Vehicle dealers RYMCO (Rasamny Younes Motor Company) employ nearly 180 people and rank at the top of Lebanon’s automotive sector. Number one in units sold last year and number two in 2004 to date, they are also the only firm to represent the automotive sector on the Beirut Stock Exchange. In 2003, RYMCO opened a new main showroom and overhauled their communications infrastructure, installing a new corporate website. But more changes are around the corner. Inquiring about RYMCO’s new moves in products and management, Executive talked to sales general manager Fayez Rasamny Jr. and to chief operating officer, Abdo Sweidan.
To start with, please outline the range of your makes and the models you sell.
Fayez Rasamny Jr.: We represent three makes, Nissan, GMC, and Infiniti. For Nissan, we have the Sunny, Pathfinder, the new Murano, 350Z, Micra, and many models to come. For GMC, we have two trucks, Envoy and Yukon. For Infiniti, our main topic is the new showroom, which will open by late October or early November in downtown Beirut; that is in the new residential area of luxury buildings on the seafront strip.
Does it pay off to invest into big new showrooms in Lebanon?
FR: If we want to invest into Infiniti, we have to open a new showroom. This is the branding strategy and we have done our homework. It is profitable, perhaps not over two or three years but to launch a luxury make you have either to invest or not bring it to market.
Would you tell us how much you are investing into the showroom and how much it will cost you to develop the Infiniti brand in Lebanon?
FR: It is an investment of $400,000 in tangible assets and $300,000 in intangibles.
Does the manufacturer give you special incentives supporting that brand introduction?
FR: To be honest, no. We took the initiative to open a new showroom and differentiate Infiniti before Nissan told us to do it. In the future, they will contribute to advertising but this startup investment is 100% RYMCO.
Is the image of Nissan, your main selling make, changing in Lebanon?
FR: Before Carlos Ghosn, Nissan was really a volume seller, except for the SUVs, but now the brand is moving up segment. The brand Nissan is changing, absolutely.
Does the fact that Nissan CEO Carlos Ghosn is of Lebanese descent give you an added advantage in the local market?
FR: Yes, in the upper segment. Mr. Ghosn’s reputation doesn’t really affect the customer who wants to buy a Sunny for a company car. But individuals, who stay on top of the news, have heard many things about the new developments at Nissan that Mr. Ghosn has created over the years.
Can you tell us something about the composition of your sales by customer groups and price range?
FR: Of all sales, 40% are fleet sales and 60% individual customers. In terms of price, 60% is below $16,000. In fleet sales, the margins are really very low. SUVs and upper segment cars have better margins but of course less volume. It makes a balance.
Who are the fleet customers in Lebanon?
FR: Most of them are rental cars.
How does that impact the image of your brand?
FR: That is an important question. One of the reasons why we are not really concentrating on being number one is that we are trying to build a certain brand. That is why, with the new models, we will not sell all of them to rental car companies.
Do you think that this sets you apart from the rest of the industry?
FR: Of course, no one thinks now like we do. I am quite sure of that. Everyone wants to sell cars. We want to set the benchmark.
Do you consider yourself still as part family-driven or as fully institutional in terms of your corporate culture?
FR: As of this year, I consider our company to be fully institutional but we still have to see the results. The family used to have all the management positions in the company. Six months ago, the company hired a new COO [Sweidan] who was chosen for his capabilities and his experience. This COO can hire and fire according to the results and qualifications, even me, if I am not competitive enough and not doing my job. In any major decisions involved in contractual agreements for the company, he will refer to an executive committee or the board of directors. Our main focus is to see our shares appreciating and this company making more profits each year.
You are also the only automotive dealer in Lebanon to be a publicly traded company. Was this a good move?
FR: When you are a family business, you have a ceiling. Now, we don’t have a ceiling. We can grow much faster; we can take professional decisions, not taking into consideration the family. It is a big plus for this company.
Abdo Sweidan: The benefits of going public are immense, through first opening of capital; second appetite from our partners to participate in the buildup of the company as far as capital investment, audit and growth; and third, the ability of this company to be run by corporate interests. Taking all of these together, you find that the uniqueness of RYMCO in this position is its sustainable advantage today over other car dealers.
Aren’t some of these advantages, particularly in attracting capital, at this stage mostly theoretical?
AS: No, they are real. Going public is only a vehicle for us to prove that we can attract more capital and this year, we are attracting fresh capital not only in car trading but also in car financing and other related services.
