Vol. 3 No. 7
April 3 – 5, 2007: The New York International Auto Show, the JD Power Roundtable and the Morgan Stanley Global Automotive Conference – Part I.
Although Philadelphia is really a stone’s throw away from “the City” as it’s called, the sad fact is that I get there much less often than other cities in the US, as work travel seems to put me more frequently in the sunbelt areas. I’m not complaining on that score, but to my way of thinking there really is no place in the world like New York City. So I’m glad that at least once a year there is a combination of excellent car events that are too good to miss, and, ironically enough, the three don’t have anything directly to do with each other except, in fact, they are car events and, of course, all “car guys” will be at the same venue -- that is, in New York City for the annual right of Spring, the New York International Auto Show.
Although the weather didn’t seem much like Spring, as it was cold and snowy on April 3rd when I got into town, and, I think New York had record cold temperatures by the end of the week, the events were hot – from the J.D. Power Automotive Roundtable, to the two day Morgan Stanley Global Automotive Conference, to, of course, the Preview Days of the New York Auto Show (running simultaneously with the auto conference). Additionally, and unrelated to any of the above but filled with folks I had seen for the prior two days, the 5th Annual Volvo For Life Awards Gala, a fantastic event sponsored by Volvo for a very worthwhile and unique charity drive.
I have to admit, I didn’t attend much of the J.D. Power Roundtable this time, as it was mostly geared towards retail dealers: “Opportunities for Sub Prime Financing,” “Rejector Study Overview and Update,” and “Annual Franchise Assessment” were the topics of the day. I enjoyed Charlie Vogelheim’s co-hosting of the Wall Street Journal Awards, honoring “the 2006 leading automotive stock performances” on the first night of the automotive conference, along with his hosting of the conference lunch on the second day which featured a private automotive retailer panel discussion.
The trip really started for me on Wednesday morning, at the Morgan Stanley Conference kick off, with Mark LeNeve, GM’s North America Vice President, Sales, Service & Marketing, addressing the audience of equity analysts, hedge fund managers and reporters. He was followed up afterward with two concurrent sessions running right up until lunch – with one room hosting, Phil Martens, President Arvin Meritor, Iku Mori, President Fuji Heavy Industries, John Mendel, Executive Vice President, Honda, and Roger Penske, CEO of United Auto Group, and the other room hosting presentations by Tony Gallagher, the Chairman, President & CEO of Genuine Parts, Darren Wells, the Senior Vice President of Goodyear Tire & Rubber, Earl Hesterberg, President & CEO of Group 1 Automotive, and Steve Roell, Executive Vice President and Vice Chairman of Johnson Controls.
Roger Penske, One of the Best Dealer “Car Guys” in History
While all of the presentations were first rate, in this old line auto retailer’s opinion, nothing is better than a presentation by the legendary Roger Penske. Penske is one of my personal heroes in this business, having tremendous success with over a dozen major automotive enterprises outside of his racing triumphs – if there is a more successful retail “car guy” I’ve never heard of him. In addition to presenting the outstanding results of the United Auto Group since he took it over from the Marshall Coogan team (United Auto is the second largest dealership group in the country, and, Penske Automotive Group, run by Roger’s son Greg, is the 11th largest automotive group in the country, and controls one of the largest single point stores in the nation, Longo Toyota in southern CA), Penske outlined the concept of growing “organically” through creating destination auto malls, as well as through acquisitions. The idea that the service and parts side of the business creates the best margins and reoccurring revenue is not new in itself, nor is the idea that service creates sales (that’s what we counted on in our small store and, implementing this on the fleet side of the business created our tremendous growth), but the large scale implementation in destination stores, as exemplified in United Auto’s new Turnersville complex near my home town of Philadelphia, is nothing short of groundbreaking, and does set the bar higher for all competitors.
