Sandy Schwartz

THE formation of Cox Automotive Australia is offering car dealers equity in many of the retailing systems and services they purchase week-in, week out.

GoAutoNews Premium publisher, John Mellor, talks to Mr Schwartz in this exclusive interview.

How is this joint enterprise going to come together?

Let me paint a picture for you. I am a dreamer. I am a strategist and someone who believes in the big picture.

The car has to be made somewhere and we obviously have nothing to do with that.

But after that, the car has to be advertised and sold. That is something we can help dealers do.

Once it is sold it needs to be financed. Now we are not going to ever do direct financing, we are never going to be a direct lender but we do have wholesale financing for used cars. It’s not in Australia and we have not made a decision to bring that here but we do want to help dealers with their floorplan.

And then, when someone owns that car they need to use dealer fixed operations to service and repair that car and be reminded when that has to be done, and the dealer needs some way to keep track of that through a dealer management system (DMS) or customer relationship management (CRM) system.

Cox is really cradle to grave.. What we would love to do is duplicate that here at Cox Automotive Australia

In the US, that car has a life cycle of four or five times on average so when you think about that whole thing and how we (Cox) paint the picture is really cradle to grave (across that whole process).

So what we would love to do is duplicate that here at Cox Automotive Australia. Now that will take a lot of time and it will take a meeting of the minds of all those involved.

So there has to be a meeting of the minds and there has to be a resolve that this is what you want to do. What I love is that we really do have a vision. And once we take that vision then we have to practically say: what is the mission here and how are we going to drive this and what are we willing to do and sacrifice in the meantime?

What I love about this opportunity, unlike some others, we have a lot of willing participation of dealers.

So there are going to be lot of tough decisions and most importantly we need to work out our priorities. You cannot do everything. What are the most important solutions dealers will want and will they help them to sell cars and be more profitable. And that is how we will prioritise what we are going to do.

Cox is a patient investor

The one thing that I will tell you is that we are a family-owned company. We are very humble people. We have been in business for 118 years. Cox Automotive is also now really coming full circle as a company and we don’t take a short view on things. So we look at things, three years out, five years 10 years.

I am not going to tell you we are going to put tons of money in and invest tomorrow but if it makes sense for us to invest for something that is long-term it does not have to pay back in a year or two for us.

Dealers must have a choice to come and go as they please

Part of the philosophy is to get more dealers in and get them to use more of our solutions. So absolutely I would love (shareholder) dealers to use more of our solutions.

But as I tell our staff every day: Dealers can fire us any day they like. They can hire us or fire us every day. What is really important is that we work for them.

Dealer flexibility and “open Architecture” a key

We really believe in open architecture.

We really believe that in today’s age every solution should fit together. With open architecture any dealer should be able to pick what they want to use. Nothing should be forced on them.

But, in the US, that is not always the case. In the US, with the DMS systems the way they are built and the way things go together they make it difficult for dealers to (use another system).

Our DMS are going to be total open architecture for people to use what they want to use and have it fit together the way they want it to fit together.

If someone wants to plug in a service from another supplier then our architecture should be able to allow them to do that. There should be no “barrier to exit” that exists in many systems on sale today

Every dealer is not created equally.

Our philosophy is that if someone wants to plug in a service from another supplier then our architecture should be able to allow them to do that and there should be no “barrier to exit” that exists in many systems on sale today. That is exactly our philosophy.

Again you can create these barriers if you want to and make it difficult (for your customers) to exit but you just wind up with unhappy clients when you do that. That is not the way we operate.

We are very dealer-centric and we want dealers to know they can have the best of all solutions.

A dealer has to be doing well if they are going to stay with you and we are motivated to help them do well

And, I have to be honest with you, not all of our solutions right now work exactly the way we want them to in the States and we are working to make them better. We are also working on performance management. That is really important to us. I mean a dealer has to be doing well if they are going to stay with you and we are motivated to help them do well.

