For Texan Red McCombs, the wild ride never stopped

SAN ANTONIO -- After he dropped out of the University of Texas law school in 1950, Billy Joe "Red" McCombs had six weeks to kill before starting a corporate job in Mississippi. He decided to earn a little cash roughnecking in the Texas oil fields.

But a friend suggested a different plan: "He said, "You ought to come down and sell cars with us. Hell, you don't have to work, and they give you a new car to drive. You don't have to live out with those rattlesnakes out on the drilling rig,'" says McCombs, now 83.

The young McCombs, already a wheeler-dealer, didn't need to be told twice. George Jones Ford was in Corpus Christi, Texas, also the home of Charline Hamblin, whom he was courting. The corporate job soon vanished in his rearview mirror. Red McCombs was all in.

So began the epic journey of one of America's legendary car dealers, entrepreneurs and philanthropists.

"I built a business empire working out of an office at a car dealership," says McCombs in his booming John Wayne drawl. The instincts he honed in those swashbuckling early days -- going with his gut feeling, making lightning-quick decisions, trusting his lieutenants and rolling the dice on a hunch even if he risked losing a fortune -- helped him forge a far-reaching network of businesses. That empire would include three pro sports franchises, Clear Channel Communications, cattle ranching, oil exploration, real estate and what was once the nation's sixth-largest dealership group with sales of $1.3 billion in 1997.

McCombs still has his trademark red hair and hulking frame, 6 feet 3 inches and 250 pounds. He's healthy but needs a walker to get around. He downsized the dealership group to six stores in the late 1990s with the rise of the public groups, but now McCombs Enterprises is in acquisition mode again under the leadership of his daughter, Marsha Shields. Together, they have also been investing recently in dealership information technology companies. And he spearheaded the campaign to bring Formula One auto racing back to the United States with the U.S. Grand Prix in Austin next year.

After bowing out of his corporate job and going to Corpus Christi, McCombs quickly became the star salesman at George Jones Ford, selling a car a day. The bright young star caught the eye of the general manager, Austin Hemphill, who became his lifelong mentor and friend.

One day, McCombs was sitting in Hemphill's office. Hemphill had spread out a sales chart on his desk that showed how much money each of the new- and used-car salesmen made.

McCombs stole a glance at the chart, and the numbers jumped at him -- the lowest-paid used-car salesman was making more money than he was as the star of the new-car sales department. McCombs pleaded for a move to the used-car side. Hemphill protested that he needed his young sales star on the new-car side.

But, finally, the boss relented. McCombs soon went into business for himself, opening two profitable used-car lots in Corpus Christi. He credits Hemphill with giving him his big chance, a debt he would repay later.

McCombs needed a loan to buy inventory for his used-car stores so he went to his banker.

"I proposed to finance all my contracts with the bank and let them keep the reserve," he wrote in Big Red, his autobiography, published this year. A finance reserve is a fund set aside to cover anticipated bad loans. "I planned to sell my house and put that money into the deal along with about $7,000 I had saved."

As usual, he was all in. Not for the first time, a banker would express skepticism in the face of a daring McCombs plan. The banker, Eugene Dabney, called the plan silly and insisted no car dealer could operate without a finance reserve.

"I insisted that it could be done because I was going to handle everything myself -- buy, sell, finance and keep the books," McCombs wrote. The plan -- a forerunner of the buy-here, pay-here system -- worked. Buy-here, pay-here dealers sell older, high-mileage cars to customers with marginal credit. The dealers finance the loans without turning them over to outside lenders. McCombs made a pot of money with his two bare-bones stores.

He says now: "I never did have more than three or four employees. A used-car lot is nothing but capital. It's immediately liquid. It's the greatest business in the world.

"You can take any used car and create a story for it that's different than the guy next door. You can't do that with any new car. So I fell in love with used cars and did extremely well with it."

Used cars worked so well that McCombs decided to jump back into the new-car business when the hottest new thing the industry had seen since the end of World War II came along in 1957.

"It was called the Edsel," he says. "And I decided I was going to be the dealer in Corpus Christi."

McCombs did well at first. Working out of his small Corpus Christi dealership, he quickly became the most successful Edsel dealer in Texas, selling more cars than dealers in Dallas, Houston and San Antonio. The car created a tremendous buzz in a nation looking for something new. But the novelty wore off fast, and McCombs showed his instinct for spotting a loser and unloading before disaster struck.

"By the end of the second month, I realized Edsel was not going to make it.

"The car drew more traffic than any car I've ever seen announced anytime anywhere. But people didn't want the car."

Everything was wrong with the Edsel, from the notorious horse-collar grille to the inflated price, he says. McCombs went with his gut. He closed the dealership after just five months.

"Ford Motor Co. came unglued," he says. "Here was their leading dealer in Texas closing."

The company pleaded with him, but to no avail. McCombs moved on, though he was still holding 27 unsold Edsels.

