A 40-year veteran of the retail business, Charles Oglesby has worked in every area of the dealership climbing his way up from the showroom floor to becoming the CEO and president of the Asbury Automotive Group.
Asbury, one of seven publicly traded dealer groups (counting CarMax), generated more than $3.6 billion in revenue in 2009 selling nearly 63,000 new cars.
Oglesby guided the company through one of the toughest periods in automotive history and has Asbury strongly positioned for the future.
He shares with us what life is like running a public company; the ingredients for what makes Asbury so successful and his view of what the future holds for the car industry.
Charles, let’s start with your background in the industry. How did you get to be where you are today, running a public dealer group?
My story actually starts when I was 16 – which was when I got married for the first time. I was going to high school from 8:00 am to 3:00 pm, and then working at a wire manufacturing plant from 4:00 pm to 12:00 am.
You were married when you were 16 years old?
Yes I was, and sometimes I don’t believe it, either! I told people at work I was 18 – in those days, you could lie about your age and get away with it. Obviously, you couldn’t do that today.
Once I finished high school, I continued to work my way through college making baseball bats, pumping gasoline and doing construction.
After graduating college, I was looking in the paper for a job and saw an ad for car sales. I thought, “I can do that until I find a real job” and I’ve loved it ever since – I love people and I love cars.
What dealership was it?
It was an Oldsmobile dealership in Savannah, GA. I was good at it – I made more money than most of my fraternity brothers who had “real” jobs!
You moved up the ranks quickly.
Early on, I saw opportunities in the car business. I worked as a finance manager, sales manager, general sales manager and general manager. I’ve been a partner, I’ve been a dealer and I’ve been part of a consolidated group.
Several years ago, the investment group Warburg Pincus bought Cecil and Larry Van Tuyl’s business in Kansas City, which they eventually merged with Rick Hendrick’s stores.
Warburg recruited me to run those stores, and that was my first time being a part of a consolidated group. I had fun, and have been part of a group ever since.
While I was in Kansas City, my wife passed away from breast cancer. So I bought a Toyota store in Georgia in order to be closer to home. That store ended up being a little too small for me, so I sold it and moved to San Francisco to work with First America Automotive, a small group that we grew from six dealerships to 36.
We couldn’t get an IPO put together, so we ended up selling it to Sonic Automotive Group, which is how Sonic actually got started on the West Coast.
Did you join Asbury after that?
I retired for a couple of years, but didn’t adjust to retirement very well – my golf handicap went up instead of going down! I had friends at Asbury, who had some needs in Little Rock, so I moved there in 2002 to help repair those dealerships.
Then in 2004, Jim Nalley retired from Nalley Automotive Group in Atlanta. Asbury wanted to consolidate the regions of Atlanta and Little Rock, and asked me if I’d oversee the combined region.
(Editor’s note: Nalley had run Asbury’s Atlanta platform after selling his dealerships to Asbury.)
When MSD Capital considered purchasing Asbury in 2006, I was going to be the CEO of the new company. When that didn’t happen, the board moved forward with the decision to make me CEO. That’s 40 years summed up in two and a half minutes!
That’s a pretty successful 40 years.
Well, I’ve worked on the East Coast, West Coast, Southwest and Midwest. And if you count my time in New York before we moved Asbury’s headquarters to Atlanta, then you can add the Northeast to the list.
While I was working at all of those dealerships, the people that recruited me had broken dealerships. Being able to ignite those dealerships really helped me, and I didn’t realize at the time I was building a resume that led me to where I am today.
When was it you first realized you were in the running to be the CEO of Asbury?
A lot of things were happening simultaneously. It really wasn’t something that I was seeking, but when you look at a career like I’ve had, you think of it this way: if you’re a mountain climber standing next to a mountain, you can’t help but climb.
That’s how it happened, and I’m having a blast. As I said before, I love people, I love cars and I love this business. I am very fortunate to be able to be a part of something like this.
