Michael Morais became the President of the Open Road Auto Group in April of this year. He joined the group in 1999 selling Hondas as a second job while working as a police officer. Morais, who once worked personal security for Bruce Springsteen, has displayed a knack for hard work, a mind for business and a demeanor that’s both articulate and engaging.

Majoring in accounting in college along with a lifetime of experience working in restaurants and bartending taught him how to interact with customers. Morais discovered he loved the automotive retail business. Working only three days a week, he was averaging about 10 sales a month.

Later, he convinced Open Road founder and CEO – and his father-in-law – W. Rodman “Rod” Ryan to let him run a newly acquired and troubled Acura store in 2001. The first month, the store – which had averaged 400 new sales a year — sold 100 new Acuras. Within a year, the Acura store was number three in the country while winning the brand’s coveted Precision award. A couple of years later, he was running all three of Open Road’s Japanese import dealerships, moving the Honda store to number one in the country while selling more than 5,000 vehicles.

After overseeing the successful acquisition of several dealerships, Morais was named COO in 2010. During one of the worst recessions history when other dealerships were cutting back or closing, Open Road grew its revenue more than $150 million with disciplined processes. Meanwhile, Morais has served on numerous dealer councils including a stint as chairman of Mazda’s national dealer council.

Today the group, which Ryan started as a Honda motorcycle dealership in 1972, has 16 dealerships in New York and New Jersey selling Acura, Audi, BMW, Honda, Mazda, Mercedes Benz, MINI, Smart and Volkswagen. It sold more than 29,000 vehicles in 2013 generating more than $1 billion in revenue.

Morais credits his father-in-law, whom he says has a tremendous mind for business and a good heart, for mentoring and supporting him the last several years. A strong executive team has Open Road positioned well for the future as it continues to look for new dealerships and brands to add to its portfolio.

Dealer magazine recently spoke with Morais about his philosophy of leadership and the future of Open Road, as he was watching his two boys on a Sunday afternoon after coaching Little League baseball practice.

A Dealer magazine exclusive interview with Michael Morais

Michael, Open Road finished 2013 with more than $1 billion in total revenue selling more than 29,000 vehicles. That’s a good year.

We’ve had a very good 24 months with solid growth. We’ve spent that time getting our accountabilities in order because we want to be ready to continue growing. So, we took a hard look at what the public groups do in regards to inventory management, cash flow management, and frozen assets – areas that we can control and make ourselves a better group.

In 2012, still a difficult environment for dealers, you were able to increase your revenue by $150 million. How did you pull that off?

First of all, we tackled our pre-owned operations. But much of it is brand-related. Our brands really didn’t suffer the way the domestic brands did in 2009 and 2010. We don’t have any of those in our stable – which is something we plan on changing this year. We’re going to be diversifying our portfolio moving forward.

At that time, in 2010, we had Japanese imports and German luxury brands. It was really in 2011 through the midway of 2012 when the Germans started to falter and go through the recession – especially in the Northeast. BMW really started rebounding last year and into this year.

For me, that was when things really started to turn around and we began taking more care and having more concern over our pre-owned inventory.

For BMW, when they put on that last quarter push we would see a surge of $6 million to $10 million in pre-owned inventory for each individual store because were taking in all those off lease vehicles.

Then it gets compounded in the Northeast – especially in the first quarter because the incentives slow down.

The fiscal year has just closed and the OEMs aren’t ready to fire back up until President’s Day.

So, we were making these huge year-end quarterly bonuses with BMW and then giving it all back in the first quarter because of our wholesale losses.

How did you resolve that?

We looked at how the public dealer groups operated. One, we capped our inventory at 45-days supply of sales.
Let’s say we deliver 100 retail units a month on average – we’re only going to stock 150 BMWs. Assuming the average price of those 150 units is $30,000 – that’s a $4.5 million cap. The store can’t exceed that cap. For us, it’s 60 days on a non-certified vehicle and 75 days on a certified – anything exceeding that, the store has to be under the cap.

This insures we turn anywhere from 60% to 75% of our inventory each month. Wholesale losses are minimized and you have tremendous surges in revenue.

It was a trial by error for us as saw we had to forge a better system for ourselves.

So this year, through March, we’re $1 million below our cap in our BMW stores and we have no inventory that’s been on the lot for more than 65 days. And our profits are surging.

What about areas in the dealership?

From a management perspective, we’ve worked hard to transform our group from operating as 16 individual dealerships to being a corporation that owns and manages 17 dealerships.

