The Collectibles (17 page)

“Yes, three creditors could force an involuntary petition of bankruptcy.”

“And Joe, how can the bank have confidence that these stores are going to suddenly turn around and become profitable, and that's how we'll get paid back? What if they don't?”

“All good questions,” Joe said. “It's frustrating as hell, isn't it?”

“It sure is,” Barry replied. “It's a huge problem.”

“Well, let's sit down and keep working at solving it,” Joe said. “It can be done. And it beats the hell out of the alternatives.” He looked at his watch and smiled, noticing that it was almost four o'clock. They all took their seats around the table just as they heard a knock.

“This is Alex Herman,” Joe said to everyone. “With your permission, Tom, I invited him to join us.”

“Glad to meet you, Mr. Herman,” Tom said, standing up and shaking his hand. “Happy to have you join us. Sit anywhere you like.” Alex went around the room, then took a seat at the end of the table facing Tom.

“You have Mr. Herman's report,” Joe said. “I've known Alex and worked with him on automobile turnarounds for several years. I met him when we both were asked to speak at a JD Power Super Round Table for mega-dealers in Atlanta. He's been in the business for a lot of years, and in addition to knowing what he's doing, he can be trusted.”

“Thank you, Joe.”

“Alex, I have represented to these folks that while you've found substantial problems with these dealerships, you believe they have the potential to be successful. Successful enough, in fact, to generate sufficient net profit to pay the bank back.”

“First, let me say that I am pleased to meet you, Mr. Wilson,” he said, looking directly at Preston. “You have done a commendable job in building these six stores. I am particularly impressed with the way you've managed the mixes of the product, as well as your relationships with the manufacturers. In my experience, it's very unusual to see stores in the bad financial shape that these stores are in and still have the loyalty and support of the manufacturers. Each of these could have stopped sending product any time they wanted to. To a manufacturer, however, each has allowed the pipeline to stay open, knowing that if they shut it off, the dealerships would die. They know their cars have been sold. And they obviously want to keep the franchises open. That means they still have confidence in you, Mr. Wilson, which, under the circumstances, says a lot.

“I visited each of the sites. Every one is in a good location. The dynamics are good, the streets are good, and each of the stores is positioned perfectly in between other dealerships who are selling good product, but not necessarily in competition. For example, East Bay, which is doing great, by the way, and very profitable, is selling Porsche and Audi in between a smaller Mitsubishi store and a small Volvo store. The sports car traffic is generated, but the surrounding stores are no real competition. All six of the stores are well-situated.

“From an operational point of view, Manhattan Mercedes, Atlanta Motors and East Bay are all doing pretty well. They've got good programs and the GMs and sales managers there are pretty good. Their service departments are strong, and so are their warranty departments. Each department is an independent profit center, as it should be.

“Houston, San Francisco and Charlottetown suck from an operational point of view.” The room erupted in laughter, everyone appreciating Alex's candor. “I would fire the general managers, as well as the entire bookkeeping department in Charlottetown and San Francisco. I can go into the details with you later, if you want. These stores are potential gold mines, but they've been dragged down by incompetent management and lack of controls. It's not the sales department that's the problem. It's the lack of management, financially and otherwise. Bad people obscure the solidity. What these three stores need is fresh, strong talent in virtually all the management and financial positions.

“There are a lot of other ways that the control of operations can be exercised. First of all, with due respect to Mr. Fitzgerald, the CEO needs to be visiting these stores constantly to know what is really going on. A conference TV could be set up to permit the head office to be talking to these dealerships weekly, if not daily. I'd like to see a lot more open communication with the bank on a constant basis. The dealership and the bank need to work together to constantly understand what is going on. If you answer the questions on the daily snapshot form honestly, there's no room to wiggle and everybody gets a clear picture.

“I know this has been brief, and to some extent, oversimplified, but, as Joe said, you have my report. The point I would make is the basic ingredients – location and franchises of value, and the support of the manufacturers – are in place. They can clearly be turned around with good management and proper controls, because they have the capacity to be profitable, highly profitable.”

“Thank you, Alex,” Joe said. He could tell, looking around the room, that the bankers were impressed. The real question in Joe's mind was whether Alex had been persuasive. Joe knew that to convince a man against his will leaves an unconvinced man still, and he was well aware of the negative mindset many of these bankers would have a hard time overcoming. On the other hand, he felt that Bobby, at least, got Alex's point that the dealerships had the capacity to ultimately be profitable.

“We've covered a lot of ground today,” Joe said. “I appreciate your patience.”

