Herb Chambers, the Auto Dealer and Empire Builder Opens Another Dealership

DEALER

FEBRUARY 2008 VOLUME 21 NO.1

InsideInsideCOVER: Herb Chambers - Dealer of the Year

Take the * Out of Advertising: The Attorney Generalmay be just getting started

Guarding Yourself From Safeguards: The rule is here tostay, ignore it at your peril.

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APPETITEfor Opportunity

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INSIDE

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6 IN THE NEWS: Silko Kia joins nine other Kia dealerships that have closed their doors over the past18 months. But others, including Kia Sports Auto World in Bourne, are going strong. Bedard Brotherstakes over Gateway Chevrolet. Hassan Brothers settles its termination lawsuit with Jeep. Lowell ChryslerDodge closes its doors. Lia Toyota begins expansion. Ira donates to Danvers diversity. Dealers report thatMassachusetts customers are finding loans for autos despite the credit crunch. Dealers – furious aboutanonymous online consumer gripes criticizing their stores – fight back. And more.

8 POLITICAL ACTION: Attorney General Martha Coakley handed down nearly $300,000 worth offines to state dealers. Could your advertising end up costing you?

10 KEEP YOUR GUARD UP: The Safeguards Rule has caused expensive headaches since itsinception. If the FTC doesn’t get you, plaintiffs’ attorneys will. How to navigate the rules and keep yourdealership out of trouble.

12 COVER STORY: Dealer of the Year An outsider who made his mark in the office copierbusiness, Herb Chambers turned to cars 25 years ago. Today he’s an empire builder with an eye foropportunity, and he’s the Time Magazine Dealer of the Year nominee.

20 CONTRIBUTORS: NCDPAC Supporters Thanks to those who gave generously to the New CarDealer PAC: Your voice on Beacon Hill. And to the Dealers Election Action Committee: Your voice inWashington.

21 POLITICAL ACTION: All The President’s Men Massachusetts members of the DEACPresident’s Club say the PAC is the best investment a dealer can make. Isn’t it time to join the club?

22 NADA UPDATE: The EPA decision to deny California's waiver request will face opposition. NADAsupports the national CAFE increase recently signed into law, and argues that a patchwork of stateenvironmental regulations will cause confusion and harm.

AUTODEALERMassachusett

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The official publication of the Massachusetts State Automobile Dealers Association, Inc.

‘You have towork it – really live

and breatheKIA.’

‘The AG willnot stop with

these eightdealers.’

on the cover

Herb Chambers is the Dealer of the Year

PHOTO CREDIT: ANTHONYSCARPETTA PHOTOGRAPHY 6 8

‘Expect 2008light vehicle sales to fall

about2.5 percent’

9‘You could beunwindingEVERY deal

since May 2003’

10

MSADA Feb08 2/14/08 10:54 PM Page 4

It could just as easily apply to the man. HerbChambers has got it.

He’s got the 40-odd dealerships including hispalatial Lexus store in Sharon (see side story).He’s got homes in Boston and Connecticut, andhe’s got a helicopter to commute between thetwo. For long distance commuting he owns anew Gulfstream 450 Jet. He’s got a rotatingcollection of 15 to 20 exotic and collectible carsin his garage, and he’s got a 188-foot yacht ifdry land becomes dull.

And now he has the 2008 Time Magazine Dealerof the Year nomination and he’s the state’sdealer of the year.

When the press writes about Chambers, theyfollow a tight narrative. How as a youngstergrowing up in Dorchester, he thought the localdealer possessed untold wealth. With his nosepressed up against the showroom window, hemarveled at how many cars the businessman“owned.”

How, following a four-year stint in the Navy, heopted for a paycheck instead of school. He neverattended college. How he founded a copymachine company that would go on to become

the largest independent distributor of officeequipment in the United States. And they alwaysinclude how Chambers went looking for aCadillac and ended up buying a dealership.

The Central Question

None of those stories asks the central question.How did an outsider with no automotiveexperience build such a formidable organization?What keeps Herb Chambers – the man and theorganization – going, and growing?

Following his time in the Navy, Chambers beganworking for a copy machine company, first as atechnician and later as leader of its #1 salesteam.