Given that the location of the Turnersville complex is quite close to where I was a car retailer, I’ve followed that particular store group from the beginning: when it was innovatively created as a combination of franchises and stores as founded by the late, insightful Martin Lustgarten (under the “Martin Group” logo) in the late eighties, to its purchase by the “Classic Group” of stores in the mid nineties, to ultimately, the Classic Group’s purchase by United Auto. I saw it transformed by Penske from a large group of franchise and “rooftops” all in the same place (but so much like other large automall properties now prevalent in major cities and suburbs), to a trulyorganized and “over the top” state of the art, automotive retailing facility that it is today – complete with a vehicle test track for interested prospects. I forgot the exact number of additional service customers Penske quoted that the new Turnserville complex garnered its first year or so of operation, nor do I remember the exact percentage of “conversions” the store made, (that is, the number of service customers that bought their prior vehicle at another dealership but bought a new or used one at the Turnersville complex after going there for service), but I do remember both of those numbers were significant and portend the underlying intelligence of such an investment, and perhaps, indicate the very direction of automotive retailing itself.
On the latter point above, one fact Penske did identify, and that speaks volumes, I think, into where automotive retailing as an industry is heading, lies in the “Opportunity for Further Consolidation” statistics he presented, that compared automotive retailing consolidation with other specialty retailing categories. It seems that the top 10 industry players in the United States, as I remember it, control 45% of the consumer electronics sales in this country, 36% of the home improvement sales, 25% of the “off-surplus” category, but only 7% of the new vehicles retailed in the US. With this statistic, it’s obvious that there is much more room for consolidation in the car business. One shouldn’t lose site, however, of the fact that back when I was a retailer (and it wasn’t that long ago even now), the top 100 players controlled less than even a few percentage points of the total new car sales volume, and, well, it was said back then that the percentage couldn’t get too much larger, as the manufacturers would prohibit concentrated market share. I think what has happened since (and continues to happen), with the consolidation of the industry, says as much about the economic distribution efficiencies of retail consolidation for all of the vehicle manufacturers as it does for Wall Street and the efficiencies of the consolidators.The manufacturers may not want to give up this control to their retail distribution “partners,” but in this new automotive age where the product market share of any one manufacturer is decreasing dramatically (I remember when what GM said in their franchise agreement, when they had 40% market share, pretty much dictated what other manufacturers franchise agreements would prescribe), it allows for the large automotive retail groups with sophisticated capital and management to increase their individual market share, and further consolidate the retail automotive market. (The manufacturers don’t have much of a choice but to support this consolidation, as it is to their economic benefit, even if they give up some of the control leverage over dealers that they once had). Interesting business this car business these days…
A Slideshow Lunch, then a Presentation by the “Non Car Guy” Most in the Spotlight These Days (but a $28M Paycheck for the First 4 Months is Worth a Little Heat…)
The lunch presentation was by John Davis, the Producer, Host & Creator of Motorweek and also who, for any of you that follow this blog, know was the keynote speaker at the Automotive Fleet & Leasing Association’s annual conference last September. Davis, with his own unique narration, presented a ton of slides of new model vehicles on display at the Detroit and Geneva International Auto Shows earlier in the year, and/or at the New York Car Show down the street. The lunch was so popular that they had to scurry to add extra tables.
After lunch, a much anticipated presentation was made by Alan Mulally, the new President & CEO of Ford Motor Company. Fresh from Boeing and new to the car business, Mulally is the turn-around expert that was brought in by Bill Ford to literally save the company. Mulally has
since mortgaged everything at Ford, or, as he describes, took out the world’s largest “home improvement loan,” for the $28B in cash needed to set the company right. Judging from the response of the audience, and his own confident and deliberate style, it certainly seems like everything is on the right track for a dynamite recovery, but, I would be incorrect if I said there still wasn’t major concern about the strategy of “downsizing” Ford’s way to success. I’ve always believed what Lee Iacocca said when turning around Chrysler Corporation from near fatal collapse in the early eighties, that it’s the product (that is the car) that turns around a car company. Mulally seems to recognize this though, so we shall see…(again, interesting business this car business these days…).
Yes, Mulally’s pay packet as CEO was a whopping $28M for the first four months of work, but to be fair a lot of that was to replace what he gave up for leaving Boeing, after his long career there…it broke out as follows: $666,667 in salary, bonuses totaling $18.5M, an $8.68M expense for stock options and other stock related rewards, and $334,433 for required use of the corporate aircraft, relocation costs, and temporary housing. All and all, it doesn’t look like Mulally’s financial neck is on the line whether or not his turn around plans for the company succeed or fail (not quite the same for the hundreds of thousands of factory workers, vendors, or franchise dealers and employees that hang in the balance).