No sooner had he extricated himself from Edsel than McCombs got a call from Austin Hemphill, his old friend and mentor. Hemphill had opened his own Ford store in San Antonio only to be caught sideways in the 1957-58 recession. Hemphill asked McCombs to come up to San Antonio for a talk.

Over a bottle of scotch -- McCombs would down many more of those before giving up drinking for good at age 48 after a near-fatal bout with hepatitis -- Hemphill explained that he was more than $100,000 out of trust and would soon go broke. A dealer goes out of trust when he fails to pay off a floorplan loan immediately after selling a vehicle.

Hemphill offered McCombs a partnership in the dealership if McCombs could pay off Hemphill's bank debt. McCombs had never forgotten how Hemphill had spotted his talent and supported him in Corpus Christi.

"It was more than a father-son relationship," McCombs says. "I literally worshiped the man. He boosted me in every way he could."

McCombs says he took a deep breath: "I thought "God, I just got out of that Edsel thing.' But, number one, I wanted to help him."

So McCombs promised to do what he could and drove back to Corpus Christi, "still scotched up to the hilt," he admits. He told his wife, Charline, they might be moving to San Antonio.

Again, he put his entire fortune on the line, persuading a skeptical banker that he would personally guarantee all the sales contracts.

Hemphill introduced the young McCombs, then just 29, to his salesmen and asked them to trust him as they would trust Hemphill himself. McCombs met with them one by one that day, but many were not reassured and walked out. By the end of that afternoon, only five of Hemphill's 16 salesmen remained. The rest didn't believe that the young unknown from Corpus Christi could save the store.

Fearing he would be left with nobody, McCombs says, he gathered the remaining five together and spoke.

"I said, "Hell, don't just leave me standing here.' I said, "Why are these guys leaving?'"

They told him the others didn't trust such a young, unproven outsider.

He promised each of them that he would make sure they got their own dealerships if he could save Hemphill's Ford store. The five agreed to stay.

"Every one of them became a millionaire with their own dealerships," McCombs says now.

It was 1958, and rock 'n' roll was king. McCombs took a chance by putting all his advertising dollars into the show of the hottest disc jockey in town, Ricci Ware at KTSA radio.

McCombs says he told Ware: ""On that morning show from six to nine, I don't want you to talk about anything else but that red-headed guy, that new Ford dealer in town.'"

And he told his salesmen: No customer would leave the store without talking to the boss. He would close all deals.

"I figured if I could close 10 deals a day, I'd put that thing back on its feet in a hurry," which is exactly what happened. "The second day turned into the black, and we never saw a red day again," he says.

Hemphill McCombs Ford became the cornerstone of a dealership group that would grow into the largest privately capitalized one in Texas and the sixth-largest in the country with 20 stores and annual sales of about 25,000 units and $1.3 billion in 1997.

McCombs' influence has been far-reaching. His success at the San Antonio store caught the attention of Ford officials, and they asked him to bail out some other troubled stores in Texas. From there, he was off to the races.

The list of successful dealers who grew up in the McCombs organization is long. Among them is Charlie Thomas, his first general manager in San Antonio who went on to build the Charlie Thomas Dealerships group in Houston and eventually owned the Houston Rockets NBA team. Alfred Flores, owner of Spring Chrysler-Jeep-Dodge-Ram in Houston and chairman of the Chrysler National Dealer Council, also credits McCombs with teaching him the business.

Bill Wolters, president of the Texas Automobile Dealers Association, says McCombs was one of the first dealers to realize that the route to profitability lay in consolidation as the manufacturers cut dealer margins.

"He started this trend of large private capital chains. He was a very strong influence there because dealers saw you could spread your overhead and cut fixed costs."

Henry Coffeen III, a McCombs protege who just opened his own store, Honda of Burleson, near Dallas, says McCombs saw early on the need to standardize procedures across a large number of dealerships, a practice adopted by the public dealership groups that followed.

"Most dealerships at that time ran according to what the general manager's theories were," Coffeen says.

McCombs had little patience with bureaucracy and lots of fancy charts, Coffeen says: "Four questions he would ask at managers' meetings: How much money did you make? How many cars did you sell? How's your CSI, and how did you rank? Guys would show up with these thick binders and colored charts."

At one meeting, McCombs grabbed a big pile of carefully prepared files and chucked it in the trash, Coffeen says. "He said: "Guys, quit wasting your time on all this crap.'"

After selling most of his dealerships in the 1990s as the public companies he so influenced became dominant, McCombs is now hunting for dealerships again, albeit on a more modest scale. He doesn't visit the six San Antonio stores much because he has become such a legend that all work stops when he does show up.

With Shields in charge, McCombs Enterprises is getting back to its automotive roots.

Shields says: "We have proven that the car business is an excellent business to be in even with economic challenges around us. We have streamlined operations. We're good at what we do, and we see it as a core business."

Says McCombs: "Look what America established by building this automotive industry. It is still the most desired product when a teenager turns of age to drive. All other products pale by comparison with the desire to have a car."