Don Mealey - AutoNation
Interview by Michael Roscoe
Don Mealey was a dominant dealer in Florida, particulary in Orlando, prior to joining AutoNation in 1997. In this interview, Don shares his experiences before and after he went to work for America's largest dealer group.
Don, how did you get started in the car business?
I have been in this business for 46 years. After graduating from high school in Washington, D.C., I went to work for a dealership driving a parts truck. I worked for a gentleman by the name of George Fogarty who was willing to promote someone who worked hard. In 1958, he made me a sales manager. At the time I was not even sure that I could spell sales manager, but I succeeded. In 1968, at age 33, I had an opportunity to become an investor with George in a dealership in Silver Springs, Maryland called Sport Chevrolet. I had no further buy-out opportunity because the dealer had a son, Robert, who was coming along in school, and I knew that if the son ever wanted to be in the business he would be given the chance. When I came to Florida in 1974, Robert worked with me for three years before returning to Sport Chevrolet in Maryland as general manager and is now the dealer operator.
Did you ever dream, when you were driving a parts truck, that you would be where you are now?
I certainly did not. I did not have a college education and had no money. At my first sales meeting, at age 23, I told the sales people that they knew infinitely more than I did, but I told them "nobody here is going to out work me. I will be here when you get here and I will be here when you leave." That effort encouraged George Fogarty to give me a chance at additional management opportunities.
George reinvested in the business with a number of dealer partners. He played by the then existing GM policies that required the operating partner to have 25% equity going in and a five-year buyout. That made sense when dealerships could be bought with $200,000. Now the policies have changed and someone moved the decimal point on the required investment. George claimed to have put 22 men in business on a buy-in, buy-out basis during his career. I knew many of these men and I thought if they could do it, I could, too. The next step was natural evolution. From 1974-1979 I brought out George's interest in Don Mealey Chevrolet. I wanted to continue to reinvest in the business and once again, with GM's old rules, you could not have two GM stores in the same market. If you wanted to invest in Chevrolet, for example, you had to go out of town. I eventually ended up having Chevrolet franchises in Maryland, New York, Connecticut, North Carolina, and other places. In the mid 80's everything started to change. In 1997, when we actually made the deal with Republic, we had 14 shareholders. I had a lot of partners in this deal. They realized a few bucks in the process and so did I.
Without these opportunities, how is the industry going to attract the people that it has to get it to this point?
I think we are going to attract a new and different kind of professional manager. One who finds satisfaction in being a general manager of successful stores, and is well paid in terms of salary, bonus, and options. The opportunities that I had are still out there but they are going to be a lot harder to find. In 1974, my investment was $125,000 for a large Chevrolet metro store. Today, that will not even get you to first base.
So, that type of opportunity has passed?
I think so. I think our business, after a hundred years, is truly going through some fundamental change. If we were to look ahead to 2004 or so, I think that the business will have changed dramatically. Perhaps it will be similar to the United Kingdom where about half of the dealerships are publicly owned and half are privately owned.
Don, stepping back a bit, had you not sold cars yourself up to the point you became sales manager?
No, I had not sold. I went through basic training for about six months before I became an assistant sales manager. George Fogarty asked that I head up an outside sales force. There were three of us on the team. One salesperson came off the floor and I hired one. We called on businesses and did whatever we could do to make a sale. We probably collectively sold fifteen cars a month, but it was a learning experience. After six months of this, I was made assistant used car manager.
What was your sales management philosophy?
In candor, if there was a philosophy, it developed later. In the beginning my goal was to help my team do what they did best so we could all make a decent living. Later on the philosophy developed was, and still is, to find really good people who want to work hard and who have personal integrity. I have heard the word "process" so much that it makes me want to throw up. If you put the right process with the right people it will work. If you put the right process with the wrong people, you have no chance. My focus was to try and find people who were willing to take ownership, be responsible and be accountable. As a manager, I am not a dictator and sometimes I think the word "motivation" is over used. What I have learned over the years is that the strongest motivation in the world comes from within and is a belief in something. If you can get someone who believes in what they are doing, the chance for success is great.
Don, how did you become an AutoNation dealer?
The decision to join AutoNation was the result of a long period of deliberation regarding the future of our company, as well as the future of the retail car business. As far back as 1985 I became interested in the possibility of public investment in the retail car business. I was a member of the first NCM multiple dealer management group, which included nine other dealers with dealerships across the USA. At a meeting in Chicago someone suggested that our group, which included about 100 dealerships, would be a great entity to "take public." I knew nothing about public ownership but I learned a great deal over the next year or so. Our group visited with a number of Wall Street Investment firms. They were enthusiastic about the prospect of pulling together a group such as ours but many questions had to be resolved with the dealer partners and the manufacturers. After a year or so of investigation, I concluded that public ownership was likely but probably not for our group at that time.
In 1996, we were a company with 14 dealerships in Orlando and Tallahassee doing about 400 million dollars in annual sales. In early 1997, we made a decision to do a public offering as First Team Automotive Corp. We grew the company with two more acquisitions in Bradenton and Panama City, Florida. Our prospectus showed sales of about 500 million. After preparing to move ahead with the offering in July and once again in October, Wall Street's enthusiasm for new retail automotive IPO's seemed pretty weak. I decided to terminate the effort and seek other alternatives. I was aware of the growth and concept of Republic Industries and decided to see if a merger would make sense. On December 18, 1997, we signed an agreement, including a three-year employment contract, which led to a closing on April 1, 1998.
