Why have heads not rolled in the global motor trade over the current supply mess? It's a perceptive point raised by Mick Dwan, boss of one of Ireland's leading car distributors at the coalface of the supply crisis.
This time last year showrooms were shut. Amid strict Covid-19 restrictions, dealers could only offer a click-and-collect service. Yet, despite showrooms being open now and order books bulging, the new car market is down 13 per cent.
That's due to the lack of supply of new cars, blamed on a global shortage of semiconductor chips. Dwan believes some blame lies at the wheels of the auto industry.
He is surprised that within the upper echelons of the motor industry there has been no admission of mistakes. “No heads have rolled. Someone got it wrong.”
Dwan reckons chip manufacturers, faced with a surge in demand, have opted to supply their traditional tech customers with whom they had a better relationship and who paid them a fairer price.
Dwan has a better perspective on the situation than most. As the managing director of Gowan Group, the Irish family-owned conglomerate with a portfolio of Irish distribution rights that ranges from cars to household appliances, he contrasts the situation in the motor trade with that in consumer retail.
Asked how the company's electronics division is coping with the global chip shortage he replies: "I'm amazed, because I'm asked this question all the time. We sell consumer electronics, household appliances. We have supply chain issues in terms of costs because of deliveries from China, but we have not had issues around chip shortages. And we've had a bumper number of years in our appliance business because we've had stock. And we're involved in a couple of other businesses, such as in the agri-equipment market, but again we've seen no issues around chips."
Yet when it comes to their motor business, he says: “We are absolutely hamstrung in terms of stock. It’s embarrassing.”
He says the situation is improving but “the new vehicle market [vans and cars combined] would be 170,000 to 180,000 if we could get product. It’s probably going to be 125,000 to 135,000 because of supply.”
This new car shortage is feeding into a used car shortage caused by years of lacklustre new car sales – the critical source of future used stock – along with a collapse in the used import market on the back of Brexit.
“There’s nearly an unwritten rule out there where dealers will give preference to someone with a trade-in over a cash buyer because they need used stock to sell on,” he says.
Dwan points to the auto industry’s devotion to just-in-time manufacturing as a major factor in the current crisis, leaving it vulnerable to supplier problems. He says the motor industry has long been “so resolute on this, and on taking stock out of the channels, at our level, at dealer level and right up to [the manufacturer level], so it really backfired. At the same time cars are also getting so technologically advanced – with some of our models having 3,000 chips or so.”
While supply constraints will curb Gowan Group’s sales potential in 2022, it’s benefitting from a strategic U-turn at carmakers. A decade ago, the industry was busy taking back control of national markets from local importers, under the auspices of cutting out a layer of costs. Manufacturer-owned national sales operations were in fashion.
That business model hasn't delivered on its promise and some carmakers are now handing back control to local importers. Gowan has been well placed to reap the rewards. It has held the Irish franchise for Peugeot since 1969 and Honda since 1984. In the past three years it has added Opel to its portfolio and also taken back Citroen and its DS sub-brand. At the end of 2021, Gowan added Fiat, Alfa Romeo and Jeep to its mix. In total, Gowan controls nearly 10 per cent of the new car market and 25 per cent of the new van market.
Aside from Honda, all are now part of the French car giant Stellantis (formerly PSA), which has been on an aggressive acquisition streak under chief executive Carlos Tavares.
After the Stellantis takeover of Fiat parent FCA, Ireland became one of the first countries where Fiat brands were taken over by a national importer. And that contract went to Gowan Group.
Getting the franchises to fit into the Gowan system hasn’t been easy. First with Citroen, then with Opel and now with Fiat, there have been significant issues with implementing systems, sorting supply, reviewing dealer networks and preparing clear market strategies.
Yet at Stellantis – and Gowan Group – there is a template in place. Peugeot is a success story, built on the back of dramatically improved product that started to arrive in 2017. Its Irish market share has nearly doubled since then.
