"Newsmaker of the Week" is presented by the SCV Press Club and Comcast, and hosted by Signal City Editor Leon Worden. The half-hour program premieres every Wednesday at 9:30 p.m. on SCVTV Channel 20, repeating Sundays at 8:30 a.m.
This week's newsmaker is Randy Cressall, owner of the Valencia Chevron AutoSpa. The following interview was conducted May 4. Questions are paraphrased and answers may be abbreviated for length.
Signal: Why are gas prices so high?
Cressall: There's a whole litany of things that are creating that, but primarily it's supply and demand that controls all of our prices of all the commodities we have.
Signal: But even last summer, gas was appreciably less expensive.
Cressall: Yes, but there was more supply in the product line than there is today. For example, we just recently (saw) OPEC reduce their production levels, less than what it was last year. We've also had some refinery changes, with fewer people to actually produce the gasoline and reformulate it with the new standards that are required in California today.
Signal: How much less gas is there now?
Cressall: Last year at this time, I believe OPEC was producing roughly 27 million barrels of oil per day, and now they're down to 25.5 (million). That's a decision that they have taken upon themselves, to reduce the supply of oil in the market.
Signal: Is this related to the war in Iraq?
Cressall: It's hard to say. They really typically shouldn't reduce the supply at that particular time. Iraq is not really an issue here. It's an issue of, I believe, OPEC just wanting to control the supply of fuel, so that they can plan for the future and not so much for the present. All of the OPEC (countries) have a limited amount of oil that's available. They're making the decision: Do we want the money now, or do we want the money in the future when we sell the oil?
Signal: Will gas prices keep rising this summer?
Cressall: I wish I could give you an accurate answer. Frankly, I don't believe anybody knows. The supply level is so perfectly balanced right now that any interruption in supply, whether it's on the delivery side, with OPEC, of the bulk crude, or whether it's on the refined gasoline that's dispensed in the typical service station today. If anything interrupts that supply or limits it, it's going to drive the prices higher.
Signal: What's the story with California's cleaner-burning summer formula gasoline, and why is it more expensive than fuel in other states?
Cressall: The standards required for a refiner to produce gasoline in the state of California are substantially higher than other refineries throughout most of the (rest of) the nation. And those are stricter standards, to produce a cleaner burning fuel, than are required (elsewhere). Many of the refineries and oil companies have had to spend significant amount of money — upwards of probably the $1 billion level — per refinery, to bring it up to that standard today.
Signal: All of this is tied to the government's goal of reducing the amount of smog?
Cressall: Exactly.
Signal: What ongoing costs are there?
Cressall: One of the things that has brought the prices up even higher now is the fact that recently, the state of California required that we replace one of the products that was in gasoline before, called MTBE, and replace that with an ethanol product. As we typically think of ethanol, it's produced from natural gases that come out of refining corn and other (grains).
Signal: It turned out that MTBE polluted the groundwater.
Cressall: It can be very hazardous. It's one of the most hazardous chemicals that's associated with gasoline.
Signal: Are gas taxes going up?
Cressall: Well, they go up as a natural progression with sales tax, because whenever the retail price of any product is increased, then the sales tax is tacked onto that retail price, and that has created a big difference in price.
Signal: How much tax is there on a gallon of gas?
Cressall: Typically today in California it's around 50 cents. ... There's a federal excise tax, there's also a state excise tax, and then there's a sales tax. Those are the three main taxes. But there are unlimited other taxes that are placed on the product of gasoline (up) the line...
Signal: Why is gas usually more expensive in Santa Clarita than in the San Fernando Valley?
Cressall: The reason for that is primarily because of an oil company technique that they have called price zones. The same thing exists, for example, in the hotel industry. If you stay in a hotel in downtown San Francisco you pay one price; (if) you stay outside of town, another five or 10 miles away, the price is substantially less. And yet you may be receiving the same amenities. The oil companies figure, well, they can set and establish their price zones based on the competition in that community.
