1. business and industrial

A Publication of the Illinois Automobile Dealers Association
How to Avoid
Vol. 20 No. 3
Swimming with
the Sharks
CONTENTS Vol. 20 No. 3
Illinois Automobile
Dealers Association
300 West Edwards Street
Springfield, Illinois 62704
T 217.753.0220
F 217.753.3424
www.IllinoisDealers.com
6
IADA Chairman’s Letter
9
You Can’t Cut Your Way to Success
12
2012 IADA-CATA State Convention
19
How to Avoid Swimming with the Sharks
The ILLINOIS AUTOMOBILE DEALER NEWS is published
by Media Communications Group, Inc. and is the official publication
of the Illinois Automobile Dealers Association. The ILLINOIS
AUTOMOBILE DEALER NEWS is published 4 times per year.
The statements and opinions expressed herein are those of the individual
authors and do not necessarily represent the views of ILLINOIS
AUTOMOBILE DEALER NEWS, or its publisher Media
Communications Group, Inc. Any legal advice should be regarded as
general information. It is strongly recommended that one contact an
attorney for counsel regarding specific circumstances. Likewise, the
appearance of advertisers does not constitute an endorsement of the
products or services featured by Media Communications Group, Inc.
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ILLINOIS AUTOMOBILE DEALER NEWS
www.illinoisdealers.com
Desmond Roberts
Dealer Principal / Owner
Advantage Chevrolet, Bolingbrook and Hodgkins, IL
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IADACHAIRMAN’SLetter | BY JIM LOMBARDI
Wishing Each of You a
Profitable and Prosperous 2012
O
n behalf of the IADA Board of Directors and staff I would
like to dedicate this edition of our Illinois Automobile
Dealer News to all of the dealer members and sponsors
who made our 2012 IADA-CATA State Convention
so successful. We had a wonderful group of attendees
participate in the March 24-28 convention held at the Harbor
beach Marriott Resort & Spa, Ft. Lauderdale FL.
The convention agenda included a wonderful talk by
NADA Chairman, Bill Underriner of Billings, Montana, several dealer board meetings, plenty of opportunities for dealers
to socialize and discuss industry information, all topped off
with an Oceanview Lauderdale Latino Style Party.
I would like to thank all of our dealer members for your
support of IADA throughout the year and I encourage you to
consider joining us at next year’s convention for informative
business sessions, fun-filled activities and outstanding social
functions. On behalf of the IADA Board of Directors and
staff, we wish each of you a profitable and prosperous 2012. 
Sincerely,
Jim Lombardi
Lombardi Chevrolet Buick
IADA Chairman
We have used many of the following pages to showcase
photos of the Convention. I would like to offer our most
sincere thanks to our sponsors who helped make this event
possible. Without their generous ongoing support, the event
would not be possible.
2012 Officers
Chairman
Mr. Jim Lombardi / 815.476.2333
Lombardi Chevrolet Buick
901 E. Baltimore St., Wilmington, IL 60481
6
Secretary
Mr. Dave Taylor / 815.935.7900
Taylor Chrysler Dodge, Inc.
1497 N. Route 50, Bourbonnais, IL 60914
Vice Chairman
Mr. Gary Knight / 217.443.6803
Carmack Car Capitol
3724 N. Vermilion, Danville, IL 61832
President
Peter J. Sander / 217.753.0220
Illinois Automobile Dealers Association
300 W. Edwards, P.O. Box 3045, Springfield, IL 62708
Treasurer
Mr. Mike Mangold / 309.467.2344
Mangold Ford Mercury, Inc.
1100 West Center St., Eureka, IL 61530
Illinois Automobile Dealers Association
ILLINOIS AUTOMOBILE DEALER NEWS
300 West Edwards Street, Springfield, Illinois 62708
T 217.753.0220 • F 217.753.3424
www.IllinoisDealers.com
www.illinoisdealers.com
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You Can’t Cut Your
Way to Success
BY KURT A. KARLSON, PRESIDENT, ILLINOIS AUTO GROUP
Cost cutting is often the strategy chosen for a dealership
that is trying to weather economic downturns or higher
costs required from manufacturers.
W
hile NADA tells car dealers to upgrade
their facilities to increase profits and bonuses, common business sense indicates
that spending money on the facility means
that costs may have to be cut in other areas
of the business. Some businesses make cuts to bolster
their profit margins or retain market share, while other
businesses seek to remain economically viable.
It is always prudent to analyze spending. But too
often dealerships cut costs haphazardly or across the
board, often damaging a company’s long-term foun-
dation. There is no silver bullet to controlling business
costs, and paradoxically, sometimes to save money or
improve profits you will need to spend money.
The key to determining if a cost can be justified is
to ask a simple question. Will this expenditure return
more money than I have invested? If you can say yes to
this question, than it is a wise investment and should
not be part of your cutbacks. When considering the
return on your investment don’t forget to factor in the

