Former lawyer and a ‘head of distressed debt’ in the City, Rob Foulston took up the post of chief executive of the Retail Motor Industry Federation on February 1.
There may never have been such a challenging time to take on the role of steering an organisation at the centre of an industry which, including retailing, aftersales and insurance, represents 600,000 jobs in the UK.
The RMIF alone represents the interests of 8,000 franchise and independent retailers of cars, vans and fuel, bodyshops, auction houses and vehicle recovery specialists.
So, changing a commander in the middle of a battle would seem like a recipe for defeat – or at least a few weak-kneed moments.
Not so for Foulston, who admits to using business know-how gained as a lawyer and in investment banking – including 15 years at Deutsche Bank – in addressing the challenges in our industry.
He has forthright views on the market, the media and what he would do if he was in Number 10.
AM: How are you approaching the current problems in the retail motor trade?
RF: The automotive industry is in crisis. I can’t deny that. But it’s more a crisis at manufacturer level.
For retailers a credit crunch means consumers have become smarter about buying cars and that’s why second-hand stock is drying up.
Cash plus confidence means it’s nice to have a new car. Take both away and purchasing is about what’s essential, that doesn’t include new cars.
AM: Aren’t we experiencing the bust in a cycle of boom and bust?
RF: Businesses in all sectors are going bust – you can see empty shop units everywhere.
This has heightened the awareness of the economic crisis, but dealers were going bust anyway. And if there is going to be another wave of insolvencies it will begin now.
Businesses will be waiting to see how strong March is and keeping bank lines open and will then make decisions on their viability. We will be hearing the outcome in the coming weeks.
AM: But second-hand sales are incredibly strong at the moment.
RF: Yes, but the prime stock will run out, particularly nearly new. Prices of these cars will start going up and will force consumers to look at older or new cars, when in fact, they don’t want either. The buyer will have to go one way or the other.
The fleet market will provide some stability. The typical fleet sales person doing 30-40,000 miles a year will drive a car with a maximum two-and-a-half year shelf life.
Even if the fleet manager extends the car’s operating cycle it will need to be changed sooner rather than later.
AM: What will drive sales and when will we see a market recovery?
RF: Consumer confidence. If I was Gordon Brown I would get the national press into a darkened room and tell them to stay there until they changed their mindset on the car market.
People have been shouted down for talking about the green shoots of recovery, but we need to start focusing on them. As a result, consumers are frightened about what’s around the corner. Yet, it’s a fantastic time to buy a car.
In the final two months of last year anyone in business decided the first quarter of 2009 would be tough and they would run their business tighter.
Consumers have done the same. I expect we will start purchasing again in the spring.
AM: Is the Government doing enough?
RF: There’s a perception it’s not doing anything. Incentives, such as loan support schemes, are not new. The Government has promised £2.3 billion – none of it has appeared yet.
AM: So what’s the RMIF doing in the absence of Government action?
RF: Improving our communication is critical. It’s easy to get the top 25 franchised dealers around a table and cover a lot of ground.
It’s much harder to do the same with the independents because they tend to be smaller and disparate. Between 40–45% don’t have email addresses.
We do maintain good links through regional meetings and our member magazine, but we can do better. We need to shout our message from the roof tops.
AM: How will this be done?
RF: We’re moving to what is called a relationship model. There will be far more regional contact with members through designated relationship managers; men and women you will see a lot more of.
The RMIF used to have its equivalent of the Avon Lady. Remit (the RMIF’s training arm) has the same arrangement. Its representatives used to be known as the ‘Remit man’. We will start with around 10 relationship managers in the next few weeks.
AM: What will they do?
RF: They will sit with members to talk about particular issues and the services they need. At the moment we’re guessing. Communication at a local level clearly will stop this.
AM: NADA is very successful at getting the voice of US dealers heard at the highest levels, including Congress. Does the RMIF have the same influence and clout?
RF: The National Franchised Dealer Association is moulded by NADA. Our chairman Paul Williams goes to the NADA convention every year as does RMIF director Sue Robinson. And MPs do speak on our behalf in Parliament.
We speak to BERR (Department for Business, Enterprise and Regulatory Reform) representing our business sector and we do have on-going relationships with Government ministers.
One of the strengths NADA has, which we are working on now, is group lobbying for members, or class action, where one entity can represent a number of plaintives against a carmaker.
The benefit to members is that legal costs are split between all the people in the class.
AM: Do car manufacturers exert too much control over franchised dealers?
RF: There are areas of conflict. It’s why there is a separate organisation – the SMMT – representing manufacturers.
At the moment dealers need financial support and they look to manufacturers for it. But carmakers need money more than dealers right now, as all the news reporting will tell you, to stay alive.
AM: How will you judge whether you have been a successful RMIF chief executive?
RF: It will rest on the number of members the RMIF has. An increase from 8,000 to 10,000 is a good target. Trade associations are judged by how successful they are for their trade in talking to ministers and Government and they are measured by their membership.
The RMIF has been a little too quiet. I’ve a real opportunity to make a difference.
RMIF looks to establish its own bank
One of Rob Foulston’s stated aims when he became chief executive was to provide a range of new services including financial.
The RMIF is looking to establish its own bank.
Foulston said: “We are discussing the issue with a number of banks and Government to see if they will give it their support. It’s in the early stages.
"But we hope to have it running by the end of the summer. I can’t say who will run it or how it will be financed because of confidentiality agreements with those involved.”
An RMIF bank will potentially offer stocking loans, but not asset finance.
An RMIF bank would be looking to take deposits from anyone in the automotive industry, for example a franchised dealer, independent garage or people that have worked in the
automotive industry, but only to RMIF members, ensuring its future financial risk credibility.
Credit lines have been offered and, crucially, customer credit.
“The way we solve the current problem in new car sales is getting people to buy cars again. If the consumer sees that finance is more readily available it will get them back into the showrooms,” Foulston said.