Signal: So they redline.
Cressall: To a certain degree. You could say that.
Signal: Are you saying that the surcharge to you, the dealer, isn't based on their actual cost?
Cressall: It's based on — what I personally believe — on the amount that they feel is a fair price that they want to charge for it in that particular community. Of course there are expenses that they have; in some communities there is a heavier distribution fee to bring that fuel out to more of an outlying area. I don't realistically think that's an issue here in the Santa Clarita Valley.
Signal: Sometimes it's cheaper in the Antelope Valley. It would seem it would cost more to truck fuel to Lancaster.
Cressall: One of the recent things that I've seen that has had an impact on the price zones are the mass-marketing retailers of gasoline, such as Costco. And some of the supermarkets are going into that. They're using that as a loss leader to bring people to their facility, so they're selling that fuel at a substantially lower price. When the oil company determines what they're going to price the fuel at in that price zone, they take their own surveys of what people are typically charging and then they back into that number and establish their price.
Signal: So with zone pricing, you're paying for the privilege of living in Santa Clarita.
Cressall: That could be said, yes. Exactly.
Signal: They charge you because they can.
Cressall: Yes.
Signal: Is there an effort to change that?
Cressall: The retailers have long been taking issue with that with the oil companies. But the oil companies have been very selective of the information that they would give us. And they have never disclosed, to my knowledge, to myself or anybody that I'm aware of, their formulas that they use for establishing what that price zone is.
Signal: Do you own your gas station?
Cressall: Yes. We've made the investment, and it is a considerable investment. A typical gasoline station today, just a plain gasoline station, probably costs about $2 million or more to develop and build. A lot of that has increased to a high level because of the regulations that are placed on us.
Signal: What are the different ownership structures? Chevron owns some stations itself, doesn't it?
Cressall: Chevron does. For example, Chevron owns the station located at Magic Mountain (Parkway and The Old Road). But most of the others are what we would call two-party dealerships, where there is an operator that owns the location and is buying fuel directly from Chevron.
Signal: So yours is not a franchise?
Cressall: Chevron does not call it a franchise. They call it a dealer operating agreement and a supply agreement. So no, it's not directly a franchise. We could change and move to any brand of fuel that we want.
Signal: You're Chevron today, but you might decide to be Shell or Texaco tomorrow?
Cressall: Exactly.
Signal: How did you get into this business? You've been in it a few years —
Cressall: Yes ... 44 years. I was a young man, just recently out of high school, and wanted to work at a location that I felt had some good potential future for me. I went to work for what we called Standard Stations Inc. That was when we used to wear the totally white uniforms and when you would see a group of three or four men come running out to your car to give you unlimited service ... shine the windows inside and out, check the air in the tires, check under the hood —
Signal: How long ago was that?
Cressall: That was back in the early å60s.
Signal: How did you wind up as an owner?
Cressall: I progressed into different levels of relationships with Chevron until I became a (Standard Station) manager. I was a company-operated manager. During that same time they also had Chevron; Chevron was the designation that separated a dealer-operated location versus company-operated. Then ... after I transferred to their property development program, (I) saw the value of going into the business for myself, and went into my first gas station that I built and owned back in 1968.
Signal: Where was that?
Cressall: That was down in Mission Hills, at Sepulveda and Devonshire St.
Signal: Then what?
Cressall: Then, not too much later, I opened up a couple of other stations that were not Chevron-branded, and I also purchased a Chevron station that was located up at — the term we used then, Castaic Junction — up there at I-5 and 126. Some of the old timers like myself might remember that (area) from where the Tips restaurant used to be. ... This was in the early å70s.
Signal: How many gas stations did you own?
Cressall: At one particular time I had five gas stations.
Signal: When did you build the AutoSpa?
Cressall: We built the AutoSpa in å95 and å96.
Signal: Do you still own other gas stations?