way to success — continued on page 10
9

way to success — continued
added value to your customers, such as warranties, service and
overall satisfaction. Those details alone will add to your bottom line down the road.
Contrary to common perception, customers will not go almost anywhere just to save a buck. In a 4-year study conducted
by BIGresearch, most customers will put service ahead of price,
if you give them a chance. Customers see price as only one
component of the bigger picture of “value” that includes the
service, information and follow-up they receive.
Increased access to the internet and inventory programs
(such as Vauto) have leveled the playing field on automobile
pricing. With price out of the picture, the consumer will look
to other components that are perceived as value. Wouldn’t you
close a higher percentage of prospects if you presented a greater
value in aesthetics or warranties to the consumer? Would it be
wise to invest in your inventory?
Businesses that spend money intelligently make more profits.
Considering that used cars produce the highest profitability to
a dealership, cutting costs on the appearance and warranties of
that segment of your business is not an option. According to Kelley Blue Book, aesthetics is one of the top considerations when
a person buys a car. Consumers want and deserve the same con-
sideration on a used car that they receive with a new car. Again,
will these expenditures return more money than I have invested?
A prospective buyer is going to appreciate and will pay more for
a car that looks good, one that’s shiny and clean on the outside
and one that smells good and looks good on the inside. Psychologically, a used car in good condition is extremely important to
the consumers’ perception of value and reflective of the overall
care your dealership provides. When a warranty is added to an
already great appearance, the consumer is going to get the best
bang for their buck, even if they paid more initially.
Cutting costs can be beneficial. However, before you “slash
and burn,” consider carefully if cutting a cost will decrease
the value your customers perceive and the profit margin the
dealership receives from that service. Don’t compromise on
product quality to save money. In the long run this will damage consumer confidence and may actually constrict revenue
and growth. 
Kurt A. Karlson, President, started Illinois Auto Group (IAG) in 2006; it
currently consists of two divisions located in the Chicago metropolitan and
Central Illinois areas. The company provides a premium interior/exterior
reconditioning service called the “Total Lot Management System” (TLM).
The service turns used car inventories for new car dealers into a competitive
advantage with an award-winning, nationally proven program. This is done
by using Proprietary Processes, Certifi ed Warranties, Sales Development
Training and an exclusive Service Lane Program, all targeted at delivering
the consumer a better car buying experience. IAG promises their dealers
that they will sell more cars, sell them faster and for more money besides
creating additional revenue centers! For more information, call 1-877-6444IAG (4424) or visit the web at www.IlAutoGroup.com.
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10
ILLINOIS AUTOMOBILE DEALER NEWS
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2012 IADA-CATA Dealer
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12
ILLINOIS AUTOMOBILE DEALER NEWS
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aler members and sponsors for making our
CATA State Convention so successful.
13
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ILLINOIS AUTOMOBILE DEALER NEWS
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ILLINOIS AUTOMOBILE DEALER NEWS
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How to Avoid
Swimming with the
Sharks
BY GARY VUCEKOVICH, PRESIDENT, FORESIGHT SERVICES GROUP
I
recently earned another “honorary degree” from the school
of hard knocks. Acquiring this B.S. (not Bachelor of Science),
required using a lot of big words like Insolvency, Co-mingling
of Funds, and Liquidator, who it turns out is sort of like the
Terminator.
It started with a letter arriving at my office at FSG from the
Third Judicial District Court in Utah:
WESTERN INSURANCE COMPANY NOTICE OF
ISSUANCE OF LIQUIDATION ORDER.
It was quite a contrast to my first meeting with Western Insurance Company (WIC), less than five years before to discuss
a possible business relationship. At the time, they sported an
impressive A.M. Best rating of A- (Excellent). The relationship
involved FSG insuring mechanical breakdown service contracts
for auto dealers, and the first thing I did was to insist that all monies flow directly from the dealers to FSG. Fronting fees would
be remitted to WIC and the premium would go straight into a
segregated trust account held by a dealer-owned reinsurance company, one with its own Tax ID and managed by a non-affiliated
bank. We hammered out the agreement.
Four years later WIC was declared insolvent. By then we had
set up on behalf of our dealer-clients 17 separate reinsurance custodial trust accounts totaling millions of dollars. What would be
the fate of these accounts? Might they be added to WIC’s general
assets? Would our clients be made to circle around with other
claimants like sharks, waiting for the almighty Liquidator to dole
out the next morsel?

