ANN ARBOR, MI —
Every other week, aftermarketNews.com offers an interview with a high-profile individual in the automotive aftermarket. We give executives free rein to express their views on anything from the state of their corporations to recent legislative news to future trends in their niche markets. Here you see what matters to the newsmakers themselves.
Our latest edition of “Executive Interview” features John Washbish, president of customer relationship management for the Dana Automotive Aftermarket Group (AAG). On Friday it was officially announced that New York-based investment firm Cypress Group agreed to buy Dana AAG for $1.1 billion. We had the opportunity to talk to Washbish just hours after the announcement was made. Join us as he shares some of the preliminary details on the acquisition and talks about the future of the Automotive Aftermarket Group.
Q: Will the Dana brands remain together under the Automotive Aftermarket Group umbrella, or is some other structure planned?
A: No radical structural changes are planned. Cypress Group’s approach always has been to acquire sound, successful businesses with good management teams. They like the Automotive Aftermarket Group much as it is today. The meetings we have had indicate that we will continue with today’s people, facilities, and management team in tact. And very importantly, we’ll go forward with the same set of strong brands we’ve featured right along. For under-vehicle, this will include not only all of the brands our North American customers are most familiar with…Raybestos, Spicer, McQuay Norris, Aimco, etc., but also our global brands, such as Nakata for shocks and suspension components. Of course, Wix and Beck/Arnley also will continue to be mainstays in our brand portfolio.
Q: What will happen to the AAG’s organizational concept that you call “Customer Relationship Management (CRM)?”
A: It’s gratifying that Cypress has taken such a close look at our company and feels the same way we do about our CRM structure. That is, the best way to run a successful business is from the customer’s perspective, and CRM keeps our organization focused on the customer’s needs. I think the CRM concept has proven itself particularly during this divestiture period, as our people continued to provide exemplary customer service under pretty tough conditions. So the intention is to stay structured substantially the way we are today, but to redefine some responsibilities and add additional accountability into some areas of the organization.
And if you’re asking about potential changes in our organization, the most substantial change will be our transition to a stand-alone company, with our own corporate headquarters and corporate identity. The Cypress Group has no existing aftermarket business to merge us with, so we’ll be a separate entity. That’s one of the things that makes this deal different and better than so many we’ve seen in the aftermarket over the past few years. We weren’t acquired to be part of some grand consolidation scheme or synergy plan, or in the hope that one plus one would equal two. These folks just saw a good business and bought it.
Q: Has a new name been assigned to the Group?
A: We know that the Cypress team has some ideas about what we’ll call this new stand-alone company, but they haven’t settled on a name as far as I know. I do know that the soul of the AAG doesn’t depend on a name for its strength. From that standpoint, I guess any moniker will do.
Q: You mentioned that the current executive structure would remain intact. How will the existing AAG sales force be structured under the new owner?
A: There certainly won’t be any immediate changes in the way we take our program to the streets. That’s not to say we can’t make improvements in our personal selling and service efforts, but when it comes to our field structure, changes will be more in an evolutionary vein. Of course, we all must understand that the world around us is changing pretty rapidly, and our rate and direction on philosophical and technological issues will continue to change apace. Above all, we must keep our field sales force focused on the revenue wellhead…the professional service technicians who are our “consumers.”
Q: Can you give us your view of the upside and downside of the process you’ve just come through…of being sold and bought in this manner?
A: Let me just say I know how he felt when Groucho Marx said, “I’ve had a wonderful time, but this hasn’t been it.” Certainly the biggest downside was just the enormous amount of time spent by our entire management team on matters that, in the short term, didn’t help our customers at all. Of course, in the long term, we’re sure that investment of time will turn out to be of tremendous benefit to them. The biggest potential downside was that we’d lose sight of our mission…serving the customer. But as I said earlier, thanks largely to our CRM approach, that didn’t happen. As just one example, many companies in our situation have curtailed introduction of new parts. The AAG, as an enterprise, has introduced more new part numbers and coverage this year than in any similar time period in its history.
Without a doubt, the biggest upside of this experience has been what we’ve learned about ourselves and our customers. Our customers have been supportive beyond what you’d expected, and we believe our people have responded in kind. During a time of uncertainty, our people remained calm, productive, inventive and focused. We’ve continued to win customer awards and accolades, reflecting the attitude and determination of our crew. What we’ve learned about this strong but humble group has shown us where we can take this thing in the future.
That upside had to do with the process itself. A couple of others stem from the result. First, as our own stand-alone entity, operating under The Cypress Group, we’ll have opportunities we’ve not had in recent years. Capital requests – whether for facilities, machinery, tooling, software or hardware – will be considered on their own merit. They won’t compete with other “core” projects as we’ve had to in the past. No disrespect to our current owners, but as they’ve made clear, they consider their core business to be OE and OE only. Don’t get me wrong…the AAG is involved in the OE side of our business; but we certainly want to have the opportunity to expand our range and our core products based on what we think is right. That could be OE products as well as aftermarket.
I like the fact that we will be an unencumbered corporation, with the ability to do what we need to do, as quickly as we can. It will make us more responsive to the marketplace. That’s not to suggest that we haven’t been today, but when you are involved with a large corporation and you are just a portion of it, you have to ask permission for everything that you want to do. And, if you are not the major focus of the corporation, sometimes it takes too long for that permission to be granted or denied. I think in our new environment we will be able to move very rapidly and be more nimble.
