The chart that Autobytel.com CEO Mark Lorimer sketches shows a box representing Autobytel Europe, linked to a series of smaller boxes. The small boxes represent Autobytel's licensees in European nations - the United Kingdom, Sweden, the Netherlands and Spain, with Germany and France coming this year.
In Europe, as in the United States, Autobytel is an online auto shopping service that refers customers to dealers, who pay a subscription fee for the referrals. Autobytel's European operations are close to profitability, Lorimer says. But deregulation threatens them. Autobytel's strategy is based on its ability to do business with franchised dealerships in each market. But what if those franchised dealerships disappear? That might happen in Europe. The European Union is considering proposals to eliminate the block exemption, which allows automakers to organize a network of dealerships.
The exemption expires next year. The European Union may modify or kill the traditional dealership system that constitutes Autobytel Europe's customer base. In theory, any dealership or independent online service could then market any vehicle.
No problem, says Lorimer. 'We have specifically contemplated this,' he says quickly. His pen flies to the chart. He begins drawing arrows from the national units back to Autobytel Europe.
'If you can do business on a pan-European basis, you just roll these groups back into Autobytel Europe.' Consumers could buy cars through a continentwide Web site, rather than individual sites for different countries.
And Lorimer is ready to go further. Because Autobytel sells sales leads, it could help automakers re-establish sales territories - or something like them. 'We could try to restore some sort of harmony in the distribution process if it blows up,' Lorimer says.
It is no surprise that Lorimer has pondered life after the block exemption. Autobytel was founded in the United States in 1995. At the time, the Internet seemed certain to revolutionize retail business - but no one was sure how. Among dot-com entrepreneurs, improvisation is a survival skill.
Independent auto-shopping services such as Autobytel shook up U.S. dealers and automakers. Only one thing was lacking: profits. Autobytel lost $29 million on sales of $67 million last year. Like many once-chic Internet businesses in the United States, it lost investors' confidence. In the past year, Autobytel's stock price plunged to $1.72 per share, down from $10.75. By Lorimer's reckoning, the company has spent $100 million to build its brand. Now it hopes to post a profit by the third quarter of this year.
Analyst Jeetil Patel at Deutsche Bank in San Francisco is skeptical. He predicts a 3-cents-per-share loss in the third quarter. That would be an improvement over the fourth quarter of 2000, which produced a 16-cents-per-share loss. But Autobytel has serious cost cutting to do before it enjoys profits, Patel says.
Still, Autobytel has the cash to finance international expansion, he says. And the European operation could produce profits. 'By licensing the brand, you could see how they would get to profitability,' Patel says. In each country, licensees bear most of the risk, he notes.
Autobytel also runs car-shopping Web sites in Japan, Australia and Canada. But non-U.S. operations are not likely to guarantee profitability if the U.S. business falters. 'I think the key driver of stock prices is profitability in the United States,' Patel says.
Lorimer says the U.S. unit, which has about $82 million in cash, will continue to fund launches in other nations 'because it's so important to the future of the company.'
The company is adapting to different cultures. In English-speaking nations, the stereotype of the fast-talking, intimidating auto dealer persists. So Autobytel tells dealers that it helps make shoppers comfortable, Lorimer says. In Japan, where salespeople may sell only two cars per month, it tells dealers it can improve productivity.
Autobytel's next goal is likely to be Southeast Asia.
'We're probably closer in Southeast Asia, just because it's much easier to get a grip on the distribution system,' he says. In the long term, Lorimer wants to move to markets where the retail structure is not fully formed. The problem is that those same markets have a smaller middle class and fewer Internet hookups per capita. But Lorimer sees an opportunity to avoid the resistance Autobytel encountered from dealers and manufacturers in developed markets.
'What we're hoping in developing markets like China and India is that we can be there as the market develops,' he says. 'So we can avoid some of the problems we've had with people casting us as the villain. We'll be part of how the market develops.'
The prospect is tantalizing. But if Autobytel wants to get to India or China, it must post a profit - and soon - in its home market.
E-mail Managing Editor Dave Guilford at [email protected]