Cox shifts into 'integration mode' after shopping spree

DETROIT -- Cox Automotive will be in "integration mode for a couple of years," after a string of mergers and acquisitions starting in 2010, President Sandy Schwartz said.

He implied that the pace of acquisitions will slow. "We have all the products and tools we need, and a lot of integration work to do," he said in a wide-ranging interview.

The biggest acquisition was the 2015 purchase of Dealertrack for $4.5 billion, including the assumption of debt by Cox Automotive's parent, Cox Enterprises of Atlanta.

"Dealertrack was a big, strategic play," said Schwartz. While it brought considerable technology to Cox, Schwartz says the main benefit from that purchase was "much deeper relations with dealers." 

But that was hardly the only deal Cox did. Since the start of 2010, Cox has purchased or launched Kelley Blue Book, vAuto, Ready Auto Transport, NextGear Capital and Xtime, among others. About a year before being purchased by Cox, Dealertrack had bought Dealer.com. 

That's a lot to absorb. Cox Automotive has realigned its organization chart "three or four times" since the Dealertrack acquisition, Schwartz said. He also admitted that the company is seeing some "fatigue" in terms of integration. 

But he added that some newly acquired products need to be enhanced. For example, Arkona, a dealership management system purchased by Dealertrack in 2007, has always been a bit player in that market. Those systems are at the core of many dealership operations, including payroll, inventory and customer-relationship management systems. 

"We need a DMS. We've invested money in our DMS, and we'll invest more," Schwartz said. But a DMS in the future "should be a smaller unit" within a dealership, he added, "not this big anchor." And any such DMS should be open source -- something that integrates easily with whatever other products a dealer wants to use, he said. 

Also, he indicated that Cox is not looking for a larger role in auto finance beyond NextGear, which provides floorplan loans primarily to independent used-only dealerships. Said Schwartz: "No plans on the deck for a Cox bank." 

Some of the integration work will be finished fairly soon. Schwartz predicted that the product- and client-support integration should be done by year end.

Integrating cultures may take longer, but Schwartz told Automotive News that the company has several advantages on that front. Cox Automotive is integrating strong companies that it purchased, which he said is easier than combining a strong company and weak one. Each of the brands at Cox has an entrepreneurial culture and thrives on innovation, he said.

It helps that at several of the acquired units, the founder has stayed on under new Cox management, including vAuto's Dale Pollak, Dealer.com's Rick Gibbs, Dealertrack's Mark O'Neil and ALG's Raj Sundaram. 

The company has reduced employee stress by saying there will be no layoffs. If there are duplicate jobs, "We'll find you a new one," he said, perhaps filling one of Cox Automotive's 1,000 current open positions. 

Schwartz has urged employees in various locations to hold "Cox Automotive Nights" to get to know each other. That might be a pizza party at a Manheim auction location, where representatives of each brand stand up and give a five-minute presentation on what that brand does. 

Sales is one area in which Cox is still charting its integration route. 

Cox Automotive has 3,200 employees, about 10 percent of its work force, in some form of sales. "We don't need seven people showing up at a dealership and taking their time," Schwartz said. 

No salesperson can be "Superman or Superwoman" and know every product offered by every brand, he said, "but they should know their customers and know what we've got." 

Cox is still working out how to handle that. Should a team of two or three salespeople call on a dealership? Should there be one account manager for larger dealership groups, working with a support team? 

The answers aren't final, but Schwartz knows that dealers want a simpler connection to Cox. When Cox Automotive was formed as a division by the combining of Manheim and Autotrader, he recalled, he sat down with one of the company's dealer advisory groups and asked, "How can I get you to be more profitable?" 

A dealer, weary of having to log in repeatedly to his various Cox accounts, responded: "Could you get me a single sign-on?"