Episode 13: Mark McLarty, Founder and CEO of McLarty Automotive Group

For our 13th episode of Full Throttle we are joined by Mark McLarty, Founder and CEO of McLarty Automotive group. Topics of discussion include Mark's time working in China and Brazil, the differences in culture and the automotive industry in those places, and much more!

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Transcript

This is full throttle, the Presidio group's automotive industry podcast. I'm your host, Jason Stein Presidio's Managing Director and host of Cars & Culture on business channel 132. On a monthly basis full throttle serves as the industry's meeting point. For great conversations with leaders across the automotive world

The big mega trends that I would see and I think we all see is where do things go with power trains from ICE to EV, if that was the only trend that in and of itself is a once in a century shift that's taking place. Obviously, you're seeing that in a very big way in China, back to my time there a few weeks ago and just the preponderance of EVs and notably EV brands that nobody in the US has ever heard of yet all over the streets, there and increasingly around the world.

There are few in the automotive retail market with the expertise of Mark McLarty. His international experience includes a two decade run that gave him exposure to South America and Asia, and a wealth of experience that most in North America will never have in their careers. Following that his return to America included the task of building McLarty into a retail giant in less than a decade, positioning the family business as a force in the dealer world. He has a measured approach with the continued goal of building the auto retailer into a shining example of success. All the while flying under the radar. Mark McLarty prefers working in the background, quietly shaping the group into a force of nature. He's done exactly that. And all the way mirroring the American footprint in Brazil and keeping his relationships in China in Japan incredibly strong, with an international presence that gets the attention of automakers around the world. Today on Full Throttle, we take a walk through his history as well as his future. Mark shares his perspective on the retail world, as well as geopolitical pressures that are forcing some decisions in this market and others as he keeps his business on track for greater success. He talks growth, leadership, and even some fun moments with the Presidio group and its executive team. In a rare interview, Mark McLarty on full throttle, the industry's podcast.

Hi, I'm Mark McClarty, and very glad to be here on Presidio's Full Throttle.

Welcome in to a guy who I first met when he had moved back from Asia. And he was a little like me at times when I moved back from Europe, a little, little star struck with the expat experience, because moving back to North America does change you a little bit, doesn't it, Mark? But thank you for being on the program. And I know that that that you are definitely fully acclimated into this environment now, although you've just returned from Asia Pacific.

That's right, Jason. Yeah. I've enjoyed our, I can still remember very distinctly our conversation about the expat experience. And indeed, it was an adjustment moving back. And a lot has changed over in Asia since then, as you well know. And that was very evident during this last trip over a month before last coming through COVID.

What were you doing there now?

I was over there to meet, several things. I was in Japan with some of the Japanese OEMs as well as in China. And going back and visiting a lot of Chinese OEMs that I've known a long time have worked with in China, who are now pushing out globally.

So tell me how much life has changed. Well, let's back up. For those who don't know, on this program, how long were you away from the United States?

Almost 20 years, so roughly an even decade in Brazil and China, and also had a lot of activity but never lived full time in Mexico, and all with automotive, retail and wholesale distribution. 

How did that change you? 

That it's probably too early to say at this point. I would need, I think it'll change, it's changed the course of my life and career, of course, in ways I never could have imagined. I think it changed wanting giving a broader perspective of how different our industry is in different markets, I think there's an assumption that car dealerships auto retail is the same everywhere you go. And it's not in so many ways, it obviously gave me a greater appreciation of cultures in a very different way. If you just take a business trip somewhere for a week and come back and stay in a bit of a bubble with the group and you know, once in the language and culture while there, it was a full immersion experience and I think quite different with auto retail, which is such a local business, right Jason?

Yeah.

In the OEMs, and consultants, bankers go to these markets and are generally in an office environment that is still English based, predominantly an international, you know, more of kind of Anglosphere type of culture perhaps, or whatever the multinational is. And for me, it was just total immersion. Where both in Brazil and China, I was the only non native speaker. Only, only non Brazilian or Chinese and the entire organization with 1000s of people. The day to day was almost all conducted in Portuguese, or Chinese. And so I think that aspect of it is quite different from what a lot of people imagine, of a stet abroad, given an auto retail is such a deeply local business.

And when you returned, what aspects of what you have learned did you bring back to the auto retail market in North America? In other words, how did it shape your, your, your future? And maybe what you tried to apply to the business back when I first met you?

