THE DEALER SPEAKS -- SUSAN SCAROLA

5-year-olds taught DCH boss to handle auto slump

by Amy Wilson at Automotive News
   
Susan Scarola says teaching kindergarten taught her to move fast: "It's not that much different from a dynamic business environment where you're being pulled in every direction."

Susan Scarola is the first non-Chinese and first person from outside the ownership family to lead DCH Auto Group. Scarola, 59, was named CEO in 2007 after more than 20 years with DCH, a South Amboy, N.J., dealership group with roots in Hong Kong. DCH stands for Dah Chong Hong, which means "great prosperous company" in Chinese.

After starting as a trading company in the 1940s, DCH acquired interests in real estate, food, textiles and dealerships. In the 1990s, the U.S. operation broke away from its Hong Kong parent and narrowed its focus to automotive retailing. Ownership remains with people of Chinese descent.

DCH has 27 dealerships and 2,000 employees in New Jersey, New York, Connecticut and California. The group is down from a high of 35 stores and 2,800 employees.

Some trimming happened before the recession hit, Scarola said. Then DCH closed six Saturn stores and cut head count by "a good 15 percent" during the economic turmoil of the last two years.

Revenue has followed that trajectory, dropping from nearly $2 billion in 2007 to about $1.53 billion in 2009. Even during the worst of the decline, DCH continued to make money, and profitability rebounded in 2009, Scarola said.

Scarola spoke this month with Staff Reporter Amy Wilson.


How did you end up in the car business?

Totally unexpectedly. I actually had a very early career as a kindergarten teacher. One year. That was enough.



Did you learn anything teaching 5-year-olds that helps you in business today?

I tell my management team all the time that it was the best experience I ever had. I was so young, just 21. I probably learned more about myself than anything else. But it was organizational skills.

You have to learn to balance all kinds of requirements, and it's not that different from a dynamic business environment where you're being pulled in every direction. I was being pulled in the direction of 30 5-year-olds, which proved to be far too much of a challenge for me.



How did DCH become solely focused on auto retailing?

It was the most profitable part of our business. We were fortunate that our first dealerships were Honda dealerships [in the] late '70s and early mid-'80s. Those dealerships were cash cows and allowed us to grow.



How has DCH's history -- Chinese owners and a former subsidiary of a Hong Kong trading company -- informed its culture?

Early on it was a very heavy influence. Not unlike many family-owned businesses, the family felt more comfortable with family members. So there tended to be more Asians among the management team than non-Asians.

Quite honestly at one point that started to be a problem for us. There seemed to be almost this cultural divide that we had to get beyond. We are an American company, and we needed to open ourselves up culturally to everyone. Our business had to more and more reflect our customer base. It's the same struggle dealers have now with bringing more women into the work force. Whether it's cultural, whether it's male or female, you want your business to reflect your environment and your customer base.

We knew we had to change that perception by opening the doors and recognizing people from many backgrounds.



Has that happened?

It has absolutely happened over the last 10 to 15 years. I don't think someone coming in today would have quite the same perception.



How has the industry sales decline and the recession affected DCH?

Like 99 percent of auto retailers, it threw us for a loop. We didn't have time to plan. But we've really celebrated the progress that we made last year. We are a relatively young management team. None of us have ever seen the likes of this type of business cycle.

It forced all of us to bring our best game to the table and work more closely together than we had before. Because we had built up a pretty decent level of trust in the organization, it enabled us to make some tough decisions and have our middle management team support us relatively quickly.



What specific things did you do?

We clearly had to reduce head count. We drastically cut back our advertising spend. We had to look for new, better, more efficient ways to market. And we went through every line item looking for pennies and made it a collective effort. Everybody had to participate in that pain, and I think the camaraderie helped get us through that.

Our heavy hit was really the last quarter of '08. Our portfolio is a little different because we have Northeast and Southwest dealerships and nothing in middle. The Northeast held very strong for us, didn't drop as drastically and came back a lot faster. The Southwest, Southern California, dropped sooner, dropped harder and is still struggling to come back.



Are you seeing profits starting to recover?

Absolutely. '09 was a good year.



What was the most unusual solution you came up with that would be instructive for other dealers?

The way we changed our marketing approach. We, like many other retailers, had been very dependent on newspaper advertising. We had the Internet really taking off, much less expensive than print. It forced us to expedite our learning about the Internet.

We revamped all of our Web sites, really jumped in to social media, a lot of grass-roots marketing, community work.



How did you stack up against the industry in terms of sales in '09?

We never report specifics. But when I look at Automotive News' list of the top dealers in the country, we would sit in your top 10. [The 10th-largest U.S. dealership group sold 27,443 new retail units in 2009.]



What is your outlook for the industry for 2010 and beyond?

It's coming back. The first two months were tough. We have quite a few Toyota dealerships, so of course the Toyota situation scared us. But we're very happy with where we've ended the first quarter. April was a solid month, and we're particularly pleased to see the light going back on in Southern California. Our outlook is positive. We're not expecting, nor are we gearing up for, the volume to return. We are in a situation now where we've learned to do more with less. If we can remain disciplined and focused and execute, we know we can retain the profitability without having the huge volume we had years ago.



What are your growth plans?

We've always been cautious. We'll continue to weigh our options, more than likely stay in the footprint we're in. We don't have plans to be a nationwide consolidator.



Would you modify the portfolio even if you stay roughly the same size?

We're not out there looking. If something is in our backyard, and it's attractive and the price is right, will we look at it? Yes. But we're not out to grow. That's one of the advantages of being a private company.

And we also have quite a bit of capital expenditures in front of us. Being in older metropolitan areas, we have older facilities. We know our best investment is upgrading some of our existing dealerships.



What are your biggest challenges?

Pressure on margins. Consumers are more and more informed, and the ease with which consumers can gather information and shop is mindboggling at this point. There is more and more great product available, so it's harder to compete on the merits of the product. Margins are so slim. It's hard to compete on price because there's not much left to work with. So what do you compete on, and what would drive a consumer to be loyal to your business?



Do you have any answers yet?

We are working on the assumption that people still prefer to do business with people they know and they trust. So we have worked very hard on our core values and making sure a customer experiences those core values when they do business with us.

Now, I'll be honest: Had [the business] always run on those values? No. And even today, it's not a perfect world. But as a management team, we came together and said these are not just words anymore. We are truly going to live by these standards, and we're going to make the tough decisions.

So if we have a salesperson selling 25 cars a month but he's not living up to our standards, he will no longer be part of our team. It's hard. It's easy to say the business is built on certain values, and it's much harder to hold true to it.

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