He made the transition tosales by selling extendedwarranties while servicing themachines – so manywarranties that managementtook notice and expanded histerritory. Speaking to peoplein a sales context was difficult,but a Dale Carnegie courseboosted his confidence. Today,

he says, the key to sales is simply being nice topeople.

A-Copy Becomes Ikon-ic

The office world was moving from mimeographand carbon paper to photocopy. In 1965 hefounded his own company with just $500borrowed from his mother. He named it A-Copy,so it would be listed first in the phone book.Chambers used his savvy as both technician andsalesman to purchase used copiers, then fix andresell them.

His success snowballed. His competitorsguaranteed repair in 24-hours. A-Copy promised

to fill service requests ineight hours – and in theearly days Chambershimself made the servicecall.

Chambers sold hisbusiness in 1983 to Ikon,then known as Alco-Standard, which wasattempting to consolidateindependents like A-Copy.

COVER STORY: DEALER OF THE YEAR

Empire Builder by Lee Goodwin and Meredith Spencer

When people look at Herb Chambers, they see the accoutrements of wealth and a stableof dealerships. So why would a guy at the top of his game give a damn if the mechanics’bathrooms are clean? When you understand that, you’ll begin to understand HerbChambers.

“The first time I met him,

I said to myself,‘This guy is electric’”

recalls John Covell

You know the jingle. “We’ve got it. At Herb Chambers we’ve got it.”

Herb Chambers Lexus in Sharon opened in fall 2007. Chambers and his team toured the country seekingdesign ideas to incorporate into the 110,000,000 square-foot dealership.

MSADA Feb08 2/14/08 10:54 PM Page 12

Chambers had become the largest Canondistributor in the world.

How to Buy Companies

The addition of A-Copy represented “a bigfeather in the cap” of Alco-Standard, lending its

consolidation strategy “instant credibility” andhelping the Fortune 500 company grow into oneof the dominate players in the office equipmentindustry worldwide. Alco became a $20 billiondollar company and Chambers its largest singleshareholder.

“The first time I met him, I said to myself, ‘Thisguy is electric,’” recalls John Covell, director of Marketing and Training. He first joinedChambers at A-Copy in 1981 from Xerox. “Hewas so exciting and intense about what he was doing. There was this [atmosphere of]entrepreneurship.”

Chambers stayed on for a while at Alco-Standard, in charge of mergers and acquisitions.He gained valuable experience in buyingcompanies. He also learned how to delegate toothers, and to trust others while holding themaccountable.

After completing a number of acquisitions, hestarted to shop around for a company of hisown….in a different industry.

He wanted a business involved in distribution,a mix of new and used products, and somethingservice intensive. What he didn’t want was to compete any longer against the likes of IBMand Xerox.

No Pre-Conceived Notions

Not long after he purchased the first dealershipin New London, Connecticut – where he walkedin looking for an El Dorado and walked awayowning the business – he set his sights onexpansion. By 1997, just 10 years later,Chambers had 15 dealerships spread overRhode Island and Massachusetts and sold24,000 cars.

From day one Chambers generated ideas of howto conduct business differently. A confirmed carnut, he began buying and selling cars in theNavy; nine in one year. “Automobiles becamebeautiful to me,” he recalls.

At A-Copy, he once purchased 16 in a year. Hefrequently says that he understands the businessfrom the consumer side.

“He had no pre-conceived notions of what hecould or couldn’t do,” says Quincy-based dealerDan Quirk. “He put A-Copy on the map. Hefocused on customers. He brought the sameprincipals to the car business.”

Keeping Up Morale

Adopting the mindset of a customer is just onekey to his success. (Chambers’ servicedepartments wash and vacuum every car thatrolls through).

His ability to inspire andturn over managementcontrol to others is alsokey. He expects his GMs –he refers to them as his“partners” – to fix theirown problems and runtheir dealerships asi n d e p e n d e n t l y a spossible. He has a saying:“We lead people andmanage information.”

He also subscribes to theadage: Trust but verify. Forexample, he demandsthat his technicianbathrooms be inspectedonce a month. When hediscovered one recentlythat was a mess, he hitthe roof. “People maywonder why that's

important. The restrooms aren’t public and thetechs spend more time with cars thancustomers. I ask, ‘What about morale?’ If theydon’t enjoy good morale, they may not fix the car right.’”

