There’s nothing like a crisis to teach leadership. Craig Monaghan has experienced at least two — one on the Demilitarized Zone between North Korea and South Korea, and the other in the auto industry, when his company came within an eyelash of shutting the doors.
Monaghan, 55, is CEO of Asbury Automotive Group, the fifth largest publicly traded car retailer in the country, with $4.3 billion in annual revenue from 28 brands sold at dealerships in 10 states. The Duluth-based firm nearly failed during the Great Recession when lenders could have demanded $500 million it didn’t have. Monaghan talks about what he learned from leading people through nerve-wracking events in business and the military.
Q: Your company was in critically bad financial shape. Would you please discuss?
A: In 2008 and 2009, our stock was trading at $2 a share and a lot of people had written us off as goners. Our debt of $500 million was 5.5 times our cash flow, which is a very dangerous level. Our new cars sales had fallen by 40 percent. GM and Chrysler were on their way to bankruptcy and we had many of their dealerships. Our auditors were telling us that they didn’t believe we would exist a year into the future.
It was a scary time. We were forced to restructure our business. We eliminated an entire layer of management. Our offices were in New York City and we moved to Duluth, saving millions of dollars. At its peak, we had 8,500 employees. Today, it’s less than 7,000. Many employees took pay cuts.
What we learned is that business is a team sport. Our employees and our partners stood tall with us — the banks, manufacturers and vendors. Our lenders could have called back $500 million and we would have been bankrupt. But within a matter of days, all of the lenders said they wouldn’t do that.
Q: Why not?
A: They believed in us. We had long-standing relationships with them. We were able to quickly demonstrate to them that we had a plan that we would be able to maintain positive cash flow throughout this downturn.
They stood behind us because we had always been a company of our word. We had people here with long-term relationships with our lenders, including Bank of America, JPMorgan, Toyota Motor Credit and BMW Finance. They could have said, “lights out and we’ll take whatever money we can get.”
Once we got through that, we were on our way. We sold some stores and made cuts. We got ourselves into a position where we could maintain a cash cushion and stay cash-flow positive at the same time. In fact, we started buying back our debt, which had been trading at 30 cents on the dollar. Today, our debt or leverage is less than half of what it was. It’s been cut to 2.3 times our cash flow, from 5.5.
Q: What did the employees do?
A: The people here earned the reputations that helped us with the lenders. Still, it was a demoralizing time to see some of your peers lose their jobs. It was very difficult for me personally. There were a lot of people we had to ask to leave — many of whom had spent quite some time with the company. But we weren’t going to survive if we didn’t make the hard decisions.
We compounded those hard decisions by asking other people to uproot their families and relocate here. So you had an economy and a housing market in a free fall, many of our peers were asked to leave, and then we asked others to leave their homes in New York, New Jersey and Connecticut and move to Atlanta. We asked them to take your kids out of school, leave your parents and your spouse’s parents, and come here to try to save a company. And they did.
When you take a group of people and you put them in a crucible and they survive, they are a far tighter and stronger team than you can ever imagine. They understand how close we came to losing what we have today. It makes them far superior managers today than what they would have been otherwise. They were baptized by fire.
Q: How about you? Were you baptized by fire during your military service in Korea?
A: I was an Army platoon leader on the DMZ in Korea in 1980 during a very hostile time. The North Koreans would jam our communications equipment, so when that happens I’m making the calls as a platoon leader. They had shot down one of our helicopters while I was there. We were on the edge.
I’m not sure you can teach leadership, but you can experience leadership. As a young lieutenant dropped in that situation, I was very fortunate to have some great sergeants that I learned from. And let’s not kid ourselves — the people who really run platoons are the sergeants.
We dealt with every level of human emotion. I learned what’s a real problem and what’s a problem we can manage. A real problem is when someone’s life is in your hands. I sat there on the DMZ and sometimes late at night we’d hear noise out there. Your radios are jammed and you’re thinking this could be it. If these guys come, we’re going to put up one helluva fight.
There’s a strength and a resiliency that comes from that. When you get back here, you realize that even though we’re having a crisis, there’s nobody with an AK-47 sitting a short distance away who’s trying to kill us.
We’re trying to save a business, but nobody is going to die. You can keep things in perspective and make calm decisions. There’s a big difference between having your livelihood at stake and your life at stake.
Q: You had an interesting mountain climbing experience with two of your kids. Would you please discuss?
A: I was with my 23-year-old son, Connor, and my 26-year-old daughter, Shannon. We were attempting to climb the Grand Teton in Wyoming, which is a two-day climb. You climb to 11,000 feet the first day. On the second day, we were at about 12,500 feet and starting to break out the ropes for the technical part of the climb to 13,800 feet. My daughter began to suffer from altitude sickness. She had a headache, was nauseous and said she couldn’t go on.
My son said, “We came up together and we’re going down together.” I couldn’t be more proud. We’re a family.
Each week, Sunday Business Editor Henry Unger has a candid conversation, called “5 Questions for the Boss,” with a top executive in Georgia. Some remarks are edited for length and style.