Jim Smail was into motorcycles before he was into cars. Grabbing a Yamaha franchise in 1974, he added Honda bikes in 1975, saw their engineering strengths and added Honda automobiles the year after that.
Smail Auto Group has expanded significantly since then, and it now sells nine brands. Smail has gained such respect among his peers that, in addition to chairing the Acura Dealer Advisory Board, he also becomes chairman of the American International Automobile Dealers Association this month.
Smail spoke with Staff Reporter Mark Rechtin about what the future holds for Acura.
Q: How was 2010 for Acura dealers?
A: It was a significant improvement over 2009. Not only were sales up 27 percent, which is right up there with the best increases in the industry, but dealer profitability made significant strides as well. We saw increases in profits, not just with new-car volume but also in the certified pre-owned brand and with service and parts contributing as well. I was at the December dealer board meeting, and that was the sentiment of all the members of the board.
What will be the big issues for Acura dealers in 2011?
The company has to continue to have the marketing, incentives and advertising to support a brand with only one new product coming this year. That's the TSX wagon, which, being realistic, the company isn't looking for significant volume. And we have a facelift on the TL. But for the whole line to continue to sell, the biggest thing is going to be keeping the incentives strong, and keeping the marketing strong.
What about beyond 2011?
Starting in 2012, in terms of product launches, it is going to be some of the best years possible for Acura coming up. They are getting back to their core values in terms of value, in terms of pricing, and adding a lot of content in these vehicles.
Are dealers satisfied with Acura?
Looking at the NADA survey last summer, Acura had made some progress. And when I was leaving our dealer meeting in October in Denver, I heard all the positive comments. Management did a great job communicating the direction of the company. They said, "We know we had some challenges, but we are sharing information with you about where the brand is going." I hope I'm right, but I think the brand will take a step forward in terms of dealer confidence as the product portfolio gets stronger. There's a good sense of optimism.
Do you get that feeling from Japanese management, too?
Earlier in his career, Mr. Ito [Honda Motor Co.'s current CEO] was instrumental in development of first NSX and the first MDX, and he met with the dealer advisory board in October. He shares a passion for the Acura brand, even though it only is here in America. There are a few vehicles exported to China and Russia, but those numbers are small. But if the brand does build back up to 200,000 units, he told us there might be consideration of putting the brand in other markets around the world.
What is your feeling about Acura styling? Does the factory ask dealers about that sort of thing, or do Acura designers not want feedback?
We have had many discussions about it. Acura was criticized for not having aggressive-enough styling. But now, quite frankly, particularly on the TL, they went too far the other way in being aggressive. We have been very robust in our conversations, saying this went way too far, it is out of hand. Customers like the car, but not the styling, particularly the front end. In seeing the 2012 enhancement of the TL, if we had that initially, we would have sold a lot more cars. I think Acura got the message loud and clear. We want highly styled cars with great content, but we don't need boy-racer looking vehicles or whatever.
Acura SUVs seem to be selling well, but what are you going to do to get car sales revved up again?
We had a minor change to the TSX this year for the 2011 model year, and as we have other products joining the portfolio, I think that's going to be the resurgence. As calendar 2013 comes around there will be additional products, which might be all-new or full-model changes. It's going to take a little bit of time, but we're not that far away from seeing a significant amount of product arriving over a 15- to 18-month period, where virtually everything in the lineup will be changed.
Should Acura get back into the compact luxury segment with a rebirth of the Integra/ RSX?
We've had discussions about that. The Integra and RSX were great vehicles, and we sold 25,000 or 30,000 units a year of them. The strategy was that the RDX crossover would replace the RSX, but we've never hit those types of numbers, even with the two-wheel-drive version. The compact luxury segment is a great opportunity, and we would like to see that part of the market come about, and there are all indications it may happen.
Is there anything else missing in the product lineup?
A revised RL will be coming. You will see further derivatives of the vehicles that we currently have, new segments we will be entering that we have not had in the lineup in a number of years. Once the core products are re-established and put into the marketplace, that's going to give Acura the chance to explore opportunities with other derivatives. Whether that's convertibles, sports cars or coupes, that's a long way off.
What's your opinion on Acura not having rear-drive or a V-8 and trying to compete in the luxury game?
