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Stratton Auto
William Naumes, University of New Hampshire

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Margaret J. Naumes, University of New Hampshire
Christopher J. Weiss (student), University of New Hampshire

n December 15, 2005, John Calhoun, the president and co-owner of Stratton

O Auto, received a call from Tyler Mann. Tyler owned a car wholesale business to

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which Stratton Auto, a new car dealer, frequently sold used cars. Tyler got right
to the point. “I’m sorry to say that one of your used car managers, Blake Power, has been
asking for extra money under the table,” he told John. “He offered me some of your
wholesales if he could get something extra for himself.” Tyler paused and then added,
“You know, Blake asked me once for some side money for supplying a car. That time, I
gave it to him. It was only a few hundred dollars. But, this time, he wanted much more.
What do you want me to do about this situation? I want to maintain a good relation-
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ship with Stratton Auto, and I don’t want this to come between us.”

BACKGROUND
Brothers John and Steve Calhoun had established Stratton Auto in 1976. The brothers,
both avid skiers, had purchased an existing Chevrolet and Saab dealership in Stratton,
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Vermont, with the intention of skiing full time and working part time. Soon, however,
they realized that operating a car dealership, even in the relatively quiet town of
Stratton, would be a full-time job. In the early days of the venture, the two brothers
filled various positions throughout the dealership. They did not have sufficient funds to
hire employees for all positions, so the brothers filled in the gaps when necessary. At
times, John would work the parts desk and Steve would work the service desk. They also
put family money into the venture. John noted, “Our father even sold one of our fam-
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ily’s cars so that we could put in a new lift in the service shop.” But, both brothers loved
the small-town feel and laid-back atmosphere of Stratton and gladly committed them-
selves to making their business a success. As John explained, “My brother and I have
made the dealership our lives for the last thirty years. We frequently gave up opportu-
nities to pursue our love of skiing to put more time into the dealership.”
Many things had changed since the early days of Stratton Auto. By late 2005,
between fifty and fifty-five people worked at the dealership full time. In the original
building, the brothers operated Chevrolet and Cadillac franchises (they had given up
Saab). In addition, the brothers had constructed a new building nearby to support their
Do

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Stratton Auto 1

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[email protected] or 617.783.7860
 Chrysler, Dodge, and Jeep franchises. Each building had its own sales manager. The

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dealership had also acquired a building next door, which they modified in order to open

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a vehicle accessory shop. This shop specialized in spray-on bed liners, wheels, chrome
accessories, step up bars, and other items customers might want for their cars or trucks.
John Calhoun noted: “After thirty years, our managers still feel that we are still willing
to adapt to new markets and changing customer needs and provide what the customer
wants.”

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LEADING BY EXAMPLE
After thirty years of selling new and used cars, Stratton Auto had become an important
part of the community. John stated that, “We always wanted to be respected by the
community. We tried to gain this respect by being committed to the community.”
Stratton Auto sponsored golf tournaments for local charities, gave money to youth

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sports teams, and committed to doing business locally. Stratton had a small town feel-
ing, and any local news spread quickly among the population.
In addition, the owners expected a high level of responsibility from their employees.
Although there was no specific statement of ethical policy, the founders felt that “hon-
esty and admitting to and learning from your mistakes are more important than the bot-
tom line.” A formal employee handbook stated that all employees were to act in a man-
ner that would not be detrimental to the best interests of the company, or of the com-
munity.
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Over the years both John and Steve felt that they had instilled a strong sense of moral
fiber within the organization through their actions and words, while still making the
dealership profitable and an enjoyable place to work. The brothers felt that they had
provided a personal example of high-level responsibility for others to follow. As an
example, John related the situation where a technician accidentally scratched a cus-
tomer’s BMW. His brother, Steve, had driven to Boston, over 300 miles round trip, to
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pick up the matching paint so that the customer could have the vehicle back as soon as
possible. The brothers consistently tried to lead by example and also make sure that their
everyday decisions never reflected negatively on their business.

EMPLOYEE RELATIONS
Steve and John had felt that the quality of their employees had always been important
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to Stratton Auto’s success. The town of Stratton was small—with only about 14,000 res-
idents—and skilled salespeople and managers were hard to find in the local population.
“When we did find good managers or employees,” John recalled, “we needed to do what
was necessary to keep them. The reason why good managers were hard to keep was that
they could make more money in larger cities nearby.”
The dealership had always been willing to invest money and training into those who
showed potential. Often Stratton Auto had chosen to develop their own mechanics
rather than hire fully trained personnel. The company started new employees in a basic
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oil-change position, and then sent them for more advanced training as mechanics.
Stratton Auto had also sent many salespeople to training seminars in order to help them
become better at their jobs. Although salespeople had come and gone, a core group of
nine had been with Stratton Auto for at least five years. John described some of the long-
time employees:

2 Case Research Journal • Volume 30 • Issue 4 • Winter 2010

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[email protected] or 617.783.7860
 One employee worked at the dealership before we had bought the store and has been with

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us for the last thirty years. Derek, another employee and a seven-year veteran, used to work

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at McDonald’s and has become one of our best salespeople. Jake, a third employee, has
been working in parts so long he almost blends in with the background. There’s also a car
washer that we all call Sparky. Even when he had to take time off for medical problems,
we kept his job for him. Walter, the service manager, is always ready for whatever strange
problem a customer might have. He always views these requests as challenges.
John and Steve realized the importance of keeping and training these employees—

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they were the life blood of the organization. The dealership was also able to become
more a part of the community by retaining their employees. John said, “Instead of
becoming the ‘big business’ in town we became the place where ‘Uncle Jake’ has been
working for the last ten years. We always felt that retaining competent employees was
more profitable than constantly hiring and training new employees.”