On the sales side, new sales people spend twoweeks with Covell. He likes to point out that newsales consultants win MVP honors every monthalong with seasoned employees at a monthlymotivational breakfast. Every year Chambershosts an elaborate gala, rewarding topperformers with Rolex watches and cash. Topsales figures won’t win at either event unlessaccompanied by high customer service marks tomatch. For managers, overall managementcombined with low turnover is a must.

“He’s concerned with the total overall objective,”says Quirk. “He has confidence in his ability andin his people’s ability. He absolutely, positivelyloves the business.”

13www.msada.org massachusetts auto dealer february 2008


Empire Builder...continued from page 12

The 40-Group: Chambers (center) with his 40-plus GMs. They gather every month to present detailed results and toss around ideas. Chambers dissects thenumbers and exhorts his managers to find where opportunities exist.

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‘There’s no question that he’s a big picture guy,’ says John Covell, who has worked forChambers since 1981 and followed him from the copier industry to the auto industry.‘He was so exciting and intense about what he was doing.’

Every month the company’s 40-plus GMs gather together for adetailed review of their stores.

Chambers lavishes praise on those who bring good numbers as wellas good ideas to the meeting.

The managers are expected to dig into minutiae at these meetings.They present their financials one manager after the other: units newand used, gross profit and per vehicle, F & I, service, parts, expensesby category, aging receivables, asset management and customerservice.

Chambers, who has pored over the numbers earlier, sits ready topounce: “What happened here? How about here?”

“He zeroes in. He finds where the opportunities exist,” John Covellsays. “There’s no question that he’s a big picture guy. But he believesin looking at the numbers and dissecting the numbers.”

Constant Improvement

The discussion is designed to provide the type of focus they miss whendealing with day-to-day issues and questions. It also provides a forumfor implementing changes swiftly among the entire group. Forinstance, while examining credit card expenses, someone discoveredthat taking a credit card number over the phone nearly doubles theservice fee compared to swiping a card. Pennies, perhaps, but multiplythe fee by hundreds of thousands of service customers, and costsquickly mount.

It is an example of the Japanese concept of kaizen, or constantimprovement, that Covell tirelessly advocates. “If we didn’t have thesemeetings we wouldn’t be as successful as we are,” Covell says.

Chambers prods everyone, constantly, to find new avenues toimprovement. “I’m trying to convince each and every one of you howyou can be better,” he tells his employees. “As a company, we can beso much better.”



The ‘40-Group’ Review

Does Chambers take more pleasure in the rewards of his success, or thefact that he found a way to turn some of those “accessories” into profitcenters?

In addition to his legion of dealerships, he has amassed a collection ofreal estate and exotic cars. He is quick to acknowledge that he has beenvery fortunate in business.

His properties include a country estate in Old Lyme, Connecticut and aspot at the new Mandarin on Boylston Street, slated for completion in2008. Last year, he placed his Back Bay residence – a rare Beaux-Artsstyle home – on the market for $14.95 million, breaking Boston’s singlehome sales record by $4 million. Chambers spent two years renovatingthe house before its sale, and says that it’s an “insane” property forsomeone without a family.

In Old Lyme, Chambers keeps a stunning collection of cars – 15 to 20exotics and vintage autos. The collection, featured in The Boston Globeand Chronicle television news program, includes a McLaren F1, a MileMiglia tested 1955 Mercedes-Benz Gullwing, a 1959 Cadillac BiarritzConvertible Eldorado, a 1932 Ford Coupe and 4 Ferrari Daytonas. Evencar nut Jay Leno has asked Chambers for a spin.

By Sea and Sky

And if tooling around the Connecticut countryside becomes tiresome,Chambers can head to the sky in his jet, take his helicopter for a spin,or board the Excellence III, his 188-foot yacht. Chambers was“intricately” involved in the design and building of the ship, traveling toEurope to personally meet with shipbuilders Abeking & Rasmussen.

He has built and sold several yachts – and leases the Excellence formuch of the year (at $500,000+ per week). The plane also spends mostof its time in the hands of others.

In the words of longtime associate John Covell, Chambers is “driven,driven, driven.” Another associate, Jim Xaros, contends that the mostdifficult aspect of working for Chambers is keeping pace with him. Nomatter where in the world his boss may be, Xaros quips, his phone willring at the end of the work day, everyday, and Chambers will be asking,“How’d we do today?”