Some car manufacturers make more money from financing than from manufacturing. Are you planning to introduce something new to the Lebanese market in this respect?
AS: I can tell you one thing: in three years, car dealers who are not financial dealers will not be able to cope. We have to become financial dealers that work with partners to develop products – finance, insurance – that we can add up to our cars for the rest of the dealers.
How many car dealers do you see as surviving in this market three or four years from now?
AS: Seven
FR: I was going to say eight
What will decide which dealers will survival?
AS: It is a matter of putting up the capital today. When I say seven, I have in mind only the seven dealers that are willing to inject capital into their businesses – but not too many dealers are willing to do that. Trading alone is not sustaining the branding requirements of the manufacturers. All dealers are today under corporate identity guidelines. This is an expense.
Are you on a tight leash from the manufacturers?
AS: We are today more like partners than anything else. We share processes.
But Lebanon, even as it is a trend market, is very marginal in size. How much of a chance do you have to influence things such as product policies, service policies, or image campaigns?
AS: Here, our [small] size kills us. We don’t belong to a region. In Lebanon, the only thing that we can build upon is being a trendsetter.
FR: We have models that are not imported to Europe and models that are not imported to the GCC; that’s why we have a lot of models.
But each model has its associated cost base; you need trained technicians and so forth. How much does this situation push your overheads and weigh on your profitability?
AS: That is the $1 million question. I wish we had the answer.
FR: For example, even though we know that we will not sell a lot of them in Lebanon, we have to import models such as the Micra and 350 Z, to prove that Nissan is not only about Sunnys and Pathfinders. It is a question of branding and we are not really looking at the overheads.
But in the long run, you expect to reap returns on these investments because you see yourself as one of the dealers surviving in the market?
AS: It is a basic question that we have to ask ourselves every day. Narrow product lineup, i.e. cash cow, i.e. proper unit separation, i.e. very small market share, or, basket of products, i.e. investment into spare parts, technicians, training, product launch expenses.
The funny thing about it is that there is no in-between solution. The most dangerous thing is to be dependent on one model. After long deliberations, we have started to invest in the future. The future is branding of RYMCO, branding of Nissan, spinning off of Infiniti as a separate brand.
Does the GMC make still figure in your future?
FR: We went to Dubai three months ago and sat with the GMC regional management there. We agreed on a target that is much more than 100% up on our sales from last year and we hired a new brand manager who is only responsible for the GMC sales. Also, like we did with Infiniti, we hired a new communications department only for GMC to study the market for the luxury SUV, which is not large. We are investing in GMC and think we can take a big portion of this segment, especially as we will target fleet sales with the GMC Envoy.
How much does dealership loyalty count versus brand loyalty?
AS: There is a major conflict on how to brand first. Car manufacturers would like to brand their product, of course, for mutual benefit. But we know that in underdeveloped countries the strength of the name of the dealer is what plays a role in the credibility. Especially when we are talking about capital goods, what matters is the continuity, reputation and the credibility of the dealer and his ability to service. And this is what we are trying to create.
How much did you invest in building RYMCO as a brand?
FR: We really invested a lot, in sweat and tears and dollar wise. Over the years, RYMCO was at times number one, then number two, then again number one. There are a lot of intruders. They lowered their prices, dumped cars in the market, then they become number one for a year or two, and then RYMCO comes again. We are going after steady growth.
How vulnerable are you to rumors such as regarding alleged disagreements among the members of the families that built RYMCO?
AS: We are vulnerable, yes, but the vulnerability is lessened because of the nature of shareholding. Had we been strictly family business, then we would have been as vulnerable as any family-owned business. But this company is owned by investors.
Is the distribution of shares today wide or narrow?
FR: It is not concentrated. We have many investors, including financial institutions. 48% of the shares are owned by investors, and out of the 48% more than 50% are held by people who own 1% or more, the rest are scattered.
Mr. Sweidan, do you see yourself as a troubleshooter, entering RYMCO in some parallel way to Carlos Ghosn coming to Nissan?
AS: It is the same analogy, of coming in to reform, restructure, and put the company on the right platform.
What are your expectations in terms of profits? Do you produce future earnings projections to provide to your shareholders?
AS: We have to submit quarterly results and we have a plan for 2004 and the next two years. This plan has three elements, one is margins, two is to reduce debt and three is to increase sales to cash customers.
FR: Our plan is 20-6-60: this means the company plans for 20% market share, 6% operating margin and 60% cash sales, meaning cash and banks.
