Group 1 Automotive's Chris Hayden on what UK dealers can learn from the US

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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) Profit £3,024,000 Franchises BMW (3), Mini (5), Audi (5), Ford (4) Staff 717

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.

 

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JB: You always had a focus on tyres at Ford Retail. Was this required in the US?

CH: Wherever you’ve got a dealership in the US, you are surrounded by dozens of Jiffy Lubes (franchised service centres). Every petrol station offers tyre pressure gauges and from my office in Anaheim, you would pass six or seven tyre centres off the freeway.

So, every dealer has a fixed view on never losing the tyre business. And I believed at Ford Retail that if you lost this business, you would lose everything else in aftersales.

Tyres are complex, but customers are aware of what they cost. So if you try to put a massive margin on tyres, you’re not going to win that business. If you sell a lot of tyres and make it convenient and a good price then it’s good for the business.

 

JB: You’ve returned from the US, but work for the same company. It must have advantages, seeing things from both sides.

CH: Yes, I think it’s twofold. I bring the US experience, but I haven’t been away so long that I’ve lost touch with what goes on here, so I can put a perspective on it. And I’ve established a network of contacts in Group 1, leading edge contacts in areas like F&I and IT and the internet. I’ve experienced the American market and I’ve learned a number of things and I think it has probably made me see what the potentials are when you have optimism that is so high.

 

JB: How can you instil in the UK the attitude and enthusiasm you experienced in the US?

CH: My job is leadership of the operations; it’s something I’ve done before, going back to my Dutton Forshaw days, where I ran a multi-franchise operation. I’m focused at Group 1 on managing the relationships with the different franchises.

The fundamentals of the business are getting the right people moving in the right direction, getting them feeling valued and accountable for what they do. I think it’s a combination of 30 years in the UK. It’s not all about two years in America, but more than 30 years’ work in the UK.

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JB: What role has Group 1 given to you in the UK?

CH: The company has grown in quite a short space of time. In the UK, Group 1 started with a few small BMW businesses and very rapidly, from 2012, has bought six Audi family businesses and the Ford sites.

There wasn’t a requirement for somebody with my skill-set previously, but the company has acquired and plans to again. My experience is required to help structure that business, to help it perform. Otherwise it will just be a cluster of businesses and we owe it to the manufacturers and to the staff to make it more professional.

At Dutton Forshaw and Ford Retail, businesses were brought together to create a company. I’m recruiting people to help: a property manager (Group 1 owns its properties), an F&I specialist, and marketing people. I don’t want a sizeable head office team, but we need to create a clear direction, rules, operating standards and all the elements that make a focused business.

 

JB: Acquisitions mean a mixing of cultures, which bring challenges in their own way. How do you overcome them?

CH: How do we get a single Group 1 culture? You put somebody like me in charge who has done it before and is focused on the manufacturer and customer relationships.

 

JB: What is the acquisition strategy for Group 1 in the UK?

CH: We want to expand. We know the franchises that will create the right opportunities, the ones I believe can add value. I can’t share the details with you, but we won’t be buying just anything.

Look at Essex Audi. It was a great family business, a brand in itself. We came to Essex Audi as a party that can provide the right facilities for the manufacturer.

We began to invest heavily in the facilities. Southend is our best, the hub for the area, and we have to invest in Chelmsford, Stansted and Chingford. We’ve got work to do for BMW as well. We’re currently looking at two new BMW sites, in Hampshire and Sussex, where we’ve outgrown facilities.

 

JB: How will you operationally instil a single culture?

CH: I came back in May and, as I resettle here, I will start to look for innovation in certain areas, be that from what I’ve learned in the UK or from the US. But my prime focus has always been on customers, giving them a great experience.

Whatever country you’re in, we all have the buildings, we all have the stock and it’s what we do with the processes and the way we connect with people that makes a difference.

As I’ve said before, it’s providing a local business for local people. So don’t expect someone commuting to London to drop their car off for a service at 2pm. They want to drop their keys off at 7am and for the job to be finished at the end of the day. Let’s fine-tune our business to what people in our locality want.

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JB: But within the business how can you ensure your staff believe that they are part of a single company?

CH: As one example, we have a sales walk-around competition. We do it at each branch, then by region and then the top Audi, BMW, Mini and Ford salespeople compete.

