McCombs Enterprises: Venture Capitalist
Automotive
Written by John Zorabedian   
Thursday, 01 May 2008
McCombs Enterprises: Venture Capitalist - American Executive - RedCoat Publishing
Terrell McCombs describes how his uncle built a Texas Ford dealership into a multinational empire.
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Red McCombs fits the bill of the hungry American entrepreneur who started small and got rich by beating the competition, then got richer taking calculated risks. From a single Ford dealership in San Antonio, Texas, he built McCombs Enterprises, a multi-billion-dollar company with investments in automobiles, oil and gas, real estate development, professional sports franchises, and media.

McCombs Enterprises: Venture Capitalist - American Executive - RedCoat Publishing
Terrell McCombs, senior VP
Terrell McCombs, Red’s nephew and senior vice president, joined the company 20 years ago, when the company was still primarily invested in car dealerships. Today, McCombs Enterprises is a highly diversified conglomerate. Its most recent investment was a partnership finalized in March to buy 10% of the stock of Brilliance China Holdings, parent company of a Chinese auto manufacturer, with Houston Rockets owner Leslie Alexander.

As McCombs said of his uncle (who previously owned, at various times, the NFL’s Minnesota Vikings and the NBA’s San Antonio Spurs and Denver Nuggets), risk is what drives growth in market economies, even in China. “Red’s always told me, and we really take it to heart in this company, that you can be a doctor or a lawyer and make a nice living,” McCombs said. “But in America, in a market economy, if you want to make a lot of money, you don’t do it without risk. You have to take risk. That’s how fortunes are made and jobs are created.”

McCombs is betting that the same kind of hunger that drove his uncle and the generation of the Great Depression era to build America into the world’s most powerful economy will make China into the next great economic power. And that means a lot of opportunity for entrepreneurs willing to take the risk to invest in Chinese growth.

Brilliant move
Brilliant Auto, China’s 16th-largest automaker, had sales of $1.3 billion in 2006 due to the strength of its minibus and auto-parts units. Last year, the company suffered an embarrassing setback to its ambitions to export cars and buses to Europe and the US after a Brilliant sedan failed a BMW-sponsored crash test. But McCombs said the temporary loss of sales to Europe and the US means little compared to what the company can do in sales in Asia.

“That’s an issue, but I don’t think it’s a major issue when you realize that over a third of the world’s population is in the two largest emerging markets, India and China,” McCombs said. “You have a middle class that’s exploding in those two countries, and they want to go from a rickshaw or moped to their dream of driving a little car. This is the car for them. One of the fastest-growing driving segments is in India and China, and I think it’s a good investment that can pay big dividends down the road.”

McCombs Enterprises is still very much invested in the US auto market, although it has sold many of its dealerships over the years. “We like the car business, be it in the US or China,” McCombs said. “Because most people, if they have a choice, don’t want to walk. They enjoy the freedom an automobile gives them.”

That kind of logic might sound simplistic, but McCombs said the basis of the McCombs’ business success has been finding products and services that people want to buy and meet a need, then finding a way to sell those products and services. And the car business has paid off—handsomely. “We’ll always be in the automobile business, because that’s basically the heart and soul of who we are, and it started it all,” McCombs said.

Entrepreneurial spirit
Taking risks has defined the way Red McCombs does business—whether it be investing in a relatively obscure Chinese auto company, drilling for oil and gas in the US, or buying an unknown professional basketball team from Dallas and bringing it to San Antonio (Red bought and sold the San Antonio Spurs before they were the perennial NBA champions of today).

“As Americans, we have to understand that good things happen from risk,” McCombs said. “In a market economy, if something goes wrong with an investment—and we’ve seen that happen—it’s no one’s fault but your own. You can’t expect others to bail you out. You dust yourself off and carry on. We think that’s the heart of a free market economy. It’s all about the freedom to choose.”

McCombs has a great faith in the free market system, and he’s sure that the US economy will recover from its recent downward spiral (much of which can be attributed to overly risky financial schemes in the mortgage markets). Moreover, it is a hunger to achieve a better life that drives people in Texas or China to reach for the golden ring.

“China is a real balancing act. They still call themselves communist, but they understand capitalism and how it works very clearly,” McCombs said. “They are really going to be something that’s going to surprise the world. When you get someone making $120 a year growing rice, and he gets a job at a factory making $120 a month, what’s not to like? That’s growing a huge middle class over there, and their aspirations are growing, too.”

Of course, every yin has a yang.  As China grows, some American businesses will suffer. “I just wish they didn’t consume so much oil, concrete and steel, because they’re making it very expensive,” McCombs said.
 
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