After Alan Mulally’s presentation, the program went back to a dual conference format, with presentations from: Yogendra Rahangdale, President & COO of American Axle & Manufacturing, Gregg Sherrill, Chairman & CEO of Tenneco, Inc., Sylvie Rucar, CFO of PSA Peugeot Citroen, and Vicent Galifi, Executive Vice President & CFO of Magna International (one of the companies on the “short list” to buy Chrysler). The conference brought everyone back together at the end of the day, for a presentation by George Murphy, the Senior Vice President, Global Brand Marketing for Chrysler Corporation (by the way, here’s a gratuitous plug: if anyone wants some “almost new” ’05 or ’06 Chrysler Crossfires, Coupes and Convertibles, at steal’em prices, go to our Driveitaway.com transaction site for retail buyers at http://dealers.driveitaway.com ...you'll find four or five hundred available) .
…And to Close Out the First Day, The 2007 Wall Street Automotive Awards Dinner
The Morgan Stanley Global Automotive Conference finished up its first day with a first class Wall Street Automotive Awards dinner, held at the fabulous Cipriani in Manhattan.
Award Presentations were as follows:
Best Automobile-Related Company Stock Performance in 2006:
ArvinMeritor
Best Global Automobile Manufacturer Stock Performance in 2006:
Fiat
Best Domestic Automobile Stock Performance in 2006:
General Motors
Best Automobile Dealer Stock Performance in 2006:
Group 1 Automotive
A few panel discussions went on throughout the dinner, with press luminaries Joe White from the Wall Street Journal and, of course, everyone in the car business’s favorite crowd pleaser, Charlie Vogelheim, as co-moderators.
All in all, it was a great close to a jam packed, high profile, New York City type “car guy’s” day.
Next, Part II, and Cipriani’s Once Again…
April 3 – 5, 2007: The New York International Auto Show, the JD Power Roundtable and the Morgan Stanley Global Automotive Conference – Part I.
Although Philadelphia is really a stone’s throw away from “the City” as it’s called, the sad fact is that I get there much less often than other cities in the US, as work travel seems to put me more frequently in the sunbelt areas. I’m not complaining on that score, but to my way of thinking there really is no place in the world like New York City. So I’m glad that at least once a year there is a combination of excellent car events that are too good to miss, and, ironically enough, the three don’t have anything directly to do with each other except, in fact, they are car events and, of course, all “car guys” will be at the same venue -- that is, in New York City for the annual right of Spring, the New York International Auto Show.
Although the weather didn’t seem much like Spring, as it was cold and snowy on April 3rd when I got into town, and, I think New York had record cold temperatures by the end of the week, the events were hot – from the J.D. Power Automotive Roundtable, to the two day Morgan Stanley Global Automotive Conference, to, of course, the Preview Days of the New York Auto Show (running simultaneously with the auto conference). Additionally, and unrelated to any of the above but filled with folks I had seen for the prior two days, the 5th Annual Volvo For Life Awards Gala, a fantastic event sponsored by Volvo for a very worthwhile and unique charity drive.
I have to admit, I didn’t attend much of the J.D. Power Roundtable this time, as it was mostly geared towards retail dealers: “Opportunities for Sub Prime Financing,” “Rejector Study Overview and Update,” and “Annual Franchise Assessment” were the topics of the day. I enjoyed Charlie Vogelheim’s co-hosting of the Wall Street Journal Awards, honoring “the 2006 leading automotive stock performances” on the first night of the automotive conference, along with his hosting of the conference lunch on the second day which featured a private automotive retailer panel discussion.