Turning ‘Accessories’into Profit Centers

Chambers, a Navy veteran, was ‘intricately’ involved in the design and construction of his188-foot yacht. Always on the lookout for opportunity, he leases it for much of the year, atnearly a half-million dollars per week.

PHOTO: CAMPER & NICHOLSONS

MSADA Feb08 2/14/08 10:54 PM Page 14



Asked about Chambers’ expansion plans – specificallyCentral Massachusetts – John Covell calls Worcester andsurrounding towns “a great market.” Metro Boston mayboast great demographics and high density population,but it suffers from a severe lack of space. However, thatspace is plentiful further from the Hub, and Chambers ismissing a few brands from his 40-plus points – which runthe gamut from Vespa scooters to Bentley. There’s noNissan. No VW. No Volvo.

Chambers is always looking for new opportunities, and if thelocation is right, and the deal makes sense, he’ll buy.

What’s the hardest aspect of putting together a deal?

“It’s price,” Chambers says. “How bad do I want it, and howbad do they want to sell it?

I’m not a fire sale buyer. I’ve dealt with some very goodnegotiators. I wasn’t the best negotiator, but I’ve gottenbetter.”

Patience and Persistence Pay Off

Occasionally, Chambers will invest himself in a deal butwalk away from it. “Even at the 11th hour, becausesomeone tried to change the deal,” Covell says.

Nor is Chambers afraid of a fight. He once pursued alawsuit for nine years against Audi when the manufacturercancelled his franchise “for personal reasons” thatChambers deemed unfair. A million dollars and a decadelater, he vindicated himself.

One recent acquisition required extraordinary patience andpersistence. Foreign Motors West, which Chambers pickedup last year, was a dealership group that Chambers hadwanted forever. “Herb was told repeatedly they wouldn’t sellit,” Covell said.

Finally, the winds shifted. After two attempts by othersuitors, including Penske Automotive Group went nowhere,it was Chambers’ turn.

From the beginning, workers at the employee-owned FMWstore regarded Chambers, a competitor, as “the evilempire.” Covell and Chambers met with small groups ofemployees over several weeks, dispelling misconceptionsand reassuring employees about their jobs. Chambers’willingness to listen, combined with his self-effacingmanner and geniality, eventually won them over, and hesecured employee approval by a near-unanimous vote.

Stay Visible in Showroom

Controlling a large dealer group provides cost efficiencies.When he purchased his first Honda dealership onCommonwealth Ave 20 years ago, the “blue sky” was $4million, “an unheard-of amount,” he recalls. However, his

THE EVIL EMPIREability to share existing advertising cuts costsand has allowed him to pay a premium forsubsequent dealerships of the same brand.

Still, he never allows the upside of a potentialpurchase to cloud his critical thinking. “I thinklong term. I think about things more. Iconsider 'what's the worst thing that canhappen? How bad will it be?’”

And what if he were to throw aside hisorganization and return to just one or twodealerships. Where would he focus?

‘It’s price. How bad do

I want it, and how bad do they want

to sell it?’

continued on page 18

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Herb Chambers Lexus in Sharon, the crown jewelin the crown of the Herb Chambers empire, tooknearly three years to build and sprawls across 11acres. Its 110,000 square-foot showroomfeatures vaulted cathedral ceilings and abundantnatural light. Customers are treated tocomplimentary espresso and sandwiches as theywait for their car in the dealership’s luxe lounge,complete with marble fireplace. Or perhapsthey’d prefer to stroll the Zen garden. If that’s tooslow paced, the dealership also offers a WiFi-equipped business center for customers.

As soon as customers arrive at the serviceentrance, German-engineered doors zip up andthen down in seconds. Either a personal serviceadvisor familiar with their history, or valet, greetsthem. Behind the scenes, the service areaaccommodates 60 bays.

Chambers scoured the country with an architectand a photographer, traveling to Texas, LasVegas, South Carolina and Georgia to pluck thebest elements from existing Lexus dealerships.He estimates he’ll enjoy bragging rights for twoyears before someone outdoes him.

