The dealership mogul: Leading a $2B dealer group

Welcome to another episode of the Car Dealership Guy Podcast.

Today’s guest is Aaron Zeigler, President of Zeigler Auto Group. In this episode we discuss leading a $2 billion dealer group, how anyone can run a $100 million business, addictions in the dealership, and the potential consequences of November’s election.

Stream the full episode now: YouTube | Spotify | Apple

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(00:00) - Intro

(00:56) - Aaron’s background and career

(04:32) - What’s been your acquisition strategy?

(06:16) - Zeigler University

(10:49) - What do you look for in acquisitions?

(14:31) - What are your most exciting franchises right now?

(19:20) - Thoughts on the state of Stellantis

(25:00) - Outlook on the dealership market

(28:37) - Do you sense there is still pent-up demand for new vehicles?

(29:50) - What are the key differences in operating across these mid-west markets?

(31:08) - How do you approach marketing?

(35:34) - How are you structuring your monthly meetings?

(38:33) - What are the common traits of the folks who have grown the most in your organization?

(41:31) - What’s keeping you up at night?

(44:04) - What roles are you looking to fill right now?

1. Aaron’s journey in the car business.

It all started with his dad, Harold, who got into the car sales game as a way to support himself through college. After college, a struggling dealership in the next town over caught Harold’s eye, and in 1975, he opened Zeigler Ford in Lowell, Michigan. At 28 years old, Harold was the youngest Ford dealer in the country at that time. He quickly turned the store around and amassed 5 dealerships in total. Growing up, Aaron wasn’t sure if he wanted to follow in his father’s footsteps. In his senior year of high school, he sold his first car and fell in love with the same adrenaline rush he got from playing sports in his youth. He went to college, attended the NADA Dealer Academy, and then worked just about every job in the dealership. He took over as President at just 28 years old. “This is a business that you need to love to be good at it. And you got to live it every single day – every single minute of the day,” he says. Based out of Kalamazoo, Michigan, Zeigler Automotive Group has 41 locations today that reach into Illinois, Wisconsin, and Indiana to name a few. Zeigler represents pretty much all of the high-volume domestic brands as well as many high-line makes and foreign brands.

2. Taking over and shaking things up.

Aaron says that when he took over the business there wasn’t a lot of structure. So, he decided to create Zeigler University as a way to invest in his people and company culture. Zeigler was inspired to start the university after his time at the NADA Dealer Academy. New hires can enter at "day one" with no prior car industry experience. The program utilizes a variety of methods, including over 1,500 bite-sized videos (5-7 minutes) alongside live training and classes. As employees progress, they can aim for leadership positions through specialized programs like the "aspiring leaders" curriculum. The pinnacle of the program is the "performance group," personally led by the program director, which trains individuals to manage dealerships. About 10 people go through the performance group at any given time.

3. Going from 5 stores to 41.

When the recession hit in 2008, many dealers were gun-shy when it came to buying up stores. But not Aaron. The first 7-8 years of his tenure were spent buying underperforming dealerships and turning them around. In 2010, the group reached a major milestone: $300 million in sales. By 2016, they were doing $1 million in sales. Fast-forward to 2020 and that number doubled. “But what happens is you get bigger and you learn more. We had a lot of great people that were coming up through the organization that could take over dealerships. We started buying bigger dealerships –  the absolute best franchises, in the best locations and the biggest volume stores that we could find out there,” Aaron explains. 

4. Zeigler’s acquisition strategy.

Back in 2008, he targeted underperforming stores because that’s what he could afford. The first 15 stores he bought were all losing money. But after turning them around, the return on investment was incredibly strong. As a dealer group grows, it becomes more difficult to maintain that strategy. In 2015, the group’s bankroll was solid, so Aaron decided to go after the best dealerships in the biggest markets. That has been the focus for the last 8-9 years. The single most important thing Aaron considers for acquisitions is location. “We're looking for locations that are either high volume, high traffic areas, or areas that are going to grow over the next 20 years,” he explains. “Then, once you have the location,  it comes down to the franchise, right? So you've got to have a major franchise out there. We're looking to buy tier-one franchises.”