Cressall: No, I do not. I was actually forced out of the one remaining gas station that I had, by the 1994 earthquake. That was the Castaic Chevron location.
Signal: It's been awhile since we've seen full service stations, but at Valencia and Cinema Drive, you are clustered with other auto-related service businesses. What was the idea behind that?
Cressall: A number of years ago I had had a concept that I wanted to develop, and that was kind of a one-stop automotive shopping center, after looking at what had happened with regional shopping malls back in the å60s and å70s. Prior to that, there were no shopping malls as we know (them) today. They began to be developed, and what happened is, they got all the businesses together and they made it a very convenient and very pleasant shopping experience in these shopping malls. They've really grown and flourished well.
At that same time I saw that Main Street was being (adversely) affected because the consumers were going to the shopping malls. So it was, in my mind, a limited period of time before the same thing would happen to gas stations. That was simultaneously the time (when) gas stations, or service stations, were being converted to what we know today as convenience stores and gas stations. The service bays were being removed by the oil companies, and also there was a natural progression of automobiles becoming more technical — so I thought it would be great concept to build a one-stop automotive shopping center.
Signal: What are the types of business there?
Cressall: We have an oil-change specialty center called Oil Stop; there is a tire center for tires and brakes called Big O Tires; there is a smog location there that does nothing but smog testing; there is a great air conditioning (repair company); and then there is a domestic automotive repair (shop) called PACC Automotive; and there is a transmission facility; there is an automotive electronics facility for radios and stereos —
Signal: You're an old gas station guy, not an old car wash guy. Why did you decide to couple your own gas station with a car wash?
Cressall: The concept originally was just to put a car wash there. But then I knew from my business and (years in) the gas station business, there was an item that we had to be particularly concerned about: It was what we called APCs, (or) additional profit centers.
Today in business it's very difficult for a person to be successful with just one level of business that they're offering. And so originally, gas stations started having additional profit centers, which were the service bays and then the convenience stores. Well, car washes came to the same conclusion: that they needed additional profit centers, so we added the gasoline component, and it was well received and helped bring more people to the area.
Signal: So you consider the AutoSpa to be a car wash first and a gas station second?
Cressall: Yes. We are primarily a car wash.
Signal: And today you are even more involved with car washes. You are vice president of —
Cressall: The Western Carwash Association. That's a group in excess of 1,000 different members that comprise, I believe, 3,500 different car washes throughout the six Western states.
Signal: What are some of the issues you've been dealing with?
Cressall: One of the biggest issues that we're always concerned about is — the consumer and a lot of the regulatory agencies look at car washes and they think that the typical car wash today is a water waster, and not necessarily good for the environment. Well, the exact opposite is true. Car washes use significantly less water in washing a car than a typical home car wash, and we are also regulated very extensively on any elimination of products into the environment. ... We pay extra fees and everything for that.
Signal: We've heard that we, as a community, are dumping too much chloride — a salt — into the storm drains, and now the sanitation districts have banned regenerating water softeners. Your business uses a lot of water; where do the contaminants go?
Cressall: We recycle and treat the water. It's treated several times before it's ever transferred to the sewer system. Nothing ever goes into the environment. But we are prevented, legally, by regulations, from having a water softener that will regenerate water and dispose of the salts into the sewer system. If we choose to have a water softener, we have to keep that used, chloride-contaminated water and dispose of it off-site after it has been treated.
Signal: If you're recycling water, are you washing cars with dirty water?
Cressall: Absolutely not, no. It goes through an extensive refiltration process. That water is perfectly usable again. And it's all done out of a desire to be more environmentally sensitive and not a water waster.
Signal: We've also heard news about unfair labor practices at car washes, even in Santa Clarita, where some unscrupulous operators haven't been paying the appropriate wages. What does the new Jackie Goldberg bill do?