Stellantis is applying the same game plan at Opel, though Dwan admits its revival is perhaps three years behind Peugeot. As for Fiat, it had been parked up in recent years waiting for a new buyer to invest in product. Now under Stellantis’s control, its revival is set to get under way.
They are dealing with “huge systems issues, marketing issues and cultural issues” and it has been a massive challenge. “There have been no Fiats registered in the first 14 days [of the year] as we’re sorting out system issues, and dealing with production, pricing, and the move to a national importer model, as they never had an importer during the years of FCA.”
He expects it’s going to take three or four months to get this all ironed out.
However, once the systems are in place and they have sorted supply, “I genuinely think Fiat is going to be a winner,” says Dwan. “I’m so encouraged by the quality of the dealers we are talking to and we are benefitting from the major restructurings underway at other brands,” he says.
As to the option for car companies to simply run their Irish operations out the UK, Dwan says any success in the Irish market is down to understanding its unique competitive trends and characteristics, not just throwing a few cars at Ireland from the end of the UK production run.
He admits there is pressure from Stellantis to increase market share across all the brands. “Our objective is to get to about 20 per cent share of the entire new vehicle market – cars and vans – so if the market was 150,000, that’s 30,000 units.” Last year it held a 13 per cent share across its brands.
But Dwan says you need to take it calmly – it’s a long-term game. He is determined not to get involved in the discount game, which damages residual values and brand reputations. “The French and Italians know that most of the issues are on their side. We have thrown massive resources at it to get this thing right. But I said [to Stellantis] this will take time.”
And not every Stellantis wish is going to be met. The car giant has in mind a network of dealerships carrying all its brands and models. “They see this multifranchise Stellantis dealer. We fundamentally disagree with that.”
Dwan says the risk of cannibalising across brands is too great, along with strains on a dealer’s finite working capital and time.
As Gowan owns a dealership on the Navan Road in Dublin, Dwan recognises the major challenges dealers are facing with the advent of online sales channels and reduced servicing needs of electric vehicles (EVs) compared to current combustion engine models.
“In terms of EVs there are estimates that service revenues for dealers could come down 20-30 per cent on a per unit basis and there’s all sorts of data analysis out there. But from a franchise dealer, to bridge that will be about having much better customer retention, which is surprisingly low after the initial sales period. So this is where there is major room to improve, because I don’t think a lot of EVs will be going to the backstreet garages for repair. You should be seeking to have a customer for life, changing their car every three years and working on a cost per month basis.”
On the Government’s targets for nearly 950,000 electric vehicles in the Irish fleet by 2030, Dwan says: “I’d be concerned about the drive towards EVs, they’re just so expensive. If they want to achieve the very ambitious targets they’ve set, Government subsidies are going to have to continue. And you have to ask what that does for Government tax revenue; they’re not getting the duty on fuel, they’re giving away thousands of euros per car between VRT [relief] and SEAI grants. If they said they’re going to reduce subsidies, then that’s going to dampen demand.”
Dwan doesn’t believe the Government EV target for 2030 is realistic.
"I think there's a number of factors at play. I cannot overstate the issues around infrastructure. I know myself personally, I'm driving a plug-in hybrid. If I was in a pure electric car – and I drive around the country – I would be a little nervous about the car going to Cork or to Belfast. I think people are getting more comfortable with electric cars, and we are going down that route, but I think we would be better setting more realistic targets. This thing about having one million vehicles, mathematically it's just not possible."
As for online direct sales by manufacturers, Dwan is quite clear on Gowan’s approach. “We will not be getting involved in selling direct. If we move towards an agency model, the dealer has to survive. The new and used transaction become separate, but our dealers will be our fulfilment partners. We will not be fulfilling vehicle delivery and suchlike.”
He also says the group has no interest in expanding its motor retail operations beyond the Navan Road premises.