Where we are today, with more powerful V-6s, I like to call Honda Motor Co. with the emphasis on "Motor." They have the ability to create anything they want to. Whether it's through direct injection or turbo, Honda has done things with engines that no one else has done.
Rear-drive has its advantages, but as a Mercedes dealer outside Pittsburgh, I don't stock rear-drive. All my customers want all-wheel drive. Acura will be a solid player. Not that the TL and TSX are bad cars, but to get back to 200,000 units, we're going to have to offer cars that the consumer is looking for.
What is the best way for Acura vehicles to be more than just Honda-plus?
We're getting away from that, to a great extent. The content of the vehicles is different. There will be further separation in styling, for both divisions. I see more familiarity between Lexus and Toyota than between Honda and Acura. I realize the Europeans are different in that regard. But I think we'll have enough differentiation in our products.
How much real contact do you dealers have with factory management?
I have a good rapport with John Mendel, Jeff Conrad in sales, Chuck Kendig in service, Bruce Smith in parts, Richard Kent in marketing. These fellows really do reach out. We have their numbers and they like to talk to us. I've been in this business for 40 years, and the Acura and Honda advisory process is the best in the industry, from a grass-roots, district, zone level, gathering that information up and meeting as a group to discuss the issues that are a national concern to dealers. When we sit down with John and other American management, they really pay attention. There's lots of note-taking and questions back.
What about talking to the Japanese leadership at American Honda?
Mr. Iwamura and the Japanese staff really want to know what's on our minds. They tell us what they can and can't do, what the costs and benefits are, and they get back to us with answers. After representing GM, Ford, Mazda, Kia and so forth, I think Honda and Acura really have the best process for dealers. Sure, the last few years have been challenging for Acura, but things are changing as quickly as we could expect at this moment.
What are Acura dealers doing to attract more service business?
They have developed some of the most forward-thinking programs in direct-marketing and digital formats. Our service departments are going to be wireless, instead of having to go to a dedicated computer. An adviser can take a laptop or service tool and get all his information wirelessly. It lets the technician stay with the vehicle. It's a great enhancement for how service departments are going to work in the future. He'll have service codes at his fingertips. He won't have to look it up.
You mentioned Acura's certified pre-owned program. How goes it?
I think we have a great opportunity with certified used cars. Companies are looking to establish a certified brand, but it's now going to be the entry-level for those who are competing the in the luxury segment. The research we see for Acura is that 70 percent of those who buy a certified pre-owned Acura end up buying a new Acura later on. So there's a lot of upside there.
Should Acura get more involved in leasing? Your residuals are so strong, it would seem like a no-brainer.
I think the whole industry is going to be more aggressive in leasing. I see a real upside for Acura. As long as you have great products, the residuals should be there. By not playing in the fleet business, that has helped our residuals dramatically. There's a tremendous amount of leasing in the Northeast, but not so much in other areas. It's a matter of educating the customer. We are growing our lease portfolio because we want that customer to come back in three years, and for us to have that certified used car. As we hit the fourth quarter of this year, the industry is going to have some difficulties acquiring used cars.
What do you think of Acura's advertising?
After hearing the presentations in October, I get the "Advance" message. It's simple. It's saying, "Advance your thinking." But the consumer can interpret it however they would like to. Is Acura advancing the value, the styling, the features? But we also want Acura to keep the theme that Acura is where you will find the most innovative thinking.
Is Acura ahead of the game, behind the game or in the game when it comes to social media?
It's getting better. Acura is taking their time to make sure they get it right. Our dealership is involved in social media. It's where marketing has gone in the past year. I think it's less of a factor with luxury brands than mass-market brands.
You also are chairing AIADA. What are the issues there?
The international nameplates have 54 percent of the market. There are a lot of opportunities for the international manufacturers to work together, to make sure there aren't moves within the Beltway to make it more difficult on us. When the U.S. government still owns a significant amount of GM, and has significant interest in Chrysler, and the UAW has a significant stake in both, we need to watch for actions being taken.
We dealers are all local businessmen, and the international players have spent billions of dollars on plants here, employing tens of thousands of workers. You can't favor one set of manufacturers over another.