Automotive News - February 11, 2008 - (Page 64) 64 • FEBRUARY 11, 2008 Asbury’s Oglesby: Retailers survive tough times Charles Oglesby is completing his first year as CEO of Asbury Automotive Group, the sixth-largest U.S. auto dealership group. The public company is based in New York and operates 89 new-vehicle dealerships. Oglesby, 61, has spent more than three decades in auto retailing. He started his career as an Oldsmobile salesman, was president of several dealership groups and joined Asbury as a regional executive in 2002, later becoming COO. He still describes himself as a car salesman. At the Detroit auto show last month, Oglesby met with Automotive News Editor David Sedgwick, Retail Editor David Kushma and Staff Reporter Alysha Webb to offer his industry forecast and discuss his company’s plans for 2008. Q&A What will be the hot segments in 2008? Luxury is still strong. More on the car side, and any crossovers. The truck side will be challenged. The midline imports — Toyota, Nissan, Honda — will continue their momentum in taking some share. large space that they haul their family in and have certain needs for. But when it takes 120 bucks to fill it up, you use it less. So those vehicles will have less value to them as they trade down. It’s an issue, but it is not new, and it is not necessarily more predominant now. We might have an uptick, but it will level out. It always has. What is your limit on the repayment period for a loan? Do you say, nothing over 72 months? It is always a matter of serving the customer. In some cases we are hearing (about loans of) 96 months. That concerns us, but it is a very small part of the business. We hope that will not grow. We don’t agree with it. I’m not aware that we’ve even financed 84 or 96 months at this point. But if that’s what the market moves to, then we’re retailers. Even if we don’t agree with it, we’ve got to serve the customer. What is the average length of loans at your dealerships? Sixty months on the far side. And leasing certainly is growing, and it will grow even more. Chinese manufacturers are showing cheap SUVs. Will there be a U.S. market for a $14,000 SUV? The consumer would like a price point like that. But they want to be safe and they want their vehicle to last and to have some value out of it. Asbury Automotive CEO Charles Oglesby: “The retail business is not as volatile as the manufacturing side.” Domestics have trucks and they have minivans. It’s a declining market, but they still have pretty good product in that market. Has the market for big pickups gone really soft? It is not at the disaster level. The fuel efficiency of a pickup truck is still not where it needs to be. I’m not sure that right now, the customer sees the pickup as a family vehicle, so the truck market is in transition. Now you get crossover vehicles that can almost serve a lot of the needs of a pickup. Given the anticipated softness in new-car sales this year, will you be placing more emphasis on used-car sales? When the new-vehicle market softens, you usually do have strength in the other markets. Used has been a very consistent market. When we are in a climate like we have now, you will see a small period of retraction for the whole business. But the cycle will start back up at some point. Consumers still need their cars. They’ve got to go to work, pick the kids up after school. The retail business is not as volatile as the manufacturing side, and it has been that way as long as I’ve been in the business. You look at your business, and you’re able to move it as the market moves. You’ve got to have the right vehicles on the lot to match what the market is asking for. Does Wall Street understand your model? They understand it better today than the first time I was involved, back in 1999 and 2000. It is a cashflow business. I don’t know if they have confidence in the sector yet, because they have not experienced a retailer going through an environment like this. We do survive. Are your dealerships seeing an increase in late loan payments, delinquencies, repossessions? As we talk to our lenders, there is a slight uptick in delinquency rates. This is somewhat to be expected, with all the pressure that is on the consumer. But we haven’t seen any pullback at all on the desire of the captives to lend. Does that apply to upside-down customers? That has always been a part of our industry. When there is a correction like this, consumers still like the Are you shopping for a Chinese franchise? Not at this time. Are you finding it harder to hire these days? We are able to attract a high-quality individual. We have a number of programs in place that help us do that. The key today is training — helping support an individual while they are grasping what the business is. How do you hold onto a talented general manager who wants to become a dealer principal? It’s about an individual being able to get a return on their emotional investment as well as a financial reward. When you create a culture and an environment that gives both returns, then people don’t like to change. They don’t want to move, move, move. It diminishes their value. c What’s your overall guess for the U.S. market this year? Between 15.5 million and 16 million (unit sales). It can move some either way, depending on events we don’t know about yet. There could be a movement in consumer confidence levels, more positive. Right now consumers are just inundated with bad news, and this has an impact on all our thinking. There is an opportunity for those things to change, with the Federal Reserve Board making some cuts, with the elections coming up. There could be some stimulus. Does Asbury plan on acquisitions this year? We have a three-piece model: organic growth, acquisition growth and a large dividend to give our shareholders a 12 to 15 percent return on their money. We were pretty aggressive last year. We made seven acquisitions, seven different manufacturers. Our dividend was very strong. We had approximately $400 million in revenue last year. My own personal projection is that we will buy between $300 million and $400 million this year (in revenue from dealership acquisitions). What are you looking to buy — luxury brands, import brands? We’re very fortunate — we’re about 81 percent luxury and import. We expect to improve that blend. But we’re not afraid of domestics in the right location. The domestic stores we have, we get a good return on them. We would expect to get a return for our money a little quicker with the domestics. With our mix, we can be opportunistic and buy a strategic domestic. Does Asbury’s definition of luxury include Cadillac and Lincoln? Yes, we include them. Which segments are the domestic automakers strong in? The first thing I think about is trucks. I think trucks are very weak now. When truck volume starts to move up, there is a reason. Either a consumer is going back to work or he needs the truck because construction is picking up — something is starting to move.
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