This once-private company made the leap from goodto great when it was acquired by one of the nation’s largest publicly traded dealership groups.

Private, family-owned Miller Automotive Group was the 64th largest car dealership franchisor in the US when, in 2002, it was bought by Houston-based Group 1 Automotive, a publicly traded Fortune 500 company with dealerships across the US. Although Miller Auto was already successful selling Honda, Nissan, Infiniti, Mitsubishi, and Toyota brands from six locations across California, entering the public world gave it the boost it needed to make the leap from good to great.

Miller Automotive Group had been owned by the Miller family for more than 60 years, and Fred Miller, former CEO, and Mike Miller, former president, decided to cash in on their assets after decades on the job. Their long-time partner and Miller Auto’s former COO, Dave Hutton, stayed with the company to guide it through the upcoming changes.

But the sale was much more than an exit strategy—capital provided by Group 1 enabled Miller Auto to double in size over the past five years. “It was a prime opportunity for the company to buy new franchises and build on existing ones, which would be too expensive to do as a private company,” said Hutton, who took the helm as president in 2002.

Dave Hutton

Miller Auto has moved away from domestic brands in light of the financial difficulty many American automakers are facing and is embracing imports, particularly from Japan. According to Hutton, Japanese imports are among the top sellers in the US, and “we want to affiliate ourselves with the most successful brands. As a result, our profit margins are higher.” But the company hasn’t rid itself of domestic brands entirely: it kept one Chrysler, Jeep, and Dodge dealership in San Diego.

In shifting its product mix to accommodate luxury and imported cars, Miller Auto also changed the profile of its clientele. In fact, it now owns and operates Mercedes Benz Beverly Hills. “I can’t imagine a clientele with higher expectations,” said Hutton.

To cater to customers of its high-end dealerships, Miller Auto offers a free coffee/cappuccino bar, free shuttle service and loaner cars, a comfortable lounge with tile floors and sophisticated décor, televisions, Internet access, and a laundry list of other must-have amenities.

To further improve customer service at the Mercedes dealership in Beverly Hills, Miller Auto is constructing a separate parts and service facility next door with a hefty price tag of $25 million. “When it’s completed, it will probably be the largest and nicest Mercedes Benz service facility in the country. That is what our clientele in Beverly Hills expects,” said Hutton.

Miller Auto has also invested in improving customer service at its import franchises over the past five years. Many are now equipped with wireless Internet access, child care areas, private areas for phone conversations, televisions, and renovated lounges. “We are trying to accommodate a wide array of customers from a mom bringing in her SUV who is waiting with two kids to a business man who wants to get some work done while he waits,” Hutton said.

In addition to shifting its product mix, Miller Auto is putting more emphasis on parts and service. Auto dealerships make money two ways: selling new cars and maintaining or repairing older ones. Currently, profit margins on new car sales are getting slimmer, but plenty of opportunity exists for parts and service.

“Between 16 million and 17 million new cars and light trucks are sold in the US every year—and they don’t wear out quickly. We’ve recognized that potential and are putting a large percentage of our capital toward building new parts and service facilities and expanding our existing ones,” said Hutton. “When car sales get competitive and margins get thin, having a strong parts and services division can make all the difference.”

Creating opportunities
According to Hutton, the biggest, most time-consuming challenge in acquiring another company is aligning cultures. “You can’t change over every employee—it is neither practical nor the right thing to do. The companies we’ve acquired were staffed by quality people, they just need to learn new processes,” he said.

All the dealerships Miller Auto has acquired were privately owned, making aligning cultures exceedingly difficult, as accounting systems and business processes in the public sector differ greatly from those of privately owned companies. “We operate under stricter requirements and deal with issues privately owned dealerships typically don’t have to.”

To get a new acquisition up and running at full throttle can take anywhere from six months to a year with the help of a regional training team provided by Group 1 that covers everything from accounting to service and parts. Most training is provided inhouse, said Hutton, but some occasions call for third-party trainers that specialize in specific aspects of the business. Throughout the training process, Miller Auto performs audits to ensure the newly acquired store is performing up to par.

Recently, all Group 1 dealerships have converted to ADP, one of the nation’s leading providers of software systems for car dealerships, and the software system is often the first change that needs to be made with each acquisition.

As Miller Auto has doubled in size over the past five years, it has created numerous opportunities for long-time employees to move up the ranks. Hutton explained that when a dealership is acquired, the general manager (often the owner) leaves for greener pastures—typically retirement—and Miller Auto promotes one of its own people into that position. As employees of 10 to 15 years make their way up the ladder, others follow in their wake. “We can create six open positions with one promotion, and we try to fill them all with our own people,” he said.