5. On the acquisition trail.

Zeigler has landed a monster Subaru store along with some swanky Mercedes-Benz, BMW, and Land Rover dealerships. Even the bread-and-butter Toyota and Honda stores have been exceeding expectations. There also be a resurgence for the Ford brand. Sales are climbing, and customers seem more enthusiastic given recent incentives. However, Aaron wasn't a fan of the, now dead, Ford Model E program (a set of criteria dealers needed to meet in order to sell EVs). He felt it burdened dealers with unnecessary costs and offered little value to car buyers. While Zeigler opted out of the lawsuit against Ford, they think the OEM completely whiffed on the whole EV retailing strategy. “It was forced down our throats and ill-conceived. [Ford] had a third-party company that was doing the training. That company had absolutely no clue. You know, we're spending $25,000 a day on training for our people, plus flights and hotels and taking them away from the store,” he adds.

6. A tougher ride with Stellantis.

While Jeep sales have been sizzling, Aaron blames Stellantis for dramatically overproducing vehicles and failing to support dealers with the right incentives. They've jacked up prices by $15,000 per year, then tried to force dealers to take even more inventory. So, what's the secret sauce for Stellantis to get competitive again? According to Aaron, it's all about hitting the right price point. Stellantis needs to listen to its American leadership and stop trying to run things from Europe with a cost-cutting hatchet, he says. They need to empower their sales teams and dealers with the tools they need to move cars, like better incentives and leasing programs. Otherwise, the brand will continue to hand over market share to hungry competitors.

7. Market outlook.

Interest rates are spiking, adding a $15-20 million floorplan expense to dealerships carrying a hefty $400 million in inventory. Aaron predicts there will be some fire sales as a result, with financially troubled dealerships potentially offloading discounted cars or even entire underperforming stores. Yet, Aaron expects at least one interest rate cut this year, potentially followed by six more. This could dramatically reduce borrowing costs for dealerships. Plus, there's a hidden reserve of millions of unsold cars from the COVID period – Aaron estimates 12 million. Similar to 2008, these missed sales could come flooding back later. On top of that, he believes sales could be currently 20-25% higher if rates were lower, suggesting a ton of pent-up demand waiting to be unleashed.

8. What motivates Aaron.

Aaron has a strong entrepreneurial drive that he thinks was instilled in him by his father. “My dad was really ahead of his time when he started the business back in the 70s. The dealership business was very different and I heard as a kid growing up, man, you just got to take care of a customer no matter what,” he says. That’s why, every customer issue gets back to Aaron. He says he’ll pretty much agree to whatever the customer wants, including buying back the vehicle. “I just tell our people, whatever you got to do to make people happy, you know, make them happy,” he says.

9. Freedom to run the show.

Zeigler has a whole team of auto group experts on standby to help out with service, sales, parts – you name it. But the real magic happens during their monthly video calls where each dealership brings its top strategies to the table. This way, a killer idea from one store can spread like wildfire across all 41 dealerships. Creating a family atmosphere is also a big deal for Zeigler. The group does a lot of social events to keep things fun. In the end, Aaron believes a strong culture is their secret weapon, and it allows the stores to attract and keep the best talent in the industry. He looks for folks who are eager to learn, humble enough to admit mistakes, and willing to take calculated risks. “With a culture, it's really hard to explain it, but you know you can feel it. So I say, look, if you get up in the morning and you're excited to go to work, you're excited to work with the other people, that's a world-class culture,” he says. 

10. Rolling with the punches.

Aaron acknowledges the changing economy and compares it to a game with unpredictable rules. He highlights how businesses, like his own, need to constantly adapt. COVID-19 presented a unique challenge for appreciating used car values. It forced Zeigler to adjust its strategy and prioritize quicker inventory turnover. Rising interest rates make this approach more important as faster turns cut holding costs. But, the biggest industry uncertainty now is stricter government regulations. This is especially true for electric vehicles. Aaron emphasizes his belief in a free market and also worries about too much government intervention. But regardless of the presidential election outcome, Aaron is confident in his group's ability to adapt and succeed.