The Founder of Dave Smith Motors

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Reprinted from the Spokesman Review 12/92

Kellogg, ID -
Dave Smith runs the Wal-mart of new car dealerships in the inland Northwest and - just like the retailer he imitates - sales never have been better.

Odd, really, considering Dave Smith GM/Chrysler Inc.'s location is an unspectacular warehouse here - a town in the heart of Idaho's economically depressed county.

Smith, 56, draws customers from as far away as Alaska, California and Colorado because they all get the same bargain basement deal. No haggling over discounts. No hush-hush consultations between salespeople and their managers while customers sip coffee in another room.

"I don't want any part of a transaction that's not good for both buyer and seller," said Smith, an openly religious man. "If it's just good for me, there's some immorality there. You have to have a good feeling about what it is that you're doing."

Shoshone county mine layoffs that started in the early 1980's and continues, have left Kellogg and surrounding towns with basketcase economies. Smith bucks this trend; he's even hired former miners to sell cars and polish them on the showroom floor.

In 1982, about the time mine layoffs began, Smith's dealership desperately needed cash to stay afloat. So, he tried an idea that most dealers would consider financial suicide; he started charging less for cars - hundreds of dollars less per vehicle.

This was years before other dealerships started experimenting with one-price, no haggle policies. And it worked.

In 1992, Smith figures the dealership will sell $20 million worth of new General Motors and Chrysler vehicles. That's up from roughly $10 million in sales a year ago.

Smith, soft-spoken, but determined - attributes his company's success to divine intervention, one-price selling and multiple dealerships under one roof - in that order.

Each potential car buyer at Smith's gets a copy of the vehicle invoice that the dealership gets directly from the factory. Don't be fooled, Smith gets his fair share of the profits. His dealership gets a 3 percent kickback from General Motors and Chrysler for every car he sells. The amount of kickback is also shown to customers; salespeople get 20 percent of the kickback amount or a minimum of $150 per vehicle sold.

Competitors cringe at the system.

"It's my perception that some dealers are taking exception to this one -price sales practice," said Dave Carlson of the Idaho State Automobile Association, a AAA affiliate in Boise. "But it's something that in the future will affect the way people buy cars."

Even manufacturers such as Cadillac have buckled under pressure from their largest dealers to limit Smith's sales.

Also unpopular with manufacturers is the fact that Smith sells the complete GM line, as well as Chrysler, Plymouth and Dodge products, under the same roof. (After all, those cars are supposed to be competing against each other.)

That curious sales set-up evolved during the 1980s as nine of ten Silver Valley new car dealers folded and their franchises were acquired by Smith.

While he's now the only new car dealer in the valley, Smith concedes that success has not come without a struggle. Nor is future prosperity ensured.

"We went through a period in late 1981 and early 1982 when our sales just plunged. We were on a bobsled to oblivion," Smith recalled. "I used to go home with a little yellow notepad and a pocket calculator and no matter how I figured out our situation, it seemed there was just no way we were going to be in business another six months."

Today's challenge isn't staying in business, but rather, keeping the business under control. Smith does not believe he'll keep growing at the current rate for years on end; General Motors and Chrysler won't let that happen.

General Motors officials in Michigan and Portland did not immediately answer requests for interviews regarding Smith's pricing strategy. But he believes they're opposed to it in principle; it gives the appearance of "distress merchandising" of their products.

"This isn't a wide open deal," Smith explained. "If we sell too many cars, we may be restrained in some way."

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