed my life. I find that people don't realize you can go high and all of a sudden things change, you go into the garbage. More car dealers have gone broke because they went into business under-capitalized, they hit a blip, and they were out of business. It's a very cash-intense business. We're very conservative, we don't go out on a limb. I don't believe in it, because if things get bad, the only ones who are going to survive are people who have money."
Haiken: Do you think if you'd spent more time with family, the business would be different today?
Stern: "It's a very time-intensive business, you got to spend a lot of time in it. I never spent a lot of time with my family—it was a mistake. My son doesn't do that, he spends time with his family, goes away with them. I never did that because I was stupid, I should have not chased the buck as much and spent some more time. Internally, I would have at least had the memories of spending time that I don't have today."
Haiken: Other than cash flow, are there life lessons you've pounded into Jonathan's head, or your team's?
Stern: "[My son, Jonathan] is very conservative, knows exactly where he wants to be financially. It's a pleasure—you got to be secure that the next generation is here for what you started. I'm secure. I hope my niece, and I have a granddaughter and a grandson that could go into the business—I hope they go into the car business. It's going to be a fourth generation. It's not about the money, it's about the family."
Haiken: Should I go back to using my strengths on the showroom floor instead of getting pulled into everything else?
Stern: "You don't sell cars, you go broke. You got to have the greatest ops, you got to sell cars. Fixed ops—very important today, service—I have a Ford store, John sells 80 cars a month, makes big money because the back end is so strong. You got to know fixed ops, but you got to sell cars. That's the key. You don't sell cars, everything else falls."
