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September/October  2004

"It's a Market We'll Come Back to"

The CEO of the World's Largest AGR Company Talks About 
His Company's Next Steps in the States, the Future and 
What Really Happened with Safelite.

by Debra Levy

Gary Lubner looks like he works hard to look like just like any other basic buttoned-down managerial type. The 45-year old South African group chief executive officer of the world’s largest auto glass company runs a company with 1,000 locations in 27 countries and annual sales of more than $1.2 billion USD. But a conversation with Gary Lubner quickly shows you he could definitely hold title as one of the sharpest minds in the AGR business worldwide and would have had quite a career in it, even if it hadn’t been a company his father ran. Dad and all his history aside, Gary Lubner is anything but an ordinary manager.

As part of the unprecedented access Belron accorded AGRR magazine (see related story page 26 and on the web at http://www.agrrmag.com/Belron), I met with Lubner for a far-reaching interview in Holland the last week of June. Excerpts from that interview follow.

Q-Let me start by asking you about your background …
A—As you know, I was born into the glass business. Our organization goes back more than 100 years, and my father and grandfather had been in charge for a long time. It already existed when I was born into it. I worked in glass shops growing up …

Q-Did you kick out windshields in the shop and all those other rites of passage?
A—Yes, I did it all … worked all through school. I went to college and got a degree in accounting then became a CPA with Arthur Andersen. There was never any pressure on me to be in the business. It’s actually always been exciting to me, so it was hard to stay away. Eventually, I moved into finance and then into flat glass sales and marketing in South Africa.

Sixteen years ago, I came to the U.K. and received an MBA at the London Business School.

Q—Not many more prestigious schools out there …
A—It was a good school. After school I joined Belron as strategy director. You can imagine with all the locations in different countries, how difficult bringing strategies to execution could be. That was my job—to implement strategies.

Then I was asked by [then-CEO] John Mason to come to the U.K. John hired me out of business school. Our U.K. operation was our largest, still is, but France will be our largest by next year.

Q—You were the then-president’s son and Mason, a non-family member, hired you to run the U.K.? He must have felt very secure.
A—If you know John, you’d know that was entirely in keeping with his character. He hired me right out of business school.

Q—So once you took over what did you do?
A—We changed consumer behavior. We changed customer thinking. We wanted customers to come to us as specialists, not as mechanics. We wanted them to think of our stores as service centers, not garages. We consolidated call center operations. We worked to change the thinking about windscreen replacement. Our total operation has doubled in size twice since that time.

Q—That’s an incredible amount of growth. Was it all due to the change in consumer behavior?
A—There are basically two ways to grow. There is organic growth in markets we are in. We are doing that successfully. And there is growth by moving into new markets by acquisitions and franchises. We are extremely focused on growth.

Q—Well, I was going to ask you about this later, but since we are on the subject. What happened in the U.S.? There is really no larger market left for Belron. What went wrong with the Safelite deal?
A—[long pause] Fundamentally, the problem was that Belron was a minority shareholder in the company. That was a unique position for us to have. It will never happen again. It was very frustrating.

Q—Several of us were wondering why you didn’t make certain moves that might have been expected …
A—We couldn’t. We were a minority shareholder. It is a position we do not anticipate finding ourselves in again. Also the market was very tough at the time – that didn’t help.

Q—So what’s your current assessment of the U.S. market?
A—The U.S. market is a mess. I don’t know where it’s going. It has two main problems. First, is its pricing. It is difficult to understand and difficult to follow. And you have the tension between cash and insurance pricing. The pricing system doesn’t make sense.

The other huge difference, just a huge difference, is the lack of strength of any brand. When you ask people in some places in Europe where they would go to have their windscreen replaced, most would say our company. In Holland, 80 percent would say [Belron company] Carglass. We created that awareness. We built it by investment. No one in the States has that, and the country is so large it would be difficult to create.

Q—So how would you fix the industry in the States?
A—Oh believe me, I’ve thought about it …thought about it extensively and the answer is ‘I don’t have one.’ I don’t have a solution. We have the resources, and if I thought I had a solution we would have tried it by now

Q—No ideas?
A—The problems in the United States show why brand is so important. You can move away from price as the only issue, you can have a dialogue about other things, when you can stand behind a brand. That can’t happen in the U.S…and the brand matters, not just with customers, but with suppliers, with key accounts. It’s just a big tug of war if you haven’t got a brand.