One of the things we do differently today is we have our own independent homegrown audit team.

We have 17 stores divided into four divisions – four stores per division (except for one division that has five obviously). But each store has its own business model. We don’t have a centralized accounting system because our geography prohibits it. With stores in New York and New Jersey we have different tax laws and other laws to manage.

Each store has to stand on its own and provide a return on investment. If a store isn’t profitable we’ll work to fix it – we’re not just going to put a band aide on it because the other 16 stores are profitable. It has to perform.

Each store has its own general manager, office manager and department managers and operates according to a traditional dealership business model. Each store is in a division that has its own vice president and controller.

The division controllers report to our vice president of accounting who is a 20 plus year employee at Open Road and started as an office manager in one of our BMW stores.

She knows all of the mistakes, the processes and the evolution of those processes as well as knowing each of our stores intimately. And that’s true with most of our executives.

Our low turnover is one of the strengths of our company.

Turnover is one of the problems just about every dealer executives mentions when I talk to them. You’re saying Open Road has been able to solve that. What’s your secret?

Well, Mercedes Benz is probably doing it best right now. You’ve heard Steve Cannon (president and CEO of Mercedes Benz North America) mention that customer satisfaction is our focus.

But the first thing Mercedes did to help with customer satisfaction was to bring in an agency to help its dealers establish a basis for employee satisfaction.

They said, “If you’re not happy, you’re not going to take care of our customers.” We all looked at each other and said, “Boy, isn’t that a simple statement.”

I think the initiative – Customer One — began in 2012. But it wasn’t about the customer at first. It was about the employees.

They sent a consultant who surveyed all of our employees and measured employee satisfaction. For the dealership to get the feedback and results, the dealer principal had to be at the meeting. It was going to take about four hours.

We thought “Great. Another factory program – but let’s go ahead and indulge them.” They did a great job creating an environment in which the employees could talk openly. I sat there and listened to what our employees had to say.

What did you learn?

What came out of that meeting was that we had poor communication. Our employees said they never got to talk with the executives and didn’t know what was going on with Open Road. This was our service and parts employees.

We established a meeting that was respectful to them. It was monthly at 6:45 am before our customers start coming in. We catered breakfast in and everybody came – cashiers, valet’s parts, service advisors, salespeople.

Describe the meetings.

Well, we talked about the stores, about our sales rankings and where we stood with Mercedes’ Best of the Best program.

Within one year of starting those meetings, I’m happy to say, Open Road was awarded the Best of Best by Mercedes – one of its most prestigious awards. It was about customer satisfaction but took into account all of the metrics of running a solid dealership – sales, profitability, customer satisfaction, employee satisfaction, training.

At first, the meetings were the typical appropriate corporate affairs. But after a while, they became more informal and casual with a lot more Q&A. There was one meeting where emergency crews had to shut down the freeway because of a bad accident.

Meanwhile, a large helicopter flew in and landed about 50 yards away from the store. So, here I am talking to a room of 100 people and nobody is paying attention to me. So, we stopped and all watched what was happening.

It turned into an informal gathering. The next meeting became more informal with more open dialogue in which employees were sharing ideas on different areas.

Over time, our Mercedes representative came to a meeting, our HR director came as did Mr. Ryan, (company founder and CEO). That helped establish with our employees an overwhelming sense of respect – that we respected them. And that’s what we want them to give our employees.

Also through the meetings, our employees are able to hear from me what I expect from them. We certainly have processes but it’s about the customer. So if they see a customer needing help, that becomes the priority.

I’ve been reading a lot about Alan Mulally (Ford’s CEO and President) and the emphasis he puts on communication. I want to do the same. I’m going to make it a point as president to be in one of our dealerships three days a week which means I should be able to visit each store twice a month.

You started as a sales associate 16 years ago with the Open Road Group. Did you always want to be in the car business?

You’re right. I started with the Honda store in 1999. Before that, I grew up in Staten Island raised by a single mom. Her, my sister and I worked at least two jobs our entire lives. I was bussing tables, delivering newspapers and cutting grass when I was 13. I worked for a lot of different people and saw what I liked and didn’t like.

In college, I studied accounting. In my senior year, I took an internship with the IRS and knew after the first week what I didn’t want to do – be an accountant.

I decided to take a law enforcement exam which I passed. I became a law enforcement officer in New Jersey. As the story goes, during that time, I worked security for Bruce Springsteen and was security at his personal residence.

