Diversity key for PR/automotive warranty business

dranii@newsobserver.comOctober 10, 2012 

— The management team at S&A Cherokee didn’t push the panic button when the company’s new product for the automotive industry – a warranty program for used car dealers launched two years ago – got off to a rocky start.

“We never understand the words, ‘no, that isn’t going to work,’ ” said Ron Smith, founder and co-owner of the beyond-category, 36-employee company whose diversified business portfolio also includes public relations and publishing.

The Cary-based company’s CarMark Certified program offers a 72-month, 100,000 mile warranty protection that takes effect when the manufacturers’ warranty expires as well as a 12-month, 12,000-mile warranty for other vehicles. The program was designed so that independent used car dealers could match the factory-backed warranties new-car dealers offer on pre-owned vehicles. Since a Ford dealer can only offer those warranties for used Fords, CarMark also is aimed at franchise dealers who want to offer warranties on other brands of used cars on their lots.

“I remember clearly saying, here we are, a little company in Cary launching a national certification program,” Smith said.

Although CarMark had 20 dealers signed up shortly after it left the starting gate, it wasn’t long before the number of dealers committed to offering the warranties dwindled to about a half-dozen. The problem was that depressed new-car sales reduced the supply of used vehicles and inflated the prices dealers had to pay for their inventory. The upshot was that many dealers couldn’t afford the added cost of offering a warranty.

But S&A Cherokee stuck by the program, enabling it to take advantage of the current upswing in new car sales that also benefits the used car market, said Bill Zadeits, one of four S&A Cherokee owner/principals. As a result, CarMark warranties currently are being offered by 27 dealers in 13 states.

“And, every month, we are adding more dealers,” Smith said. “We have moved from embryonic to infant.”

S&A receives a commission on each warranty, which costs dealers anywhere from $200 to $800 depending on the type of warranty and the make, age and mileage of the vehicle. The warranties are provided by Georgia-based Automobile Protection Corp., which also provides warranties for several auto manufacturers.

Randy Beeninga, the owner of a Greensboro used car dealership called Auto Focus, has been a CarMark dealer from the outset. He said the warranty – which is included in the price of the car – is a key selling point that helps move cars off his lot, which typically has an inventory of 40 to 50 vehicles.

“It reassures the customer they are buying a nice car, a good car,” he said. Beeninga offers the CarMark warranties on all the cars that fit the program’s parameters for vehicle mileage and age, which amounts to nearly half his inventory.

Smith, who founded what today is S&A Cherokee 30 years ago, is used to nurturing new ventures that aren’t instant successes.

What started out as a public relations firm ventured into magazine publishing in 1990, when the company launched Auto Remarketing for the used-car industry. The firm already had experience with auto publications, having produced a magazine for one of its clients, the National Independent Automobile Dealers Association. Smith also is a former assistant executive director of NAIDA.

The PR business subsidized the magazine in its early years, but the publication formed the foundation of an automotive business that now accounts for about 70 percent of the company’s revenue. Other automotive-related ventures include SubPrime Auto Finance News, more than a half-dozen electronic newsletters and sponsorships of used-car industry conferences.

Public relations work for clients – including N.C. State University, the Town of Cary, Bell + Howell and Netsertive – accounts for about 10 percent of the company’s revenue. The remainder comes from nonautomotive publications. That includes Cary Magazine as well as publications it produces on a contract basis for clients such as WakeMed and the Greater Raleigh Visitors Bureau.

That unusual mix of business propelled S&A Cherokee onto the Inc. magazine list of the nation’s fastest growing companies for two straight years, including 2008, when it peaked at $7.4 million in revenue. But the recession knocked the business off the fast track, triggering the gradual elimination of about 10 jobs – accomplished mostly through attrition.

But revenue, which the company isn’t disclosing, stabilized in 2011 and is on the upswing this year.

“I feel very good that we have survived and advanced and are bouncing back strong,” Zadeits said.

Although diversification has been a hallmark that helped the company endure the tough times and prosper in the good times, Smith said there’s never been a master plan.

“Diversification is really an evolution, not a plan,” he said. “I think companies grow when they look at what they can do well and see opportunities and have the courage to take advantage of those opportunities.”

Ranii: 919-829-4877

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