The Fighting Irishman
Pick a name Feisty Fin, Fightin' Fin. Both describe Finbarr O'Neill, CEO and president of the Reynolds and Reynolds Co. Spend some time with him and pugnacious or feisty are not the first things one would think of O'Neill, a reserved, soft-spoken gentleman whose voice retains a slight hint of a native Irish lilt. But he is not adverse to a good fight. O'Neill is 11 months into a 3-year contract as
November 1, 2005
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Pick a name — “Feisty Fin,” “Fightin' Fin.” Both describe Finbarr O'Neill, CEO and president of the Reynolds and Reynolds Co.
Spend some time with him and pugnacious or feisty are not the first things one would think of O'Neill, a reserved, soft-spoken gentleman whose voice retains a slight hint of a native Irish lilt. But he is not adverse to a good fight.
O'Neill is 11 months into a 3-year contract as the leader of the firm based in Kettering, OH.
Reynolds, with 40% market share and $982 million revenue in 2004, is one of the two largest technology service providers for new-car dealerships. But it was on its heels with little direction and low morale, according to some employees when O'Neill came on board in January.
It was hurt by a poorly executed launch of its heralded Reynolds Generations Series that triggered the downfall of O'Neill's predecessor, Lloyd Waterhouse 17 months ago. Earnings per share dropped 12% on a 3% reduction in sales in 2004.
Reynolds' missteps even resulted in lost trust among automotive dealers — its customer base — as it lost to arch rival Automated Data Processing Inc. (ADP) on bids to be the sole dealer management system (DMS) provider for two big dealership chains, Sonic Automotive Inc. and AutoNation Inc. Both however still use Reynolds as their documents and web site providers.
Despite the challenges facing O'Neill when he accepted the Reynolds position, it can be described as jumping from the fire into the relative comfort of the frying pan.
His prior position as president and CEO of Mitsubishi Motors North America from 2003 to 2005 likely was more challenging than his time at Reynolds will be. The import auto maker was mired in problems resulting from a disastrous financing strategy enacted by the previous administration, and long-standing corruption practices at the parent company in Japan that were just being revealed.
O'Neill, though, has made it a habit of taking on tough assignments. When he was named CEO of Hyundai Motor America in 1998, the Korean auto maker was beset with poor brand image, quality problems low sales and disenchanted dealers.
By the time he left the company in 2003, O'Neill (who started there as its general legal counsel) had engineered a remarkable turn around, resulting in a nearly 300% increase in annual unit sales to 350,000.
He was only at Reynolds a few days when he showed early signs of feistiness.
At his first Reynolds press conference in February, he took more than a couple of jabs at ADP, letting that competitor know the gloves were off.
O'Neill, who made a mark at Hyundai by regaining dealer confidence in the auto maker, told reporters, “I'm here to reinforce and revitalize the relationship Reynolds has with its dealers.”
“He has unlocked a lot of energy at Reynolds, says Scot Eisenfelder, a senior vice president of the company. “He has been making the rounds collecting ideas from employees. You can imagine the energy level when someone shows an interest in your ideas.”
For O'Neill, getting the company's focus back on its customers and meeting their needs is critical. “It requires a culture change,” he says. “We have to be performance-oriented, faster to market and have a greater sense of urgency.”
O'Neill estimates it is a process that will take up to two years.
One of his first initiatives was to travel the country and talk with dealer customers to learn from them what Reynolds can do better. Through September, O'Neill has visited with 100 dealers at their dealerships — 50 short of the goal he set for himself when he took the job.
During an interview with Ward's in his office at company headquarters outside Dayton, O'Neill says conversations he has with dealers are similar to the ones he had while at Hyundai and Mitsubishi.
“We're still talking about dealer profitability and it is getting harder for them,” he says. “Dealers are faced with decreasing margins on new cars while warranty work in the service department is declining.”
Although he expected dealers would push back on the price for dealer management systems, O'Neill says one of the main concerns is the lack of system utilization in dealerships.
“Clearly, we have to do a better job of improving their usage,” O'Neill admits. Part of that includes better training and simpler software solutions for dealership employees.
