'Skin in the game' philosophy guides Kuni
After acquiring the five-dealership Pioneer Centres group in December, Kuni Automotive foresees its biggest year ever in 2012.
Revenues should jump from around $600 million in 2011 to more than $800 million, CEO Greg Goodwin said.
"The way business is looking right now, I'm convinced that's very conservative," he said.
With a 10 percent stake, Goodwin is one of seven owners of Kuni, a 14-dealership group based in Vancouver, Wash.
The largest share is owned by the Wayne D. Kuni and Joan E. Kuni Foundation, created by group founder Wayne Kuni before he died in 2006. The foundation funds cancer research and projects to enhance the lives of adults with developmental disabilities. One of Kuni's sons, Michael, is developmentally disabled and works at Kuni BMW in Beaverton, Ore.
Another son and Kuni's ex-wife, Joan Kuni, are the company's second- and third-largest shareholders. Joan Kuni's shares will go to the foundation upon her death. All family and foundation shares are nonvoting.
Kuni Automotive is No. 104 on the Automotive News list of the top 125 U.S. dealership groups, with retail sales of 6,683 new vehicles in 2011.
Goodwin, who got his start in the industry in a dealership finance and insurance department in 1978, met Wayne Kuni in 1990. He joined Kuni Automotive later that year and led Kuni's search for a new dealership. Goodwin ran that store, Kuni Lexus of Littleton in Colorado, for eight years before becoming CEO in 1999.
He spoke with Staff Reporter Amy Wilson.
Q: What is your outlook for 2012?
A: I'm optimistic. [It's] a combination of better news on the employment front, pent-up demand and a lot of folks becoming more confident. There are positive signs about availability of credit and interest rates. There are a lot of things working in our favor. The industry is in better balance in terms of supply and demand than I've ever seen. That won't last, but it's a good thing for now.
Why won't it last?
I look at it as sort of like growing corn. When the price of corn goes up, everybody who's growing something else starts planting corn. I think there will be that temptation to push the envelope and try to take share. However, there are supply constraints that will hopefully keep the industry in better balance.
What is your expectation for 2012 U.S. new-vehicle sales?
Somewhere in the 14 million to 14.2 million range seems attainable.
You have a fair amount of exposure to Japanese brands. How did the earthquake and tsunami affect you in 2011?
It had a significant effect. We had availability issues with Honda and Infiniti and Lexus all year.
Did you develop any best practices during that period of inventory challenges that can help you long term?
We've really restructured our company in the last couple of years. Two years ago, Joe Herman came on board [as COO]. Joe is a very seasoned executive. He's really led the effort to identify and partner with best-in-class technology vendors.
We've seen very significant increases in the last 18 months in our used-car sales as a result of technology. Margins are not what they used to be, but we're really focused on the velocity theory where we price cars to market. That has led to a significant change in our used-car volume and has a beneficial effect throughout the company in our service and parts and body shop operations.
So when inventory for new vehicles was light, we were very confident about our ability to sustain our dealerships and our profitability by focusing on other aspects of the business.
Did the tsunami and lack of inventory speed up that process for you?
That absolutely was the case. A lot of times when you introduce a new way of doing things, it's very hard to get buy-in because things are going relatively well. It's hard to develop new habits.
But when things aren't working so well because the environment has changed, the old ways don't work anymore. One of the messages I carried to our leadership teams was: We don't want to be opportunistic with our new-vehicle guests and say you have to pay more because we can't replace this car.
We've been able to point to really successful efforts through the adoption of technology and new processes, and it has led to broad acceptance and a lot of teamwork in a company that's really geographically challenged.
How are your Japanese-brand dealerships doing on inventory now?
Certainly not back to normal, but directionally it's positive. All our brands -- Lexus and Honda and Infiniti -- they all have great product cadence this year and next. So I'm confident in all three. What they experienced last year with respect to lost share, I believe they'll regain this year.
When will inventory be back to normal?
You have an unusual ownership structure. How did it come about?
Prior to Wayne's death, he made the decision to retain professional management and have a succession occur to that management rather than within the family. His views [were] this was the best direction for everyone, including his family. Here we are six years later: Everyone's getting along, the company is doing well, it's financially strong, and we're focused on the long term.
It's an incredible privilege to be in my position and have those positive relationships with all the stakeholders and this significant charitable impact the foundation has already had and to think how much the foundation is going to be able to do over time.
Is Wayne's philosophy of having top management buy in to the company and have an ownership stake still going strong?
Yes. All of us have invested over time. It works the same way it works in the dealership. The general managers have an equity piece. They're allowed to acquire more over time until they get to 20 percent. Wayne's philosophy was all about having skin in the game.
How does that vision go forward beyond the point when you step down?
I'm in my 60s. I think about it a lot. I talk to my board about it. I'm fortunate to be blessed with good health and love what I'm doing. We have a plan. We have several people I believe would be fully qualified. In the next few years, we need to narrow it down. The company will continue beyond me. None of my children are involved. It isn't about me. It's about the Kuni legacy continuing.
The recent acquisition sounds like a pretty big bite for the company.
It was a great fit. All luxury brands and all brands we currently didn't represent. It was an opportunity to establish a foothold in a new market we feel very positive about in San Diego and an opportunity to acquire a company we felt [shared] a number of the characteristics with respect to culture.
Are you looking for more growth opportunities?
This will keep us busy for a while. Some of the things we're trying to do will work well long term with a little more scale, so we are going to continue to look.
Primarily on the luxury side?
Primarily. But we have Volkswagen and Honda and Buick, GMC, Cadillac and Chevrolet. Whatever the opportunity that makes sense. West of the Mississippi is a preference.
Are you looking at the domestic brands differently these days, and could that be a possible focus of growth?
Yes. All three offer opportunity. Alan Mulally has done a wonderful job at Ford, and General Motors and Chrysler have new life. That's a great story, so we would be open to an acquisition for any of those three manufacturers.
You can reach Amy Wilson at firstname.lastname@example.org.