A Wall Street Journal reporter discovers profound insight at Lehigh Valley Honda

August 7, 2009

Congratulations to Art and Andy Wright of Lehigh Valley Honda. Below you’ll find a Wall Street Journal article about Lehigh Valley Honda. Over the past couple of years, I’ve gotten to know Andy, Art’s son and found him to be one of the brightest and most progressive thinkers in the industry. To this extent, the recent experience of a Journal reporter at his store comes as no surprise to me. Andy and his dad are truly among the very best.

Finding Hope in a Cash-for-Clunker Country

Mean Street columnist Evan Newmark recently left the insulated confines of Manhattan for a two-day road trip to Eastern Pennsylvania. In this first column of a series on the economy, he visits the Lehigh Street Auto Mile, whose auto dealers serve the 800,000 people of the greater Lehigh Valley.

How is this for a snapshot of the American auto industry?

At just after 9 a.m., I arrived at Kelly Buick GMC, an auto dealer at the southern tip of the Lehigh Auto Mile. I stood in the empty showroom for a few minutes but no one came out to greet me. “Cash for clunkers” mania may grip the nation, but apparently not at Kelly Buick GMC.

Surely, things would be different at Kelly Ford, its sister dealer across the street. The Ford Focus is the No. 1 selling “cash for clunkers” car. No luck there either. No greeter, no salespeople, only a couple of sad customers and an even sadder popcorn machine. So I gave up on Detroit and headed up the street to Lehigh Valley Honda.

It was there that I bumped into Art Wright, co-owner of Lehigh Valley Acura Honda Suzuki Hyundai. He also happens to be Chairman of Honda’s National Dealers Advisory Board.

In little more than an hour with Art, a commonsensical 58-year-old, everything was much clearer to me: Why GM and Chrysler failed and Honda didn’t; why “cash for clunkers” isn’t a cure-all for the auto industry; and why the $100 billion the U.S. taxpayer has poured into Detroit may not be enough to save it.

That is a lot to get from a conversation with one car dealer. But Art struck me as a pretty special dealer.

Twenty-five years ago, he made the big leap from managing a Cadillac-Honda franchise in York, Penn., to buying his own Honda franchise. He picked up a number of new franchises along the way, including a Ford franchise he sold a few years back. (Guess who ended up with it? The Kelly Auto Group from up the street.)

Art still has the same business partner he started with in 1984. He has the same wife. They have been together for 40 years. He has two sons, one of whom works in the business and lives nearby with Art’s two grandchildren.

Long-term commitment. Long-term investing. That seems to be Art Wright’s credo-and it fits nicely with Honda’s long-term corporate strategy: steadily grow U.S. market share, keep car re-sale values high and “give our customers great service.”

Those are Art’s words. And that is why his showroom is bright and clean, why there is a greeter desk and an express service center at which three technicians simultaneously work a car for fast turnarounds. The contrast with the Kelly showrooms down the street is simply startling. (I have tried tracking down someone to talk to at Kelly. No word back yet.)

Of course, Art’s dealerships have suffered, along with all car dealers, in our great recession. For his dealerships, Art’s combined new car sales peaked at 300 to 350 cars a month. Now, he is running at 250 to 275 a month. This year, he cut his staff to 185 from 215. “First time in 25 years I’ve had layoffs,” he sighed.

Hard times or not, if you expect Art Wright to be pounding the table for the “cash for clunkers” program, you would be wrong. “Do we need it? No. Has it been successful? Yes. Philosophically, I’m not in favor of all the spending. I don’t believe we can sustain our country by giving money to buy things,” he said.

Art thinks the worst is over, but he isn’t rehiring and sees a long, slow recovery. “If Washington did nothing, we’d recover at the same rate,” he said. “My personal opinion is if we do 11 million cars next year that would be a very good year.” That is still a shocking number. In 2007, Americans bought 17 million new cars.

So far, Art has sold 65 cars through the clunkers program and expects to sell another 40 to 50 before the taxpayer money runs out. It is a nice bump. But it adds up to less than half a month of Art’s total sales.

Of course, if you are a GM or Chrysler dealer, the clunkers program takes on a heightened urgency. Until recently, Chrysler had been offering buyers $4,500 on top of the government’s $4,500. Kelly GM and Ford had banners promoting “Cash 4 Clunkers” both outside and inside the showrooms. At Lehigh Valley Honda, there were no banners, no special discounts, nothing.

Apparently, if you sell good product like Honda Civics, Fits and Accords, you don’t need to keep subsidizing sales and cheapening your brand.

Art nicely summed up the past woes of Detroit: “Good marketing is not good business. The problem has been at the top with the business philosophy. It’s all about good products. Detroit’s costs got so high that they built cars to cover costs rather than satisfy customers.”

It is a simple lesson, but one that took Detroit decades to grasp.

Interestingly, Art believes a restructured GM will end up doing just fine. In fact, he wouldn’t mind owning a GM franchise himself. “I think it would be a good investment. All that debt is gone. They have smart people.”

I wish I could be as confident as Art. But after a couple of hours on the Lehigh Auto Mile, it seems to me that Honda and Art Wright know exactly what they are doing. Detroit still doesn’t.


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