The trip really started for me on Wednesday morning, at the Morgan Stanley Conference kick off, with Mark LeNeve, GM’s North America Vice President, Sales, Service & Marketing, addressing the audience of equity analysts, hedge fund managers and reporters. He was followed up afterward with two concurrent sessions running right up until lunch – with one room hosting, Phil Martens, President Arvin Meritor, Iku Mori, President Fuji Heavy Industries, John Mendel, Executive Vice President, Honda, and Roger Penske, CEO of United Auto Group, and the other room hosting presentations by Tony Gallagher, the Chairman, President & CEO of Genuine Parts, Darren Wells, the Senior Vice President of Goodyear Tire & Rubber, Earl Hesterberg, President & CEO of Group 1 Automotive, and Steve Roell, Executive Vice President and Vice Chairman of Johnson Controls.
Roger Penske, One of the Best Dealer “Car Guys” in History
While all of the presentations were first rate, in this old line auto retailer’s opinion, nothing is better than a presentation by the legendary Roger Penske. Penske is one of my personal heroes in this business, having tremendous success with over a dozen major automotive enterprises outside of his racing triumphs – if there is a more successful retail “car guy” I’ve never heard of him. In addition to presenting the outstanding results of the United Auto Group since he took it over from the Marshall Coogan team (United Auto is the second largest dealership group in the country, and, Penske Automotive Group, run by Roger’s son Greg, is the 11th largest automotive group in the country, and controls one of the largest single point stores in the nation, Longo Toyota in southern CA), Penske outlined the concept of growing “organically” through creating destination auto malls, as well as through acquisitions. The idea that the service and parts side of the business creates the best margins and reoccurring revenue is not new in itself, nor is the idea that service creates sales (that’s what we counted on in our small store and, implementing this on the fleet side of the business created our tremendous growth), but the large scale implementation in destination stores, as exemplified in United Auto’s new Turnersville complex near my home town of Philadelphia, is nothing short of groundbreaking, and does set the bar higher for all competitors.
Given that the location of the Turnersville complex is quite close to where I was a car retailer, I’ve followed that particular store group from the beginning: when it was innovatively created as a combination of franchises and stores as founded by the late, insightful Martin Lustgarten (under the “Martin Group” logo) in the late eighties, to its purchase by the “Classic Group” of stores in the mid nineties, to ultimately, the Classic Group’s purchase by United Auto. I saw it transformed by Penske from a large group of franchise and “rooftops” all in the same place (but so much like other large automall properties now prevalent in major cities and suburbs), to a trulyorganized and “over the top” state of the art, automotive retailing facility that it is today – complete with a vehicle test track for interested prospects. I forgot the exact number of additional service customers Penske quoted that the new Turnserville complex garnered its first year or so of operation, nor do I remember the exact percentage of “conversions” the store made, (that is, the number of service customers that bought their prior vehicle at another dealership but bought a new or used one at the Turnersville complex after going there for service), but I do remember both of those numbers were significant and portend the underlying intelligence of such an investment, and perhaps, indicate the very direction of automotive retailing itself.
On the latter point above, one fact Penske did identify, and that speaks volumes, I think, into where automotive retailing as an industry is heading, lies in the “Opportunity for Further Consolidation” statistics he presented, that compared automotive retailing consolidation with other specialty retailing categories. It seems that the top 10 industry players in the United States, as I remember it, control 45% of the consumer electronics sales in this country, 36% of the home improvement sales, 25% of the “off-surplus” category, but only 7% of the new vehicles retailed in the US. With this statistic, it’s obvious that there is much more room for consolidation in the car business. One shouldn’t lose site, however, of the fact that back when I was a retailer (and it wasn’t that long ago even now), the top 100 players controlled less than even a few percentage points of the total new car sales volume, and, well, it was said back then that the percentage couldn’t get too much larger, as the manufacturers would prohibit concentrated market share. I think what has happened since (and continues to happen), with the consolidation of the industry, says as much about the economic distribution efficiencies of retail consolidation for all of the vehicle manufacturers as it does for Wall Street and the efficiencies of the consolidators.The