FRIDAY INTERVIEW/Simon Elliott, MD of Volkswagen Group Ireland:CARS AND football may be the staple distractions of the average male living in the shadows of the steelworks of northeast England, but for Simon Elliott they represent the pillars of his career to date. In neither sphere can it be said he has taken the easy route.
In a motoring world littered with glitz and glamour, Elliott’s career has taken him from the seemingly recurring crises of the Chrysler brand to the commercial vehicle division of Volkswagen in the UK and onto his current role, steering Ireland’s largest motoring group through the turmoil of recession.
In the football world where boardroom appointments are often trinkets of success, a friendship with former football manager Brian Laws led to his involvement in a boardroom coup at Scunthorpe United as it fought off relegation to the ignominy of the National Conference.
While footballing analogies abound in business, lessons learnt at United may well offer some succour in his latest role. Trying to placate fans and negotiate with official bodies while keeping the finances in order, lauded one week and lambasted the next, is perhaps good training for life in the Irish motor trade.
With the ending of the Government’s scrappage scheme last July and no economic recovery in sight, the Irish motor trade is preparing for another grim year of falling sales. Elliott predicts the new car market in 2012 will drop to 75,000 from 89,904 last year.
It’s a long way from the heady days of 2007, when 186,238 new cars drove off dealer forecourts. He doesn’t foresee any recovery in the market over the next few years. If his forecasts become reality – and they are in line with many other car firms – it will invariably mean more dealerships will close. His intention is that the closures will not be part of his network of 84 franchised dealerships.
Elliot says that, despite the recession and widespread cuts, his firm and its portfolio of brands – Volkswagen, Audi, Skoda and Seat – will invest upwards of €100 million on dealer development and add another 100 staff to its dealer network and head office in the coming months.
The investment is part of a long-term plan that began when the German car giant took over direct control of Irish operations in October 2008. At the time, Elliott’s predecessor, Paul Willis, instigated a root and branch restructuring of the group’s operations here. Willis oversaw the group’s eponymous brand becoming a viable contender as the biggest car marque in Ireland, Audi the leading premium brand and Skoda one of the fastest growing brands in the new car market. By 2010, the group more than tripled pre-tax profits over 2009. Turnover rose to €343 million, yielding a pre-tax profit of €1.3 million.
Willis also brought VW Bank to the Irish market when outside financing dried up, providing much-needed consumer finance, along with stocking loans for dealers. “VW Bank leant more than €100 million last year to retail customers with an acceptance rate of over 75 per cent,” says Elliott. As Willis left to head Skoda’s operations in China, Elliott took over the reigns with the VW Group of brands holding a combined new car market share of 23.5 per cent in 2011.
It would seem to be in rude health despite the recession, yet Willis’s restructuring and no–nonsense approach meant he was regarded as a divisive figure by some in the dealer network. Elliott denies he’s here to pour calming oil on the troubled waters but admits his style may be different to that of his predecessor.
“I think of myself as a people person, I’m more interested in building trust and support. Some dealers might feel a bit bruised and battered, but now’s the time to take the network to the next stage. We have a solid foundation upon which we can grow.”
When pressed about his management style, he says he probably fits the bill as a troubleshooter.
His demeanour suggests his task is not only to continue the firm’s growth but to bring an air of conciliation and a degree of stability to VW operations here. Not an easy task in the current climate, yet he did something similar in an earlier role with Chrysler.
In 1999, he moved from a position as Toyota’s commercial director in Belgium to MD of Chrysler’s UK operations. His task was to persuade its unhappy dealers not only to stick with the troubled US brand, but to take on board its sister marque, Dodge. He had taken the job at Chrysler after being offered a senior post in Mercedes, its sister brand after the merger in 1998.
“I never really saw myself as a Mercedes man, and Chrysler was a niche brand with a lot of potential.” When he later took on the role of president of Chrysler China, it was at the behest of these British dealers that he was brought back to rebuild the firm’s UK operations once more.
Elliott’s two years in the Chinese role is perhaps the most eye-catching feature on his motoring CV given its stellar growth potential. Yet it once more reveals a far less glamorous reality for Elliott than many might suppose.
When he jetted off to China in 2006, he had a letter of introduction from Chrysler’s global president in Detroit in his top pocket, sure to ease his passage in a government-dominated motor industry. He was to head up a well-known global brand in the most exciting market in the motoring world, with the grand title of president and chief executive of Chrysler Group China. The reality was less regal. “When I arrived I found myself presiding over an office of three staff and no computers.”
By the time he left staff numbers had grown to 80, Jeep and Chrysler models were a more common sight in Shanghai and Beijing and he had won the imported automotive CEO of the Year award, voted by his peers and the press.
The decision by Daimler to offload Chrysler to private equity firm Cerebrus led Elliott to leave six months after returning to Britain in 2008. He says Cerebrus’ targets were unrealistic. So he moved to VW as head of commercial vehicles.
At the same time he stepped down from his role at Scunthorpe United. He had joined the board of his hometown club in 2004 with relegation to the lowly National Conference beckoning – invited by the club’s largest shareholder, local millionaire businessman Steve Wharton after a boardroom battle that saw him take back control of the club. In the new board’s first year United finished one place above the relegation zone. The following season they were promoted to League One. As one of the “young guns” on the board, Elliott worked on marketing and sponsorship for the club, alongside an unofficial scouting role.