DEALER OF THE YEAR

The Jewel in the Crown

At the espresso bar in Chambers’ Lexus store, customers can enjoy lattes, even a sandwich, all gratis. The lounge and espresso bar at Herb Chambers Lexus also provide a friendlyatmosphere for customers and sales people to chat.

The customer service desk is designed to resemble a hotel reception area. Every car that rolls througha Chambers service department is washed and vacuumed. Lexus customers are assigned a personalservice advisor familiar with their history.

It took three years to build and features 50-foot cathedral windows, marble floors, a floorto ceiling fireplace and can house 40 cars in its showroom.

BY THE NUMBERS:

3 years to complete

11 acres of land in Sharon

110,000 square-foot showroom

40 cars fit into the showroom

50-foot cathedral windows

$500,000 cost of showroom skylight

140 staff members, including sales andservice department

5 lunch rooms for staff

$30 million: estimated cost

MSADA Feb08 2/14/08 10:54 PM Page 16


DEALER OF THE YEAR

Can there be too much opportunity?

Herb Chambers would likely say no. But for nearly all dealers, includingChambers, one aspect of their business dictates “yes.”

Every day, dealers are asked to donate money, new cars, and used carsto groups and individuals in need. If only business were as steady andreliable as requests for charitable contributions.

Chambers prefers to keep his considerable charitable works low key.He responds most often to pleas from people he knows already,

because he wants assurance that the funds will find their way to thosewho truly need them. “We don't have a policy about giving,” he said.“We do it on a case by case basis.” He acknowledges an aversion toprofessional fundraisers.

His most recent visible charitable work has been on behalf of the 200Foundation, which honored Chambers as its Man of the Year last year.The Metrowest charity donates all of the money it raises directly to foodpantries, counseling centers, respite homes and other organizations.

LOW KEY CHARITABLE WORK

Like many dealers before him, Chambers has become the public face forhis dealerships. Despite his ads, Chambers is a reluctant spokesman; acommanding presence in small groups, but not someone known for leadingthe PR offensive. He feels nervous in front of the cameras, and he's criticalof the results.

His eye-catching – some would say, provocative – ad campaign is builtaround the theme that his sales people won’t try to “sell” you a car, they’ll helpyou to buy one. That line originated with Chambers as he addressed hismanagers one day. Boston ad agency Modernista enlarged the concept,painting Chambers as an “undealer;” a theme adapted by several other localdealers over the past year or two.

The idea is to play upon, and dispel, the public perception of dealerships ingeneral, and sales people in particular. One ad in the series, entitled “Here Comesa Car Salesman,” angered a few local dealers when it first ran.

Covell acknowledged that he was “personally concerned” about those ads. “Idon’t want our competitors to think that we’re disparaging them,” he said. “Irespect our competitors….even if I want to beat them.”

Pursuing Opportunity Online

It takes more than a clever ad campaign to beat your competitor, of course.People still shop the aggressively-priced store, as well as location, selectionand other key factors. But level the playing field, and who you buyfrom can become a factor in attracting customers. Just ask FrankPerdue.

Despite the success of the ads, and the enduring draw thatnewspapers hold for auto customers, Chambers continues toexpand his online presence. He was an early adopter of theInternet, and with the help of in-house Internet guru Jay Gubala,Chambers continues to mine online data with the same penchantfor dissection that he brings to his stores’ financials.

With its seemingly limitless ability to adapt and evolve,combined with a profound capacity for measurement, theonline world presents the perfect environment for HerbChambers. He remains, despite enormous wealth andsuccess, a man on a ceaseless search for opportunity – be itburied in numbers or just over the horizon.

A (Reluctant) Public Face

[ Herb Chambers,“ We don’t sell cars. We help you buy them.” ]

Herb Chambers

Everyone has a gut-level response to car salesmen. The moment we see one, we hold

onto our wallets. We bolt for the door. It’s a survival instinct. But it’s one you won’t need at

Herb Chambers. Because we’re different. Our company is founded upon providing the highest

possible level of customer service. Which means our showrooms are pressure-free zones, our

prices aren’t artificially low, and our associates are only there to help. If you want help, that is.

Hey, it’s all about you. All we want is to be the good guys in this business. And we’re committed

to doing whatever it takes to achieve that.

So, next time you’re considering buying a car, stop by. And relax. We won’t bite.