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WHOLESALING CARS
Wholesaling used cars involved selling, to a third party, cars that had been taken as “trade-
ins” when a customer bought a new car. One person managed used car sales for the entire
dealership. If the used car manager felt that the “trade-in” either did not match the deal-
ership’s image, or would take too long to sell on the lot, he or she would offer it to a
wholesaler. The wholesaler would find another buyer, usually a used car dealer. Often,
these cars would eventually be sold at auction. When reselling these cars, the used car
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manager would always attempt to secure a price that at least equaled what the dealer had
paid to the customer.
Brand managers would keep those cars that they could sell on their lots relatively fast
and at a reasonable profit. These were typically low mileage, recent model cars. The used
car manager was supposed to make decisions about the cars that were bought in trade
such that the dealership made the highest possible profit. The general manager had the
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final authority and responsibility for determining the effectiveness of the used car man-
ager’s wholesaling decisions.

THE CURRENT SITUATION

John Calhoun was disappointed to hear that one of his managers was demanding kick-
backs, but this was not the first time that he had had to deal with this issue. Almost
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three months earlier, Stratton Auto had a similar problem with a previous used car man-
ager, Mike Hunter. Mike had been wholesaling cars to Tyler Mann that otherwise could
have been retailed on the lot for a good profit. Stratton Auto never learned specifically
what kind of kickbacks Mike had gotten. The brothers had confronted Mike, but had
given him a second chance. Shortly afterwards, Mike had wholesaled a Grand Cherokee
that could have been a very profitable retail sale. The brothers had then asked Mike to
leave.
Blake Power was relatively new to Stratton Auto. He had started as a sales manager
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for one of the brands. According to John:

Blake appeared to be working well. He seemed to get along with his coworkers, and he had
been making a good profit on the cars he was given to sell for us. We had gone through
several managers before Blake and none of them had met our expectations. We had had to
fire those managers over the last few years. The reasons ranged from a manager dating a

Stratton Auto 3

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[email protected] or 617.783.7860
 saleswoman and giving her special treatment, to a manager that was going through emo-

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tional problems and was not fit to work.

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Effective managers are hard to find in Stratton due to its rural location. Blake had worked
at the Chevy and Cadillac dealership for several months earlier, as the finance manager.
He had not developed the profitability that we expected from the finance and insurance
department, and we asked him to leave. When the sales manager position in the
Chevrolet and Cadillac building opened up, we thought that Blake was a possible fit. We

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felt that due to his background in finance and sales we should try him in the sales man-
ager position.
After a few months, the job of used car manager had been added to Blake’s respon-
sibilities. John had noted that most of the other employees seemed to like Blake, and he
was showing a profit on the cars he was selling. “The fact that he had been trying to use
his position to gain kickbacks from Tyler was a disappointment to both of us,” said
John.

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John went to see James Locke, the sales manager of the Chrysler, Dodge, and Jeep
franchises, for some guidance. James had started as a salesperson for the company, and
had shown great potential. The brothers felt that he was a logical choice for promotion
when a position as sales manager became available three years earlier. John had felt that
Locke had brought enthusiasm to the dealership, made good money on cars, and was
well respected by the other employees. Because Locke had worked for the company for
a relatively long time, the Calhoun brothers considered him to be more of a general sales
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manager for both stores. John respected James’ opinion. But, he was aware that James
and Blake had become good friends and had often gone out for drinks after work. John
wondered if James had any involvement in the dealings with Tyler Mann.
John recalled his conversation with James:
James said he was surprised that Blake was taking kickbacks. James denied that he had
taken any kickbacks himself. However, James said he felt that Blake should not be fired,
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but given a warning. Unfortunately, because James and Blake were friends, I did not have
complete confidence in Locke’s objectivity and did not know if I could fully accept his
recommendation.
John Calhoun decided to ask his brother, Steve, what he thought he should do. He
reached Steve, who was in Las Vegas at a dealer’s convention, on his cell phone. Both
brothers expressed frustration, because they thought they had finally found an effective
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manager after a string of many ineffective ones. After discussing the situation, the broth-
ers agreed that John had to talk directly with Blake.
Later that day, John approached Blake to let him know that he knew what Blake had
done. Blake admitted to his actions but offered no apologies. He did not offer to return
the money to Tyler. “Blake acted like a kid caught with his hand in the cookie jar,” John
recalled. He simply cast his eyes down and looked away from John and said nothing more.
Up to this point, the other employees knew nothing about what Blake had done,
and John was hoping to keep it that way until he made his decision. “Although I could
threaten some sort of legal action, I did not want to bring more attention to the situa-
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tion,” John said.

On top of all of this, Christmas was just a week away, and John felt that firing Blake
would have a large, negative impact on Blake and his family. John was going to have to
make a decision on what to do about Blake Power—not to mention on what to do
about his wholesaler, Tyler Mann.

4 Case Research Journal • Volume 30 • Issue 4 • Winter 2010

This document is authorized for educator review use only by Dipak Bhandari, Other (University not listed) until Nov 2019. Copying or posting is an infringement of copyright.
[email protected] or 617.783.7860