Then he turned to his right and looked at Preston. “Preston, the one man these folks have not heard from is you. As I said to you after lunch, this company truly needs your leadership, your will, and your commitment to make this work. Talk to these people.”

 

Preston did not know where to start. He froze, saying nothing, his head spinning. The room was silent. Finally, Preston pulled himself up and looked at everyone at the table. Then he stared out the windows, and back at the group.

“I love looking out the windows from up here,” Preston began. “It's such a great view, looking down over everything. I have a stunning view from my office in New York, too. I love it. What I realize now is that I needed to be looking out from the ground floor, not the top floor. I needed to be going into my stores more and looking at everything. I needed to understand what was really going on and what I could do to help. I didn't do that. Instead, I just looked down, thinking the view was clear.

“I've been doing a lot of thinking since my high-priced lawyers in New York so eloquently informed me that my company was in terrible financial shape and that there was nothing they nor I could do about it except go bankrupt. I don't want to go bankrupt. I've made a lot of mistakes. I owe you folks and others a truckload of money. If I can correct those mistakes, if I can pay you back the money I owe you, if I can make my business successful again, then they will only be mistakes. Mistakes that have been corrected. If I can correct these mistakes, I will not have failed. I don't want to fail. Please give me a chance to correct these mistakes. You won't be sorry you did.”

The room was silent. “This has been quite a day,” Tom Gallagher said, breaking the silence. “I suggest we all go home and think about this. Bobby, I would appreciate your convening a meeting tomorrow afternoon with Lou, Paul, Barry, Debra, Floyd, and myself. Oh, and ask Sally to join us.”

Pointing at the whiteboard and holding up one of the books of the plan, Tom said, looking at Lou, “I ask that you and Paul take all the information and work on that tonight and tomorrow morning.” He then looked at Joe. “If any of my folks need to call you, Alex, or Casey in the morning for clarification on any of these points, may they do so?”

“Absolutely,” Joe replied. “We're all spending the night at the Sheraton. We can come back here in the morning, if you like.”

Joe, Preston, Casey, and Alex gathered the books and moved them to Conference Room C, stacking them at one end. Joe asked Casey to take the yellow box, to return the keys to the dealerships. After they rode the elevators down to the outside of the building. Casey said, “I'm starved. How about a big steak at Morton's?”

They smiled and headed for Morton's on foot.

B
y the end of dinner, the crowd at Morton's had thinned out and the room had become quieter. Preston and Casey were having after-dinner drinks and engaged in a serious discussion of their business. Joe was pleased to hear them talking about that rather than rehashing the day.

With Preston and Casey totally engrossed, Joe was working on Alex. “You did a good job today.”

Alex raised his glass of Merlot and nodded.

“You know what Wilson needs,” Joe said.

“Here it comes,” Alex replied. “I like Atomic Motors. They've been good to me. It's been a good run. And I've accomplished a lot there.”

“It's your call,” Joe said. “I haven't even mentioned this to Preston or Casey. It's just that in the event that you may feel that you have largely finished your work at Atomic, you may want to consider a new challenge. Wilson needs an overall operations manager with experience, understanding and horsepower. You know that.”

“You asked me to analyze the stores from an operational point of view. I did that. I'm sure you got your time at bat today, and your plan, as usual, was dynamite, but we don't know what the bank is going to do, do we? There may not be any business to be operations manager of.”

“Between us, I believe the bank is going to think hard about all the information they've been asked to digest. Wilson has some problems, but so do they. They've got a lot of explaining to do with their regulators. They need help, too. They don't want to lend more money, but their other choices are not viable. Bankruptcy would be a mess. Lawyers would have a field day. Foreclosure only leaves the bank with more problems, and in the end, the bank won't get what it wants and needs most – to be repaid. Our plan is their best hope for that.”

“I agree with all that, Joe, and these are good guys, although a little screwed up. But what has it got to do with me?”

“Alex, you've been a hell of a field major for a lot of years. Have you ever thought of being a colonel? Or even a general? This is an opportunity – assuming Preston agrees, which he will – for you to be group vice president in charge of all operations. If you listen to your own report, you believe these dealerships have the capacity to be highly profitable. Isn't it time for you to be providing hands-on leadership, with a piece of the holding company in the bargain?”

“How big a piece?” Alex asked, pouring himself some more wine.

“Fifteen percent?” Joe replied. “No buy-in.”

“Hmm, that's interesting,” Alex said. “But again, we don't know that the bank will allow these businesses to continue.”

“The bank is going to meet all day tomorrow and thrash this around internally and with their lawyers. We know what the lawyers are going to argue, but I believe, while the bank will scale down the loans I've asked for, they will, in the end, buy the program if they know there will be a major management change. They need to know that there will be experience at the wheel, somebody who will communicate with them, work with them. That's you.”