manufacturers may not want to give up this control to their retail distribution “partners,” but in this new automotive age where the product market share of any one manufacturer is decreasing dramatically (I remember when what GM said in their franchise agreement, when they had 40% market share, pretty much dictated what other manufacturers franchise agreements would prescribe), it allows for the large automotive retail groups with sophisticated capital and management to increase their individual market share, and further consolidate the retail automotive market. (The manufacturers don’t have much of a choice but to support this consolidation, as it is to their economic benefit, even if they give up some of the control leverage over dealers that they once had). Interesting business this car business these days…
A Slideshow Lunch, then a Presentation by the “Non Car Guy” Most in the Spotlight These Days (but a $28M Paycheck for the First 4 Months is Worth a Little Heat…)
The lunch presentation was by John Davis, the Producer, Host & Creator of Motorweek and also who, for any of you that follow this blog, know was the keynote speaker at the Automotive Fleet & Leasing Association’s annual conference last September. Davis, with his own unique narration, presented a ton of slides of new model vehicles on display at the Detroit and Geneva International Auto Shows earlier in the year, and/or at the New York Car Show down the street. The lunch was so popular that they had to scurry to add extra tables.After lunch, a much anticipated presentation was made by Alan Mulally, the new President & CEO of Ford Motor Company. Fresh from Boeing and new to the car business, Mulally is the turn-around expert that was brought in by Bill Ford to literally save the company. Mulally has
since mortgaged everything at Ford, or, as he describes, took out the world’s largest “home improvement loan,” for the $28B in cash needed to set the company right. Judging from the response of the audience, and his own confident and deliberate style, it certainly seems like everything is on the right track for a dynamite recovery, but, I would be incorrect if I said there still wasn’t major concern about the strategy of “downsizing” Ford’s way to success. I’ve always believed what Lee Iacocca said when turning around Chrysler Corporation from near fatal collapse in the early eighties, that it’s the product (that is the car) that turns around a car company. Mulally seems to recognize this though, so we shall see…(again, interesting business this car business these days…).Yes, Mulally’s pay packet as CEO was a whopping $28M for the first four months of work, but to be fair a lot of that was to replace what he gave up for leaving Boeing, after his long career there…it broke out as follows: $666,667 in salary, bonuses totaling $18.5M, an $8.68M expense for stock options and other stock related rewards, and $334,433 for required use of the corporate aircraft, relocation costs, and temporary housing. All and all, it doesn’t look like Mulally’s financial neck is on the line whether or not his turn around plans for the company succeed or fail (not quite the same for the hundreds of thousands of factory workers, vendors, or franchise dealers and employees that hang in the balance).
After Alan Mulally’s presentation, the program went back to a dual conference format, with presentations from: Yogendra Rahangdale, President & COO of American Axle & Manufacturing, Gregg Sherrill, Chairman & CEO of Tenneco, Inc., Sylvie Rucar, CFO of PSA Peugeot Citroen, and Vicent Galifi, Executive Vice President & CFO of Magna International (one of the companies on the “short list” to buy Chrysler). The conference brought everyone back together at the end of the day, for a presentation by George Murphy, the Senior Vice President, Global Brand Marketing for Chrysler Corporation (by the way, here’s a gratuitous plug: if anyone wants some “almost new” ’05 or ’06 Chrysler Crossfires, Coupes and Convertibles, at steal’em prices, go to our Driveitaway.com transaction site for retail buyers at http://dealers.driveitaway.com ...you'll find four or five hundred available) .
…And to Close Out the First Day, The 2007 Wall Street Automotive Awards Dinner
The Morgan Stanley Global Automotive Conference finished up its first day with a first class Wall Street Automotive Awards dinner, held at the fabulous Cipriani in Manhattan.
Award Presentations were as follows:
Best Automobile-Related Company Stock Performance in 2006:
ArvinMeritor
Best Global Automobile Manufacturer Stock Performance in 2006:
Fiat
Best Domestic Automobile Stock Performance in 2006:
General Motors
Best Automobile Dealer Stock Performance in 2006:
Group 1 Automotive
A few panel discussions went on throughout the dinner, with press luminaries Joe White from the Wall Street Journal and, of course, everyone in the car business’s favorite crowd pleaser, Charlie Vogelheim, as co-moderators.
All in all, it was a great close to a jam packed, high profile, New York City type “car guy’s” day.
Next, Part II, and Cipriani’s Once Again…
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