Well, it's a good question. I think first and foremost, it gave me an appreciation for so many things in America in a way that I never would have appreciated or would have maybe taken much more for granted, had I not been abroad for so long. The US certainly, like anywhere, has its problems, not perfect. But you know, particularly nowadays, you hear a lot of concerns and everywhere around the world has its challenges coming to the pandemic and the economy and so forth. But it really gave me a greater appreciation for what a not only what a great country the United States is, and how blessed the United States is in so many ways, but also how good auto retail is in us compared to many other places. And the legacy and history of auto retail here versus other international markets, like China where privately owned dealerships are still a relatively new phenomena when I got there that was just starting to take place and state owned dealerships becoming privatized. Hard to believe, given how far China has come, but that was only 20 years ago. And obviously, you had dynamics with state in China that were quite intrusive, not just me, but businesses in general, we've all seen that in the headlines a lot. And in Brazil, you know, it's very different trying to operate car dealerships, when your floorplan is 20% plus interest rates, you know, everybody's freaking out right now about our rates here. But I kind of joke with the team, like, try going to Brazil, if, you know.

You don't know anything about rates.

But we still got it pretty good. And also went through a lot of economic cycles down there that were much more severe, real shocks. We've seen obviously a shock in the US a couple of times as well. But Brazil, it's more kind of in dog years very compressed, and big swings in the economy there. So, you know, those are just a few thoughts in response to your question, Jason, but the compare and contrast having been outside and coming back, and realizing how good we have it here in many ways that we probably should take more time to appreciate is the single biggest lesson, I think.

So compare and contrast what you saw now, on one of your latest trips, which is, I think, was the first time you'd really had an extended period of time. Back there since COVID. Right?

That's right. And as you well know, I mean, basically, people weren't, borders were not granted access for visas to China throughout most of the pandemic. I think even Jim Farley, or Mary Barra only got there for the first time, a month or two before I did. And that's with multibillion dollar investments of Ford and GM in China. So you know, it's been very tough to get back to China. It was wonderful to be back. I have a lot of great friends there, wonderful memories, tremendous respect for the country, the culture, the history, and, wow, seeing where the OEMs in China have come over these past years, and even where I left off pre COVID to now and with EVs and the quality of design and product and technology was very eye opening.

It always struck me whether it was a trip to a Shanghai or Beijing Auto Show, every time that I returned to China on an annual basis, it seemed that, you mentioned dog years with Brazil, it seemed they went forward dog years, within one year, the level of advancement, the level of technology, the level of sophistication. Are you still seeing that?

Yes, I think there is a there's a sense of there's been a sense of a shot clock in China for a long time to catch up with technology standards and wealth disparity with the US and other parts of the world. But I think if anything, that sense of urgency has accelerated in many ways over these past few years.

So tell me what you're doing now. Where's your focus now?

So I returned to the US around 2014 primarily to be closer to family and, particularly, the older generation that was in their 90s at that time, and had missed a lot of time with family during the 20 years abroad. Yeah, never expected, I should say, to be abroad for 20 years. 

Right.

The thought was go to Brazil, found a business, be able to, you know, have it up and running and go back and forth. Several years out and same in China, but the fact is, it does not work out that way. You know, in emerging market, like Cortés in Mexico, you know, where you burn the boats at the beach. I mean, it's all very intensive, operating in an emerging market. And so the main focus was coming back and being having time with family towards that tail in the older generation's lifespan and that was wonderful and very meaningful, including getting some very good audio histories with my grandmother in her 90s. But then somehow, I started buying dealerships and acquiring dealerships and building a group here it was, without a grand vision perhaps the beginning just you know starting step by step but then the vision began to crystallize into building a regional dealership group which is called McClarty Automotive Group. And based out of Little Rock, Arkansas, which is our family's hometown, as you know, and surrounding states. And that morphed over time and to actually buying back dealerships that my father and his partners sold in the '90s to Asbury, and a lot of great relationships with the Asbury team and David Holt. And we mentioned George Karolis and a lot of the old folks from going back 20 years, sure. But the business really developed with some of those acquisitions, both from privately held family businesses that were selling, as well as public divested tours, and at the same time, maintain the business links with China, Brazil, and Mexico as well.

So where are we today? Give us a little bit of the lay of the land of the McLarty Automotive Group.

So McCarty Automotive Group has grown from zero, obviously, in 2014, to one of the top 20 dealer groups in the country. Hard to believe. But, 

Congratulations.