Visit us online at herbchambers.com

Here comes a car salesman:a.)panic b.)vomit c.)punch him

AUDI BMW BENTLEY BUICK CADILLAC CHEVROLET CHRYSLER DODGE FORD HONDA HUMMER HYUNDAI INFINITI JEEP LAND ROVER

LEXUS MERCEDES-BENZ MINI PONTIAC PORSCHE ROLLS ROYCE SAAB SATURN SMART TOYOTA VESPA

This ad (top), part ofChambers’ eye-catching– some would say,provocative – campaign,angered a few localdealers when it firstappeared. Chambers is areluctant spokesman. Heprefers speaking to smallgroups, and shunsperforming before cameras,often critical of the results.

[ Herb Chambers,“ We don’t sell cars. We help you buy them.” ]

A U D I B M W B U I C K C A D I L L A C C H E V R O L E T C H R Y S L E R D O D G E F O R D H O N D A H U M M E R H Y U N D A I I N F I N I T I J E E P L E X U S M A Y B A C H M E R C E D E S - B E N Z M I N I P O N T I A C P O R S C H E S A A B S A T U R N T O Y O T A V E S P A

Herb Chambers

People have a horrible perception of car dealers. And on the whole, that perception is correct.

Pushy, slick and blinded by commission dollars, car salesmen can spoil the enjoyment of buying a car.

Well, at Herb Chambers, we’re different. Our company is founded upon the philosophy of

providing the highest possible level of customer service. We believe it creates great word of mouth,

trust in the community, and ultimately, repeat business.Yes, we have an ad agency. Yes, we have lawyers. We’re not a charity. We’re still in the car

business. But we’re trying to change it for the better. We want to be the good guys, whose ultimate aim

is your happiness. And we’re committed to doing whatever it takes to achieve that.

So, next time you’re considering buying a car, stop by. We think you’ll notice a big difference.

Visit us online at herbchambers.com

This is an ad froma car dealer, written byan ad agency, approved by a lawyer.[ Now, if we still have your attention... ]

MSADA Feb08 2/14/08 10:54 PM Page 17

Jim Xaros practicallyg r e w u p i n t h eautomobile business. Hejoined the Chambersorganization 16 yearsago , and ove r seesdealership operations.

For Xaros, keeping hisa r m s a r o u n d t h eaccelerated growth andconstruction presentsone o f h i s b igges tchallenges. Even withtwo fulltime staffersd e d i c a t e d t o c o n -struction, the Lexusstore gobbled up muchof his life for three years.Not to mention majorprojects ongoing orabout to commence:

• a new Porche-Audi dealership in Burlington (a pointpurchased from Pass & Weisz)

• a new BMW in Sudbury

• a new Infiniti on Route 9 in Westboro

• a new home for the Providence Cadillac dealership

• a Mercedes-Benz expansion (doubling the size) in Lynnfield

• a complete renovation for Mercedes-Benz in Natick

• completion of 2 new Smart Car centers

Asked for his view of the broader picture, Xaros said he expects thetrend to continue for domestics, adding that the local landscaperemains “over-dealered.” Long term, he predicted it will take morethan a year or two for things to “right-size” themselves.


DEALER OF THE YEAR

Keeping Up withBuilding Operations

Chambers Vice President Jim Xaros overseesdealership operations. But keeping his armsaround the accelerated growth and constructiontakes up much of his time.

“I'd try to stay very visible on the showroom floor, and meet as manycustomers as possible – both service and sales customers. Plus youset an example for everyone else.”

Chambers’ Vice President Jim Xaros concurs, adding, “I’d pay a lotof attention to Service reception. You have an opportunity to reach 50to 100 people there every day.”

Chambers still walks downstairs to meet customers in the Mercedes-Benz showroom below his corporate offices. “It takes me 5 minutes,”he insists. “Nobody is that busy that they can’t take 5 minutes.”

Evil Empire...continued from page 15

Why should I buy from othersuppliers when I canactually buy frommyself?

MSADA Feb08 2/14/08 10:54 PM Page 18

Herb Chambers, the Auto Dealer and Empire Builder Opens Another Dealership

Automotive

Transcript of Herb Chambers, the Auto Dealer and Empire Builder Opens Another Dealership