That’s my view on the downside and upside; but there’s also a different side, if I may. Our employees who have been associated with the corporation for years really are entering into the unknown…quite a different side of things for them. Cypress is a private equity management firm, and as with most private companies, it’s hard to get reams of information about them. On the other hand, everything that Dana does, because it is a publicly traded company, is fairly open. But with what I know of The Cypress Group, I don’t see this as a downside, just a different side.
That perspective is based on my knowledge of the Group’s board, with whom I’ve met, and its managing director, Michael Finley, with whom we’ve been working. These are top-drawer individuals. For example, most of your readers know, or know of Mr. Larry McCurdy, former CEO of Echlin Corporation, and a man who knows the aftermarket as well as anyone alive. Well, Mr. McCurdy is a very close adviser to The Cypress Group, and I’m sure he’s a major reason for their good, solid understanding of both sides of the automotive market. These folks are comfortable with the requirements of these types of businesses. They understand the nature of investments that have to be made to participate in the aftermarket. They have no false notions or expectations, so there won’t be any surprises on either side. They expect us to deliver, and we’ll deliver…hopefully more than they expect.
Q: How will this acquisition affect current AAG customers?
A: The effect on customers will be all positive. I’ve been making a number of customer contacts today and so has Terry McCormack, our president. The customer response has been incredibly positive. But then, we expected the customers to stay positive when we told them that the people they’ve done business with for years will continue to be the management team; that the products they’ve bought for years will continue to be supplied by the same plants; and that the brands they’ve bought for years will continue to be the brands we offer.
But if you’ll consider the things I said earlier about the upside of this whole process, it’s clear that our customers will benefit from this change in ownership, as will the new owners and the old owners. Of course, on the customer’s part, as long as we continue to deliver consistent value, they probably would be happy with whomever the parents are.
Q: How has the industry – and customers in particular – reacted to the announcement?
A: Very positively. What we’re hearing most is that they are glad the group isn’t splitting up and going in three or four different directions. They are glad that we are remaining whole, with our brake and chassis product group, our filtration group, and our import parts group. They are very positive about that.
Customers are equally positive that the management team they already know will continue to manage the business using the CRM approach. And we all know, as alliances get established on both sides of the ball…the more you can do with those same people…the better the relationship and the rewards become. I think they are most encouraged to hear that the Automotive Aftermarket Group and its management structure will continue, with the only changes being improvements.
Q: Dana AAG was scheduled to exhibit at AAPEX this year. How are things like show participation changing as a result of the announcement?
A: We’ve already secured our booth space. We’ve been working on booth design, but obviously in a constrained manner since we weren’t certain how the divestiture process would turn out. Now we know that we will display under the name of the new company, but most importantly we will focus at the show on our key brands: Raybestos, Spicer, Wix, Beck-Arnley, McQuay Norris, Aimco, and Nakata, just to mention a few. The corporate entity and its corporate mark are really not that important in the eyes of the professional installer, which is our target audience. They’ve associated our quality with our brand and that is what we will continue to focus on.
Jerry McCabe, who is the marketing vice president for customer relationship management, will now shepherd all of the marketing and public relations activities for the firm. He will be in charge of everything that we do at the show. Something people will note going forward will be a more cohesive and consistent customer interface in all activities, including trade shows.
We also are completing our AWDA conference registration papers. We will be registered for AWDA under the three key entities: Beck-Arnley, Wix Filtration and Raybestos/Spicer Brake and Chassis. We will all be together as one family, but we’ll be ever careful to maintain the personality and autonomy of our brands.
Q: What are the Group’s plans for the future?
A: Right now, the hopes and intentions are to close this deal in the third quarter of 2004, or 45 to 90 days. I would expect late September. In the meantime, we continue to operate as Dana employees and we continue to do what we’ve always done, which is what’s best for our customers. We and The Cypress Group know that’s the way to maximize our success.
For things like the AAPEX Show, AWDA and AAIA Committee Meetings, we’ve got game plans in place. Rest assured, we will continue to represent our product lines with the verve and intensity we’ve always shown. The new owners have endorsed our “style.”
Q: How involved will the new owners be in the overall management and day-to-day operations of the AAG organization?
A: The Cypress Group typically stays involved with their companies, but not at the operating level or on a daily basis. As we start a new corporation they will put in place a board of directors and a chairman. As those selections are made we’ll know more about the level of involvement the Group will have. My view, based on their historical modus operandi, is that the day-to-day operating business would continue to be managed by Terry McCormack and me.
Q: No acquisition is without some hiccups. What challenges do you foresee as a result of the acquisition?
A: We’ll have the challenge of setting up headquarters, treasury, benefits…just generally getting the new lay of the land, that sort of thing. Fortunately, none of this will affect our operating units or our CRM focus. Our real challenge will be the same as it has been, the normal challenges we all experience in the aftermarket. We continue to operate in a very competitive environment. We continue, as an industry, to deal with difficulties such as proliferation, which has been greatly intensified by the professional installer’s desire to have parts identical to OE in form, fit, and function. That’s very difficult to do.
The really good news is, in spite of these industry-wide challenges, we don’t have to worry about challenges as far as our new ownership is concerned. I think it is going to be a fabulous relationship, one that will present more opportunities than challenges.
As I said earlier, this deal contains no major change in the form of expected synergies, consolidations, etc. We’ll be able to keep our eye on the ball, without any of the distractions we’ve had over the past few years. This will mean more time spent with customers…doing what we like best.
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