“One afternoon I spotted Billy Sharp playing on loan at Rushden Diamonds and told Brian Laws about him. We went on to sign Sharp for £100,000 (€120,000) from Sheffield United. Two years later we sold him back to them for £2 million (€2.4m). Similar deals were done with players Gary Hooper, who went on to Celtic, and Martin Patterson who later played in the Premiership with Burnley.”
Despite his departure from United’s board, he’s ready to return to club service if circumstances allow. “I would like to take on a role at Scunthorpe in the future.” He might be called back sooner than planned, given the club’s precarious position near the relegation zone of League One.
For now he must tackle the immediate needs of a motor industry with shrinking sales and little sign of a pick-up, while at the same time dealing with Government plans to overhaul the motor tax regime. His first encounters with the Government and its officials have not been smooth.
He says a request to meet with the Minister for Finance Michael Noonan before the Budget did not even receive a reply, while attempts to negotiate with Nama on a site it controls in Sandyford earmarked by Audi for a €10 million investment has failed to elicit more than a cursory response. VW wants to develop an unused site near Junction 14 on the M50 to build what Elliott describes as a “state of the art” Audi dealership. “We’re planning to create something that will set new standards for Audi internationally and become a significant local employer.”
Despite the seemingly lacklustre response from Nama, VW’s investment in the Audi brand continues apace. A new dealership is being built at the Finglas exit of the M50 for north Dublin. The plan is to move the Ballsbridge operation to a greenfield development in the southside of the city.
In Sligo a new Audi Centre opened at the end of last year with the investment estimated at close to €5 million. More development work is planned in the coming months at other outlets.
As for the group’s eponymous brand, other car firms such as Hyundai and Renault are forecasting VW will be the biggest seller here by 2013. Elliott is reticent to make such a prediction, but with the next generation Golf due in showrooms in time for January 2013 sales, the likelihood is that VW will be challenging Ford and Toyota for the top spot.
Yet Elliott is determined not to become fixated on market share. He’s critical of some competitors who have opted to discount heavily in the short-term to gain sales position, which he says is likely to damage the long-term resale values of these cars and in turn the market.
“I’m disappointed at the actions of some competitors who are practising overly distressful sales tactics. They’re not doing their customers any favours in either service or long-term values and I’m certainly not going to pursue them.”
He also estimates that the size of the new car market is skewed as much as 15 per cent by pre-registrations, where dealers register an unsold car to meet sales targets and achieve bonuses. “It distorts the market. The situation here is not as bad as I encountered in Britain but, with volumes so low, it doesn’t take many cars to throw out the total sales figures and makes it hard to judge just how many real new car sales are made in any year.”
While he can’t change the tactics of competitors, Elliott’s biggest challenge will be to resurrect the Seat range. With a market share of just 1.9 per cent, it’s the weakest link in the group’s portfolio. “The brand suffered from significant underinvestment here over the years before we took it under our direct control,” he says.
That’s a criticism of the previous distributor in Ireland, but in reality the problems stretch back to Spain. The models have consistently failed to live up either to the marketing message of auto emocion or the alluring sports car concepts unveiled at motor shows that bear little relationship to utilitarian production models.
Meanwhile the brand’s supposed youthful appeal doesn’t fit with the 50-plus age profile of its buyers. Finally the Seat brand is squeezed by its own stablemates: VW has the mainstream desirability and Skoda the value proposition, leaving Seat with little room to bloom.
In a previous interview with The Irish Times, former boss Paul Willis suggested an uncertain future for Seat in Ireland, saying he didn’t see a viable business for any brand that failed to achieve at least 2 per cent market share.
Elliott disagrees, saying there is no threat to the brand here. “We’ve seen a robust turnaround plan for the brand that’s been presented to Germany and there are bold plans in place in Spain for a major revamp of its model range.”
Part of the new strategy in Ireland will see the current sales and marketing director of VW, Adam Chamberlain, moving over as brand director at Seat. His role at VW will be taken by John Donegan, currently with Skoda. Donegan becomes the first Irish member of staff to head up one of the group’s brands since the German car firm took over direct control of Irish operations. He previously held senior marketing positions with Postbank, permanent tsb and Ryanair. He was also marketing manager of MG Rover in Ireland for six years before its demise.
As to his own future, Elliott says his family have settled well in Ireland and he would hope to stay here longer than the three-year term he signed up to. The likelihood is that it will take that long to see a return to sales figures pre-recession. And who knows, Scunthorpe might even be in the Premiership by then.
Name:Simon Elliott
Age: 50.
Lives: South Dublin.
Position: MD of Volkswagen Group Ireland.
Background: Started with VW in its UK head office in Milton Keynes allocating cars to dealers before becoming a regional sales manager. Moved to Toyota GB prior to it opening production facilities in the UK and was then appointed commercial director with Toyota and Lexus in Belgium.
At dinner with a recruitment agent he was told of an opening in Mercedes Benz in UK but opted for position as MD of Chrysler UK. He later became president of Chrysler China before returning to Chrysler UK in 2008. Left to head VW Commercial Vehicles in the UK and then on to current role last September.
Hobbies:supports Scunthorpe United, fishing, golf.
Something that might surprise: Elliott raced a VW Caddy van in the 2010 season of the VW Racing Cup. The series took him to tracks like Silverstone and Brand's Hatch where he took on rivals in Golf GTIs and the like. His highest finish was fourth.