Certainly it’s always about the people you surround yourself with. It’s not me, and it’s not ever just an individual, but the collective effort of everyone having a shared vision and the desire to make that vision a reality.
How does running a public company differ from running a private company?
There is a pretty wide gap of differences. We have public reporting requirements, we have shareholders – people that believe in us and trust us to create wealth for them – and of course we’re held accountable by the board of directors. From that perspective, a privately-owned dealer has more flexibility in the decision-making process. As a public company, we answer to the board, have certain restrictions, and need to follow those guidelines.
Another difference is the amount of employees. The more people you have, the more complex and challenging it becomes to ensure your vision is carried throughout the entire organization.
If a business has a staff of 200 people or less, the ability to communicate your vision is much easier than a company with thousands of employees, which is one of the larger challenges I’ve discovered.
Asbury has 6,500 employees, so it’s important that we communicate a shared vision. We’re able to succeed because we trust and believe everyone is working towards the same end result.
When talking about vision, what are some of the traits or skills that you look for when hiring general managers to run your stores?
Believe me; I understand that no one is perfect. I have made so many mistakes, this room wouldn’t hold all of them! In my opinion, it’s all about someone’s character and integrity. When I am speaking with a potential employee, that’s the foundation we start with – the person’s belief systems, and the challenges they’re willing to accept.
I also look for the potential of an individual. I look at the way they want to support themselves and their families, and if they’re seeking an emotional return as well as a financial return. I believe if you provide an emotional return as well as a financial return, you are serving the needs of your employee. As we do that, then that’s how we will continue to attract and retain great employees.
Are you finding it a little bit easier today, with all of the dealerships that have closed, to attract good employees?
Well, I believe that good people are always available. If we have what they want, then they’ll be attracted to our company. I do think the talent pool is bigger due to all of the dealerships that have closed – it has definitely put more people in the marketplace.
But again, to get great people you must be a great company and offer the qualities they’re looking for.
What metrics do you look at to determine if your dealerships are doing well?
I always consider market share, CSI and profitability, which are inclusive of each other. When I look at the performance of our dealerships, I want to make sure they are covering their assigned market share and a little bit more. Of course, the profitability standards and the return need to be there.
CSI, to me, is more about employee satisfaction. When employees feel good about where they’re working, customer satisfaction follows. Great leaders are able to develop that culture in which employees help make CSI a natural.
What do you look for in stores you’re considering buying?
If we’re considering an acquisition, I look at the same metrics. How are they performing in the marketplace? The CSI tells me about the leadership in the organization. Then we look at profitability metrics – are they getting the proper return on investment? We look at whether any of those areas are deficient, and that tells us where the potential is.
I assume you look at stores that probably aren’t hitting their stride – ones that have a lot of potential.
Whenever someone is selling a dealership, they will likely present the store as if it were already achieving those metrics. We’re not afraid of a store that’s performing well; the stores that concern me are the ones that are already overachieving.
That would be the first red flag, because where do you go from there, and what are the elements that created that level of overachievement? I prefer an underachieving store or one that is running well.
You said in your first quarter earnings call this year that you were seeing acquisition activity, or at least interest, pick up. Is that still the case?
Yes, I could put a billion dollars worth of revenue on the books today – that’s how much is out there.
Of course, there are different degrees – there are some good ones, there are some bad ones and there are some great ones.
Business is still challenging today. I think personal exit strategies are being accelerated somewhat, and there are some that feel it’s a good time to sell.
We are fortunate that the deals we are looking at fit our criteria. We’ve done a lot of work on pruning our portfolio to get it to where it is right now, and we really like our positioning as the domestics have improved their products and market share. We are in position to be able to expand our portfolio with selected domestics, and we still have a good mix of midline imports and luxury. I think we are actually in perfect position to choose the direction of our growth.
How much do you have put aside for acquisitions?
You know I’m not going to tell you that! I can tell you that we are able to make a major purchase if we choose to.
That’s intriguing. Is it still a buyer’s market then?