Dwan is hugely impressed by Stellantis boss Carlos Tavares and his handling of the massive cultural challenges in bringing together French, German and Italian brands.
For Dwan, managing culture is key to business success. “Culture is huge, I put it right up there at the top. When we’re recruiting people, you are asking ‘will they fit in?’ We’re driven and we’re hungry, but we want people who do the right thing. That’s hugely important and it’s a bit old fashioned, but the family would just like to know who is coming into the key roles.”
Dwan is well tuned to issues in managing a family-owned business. He is part of a Tipperary family that fuelled Munster homes during winter with its Vale Oil business and fuelled Munster children during summer with Dwan's soft drinks.
Studying business at Trinity before qualifying as a chartered accountant with KPMG he was destined to return to the family business, most likely to work in the Vale Oil division. However, the family decided to sell up.
“I’m the eldest of five, I get on well with my siblings, I get on well with my cousins, so it was the right decision, though there was a lot of emotion at the time. We’re now all doing our own thing, which is great because we would have killed each other.”
The decision to sell opened a new career path for Dwan. Joining GE Capital Woodchester in 1991, he became finance director in its Irish division before moving to Gowan Group as finance director in 1998. Within two years he was the group's managing director.
“I think family-owned businesses are a cornerstone of Ireland. There is a huge opportunity and challenge in managing these success stories.”
Of the family behind the Gowan Group, its principal shareholders are Gemma Maughan, whose late husband Con Smith founded the business in 1969, and her four daughters. All take an arms-length approach to the group's operations.
Dwan describes Gowan Group as family-owned but professionally run. The family members hold no executive roles in the business.
“We’ve a very formal family constitution, so we’ve been able to divorce ownership from management. Honestly, the team are very fortunate to have them as shareholders because they’re low key, they’re not greedy, they are conservative.
"A big change two years ago [was] Liam FitzGerald coming in as our chairman, formerly from United Drug. So that was, again, just part of succession planning for the next generation of shareholders."
While motors represent 75 per cent of Gowan Group's business, its other enterprises are performing very strongly thanks to buoyant consumer spending. These include Senator Windows, acquired in 2006, and several kitchen and domestic appliance brands distributed by its Kal Group subsidiary.
Kal has the rights for exclusive distribution of globally recognised brands De Dietrich, Nordmende, KitchenAid, SharkNinja, Franke, Sharp, Nilfisk and Whirlpool among others.
“We’re seeing a very buoyant home improvement and new build market, retrofitting and environmental issues,” says Dwan.
While the group’s portfolio may seem diverse, Dwan is clear that Gowan is not a venture fund and is not interested in chasing the latest hot investment trend if it’s outside the agreed strategy.
"What happened to us during the Celtic Tiger, we probably diversified out of our comfort zone. And that's why when we signed off on our new five-year strategy last year, it was very much to focus on what do we believe we are good [at] and really drive that. So you can see that with motor distribution, you can see that with Kal and with Senator Windows. We're not getting distracted.
“We’ve got so much on our plate and opportunities to grow. In 2021 we would have a €400 million turnover, up from €300 million the previous year. We hope in the next three to four years to be about €600 million.”
Bio: Mick Dwan,
Role: Managing director, Gowan Group
Age: 57
Family: Married to Ruth with three sons: Jack (26) is working in aircraft leasing; Matthew (24) is a trainee chartered accountant with KPMG; and Tom (21) is studying Law and Business at Trinity College.
Hobbies: A passion for sports, particularly rugby, GAA, golf and horse racing. He's a member of Milltown Golf Club (captain in 2018), Rosslare Golf Club, Fitzwilliam Lawn Tennis Club and Lansdowne FC.
Something that won't surprise: With a lifelong interest in business, he has kept up his education, completing a professional diploma in corporate governance in 2018 at UCD Smurfit School
Something that might surprise: A summer in Cape Cod working as a landscape gardener has given him a lifelong passion for gardening – "not an expert but very keen".