What is the best thing about being an AutoNation dealer?
I believe in the concept of consolidating retail car dealerships under a single brand. Implementing the strategy has been and will continue to be difficult but that does not mean that it's a bad idea or that it won't happen. AutoNation is by far the largest retail dealership organization in the USA and perhaps the world. Other publicly traded companies are consolidating dealerships but to date I see no other company attempting to create a retail brand, a brand that stands for something positive and means added value to a customer. The brand will not replace the manufacturers i.e. Ford, Chevrolet, or Toyota. It will simply enhance it on a local, regional, and eventually, national basis. It is not a lot different than before. In other words, if Don Mealey was, or is, viewed in a positive light as a local "brand" in Central Florida, that "brand" is on the building and signs along with the manufacturers. One potentially enhances the other. AutoNation will become an identity for a way of doing business.
I'm also excited about the potential for e-commerce under the AutoNation banner. Unlike referral services, we can deliver virtually every product and manage the process from beginning to end. What is promised at every point of contact can and will be delivered by one of the dealerships under the AutoNation brand. Internet transactions are on the rise. We have dealerships currently doing 15% of total sales as a result of Internet contacts. It's another channel for business and is one that appeals to a growing number of customers.
What is the most challenging part of being an AutoNation dealer?
I don't have the last call on decisions anymore. God knows I've made thousands of decisions and probably 49% of those decisions were wrong. I go back again to Mr. Fogarty who said, "Don't hesitate to make decisions. If you make enough of them and you are 51% right, you are going to be alright." Whether it is appraising a used car or hiring an employee, you have to make a decision. I've always felt that if you make a bad one, you need to recognize it and quickly make another decision. Now I have to go through channels. We are a large publicly traded company and are accountable to shareholders and what we don't need is 400 different gunslingers out there. I am aware of the need to have a coordinated effort. I am not saying it is restrictive. We have a lot of latitude to run the business and make decisions. I have to seek approval for capital expenditures and things like that. I am 64 years old and am not going to be doing this forever, but I still enjoy it.
Why will AutoNation ultimately succeed?
It will be successful because the focus is to provide a sales and service experience that meets or exceeds today's consumer expectations. The interesting thing about expectations is that they never go down, they only go up. There is no doubt that within the last three years the company has brought together some of the best car dealerships and best talent in the country. I am proud to be on the same side as Mike Maroone, Steve Moore, and many others. Working with men that I have respected all through my career had a lot to do with my decision in joining this company. I remember going to my first meeting as a member of Republic and AutoNation. There was such enthusiasm and there was an electricity in the room that I had not felt in a long, long time. Will there be some fallout? Sure. But clearly we have some fantastic people from one end of the country to the other. Also, if there is one thing for certain that you need in this business to compete in good times and bad, it is resources, and we sure have them. This is a company with the cleanest balance sheet you have ever seen, despite the current share value malaise. We have access to billions in capital. If there is any turn in the economy we are not going to skip a beat. We have bought great dealerships in great locations. Phoenix, Southern California, Orlando, and Tampa. Even if some of the management does move on and is replaced by a new group of management, that is fine. We have a proposition to the customer that will make sense to them. There are no second thoughts about my decision to do what we have done.
If AutoNation doesn't succeed, what do you think that reason may be?
I guess I would have to ask you what you mean by failing. If you are serving the customer well, growing significantly, realizing profits two times industry average, and the share price goes down, is that a failure? We are providing a customer experience, we are gaining market share, and we are growing the company. For whatever reason, if the share value doesn't move, is that a failure? You would think that share value would follow these things and be rewarded in the market place. Right now, it is not. We are trading at a multiple that is ridiculously low. If failure means that we do not achieve the customer satisfaction goals, we do not gain market share, and do not make money, then in my mind that is failure.
What's the future of the car business?
I am going to worry about the overall future of the car business when I hear a 16-year-old say "I can't wait to ride the bus." There is still that freedom of being able to get in a car and go. The vehicle as a means of personal freedom is always going to be there. How it gets sold and distributed is the huge question. A good independent franchised car dealer is the most resourceful human being on the planet, because no one has been thrown more curves in the last two decades. Whether it is regulation, factories continuing to try and push costs to the retailer, consumer incentive, or whatever, car dealers have been extremely adept and resourceful. It is a high profile business and communities always go to dealers first when they need money or support. It is hard to understand how you can be critical of the hand that helps support you. I am no longer an independent franchised car dealer but I have been one as employee or manager all of my adult life. I have been an investment partner the last 31 years and have had to be very resourceful to survive.
We're enjoying great economic prosperity and the new car business has never been better. The industry's on a roll. Will it last forever? Not likely. When once again we encounter economic downturn we'll separate the winners from the losers. Once again, I don't know for sure what the future looks like for the retail car business, but I'm convinced that it does not look like the past.
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