“Well, now that you've got my future planned, how much will I be paid?”

“Ask Alex Herman,” Joe replied. “He makes those kinds of management decisions. He knows what's best for the company, and he understands bonus structures. Alex, have a chat with Preston; I want to talk with Casey for a minute.”

Alex got up, moved around the large round table, and went over to Casey. “I don't mean to interrupt you guys, but the Captain would like to have a few words with you, Casey. Can we switch seats?”

“Sure.” Casey sat down with Joe, carrying a large plate of German chocolate cake with ice cream on the side.

“Hi, Joe,” Casey said. “You did a masterful job today. Unbelievable. I learned a lot, too.”

“Thanks. It's a process, and we're moving along. I need to talk with you about part of that process.”

“Go ahead.”

“Casey, assuming that the bank lets the business run, what do you think is the most important thing needed to make it work?”

“More dinners like this,” Casey said, as he attacked his dessert.

“Right. We can talk about this in the morning.”

“Let's get it over with tonight. You want me fired, right, Joe? I'll do whatever you ask.”

“No, I don't want you fired. I just want you to answer my question. What do these stores need most right now under these circumstances?”

“To begin with, we obviously need sufficient capital. In terms of management, each store needs a strong general manager – a hands-on type the bank will respect. And each department needs to be an independent profit center. Overall we need better controls. All of which I should have addressed.”

“If the bank gives you the chance, do you feel you're in a position to provide that now?” Joe asked.

“Probably not, although honestly, I do think I have a lot to add. Also, I never heard Preston talk like he did today in my whole life.”

“What do you think is in the best interest of the company?”

“I think we need a guy like Alex to take charge and run the place. That's what I think.”

“How would you feel about working with him? Retaining your position as CFO and having Alex be a VP/COO in charge of overall operations.”

“I'd love it, Joe. I'd love it. We could really get things organized and, as Preston said, we could learn from our mistakes. Preston's been talking to me all night about that. I'm telling you, he's really into it. The real question is, will we get the chance?”

“One more thing, Casey,” Joe said. “I think it's time you had a piece of this company. You've worked long and hard and you've been totally loyal to Preston and the business. How would you feel about 15 percent, no buy-in?”

Casey looked up at Joe, dead serious for a change. “It would really mean a lot to me. It would mean a lot to be able to say that I'm an owner. It would also mean a lot to my wife. I guess it would be an answer to a prayer if all this could work out. I hope we're not dreaming.”

The waiter brought the check, which Preston picked up. Joe stood, raised his wine glass, and said, “Gentlemen, we've had a good dinner and a good night. Let's go back to the Sheraton and get some sleep. We've still got work to do tomorrow.”

“Aye, aye, Cap,” Alex said, as they clinked their glasses.

 

On the way to the parking lot, Preston made a point of walking with Joe. “I hope I didn't mess things up in there this afternoon,” he muttered.

“Quite the contrary,” Joe replied. “You spoke from your heart. Nothing like the truth. As my Aunt Lettie used to say, it will set you free. I'm proud of you, Preston.”

“You don't know how much that means to me, and how grateful I am to you. I don't know how this is going to come out, but I'll never forget all you've done for me.”

“Thanks. I don't know how it will come out, either, but I believe the bank is going to struggle with loaning more money and letting the businesses go forward – compounding their risk – unless it has an anchor of stability in terms of management.”

“A guy like Alex, for example?”

“Exactly. And when you talk to him, which I hope you will do tonight, I suggest you ask him what role he would like to play. You'd be damn lucky to get him, and it would be a big risk for him. I'd let him set his own salary, make him VP, general manager of operations, and COO, and give him 15 percent equity in Wilson Holdings with the other 15 percent going to Casey.”

“Fifteen percent to Alex and 15 to Casey? That's 30 percent! I've never given any ownership up.”

“Look at the donut, not the hole. Seventy percent of something is a lot better than 100 percent of nothing. Anything over 66 2⁄3 percent gives you two-thirds majority and all kinds of corporate control. On the other hand, Casey and Alex will work their hearts out and feel that they're really a part – as owners – of turning this company around and growing it. It will be the best investment you've ever made. Besides, not having a guy like Alex running these companies is going to be a deal-breaker with the bank.”

“You're right, you're absolutely right. I'll talk with Casey and then with Alex first thing in the morning.”

“Good,” Joe said. “But do it the other way around. Let Alex know how much you want him and how much you need him and that he will have a direct line to you, as will Casey. Casey will understand that. You're lucky to have such a loyal friend.”