Thank you, a lot, lot has taken place over the last seven or eight years. Wonderful team. We're at a point now of when we buy new stores, or do add points, almost exclusively internal promotion of several thousand team members, and being able to give people further opportunities to grow and expand within our organization, which is obviously very different. Where we started out revenues of 2 billion plus and a diversity of excellent brands, we're very proud to represent our respective markets.

Little easier to do business here now, right? And burning boats on beaches in Brazil.

It's nice to be able to do a meeting in English, I have to admit. Yes, it takes, it takes a little less brainpower being able to focus on what you're saying, rather than making sure you're saying it with the proper conjugations.

So let's talk about what you're seeing in the markets and trends, given that you're in the mix, and you've watched what we all have watched over the course of the last year or two and the phenomena of what we would say, you know, COVID, or post COVID?

Well, that's, that's a good question. It's a tough one, as you know, because there have been so many trends shifting. At the same time, I mean, the big mega trends that I would see, and I think we all see is where things go with power trains from ICE to EV. If that was the only trend that in and of itself is once in a century shift that's taking place. Obviously, you're seeing that in a very big way in China drew back to my time there a few weeks ago, and just the preponderance of EVs and, notably EV brands that nobody in the US has ever heard of yet all over the streets there and increasingly, around the world. We've got the question of how do we kind of, the Fed, the economy, what comes next with a lot of debate right now about soft landing, hard landing recession? Personally, I'm taking a pretty conservative approach. Because I think you have smart people with very different views on that trend and where we go with the next economic cycle. And the understanding that this economic cycle is pretty different from what we've ever seen, given it's against the backdrop of the pandemic, its connection to labor markets, and Fed stimulus that's really unprecedented outside of a period of World War when you look at it as a percent of GDP. So yeah, I could go on, but those are some of the big trends that I see. And again, the fact they're all happening at once is quite notable, I think, there it's a higher degree of humility than usual, that if anything, these last years have taught us all to have a lot of respect for the unexpected, and not having a crystal ball.

It almost sounds like an emerging market.

It maybe the emerging market experience will be something that is beneficial in that regard. You know, given that we're in somewhat unchartered territory, in some ways.

Yeah, the mix of of rates and changing circumstances and relative to where this this market in North America has been over the course of the last number of decades is relatively consistent. 

Right. 

This is very inconsistent.

That's perfectly said and I could not agree more. I think it is, it's potentially a bit of a paradigm shift. And I think it's hard to recognize big changes, stairstep changes, or paradigm shifts, when one has had a fairly status quo environment for many decades before, right? 

So how do you, how do you manage around that? Hold on everyday?

Well, a couple things. Yeah, right. Take it a day at a time first of all. Don't,

Right.

Don't get too smart and start trying to think I have some unique insight and where, what the arc of all this is three to five years out. So acquisitions have been quite conservative, steady and growing and continuing to acquire and do add points, but not betting the farm, thinking that this all continues in perpetuity, or there's a new normal, much higher profitability for longer, but also not to hunker down too much and be overly defensive, but just conservative and steady in terms of growth, really focused on the team. Throughout this period, we did no furloughs or layoffs. Maintained the entire team and it continued to support really industry leading health benefits, more training support, we've not used the auto term we've not jacked with or changed pay plans, and really try to support our team and maintain the organization and grow it throughout this period. And that, as you well know is, is really the key. And to build a conservative balance sheet. We've effectively taken out all the debt from our balance sheet fully equitized the balance sheet through this period. So you know the outsized profitability during COVID rather than develop new hobbies or, or do things outside of the business, concentrated 100% of that outsize profit in the business to grow the business facilities and particularly, as I noted, to equitize the balance sheet, and to make sure that we own as much of our property and have site control. Now 85% of the locations where we operate, we have site control, and the mortgages are a fixed-rate mortgages, hearkening back to pre COVID and right, we fixed those at just above 2% back in the day. 

Brilliant. 

And so I've tried to just, you know, come what may and you know, with the changes and different questions that are out there right now in the industry, the economy to be positioned well for whatever comes next.

Are you in the market to continue to expand? I mean, you just alluded to it a moment ago, but, yeah.

Absolutely. We actually just closed on two additional stores over the last few months, and are actively working as always on several other acquisitions and add points right now, both here and in Brazil, where we opened up two new Toyota add points in São Paulo earlier this year. And we're just awarded a BYD China OEM franchise. It's one of their first ones in Brazil as part of their market entry there.

How many dealerships do you have now in South America?