Relationship with autotrader.com

No one should think that tomorrow we are going to pick up that (autotrader) product (and put it in Australia) because we are not. But if Lauren (Williams, CEO of CarsGuide) and her team see the opportunity to see some of the things we are doing that they think they can incorporate then autotrader will assist them with it.

If there is any intelligence we can offer them; we have been at this for almost 20 years so we have a lot of experience and anything from marketing to research then we are open to help in any way we can.

We have a lot of good people (they can draw on) – although we are not going transfer them over, we are not going to do that.

Products from the US that are potentially transportable to Australia

At this point there are none that we are going to bring tomorrow because we have to research them and make sure they will work (in this market).

But one that makes real sense to me is either Kelley Blue Book or something like that. I know there are valuation engines in Australia but we think we have a really good one and it is one that we will look at very closely.

The second one, which we consider a jewel in our crown, is vAuto.

This is a provisioning and used car stocking tool for dealers. It basically tells dealers: This is what you should buy a car for; this is what is needed in your market area; this is how much you should put into it; this is how long you should expect to keep it; this is what you should sell it for and this will be the profit.

In the US, the new car margins have become slimmer and slimmer so anything that can help dealers with pre-owned cars (has appeal). vAuto also has a new car indicator called Conquest which tells dealers the type of cars they could probably sell faster.

Another is Xtime which is a fixed ops solution which already operates here (in a small way).  

Fixed operations is one of the big profit areas for dealers and in the US probably 45 per cent of the profit is made in fixed operations. So we think Xtime is a great candidate for us to step it up and do more. Of course we will have to look at it and see how it all works (in the Australian environment).

Incadea is a dealer management system (DMS) that we think is a really good fit. That is part of Dealertrack so we picked up a DMS as part of that purchase. We have about 3000 dealers (using it) in the US and globally … it is in 90 countries now.

So we think those would be the prime candidates off the bat that will be transportable.

Would these products be brought into Cox Automotive Australia?

They would not be part of the joint venture which we have formed. They could not be thrown in as part of the joint venture because it would change the valuation. But we do believe there is a way where we can adopt some sort of formula just like we do in other countries. We would clearly figure out some way to ensure everyone gets value out of them.

Is the focus going to be on Carsales or on CarsGuide becoming a better business?

I think CarsGuide becoming a better business and CarsGuide having an extension of a lot more products (to help it do that).

So we want CarsGuide to get better to put pressure in the market but really we want it to offer a comprehensive suite of products to all dealers.

There was a tone in the press statements that Carsales has become less of a servant of dealers and more of a competitor with dealers. Was that something that was in your minds as you made this deal?

Carsales is a great company and they have done a lot of great things. We are the number one in the US and I know what it’s like at the top of the hill; everyone is trying to knock you off.

This is how I feel about it. I am always concerned about my competition. I am a very competitive guy. I am less concerned about what they are doing and more concerned about what we can do and how we do it.

If we do what we need to do right, then we will have a very viable business.

I think Lauren (Williams) and her team have done an amazing job in less than five years. The business has been profitable for a year.

I cannot tell you if that means we are going to be number one; that is not really the goal. The goal is how we serve dealers the best way we can and, in fairness, I think Lauren and her team have done an amazing job in less than five years. The business has been profitable for a year.

But the key to getting dealers to be loyal to you is to give them more that they can use rather than just one piece. Right now CarsGuide had only one piece and really Manheim only had one piece until we bought Dealer Solutions.

So I think this comprehensive suite of products will be very compelling once they see what we roll out and what we can do.

Does it matter if you remain number two?

Does it matter? It always matters. I think a strong number two can be a very viable position but I always strive to be number one. We all do.

The answer is that being number one is better. But this Australian market is a really good market. I think that, if the dealers in this market have choices, they will always like that better than if they only have one choice.

Competition is good for everybody.

If the dealers in this market have choices, they will always like that better than if they only have one choice

Disclosure: Cox Automotive has a minority interest in GoAutoMedia Pty Ltd.

By John Mellor