swimming with sharks — continued on page 20
19

swimming with sharks — continued
It was December 29, 2011 when the decision came down. The
Liquidator’s investigation had found that our clients’ assets were
indeed in properly segregated accounts which WIC did not control but could only seek distributions from. As such they would
not be considered part of the general assets of WIC’s estate. The
court agreed and released the funds.
Cue the scene at the end of one of those movies where everyone comes out of the courtroom cheering. You may even be
thinking: “Gary, you came out unscathed.” Read on.
Just before leaving that initial meeting, WIC asked for a good
faith security deposit of $100,000. Fair enough, but I insisted
the money be placed in a CD earning interest. Maybe a red flag
should have gone up when they responded by offering me a CD
with a great interest rate from Western Thrift & Loan, a bank associated with, you guessed it, WIC! But hindsight is always 20/20.
And I certainly don’t recall giving WIC permission to cash the
CD and deposit the money in their own account in 2010, which
apparently is exactly what they did. Word has it the individual
responsible is now retired in Hawaii.
But I still feel fortunate. There was another company in the
WIC liquidation that operates similarly to FSG. They did everything above board and proper, but had premiums sent directly
to WIC. Ouch!
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Retro Participation Agreement or DealerOwned Reinsurance Company?
For most dealers it’s a no-brainer.
Retro Participation Agreements began as a way for an insurance company to expand its market share while allowing dealers
to share in back-end profits. But today there is simply a better
wealth building strategy available, a Dealer-Owned Reinsurance Company. In fact, Retro Agreements have outlasted their
value for all but the smallest of dealers.
One of the most glaring problems of Retro Agreements is the
co-mingling of premiums and reserves to pay future claims. A
Retro Agreement will not prevent a Liquidator from grabbing
funds and giving them out at pennies on the dollar if the Administrator or insurance company is declared insolvent.
In the case of WIC, their undoing had nothing to do with the
auto industry. That was the most profitable part of their business.
The problem was Surety Bonds they were issuing for construction projects in states like Nevada and California.
Who has time to audit every aspect of the insurance companies they do business with? That was what ratings were supposed to be for!
Fifteen years ago, I entered into my first Retro Agreement.
The $21,000 in back-end profits sure looked like a fine number,
but it soon evaporated into the “terms and conditions” of the
agreement. Stipulations such as minimum production, loss ratios and lapse in production often hold dealers captive or open
loopholes that swallow their profits.
It was an important lesson, and five years ago I got to apply it
by insisting on full dealer-owned reinsurance in our relationship
with WIC. I hate to think what would have happened if we had
settled for a Retro Agreement. It shows that “honorary degrees,”
while expensive, can turn out to be worth every penny. 
Gary Vucekovich is President of ForeSight Services Group. ForeSight
empowers dealerships and auto groups to capture more profi t and build
long term wealth by reducing complexity and removing middlemen. To
learn more about how ForeSight can help you, contact them at 972-5421890, E-mail: [email protected] or visit their website at www.
foresightservicesgroup.com.
For more information,
contact your local
Document Consultant
or call 800.344.0996.
20
ILLINOIS AUTOMOBILE DEALER NEWS
www.illinoisdealers.com
REACH YOUR
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21
Accounting
New/Used Car Advertising
Woodward & Associates, Inc. ............................................ Page 2
CliftonLarsonAllen ............................................................. Page 4
WIPFLi.............................................................................. Page 14
AutoTrader.com ................................................................ Page 23
Banking/Finance
Harris N.A. ......................................................................... Page 7
Customer Relationship Management
The Higher Gear Group ....................................................Page 11
Dealership Buy/Sells
Woodward & Associates, Inc. ............................................ Page 2
Dealership Compliance
Parts Department Services/Equipment
AutoSoft ............................................................................Page 11
Reconditioning Services/Lot Management
Illinois Auto Group .............................................................. Page 8
Telecommunications
Call One ........................................................................... Page 21
Transportation/Internet
ShipCarsNow ................................................................... Page 22
Reynolds & Reynolds ....................................................... Page 20
Dealer Management Computer Systems
AutoSoft ............................................................................Page 11
Dealer Management Systems
Auto/Mate Dealership Systems ....................................... Page 14
Dealership Marketing & Sales Solutions
ADP .................................................................................... Page 5
F&I Training/Products
Foresight Services Group ................................................ Page 15
Insurance
Federated Insurance Companies .................................... Page 18
Protective ........................................................................... Page 3
Zurich American Insurance Co. ....................................... Page 10
Internet
Call One ........................................................................... Page 21
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ILLINOIS AUTOMOBILE DEALER NEWS
A Union Pacific Company
www.illinoisdealers.com
Illinois Automobile Dealers Association
300 West Edwards Street
Springfield, Illinois 62704
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