We have a panel of judges, made up typically of me, a customer, somebody from admin and a sales manager. Each salesperson is given a scenario to present to, so a product presentation isn’t sufficient, you have to take into account the fictitious customer’s circumstances.

There are people taking part and a lot more watching and the lesson is it doesn’t matter what brand you’re selling or how experienced you think you are, you can learn ways to develop a rapport and how you can engage with customers.

As a manager, I want to support our staff in growing in this way. I could send out a newsletter to tell the people at Barons what Group 1 is (see panel, right), but bringing people together like this will achieve it more effectively.  

Similarly, across the three divisions – BMW, Audi and Ford – on a Monday I will make a call, a health check, for half an hour to the head of each. Once a month, I’ll bring them together for a 45-minute discussion on the performance of the business. I’ve done it for years elsewhere and people are nervous now because I’m the new boss, but I’m quite specific: ‘tell me about this car that’s going to be 60 days in stock’, ‘how many enquiries has it had’, ‘what’s it doing on the internet’, etc.

We’ll meet in different places to further the understanding of what Group 1 is and what it stands for.

 

JB: What is the cornerstone of the cultural journey you’re on? What actually sums it up for you?

CH: That everybody understands the vision. And mine is what it has always been. I want to be the best in terms of people, profit, customer satisfaction, in the best-controlled environment, with the best manufacturers. How does that work in a dealership? Sell somebody something and ensure they come back. Everybody has got a part to play in that process.

It will take a year for staff to get to know me better. But first off you’ve got to get the senior team to buy in: my financial director, Daniel McHenry, Ford and Audi general managers, and in BMW I have a franchise director. There will be some consolidation in management as I bring in property, F&I and marketing specialists. I can’t have all these direct reports, it wouldn’t work.

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JB: Will you retain the names of the separate businesses?

CH: Yes. Group 1 is the parent, Barons and Chandlers are the names we do business under.

 

JB: At Ford Retail, the internet was of huge significance. What is the focus at Group 1?

CH: We’re controlled much more by the manufacturer in terms of what we can do and rightly so. But fulfilment was always the focus. It’s fine having a lovely website but can you actually deliver? My focus will be on delivering an excellent customer experience.

 

JB: Will you offer the Ford Retail experience of online vehicle purchasing?

CH: It was quite an innovative thing to do then, to take deposits online, but I question whether it was what the customer wanted. We realised customers just wanted to avoid a bad experience in a dealership and we needed to, instead, make sure we were approachable and honest.

 

JB: What epitomises a good website experience?

CH: I just want people to say: “Wow that was the easiest purchase I’ve ever made. I saw a car online, it was 10 miles down the road – or 100 miles – and they just made me feel so welcome. When I got there, the car was exactly as described and the process was seamless.”

We’re not good enough yet, but we recognise that we need to be and getting new websites for each of the brands in time will be a step in this direction. We’ll be using the brand platforms, but trying to offer different things. For example, in the US, you wouldn’t expect someone to buy a used car on seeing four photographs online. Forty or 50 was the norm.

 

JB: Why are you recruiting an F&I manager?

CH: I think F&I is a very important part of the business. There’s compliance pressure, of course, but that is better for the business and for the customer, since it requires a consistent process.

I want someone here that will ensure we are not the weak link in an area that is not always well managed in the dealership since F&I is an integral part of the sale, especially when customers come in with advertised payments in mind.

The conversation we have is not so much about a conversion, but ensuring all the elements of service, insurances and other products are presented properly. The F&I manager will ensure this.

 

JB: Do you think GAP will be a new PPI?

CH: Watch this space. I’m worried about it because all the customers that I’ve known who have claimed on it have been delighted.

I think we’re going to come into a whole new regime of declaration of commissions and I don’t think that’s a bad thing. I think anything that helps customers appreciate how professional we are as an industry is valuable.

 

JB: What has changed in the UK market since you were here two years ago?

CH: The confidence now is unbelievable. Everybody seems a lot more approachable about the idea of changing their car. We’re seeing a maturing of PCPs in the market and service plans are a known quantity in terms of owning a car.

PCPs allow people to be confident with their payments and so we’ve grown our penetration to 65%. We don’t want people tied to five-year finance deals, but give them the right package that retains them and allows the customer to change the car as often as they like – and they feel like they own it.

Service business is on the up and I’m seeing growth in smart repairs. Customers don’t want to drive a car with dents or damaged alloys anymore.