Charles Oglesby has been through a lot in his 38 years selling cars, but nothing like the past two years.
As CEO of Duluth-based Asbury Automotive Group, the sixth largest car retailer in the country with 81 locations in 11 states, Oglesby saw:
– The stock price plummet to $1.60 a share from a high of $29.82. That prompted a warning letter about possibly getting delisted from the New York Stock Exchange.
– A credit crunch that squeezed his business — sales dropped to about $3.5 billion last year, from $5.5 billion two years before.
– A quarterly loss of $2.5 million at the end of 2008.
But all that was just a prelude to a more intense crisis. Oglesby, 63, and his management team were sent scrambling by an auditor’s letter saying there was “substantial doubt about its ability to continue as a going concern.”
That letter, dated March 16, 2009, meant that more than $500 million in debt could be immediately recalled by the firm’s lenders. If that had happened, Asbury would not likely have survived in this era of tight money, and 7,300 employees would have lost their jobs. (In metro Atlanta, Asbury owns the 12 Nalley dealerships.)
But the company escaped death, at least so far, in part by quickly preparing PowerPoint presentations showing the lenders it already was turning things around. Those presentations were given considerable weight, Oglesby said, because execs had kept the lenders regularly informed of company strategy before the “going-concern” letter was issued.
The company also was aided by the fact that much of its credit line came from car manufacturers, which would have lost a key sales outlet if Asbury went under.
To try to stabilize the company — before and after the “going-concern” letter — Oglesby focused on the mantra, “Relocate, reorganize, restructure. Anything that had a ‘re’ in front of it was absolutely essential for survival.”
The essence of the game plan was cutting costs:
– Moving the headquarters from Manhattan to Duluth, saving about $5 million a year.
– The dividend was suspended, saving $29 million.
– Capital expenditures were reduced by 75 percent in 2009.
– New car inventory fell by $255 million.
– The corporate staff was cut by 25 percent and six regional offices were eliminated.
From those measures and more, financial results turned around. A loss of 8 cents per share in the fourth quarter of 2008 was followed by a small profit in the first quarter of last year. Profits rose in the succeeding two quarters and analysts expect a profitable fourth quarter when the company reports earnings next month. The stock is up to about $13 a share.
Still, given the “going-concern” letter, some have questioned Asbury’s viability. Audit Integrity put it on a 2009 list of “companies with highest probability of bankruptcy.” On the other hand, Wall Street analysts are predicting a 78 percent increase in earnings this year.
“Who can say if the worst is over,” Oglesby said about car sales. “We must still fear the worst and hope for the best. But you can’t run your business by hoping for the best.”
I bet a lot of CEOs are thinking like that these days.
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