Cressall: Well, (the state) requires that we have a particular license ... as a car wash operator, and we have to be subject to their inspections at any given time. Additionally we have to pay for a bond that the state can access if they ever find that we, as an operation, are not following the laws correctly and paying our employees properly.
Signal: Why did the Western Carwash Association oppose this bill?
Cressall: We opposed it from the standpoint, initially, that those regulations that are needed to control fair labor practices are already in existence. ... All they needed to do was really enforce those restrictions upon the operators that are doing it improperly. But apparently we have a politician who wanted to get (her) name on a bill, a new law, and so it was (adopted).
We were effective in working with them to help them design the bill so that they could catch the car washes that are doing it illegally, and frankly, none of us who are in the professional car wash business wants to see those people continue.
Signal: Do you have a policy to keep them out of the association?
Cressall: Yes. If we found one was doing it, they would not be allowed.
Signal: You wash a lot of cars for charity. How did you get involved in charity work?
Cressall: Well, I've always believed in the principle that we need to, as a community business, give back, and treat one another the same way that we would want to be treated.
Part of our business philosophy was to ... make the right choice in business even though it may not be the best thing for us on a financial level, but it was the best thing that we would really feel good about when we put our head down on our pillow at night. ...
When I entered into the car wash business, I became far more aware of the water that was (being wasted) in the typical home car wash and in the (street-corner) charity car wash. I clearly came to understand that that water was being transferred directly into our storm drain system and into our rivers, lakes and oceans. In an effort to help these groups that were having ... street-corner fund-raiser car washes, we tried to give them another option where they could do it in an area where it would be properly controlled on an environmental level.
Signal: You are constantly advertising charity car washes and cruise nights. You evidently see value in marketing. One of the sadder things to see is the business person who advertises a grand opening, and then you don't hear anything from them until six months later when they're advertising a going-out-of-business sale. How important is an effective marketing strategy?
Cressall: A number of people have asked me, what do you really owe your success to, in the AutoSpa? I've answered almost every time, frankly, (that it is) primarily due to the marketing people that we've hired, and specifically Stephanie Weiss and her great advice and desire to help us market our business in more than just what we do, but in how we can be a part of our community and benefit our community. Because I believe, and she believes, that we in the car wash industry — and frankly every business, but the car wash industry probably more than most — (are) a community business.
We have a lot of customers who come in from all over the community (who) spend a significant amount of time with us. We think of them as family. They bring their baby (their vehicle) to us. They don't entrust their baby to just anybody. And so we wanted to be able to demonstrate to them the integrity and the type of people that we are, so they can (bring their car) in full confidence.
Signal: What advice do you have for other business owners? OK, they've just advertised their grand opening; now what should they do?
Cressall: Well of course they have to back up what they're going to do. A lot of business owners determine they want to have their grand opening their first day in business. Frankly, that's not always the best thing to do, because as they're opening their new business, they're learning the ropes, so to speak, and so are their employees. They're probably operating better about out a month later than they are the first week they open. But they have to continue to back that up and continue to be part of their community.
One of the reasons we wanted to take the position that we have in trying to be a focal point of the community is that we wanted to set the example for other people to follow in business, in making the right decisions and giving their share back to their community. Because it is the community that has made us successful. I've often been known to say that through the doors of the AutoSpa walk the world's greatest customers and the best-ever employees. And that is true. It's become a reality, and something that we're very proud of. We have consumers that I wouldn't trade for anything in the world, and employees likewise.
Signal: How much money have you raised for charity in the last eight years?
Cressall: We're probably a little bit in excess of $600,000 at this point. But let me clarify that. I don't believe we've raised it. What we've done is, we have helped facilitate others to earn that money.
See this interview in its entirety today at 8:30 a.m., and watch for another "Newsmaker of the Week" on Wednesday at 9:30 p.m. on SCVTV Channel 20, available to Comcast and Time Warner Cable subscribers throughout the Santa Clarita Valley.