I think it depends on how you want to define that. You will see a number of acquisitions take place between now and the end of the year. They are still pricey, but not to the extent that they were two years ago or before. The well-performing stores in good locations with good franchises are much more reasonable today. However, you’re going to pay for a good store with a strong location and good franchise – it deserves a premium.
The industry didn’t see many acquisitions last year. It’s the proposed timing with the market challenges, the concern of future tax rates and an aging dealer body that’s driving some of this. Again, I think some of these individuals are finding this is a good time for an exit strategy.
Are we going to see more private equity flowing through this business more than what we are now?
I think private equity likes the business, since this is a great cash-on-cash business. But the manufacturer agreements and their impact on the business is a challenge to accept.
All of the public groups have made it through the downturn, and we’re making money at these depressed retail levels; and independent dealers are doing very well now, too.
Dealerships are running at great efficiencies and productivity, but I think private equity would have to look at it as cash – it’s a high-revenue, low-margin business. They like high-margin businesses. Even though private equity would like to participate in this industry, it doesn’t necessarily fit their model.
It seems there was more optimism in the spring. What do you think about the strength of the industry in the short term for the next year?
We said last year we expect this year to be a 10.5 million SAAR (Seasonal Adjusted Annual Rate for sales), and we wouldn’t be surprised if it was 11.5 million.
We’re running our company based on a SAAR of 10.5 million. In the event it’s less than that, we’ll still be a successful company. I think it’s just a matter of time before the market recovers, but there’s a lot negative consumer sentiment out there right now.
As an example, the drag of what’s going on in the Gulf concerning the oil spill is in the news every day – perhaps more prevalent here in the South. All of those things add up to negativity; we’re all reading the same newspapers, and bad news sells papers and gets people to watch the news. I think that the consumer is just afraid again.
However, there’s still traffic out there, and people are still buying cars. When you look at the scrappage rate and the number of people that aren’t buying today, everything points to a recovery at some point.
I believe the industry will drag along for a while. I think July sales will be somewhere in between May and June; August will be another big month as I expect the manufacturers will come out with some incentives – and consumers still respond to strong incentives. I believe the last part of the year will lag, but we should have a big December.
And then, I think we will see a stronger recovery next year, strengthening into 2012 and beyond.
Is the business becoming more professional today?
The business is moving beyond the old model – the old model doesn’t work anymore. Refusing to change will cause you to be left behind because there’s a better way of doing it today.
Social media is changing the landscape, and the way that we negotiate the deal with the customer is changing. As an industry, we can’t take four hours to deliver a car anymore – that has to be reduced. Pay plans have to change also.
You recently announced Asbury has picked ADP to be its DMS vendor. And I know you’re going to say more in the future about the decision. But moving to ADP will help you consolidate a lot of your processes and technologies across the board?
There are scalable efficiencies that we have available to us now. As an example, we consolidated our payroll. There is no reason we can’t do more with accounts payable, so we are able to take advantage of the technology that big box retailers have enjoyed for awhile. We are moving in a direction that allows us to do business in a much more efficient manner. Again, because of our size, we’re able to scale and get the benefit of doing so.
Asbury consolidated its platforms in the last couple of years.
We previously had six regions, and literally ripped the regional layer out. We then consolidated them to a structure that is comprised of a COO with a support staff and our dealerships.
The elimination of a regional structure was one of the reasons we were able to survive – had we stayed with our old structure, the weight of it would have been too much. That’s also why we relocated from New York to Atlanta.
If you think about it, we had everything going on at once – relocating, restructuring and reorganizing. I’m so proud of our employees! With all of the changes, and with what was going on in the world at the time, we navigated through the downturn to not only survive, but to position ourselves properly for the future. The attitude in this organization was so confident and supportive that there was never a question of us emerging from the situation much stronger than we were before.
You predicted that last year when we talked in the Spring of 2009.
Well, I’ve been around long enough to know what we were facing, so even if the events themselves may not have been predictable, the outcome was.
I’ve been through all of these things at different times, but never all at once. We developed a strategy, executed it well, and have put ourselves in a great position for the future.