O'Neill says he does not envision one home-run technology or strategy that will propel Reynolds into sole ownership of the market. Rather, he believes the company “will hit a lot of singles and doubles.”
He made a tough call early on, killing the Generations Series product line in July and taking a $67 million write off of capitalized software development in the fourth fiscal quarter ending in September. More write offs are possible.
He says the touted system “demos like there is no tomorrow, but had problems in the field.” Installed in 73 dealerships, the Generation Series required dealerships to completely change in-store processes to gain the full benefits of the system, creating high costs.
Ultimately, the company could not justify the continued drain on financial and employee resources, especially for a product that only 40% of its customers could use.
Reynolds also is looking to divest its Networkcar service-notification product because it does not add to the core strategy of helping dealers sell more vehicles.
The move frees Reynolds to focus on its core dealer management system products — ERA XTR, ERA XT and ERA ES systems that range from high-line to no-frills, depending on a dealership's size and needs.
The DMS market is more competitive today than 10 years ago as more companies enter the arena, creating pricing pressures. There are now more than 20 smaller vendors offering some form of DMS to dealers.
Also, more dealers are turning to consultants to help them negotiate better contracts with the vendors, cutting into potential revenue for companies such as Reynolds. Lower-pricing averages kept the lid on ERA-related revenue although the actual number of ERA systems shipped increased for both the quarter and last nine months.
Many of the new sales were of the ERA ES, a lower-price system favored by smaller dealers, also softening revenues.
Securing its DMS base is critical if Reynolds is going to continue growing, O'Neill believes. “It's our platform for growth,” he tells analysts at a meeting in September. “The DMS is our permission to be in the dealership.”
O'Neill admits the current offerings are legacy systems that will require some investment — a charge others in the technology industry have long been saying.
The challenge for Reynolds is to build a DMS system using current technology that allows for simpler integration of other companies' software solutions, and yet ensure the system does not become a commodity. “We're going to compete vigorously to increase our share in the DMS space,” O'Neill says.
Dealers also can look for Reynolds to create more software applications in areas such as customer relationship management (CRM) systems and Internet leads management and service. O'Neill wants these applications to be DMS-agnostic — meaning they can be adapted for use in competitors' systems.
“Why shouldn't our products serve 80% of the market rather than just our 40% share?” O'Neill says. “Our software solutions have to be the USA Today of the technology world — simple to use.”
Other areas Reynolds is looking at include used-vehicle inventory management tools, compliance initiatives and consulting services that help dealers manage their human resources.
“There are some gaps and we have to invest in them,” says O'Neill. “For example, used-car inventory probably is the most under served of all the dealership profit centers.”
For O'Neill, Reynolds has to look for ways to help dealers sell and service more vehicles. That will require offering more than just technology.
“Reynolds really is a services company,” O'Neill says. “Technology is not the solution, it's the tool. What separates us from our competition is our knowledge of retail. It's the Holy Grail in this business.”
Reynolds has taken some hits in its valuable documents division, a cash-generator in the past. It is a $160 million business with high margins. But O'Neill admits it has been declining recently. “There is opportunity to grow it,” he says. “We're twice as likely to sell forms to a dealership that uses our DMS.”
Meanwhile, O'Neill also is getting down in the trenches hammering competitors in advertising.
Recent ad campaigns in the automotive trade press go after the competition, sometimes by name.
One ad features a photo of O'Neill accompanied by a message from him to dealers — and others. “To our customers, I say, ‘We've heard you.’ To our employees, I say, ‘Remember who's boss.’ To our competitors I say, ‘Good luck catching up.’”
Reynolds at a Glance
10,075 | Dealerships using Reynolds' ERA dealer management systems. |
---|---|
500,000 | Licensed users. |
3,759 | Dealerships using Reynolds Web Solutions. |
887 | Dealerships use Contact Management (Reynolds' CRM software). |
600 | Dealerships in 27 countries using Incadea (Reynolds' international DMS platform). |
3rd Quarter Revenue | |
$247 | million (2% increase over same period in 2004). |
$24 | million net income. |
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