Q&A: Head of private importer Emil Frey describes the group's strategy

Stuttgart. The Emil-Frey-Group has been active on the German market for more than 20 years and represents 14 brands in Germany. Gerhard Schuermann speaks about his philosophy, new goals and strategies.

Q: Mr. Schuermann, last year the Emil-Frey-Group's sales fell by 3.9 percent to approximately 102,000 units. What is your forecast for 2004?

A: I believe that we will be selling about 105,000 units - the same as in 2001.

Q: That does not sound particularly optimistic. When will business start to increase again?

A: It is not the Emil-Frey-Group's style to make any vociferous promises which we can't keep. It is currently a slack period for the German automobile market. I don't think that the total of new registrations will be more than 3.2 million - and probably 3.3 million in 2004. However, I think that there will be a sales increase for the Emil-Frey-Group in 2004, which will be largely due to our import brands Subaru and Hyundai.

Q: How large would you expect the increase to be?

A: We are currently going through a budgeting phase, which is why I don't want to give you too many details. Nevertheless, the import brands' growth alone will make up 10 percent to 20 percent of our success.

Q: In 2002 sales at your four Fiat dealerships dropped by 26.5 percent in comparison to the previous year's results, and sales at your 24 Ford locations dropped by 19.5 percent. Is an improvement in sight?

A: In 2003 I expect the Ford group's sales to drop by 5 percent to 6 percent. From 2004 I expect them to go up slightly again. It will probably be similar for Fiat.

Q: Don't you think that it is time to say farewell to such loss-making brands?

A: Not at all. Had I parted with all the brands that had some difficult two or three years I would not be selling 14 different brands today. The Emil-Frey-Group believes in long-term relationships with partners and customers. That is because the auto business works - as I often say - in biblical cycles. No matter at which brand you look, there will always be fluctuation and economic cycles: every seven years business will go up again - or it will go in the other direction. We are able to balance those cycles due to our wide range. The Ford Group, and particularly the Ford brand, as well as Fiat, Lancia and Alfa Romeo have highly attractive new models. An economic upswing is now only a question of months.

Q: If the business with Subaru and Hyundai is going so well that it makes up for the current losses at Ford and Fiat you will probably increase your share.

A: No, we have owned 75 percent of Hyundai shares for the last 13 years and 55 percent of Subaru for more than 20 years. We are not planning to change anything. We welcome the fact that the manufacturers are directly involved in our import business. That way they can get an idea of our business approach in Germany.

Q: Are you considering taking on new brands - or maybe even opening new locations?

A: There won't be any new locations before the end of 2004. With 48 showrooms in 30 German cities we already have a good structure. We are currently working on a condensing strategy: we are checking at every location if it makes sense economically to take one or the other brand, which is already part of our general sales program, into the local sales program. We will for example increase the number of Mazda representatives from two to four: we have already completed the negotiations with the manufacturers for our headquarters in Stuttgart and also the location in Dresden. We will also expand our capacities in South Germany for our six Toyota and Lexus locations, for which I expect a sales increase of up to 10 percent in 2004.

Q: Are you also planning to expand into other countries?

A: No. Emil Frey already has locations in Germany, Switzerland, France, the Czech Republic, Hungary and Poland. There are sufficient opportunities for profitable growth.

Q: Your turnover will decrease nonetheless. After all you sold the leasing company LHS to SuedLeasing and Dekra.

A: That is right. In 2002 we had a turnover of 1.84 billion euros, for 2003 I only expect a turnover of between 1.5 billion euros and 1.6 billion euros. It was the right thing to do all the same. In order to be successful in the leasing business on a long-term basis one needs to have at least a Europe wide network. We also did not want to continue to take long-term risks such as refinancing. However, we believe that there is great potential for growth in the leasing business with private customers, which is why we did not sell FFS Private Leasing.

Q: Are you planning to quit any other business sectors - such as for example your co-operation with the Swiss Karosseriewerk für Nutzfahrzeuge (bodywork plant for utility vehicles) or the selling of industrial and boat engines?

A: No, they are very profitable sectors which have been part of our core business for decades.

Q: Beside the Kroymans Group you are one of the very few private importers left in Europe. Are you worried that the new block exemption will bring international competitors to Germany?

A: No, I don't think that that will happen. International businesses whose aim it is to reach high margins in just a short period of time will not chose to enter such a saturated and highly competitive market.

Q: Which changes will there be for the automotive trade?

A: I expect that slowly large dealership chains will be formed. However, there are natural barriers. The automotive trade is very complex. "Mega dealers" which are similar to supermarkets, neither succeeded in the USA nor will they succeed in Germany or Europe.

Q: What do you think are the chances for internet sales?

A: So far we have not had any indication that many cars are being sold over the internet. The internet brings with it a price transparency, which we don't fear. Only those who know and who can handle the logistics involved will be successful on the internet. We are part of that group. That is why we could start an internet business anytime, if we needed to.

Tags: Retail Sales

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