Senior managers with decades of experience in motor retail are not uncommon, but few can say they have had the experience Chris Hayden has had. After 12 years at Dutton Forshaw, culminating in a managing directorship, followed by 10 years forming and heading Ford Retail, he joined Earl Hesterberg’s Group 1 Automotive. He went to California as market director, fulfilling an ambition to experience and learn from the extraordinarily high-pressure environment of the US market.
GROUP 1 AUTOMOTIVE
Turnover £338.9m (2012)
Franchises BMW (3), Mini (5), Audi (5), Ford (4)
Two years later he returned to the UK, after being appointed chief executive of Group 1’s UK operations in May, inspired by what he saw in the US and resolving to bring about changes in the company.
Jeremy Bennett spoke to Hayden about the US and the UK markets and his priorities for Group 1 in this country.
Jeremy Bennett: What in the US automotive retail market made the most impact on you in your two years there?
Chris Hayden: The competition between dealerships there is intense. We don’t even begin to understand it in the UK.
In Los Angeles, there were 70 Toyota dealerships. On my 30-minute drive to work I would pass four big centres. If I went off the freeway, I would have passed eight or nine. These are not insignificant businesses; they are selling hundreds of new cars a month. The intensity of competition sharpens the mind. Staff are incredibly focused on retaining customers – you have no choice in that environment.
They have a massive advantage in that the cars get serviced twice a year and there’s very little fleet business, so retail dominates. But, despite the pressure, everyone is incredibly optimistic: everything can be done.
Take servicing, for example. In the UK, you may have 35 cars coming in, and we plan how we will accommodate them. In the US, we would service more than 100 cars a day and only 40% would be pre-booked. If you have 100 Mercedes customers turning up every day at a dealership in Beverley Hills, you cannot afford to turn any of them away.
Group 1 Automotive in the UK
Houston-based Group 1 was the second US dealer group to become established in the UK when it bought Chandlers Garage in 2007, giving it a network of BMW and Mini dealerships in the South East.
Group 1, which has more than 100 dealerships in the US and Brazil, followed Roger Penske’s United Auto Group into the UK after UAG bought Sytner in 2002.
From the outset, Group 1 chief Earl Hesterberg said he would grow the company through acquisitions. Fifty dealerships, he said in 2008, would be a “nice-sized business”.
Acquisition activity was superseded by the recession and cost-cutting in 2008 and 2009, however, which included pay cuts for directors as the company sought to save $100m (£69m).
Then in 2010, Group 1 bought Barons, expanding its BMW/ Mini representation with two sites in Farnborough and Hindhead.
In 2012, it bought six-site Audi business Hodgson Automotive, trading as Essex Audi.
In 2013, it added Inchcape’s four Ford dealerships in Farnborough, Guildford, Wokingham and Bracknell.
JB: What practical elements would you like to see here?
CH: The service drive was a fantastic education. The customer drives into the service area, where the booking-in and assessment with the technician takes place in and around the car. In the UK, we expect the customer to find a parking space, walk into our reception, up to the service desk and then answer questions relating to the car.
Over the years, Group 1 has ensured a consistent process to ensure upsell opportunities are exploited at this stage. Isn’t it better to walk around the car with the customer and point out then that tyres might need replacing rather than calling them later in the day, when they will need convincing?
JB: With such a competitive environment, how did you avoid merely trying to win on price, by being the cheapest?
CH: There was no question of being the cheapest. You had to make a profit. Intense competition leads to an intense and constant evaluation of your people and your data. And the systems we had available were incredible in the level of detail we had access to. At midnight on a Sunday, I knew what every dealer had done for the weekend. On a used car that popped up on the lead system, I could see how many people had test driven it or enquired about it.
There was also much more linkage between plug-in software and dealer management systems. It was accepted that bright young developers would produce valuable add-ons so you’re not having to double-key information like you are in the UK.
JB: Was it technology that principally put the US ahead of the UK?
CH: No. For example, a lot of marketing is still done by traditional mail. In one case, a service promotional mailer sent to customers was coloured red, amber or green. If a customer was sent a green one, they were a regular; amber meant they had missed their six-month service and if it was red they hadn’t been in the dealership for a year.
The customer brought the mailer, which also served as their discount voucher, and its colour instantly told the service adviser how to handle that individual – “we haven’t seen you for a while” in the case of amber or red, for example.
When I first saw it, I hated it, because it looked so tacky (the customer’s name is on the number plate in the picture of the car), but actually this process is one of the most impressive things I saw, because the advisers loved it.
They could tell you’re a regular customer and they’re going to thank you for coming back and be very confident right away, but no customer would ever know the significance of the colours. On Saturday mornings, the dealership would be jammed with service customers.
JB: Did it lead to an increase in ‘green’ mailers?
CH: That’s the aim. We were always predominantly green, but every so often Houston would drive for an increase. The drive for performance improvement from head office was intense too. Performance is constantly measured and periodically a report would arrive inquiring about customers or cars that hadn’t been into a dealership recently.