Ferraris in Family-Owned Dealers Lure Auto Tycoon CoganChristiana Sciaudone
Marshall Cogan, the founder of one of the largest car retailers in the U.S., plans to buy as many as six Brazilian luxury dealerships for about 1 billion reais ($430 million), seeing opportunity to double profit and sales at privately run shops.
“This is the largest retail area in all of Brazil that has not been consolidated and introduced best practices,” Cogan, 76, said in an interview this week. “It’s still run by private families living off the business.”
Cogan is entering the Brazilian market as luxury-car makers such as Audi AG and Bayerische Motoren Werke AG prepare to build vehicles in the world’s fourth-biggest auto market. Sales have grown at an annual pace of about 10 percent a year between 2002 and 2012, and are expected to reach a record 4.3 million this year, according to Anfavea, Brazil’s auto-industry trade group.
While Brazil’s economy contracted in the third quarter, demand for luxury goods in Brazil has increased in recent years as the number of high-net-worth individuals rose 26 percent from 2008 to 2012, according to the World Wealth Report, compiled by Capgemini Financial Services and RBC Wealth Management.
Brazil is the third-largest country ranked by high-net-worth individual wealth, behind the U.S and Japan, according to Capgemini. That’s helping boost sales of luxury cars in the country, at a pace of 45 percent annually, according to a 2012 McKinsey & Co. report.
“You buy when there’s blood in the streets -- and there’s blood in the streets now,” Cogan said. “You’ve jumped from an agrarian to an industrialized society but somewhere in the middle you missed best practices and how to service the customer and the lack of focus on the customer.”
Cogan founded United Automotive Group and sold it to Roger Penske in 1999 for $1.2 billion. The company is now known as Penske Automotive Group Inc., one of the three largest new-car retailers in the U.S. Cogan is betting he can double revenue from service and parts at the Brazilian dealerships and therefore will double profit. He said he plans to buy six shops by March though didn’t say where.
“Assuming no growth in cars, not a single unit more, by raising service by 8 percent, to 16 percent, I can literally double the profit of every dealership we buy,” said Cogan, who plans to take his local company, Autogroup do Brasil, public in London, New York and Sao Paulo in the future.
Cogan said he can make the luxury dealerships more profitable because they’re not being run professionally and employees are ill-prepared to handle Ferraris, Lamborghinis and Rolls-Royces, with advanced technology. The shops are paying for personal expenses like boats and private schools, Cogan said. Once those fees are eliminated from income statements and employees are properly trained, profits will rise, he said.