So how did you end up working in a Honda dealership?

I met my wife 18 years ago on a blind date and she happened to be Rod Ryan’s daughter – so I’m Rod’s son-in-law.

After a while, Rod started talking to me about working at one of the dealerships. He said he had five dealerships and a daughter who was a school teacher.

He’s a very traditional man and told me I could start out working the sales floor. Most of my side security work had dried up because it was winter so I decided to do it.

I would come into the store after working my midnight shift as a police officer and go out to the showroom and start selling.

I was working three days a week selling 10 cars a month and loving it.

It sounds like the two of you have a great relationship.

Rod’s been my mentor. He has a tremendous mind for business and a wonderful heart. The last 10 years he’s taken the time to support me and teach me. There were ideas I had at the time about moving to the Internet that I had to convince Rod about. He was 58 at the time and was wondering why we were wasting time and money on it.

But those were private conversations we had. He always supported me in front of my colleagues.

For example, we were the innovators of Insta-Quote which was later sold. Our Internet and BDC manager had invented it – we were writing our own code for our websites.

Rod treated me the way I now treat our executives and colleagues – -but he’s had to remind me on occasion. Years ago we had a vice president who wanted to build our own photo booths so we could take pictures of our pre-owned inventory. And I was opposed to it. Rod reminded about the Internet.

He said, “I learned that if I wanted to be a partner with you, I had to trust you even when I disagreed with you.” So I did the same with our vice president and you know, he was right. Today we have one of the better processes for handling pictures of our inventory.

That’s the kind of president I want to be. I want our people to be passionate and know that they have our support.

Your first general management position was at the Acura store.

That’s right. Rod bought an Acura store in Wayne, NJ in 2001. On his way to the closing, Rod dropped me off at the curb and said, “Don’t buy anything. Don’t spend any money. Just sell cars.”

We sold 100 cars our first month in a store that averaged 400 sales a year.

It was a troubled store when he bought it. It didn’t have a general manager and several employees had recently left. I suggested to Rod that I would leave my law enforcement job for the chance to run the Acura store.

Within a year, it had become the number three Acura store in the country and for three consecutive years it was one of Acura’s Precision winners.

Later, we were actually on a flight to Hawaii to celebrate with Acura our winning the Precision award when Rod suggested I go back to the Honda store which was having problems at the time and run that.

I was making great money with the Acura store and didn’t really want to do that. I suggested he make me a vice president and let me run all three of our Japanese import stores. He wasn’t sure about that and so we went back and forth about two weeks before he agreed.

That Honda store became number one in the country and has been number one in the Northeast for about six out of the last ten years. It’s our flagship store and has been selling more than 5,000 vehicles a year.

You’ve had a strong run the last several years, adding high profile stores such as Mercedes Benz in Bridgewater and the Audi Manhattan store. Meanwhile, you became COO in 2010.

I am proud of our accomplishments. When you work for someone who lets you chase your dream, you attack it with passion.

There’s nothing more motivating than giving your people the opportunity to grow. If you don’t give them that, you’re cutting off their creativity.

And I’ll tell you, we’re ready to grow again. We’ve had an incredible three years but it’s taken a lot of hard work from our team. We’re looking to move into new markets with opportunities that promise good growth with solid fundamentals implementing our disciplines and processes. Growing as a company provides opportunities for our employees to grow also.

I often hear from dealers that attracting new employees is one of their biggest challenges. Is it the same for you?

We’re finally making the adjustments that’s going to allow us to make inroads in figuring out how to attract the millennials. Some of it we’ve learned from Google.

It’s not the career fairs at the colleges any more.

I was the vice president of the Honda ad association and they took us to Google. I was watching kids on skateboards and laughing as I was thinking, this is where our new employees are.

We need to make our dealerships a cool place to be. They need to attract people. Another thing we’ve done is hire young people to work events – not so much to sell cars, but to act as influencers for potential employees.

You have to have a cool business model using tools such as the iPads that Audi has mandated as part of their Progressive Retail program. Audi is a brand that’s attracting a more youthful employee. We had our A-3 event the other night in our Audi Manhattan store and Audi’s President Scott Keogh and Mark Del Rosso, the COO and vice president came. Our employees spent time with them talking and showing how we use the iPads in the store. Kids don’t want a PC any more. It’s things like this that’s going to attract the new employees.

And that’s one of the reasons I’m excited about the future for Open Road. This next decade is going to be strong for us.