It's about the same in both markets, approximately 30. Depending on how you count the rooftops and break out Stellantis and so forth.

So you're still splitting your time between the two continents then?

I do and in Asia but the reality is with 20 years of operating experience in Brazil, and having worked day in day out with the team there one of the really magical things in this business is when you develop that level of trust and really strong relationships and we've been through a lot down there as I noted and there's a lot more you know, we had time that we've kind of trial by fire as a team, so it's a very stable committed strong team there. We do video conferences weekly and miss spending more time in Brazil but you know, that's that's how we've operated throughout COVID. It's quite telling throughout COVID and when travel was restricted. We operated and performed very well in Brazil, even remotely thousands of miles away with weekly video conferences and anything in between that we needed to as the situation required it.

We know your, I know your father so well. And I know that he he's extremely interested in how the business is operating, always has been. Does your phone sometimes ring and is there maybe some parental advice on the other end of the line, or does he just kind of let you do your own thing?

More of the latter, I would say. We talked this morning, during the commute and talk every day. But I think particularly for the international side, I mean, there's naturally interest in those markets, I think for him and so many people just because they are so different. So people are curious, you know, dad was very supportive came to Brazil a couple of times when I was living and working down there, came over to China once or twice as well. So he has first hand knowledge of those markets, as well as through his other travels unrelated to auto. But it's, he knows a lot of people, particularly in Brazil, and has met them and knows what a great group it is of people and everything we've been through. So we always enjoy, I'll always enjoy being able to give him positive updates and news about what's going on. You know, when I come back from China and some of the changes there are more the day to day in Brazil and some of the successes the teams having there.

It's always good to focus on the positive when you give a report to your father to, I'm sure, anyone's father.

Sounds like you've learned that lesson early as did I.

I have, I have. A couple of fun things to close out. You mentioned him earlier, but I know that your relationship with George Karolis, president of Presidio Group, goes back to the, to the mid '90s, right? And all the things that you've done since since then together. Tell me a little bit about your experiences with him.

Well, George and I first met, if I recall, it's going pretty far back in the ether now, as you noted, but in the '90s when George was leading the due diligence team, on behalf of Asbury acquiring, the quote unquote family dealerships were owned by my father, and his partners at that time in Arkansas. And so that was our first, we worked together fairly intensively during that short period. And then of course, always kept in good touch and the relationship developed from there. I think the world of George, wonderful guy, and was so glad when you all linked up and your partnership together with Brody, and it's such a great crew at Presidio. So we've been through a number of chapters together, including his move from Asbury after many years there to work and help to develop the Presidio business as well. And it's that we both had a good laugh, you know, about the way things come around full circle in such unexpected ways. I mean, who would have thought here over 20 years later, that I would be coming back from 20 years internationally. 

Right.

And reacquiring the same dealerships that had been owned by the previous generation, the family and partners from Asbury that George had been involved in purchasing back in the mid '90s. It's and that there's been real beauty to that, as you might imagine. And for me, personally, being able to do that, after all these years, and being able to continue to work with George I'll be in different capacities nowadays. It's just one of life's great pleasures in ways that we never could have imagined. When we first crossed paths.

It's probably a Chinese proverb bark that life comes full circle, maybe it's in a different language.

And one thing, one thing I've learned from all the years in China, everything is a Chinese proverb.

Well, and speaking of your father, he also, there was the excellent opportunity of him presenting, introducing President Bush at the Presidio conference a few years ago, and I know he just did a phenomenal job with that, to no one's surprise.

Well, he enjoyed that very much I enjoyed being there. And particularly coming through the pandemic that was one of the early events, right? That we were able to get back together in such a large group, and be together after being kind of hunkered down a bit during the pandemic. So that he enjoyed that very much. And really, as you all know, treasures relationships and has had a relationship with the Bush family going back to the previous generation as well. And when he was a young man, so I think there was particular meaning in that day for him as well.

Wonderful. What a pleasure to catch up with you again, please give our best to your family. And we look forward to seeing all of the growth opportunities that are in front of you. That's a Chinese proverb as well.

We'll look it up. Jason, thanks so much. It's great to be with you and really appreciate the time. 

Thank you. Thanks again to my guest, Mark McLarty, and thanks for listening to Full Throttle. Come back to us later in the month for our next interview on this platform. Suggestions? Email me at jstein@thepresidiogroup.com and to learn more about the Presidio group, go to thepresidiogroup.com or follow us on LinkedIn. Thanks again for listening