Q—Doesn’t sound like you are sure you’ll be coming back to the States. Will you be coming back?
A—It’s a hard market to ignore. It’s the biggest market in the world and it remains on our radar screen. It is a market we’ll come back to. We just must find a way to get a return on our investment.

Q—Can you understand why Safelite would be terrified of you?
A—I doubt whether Safelite is terrified of Belron but I really wouldn’t like to compete against Belron. I’m completely biased, but yes, I can understand. If I was a competitor of ours, I’d be worried too.

Q—Some would say that the problems in the U.S. go beyond a lack of branding, and that even before you have a brand, you have to have a well-defined industry, one the consumers understand. The U.S. isn’t really to that point yet …
A—It’s tough to establish that when you sell a product most people will buy only once every seven years, that’s difficult …

Q—Yes, so if you can’t even establish a unique profession, how do you establish brands within it? I am wondering if you think the body shops influence things differently in the U.S.?
A—When the automotive repair industries get into auto glass, it’s a reaction to market conditions. When times are bad, they [body shops, etc.] are serious competitors. We actually like them as competitors. Where Belron installers replace or repair 1500 windshields per year, the body shops might do 100-300, and the quality [of the replacement] is better from our specialists than from body shops. So I don’t think that’s it, no. If I knew what to do to change it in the States, I would have done it.

Q—What would you like people to know about Belron?
A—It probably sounds trite, but we have a winning formula. We keep a focus on people. We employ 10,000 people … 5,000 are installers … unless you value and respect them, you won’t get a committed workforce. It all stems from respect—of customers, employees and shareholders. So we set high standards and have respect for our employees.

Q—I’d like to ask you about a few other topics in the AGR news these days. Have you been following the ‘Chicago Group’ and their attempt to change pricing?
A—We support what they are trying to do. The NAGS® approach never worked. The whole way pricing is done is strange—the methodology, everything. So I applaud what the Chicago Group is trying to do. Let’s put sense in pricing. We just did this in France.

Q—The Chicago Group says its methodology should end R parts. NAGS says its upcoming pricing changes will mitigate R parts. Are R parts really the problem?
A—Yes, an industry-wide issue … 

Q—But you don’t seem to have a big problem with them here …
A—We focus on these parts. We work with suppliers. We remind them that these parts should be available to us and that we feel strongly about it. We stay focused and get our suppliers to understand.

Q—What about the use of repair in Europe?
A—We are big believers in repair. We do more than one million repairs for insurance companies every year. It’s a strategy for the long-term and we know it to be safe. We have always been at the forefront of development of repair technology. (Editor’s Note: The company also owns Glass Medic.)

Q—I noticed that you are using wire in place of cold knives for windshield removal. How did that come about?
A—Our installers in Holland were using it with great success and we looked at it. We also have Belron Technical, our research and development wing. We invest millions every year in our circle of success. If anyone uses something that can make us more efficient, it’s a no-brainer for us to use it at all our locations. We are looking for new tools and methods all the time.

Q—So what do you think Belron’s biggest challenge is?
A—Belron’s biggest challenge is in transferring best practices from one place to all places. People deal with us because we provide the best service and the best prices. If we lose either one of those, at even one location, then we are gone.

Q—Is there anything you think the U.S. does well?
A—It has a really good distribution system. We own some wholesale operations so I know how difficult that is to do well.

Q—Pilkington grew into a global company through acquisitions in much the same way Belron did. Yet Pilkington unitized all their acquisitions under one name, one logo. You have not done so with Belron. It is represented by many different names throughout Europe. Why is that?
A—In most cases, we’ve acquired the best company in the country—companies with 80 percent consumer awareness. Unlike Pilkington, we compete nationally. When we go in to open new markets, there’s really no good reason to change the names.

Q—I want to go back to the U.S. for a minute. You are franchising in some countries. I would suspect that, as you evaluate a new presence in the U.S., you say ‘we could start from scratch or we could franchise or we could buy a national company or we could buy a series of strong regional companies.’ Would that be accurate?
A—We have looked at all these, yes.

Q—Each has distinct disadvantages. Which way have you decided to go?
A—[laughs] The U.S. is so large it’s difficult to say 
what exactly we would do yet. There are all sorts of 
possibilities.

Q—The Belgium firm the D’leteren Group owns the majority interest in Belron. How is that relationship?
A—They have owned us for five years. They are absolutely delighted with our performance and plan to keep us a part of their family for a long time.

Q—I’m sure our readers would like to know a little about you personally.
A—I am 45, married. I have 3 children—a 12-, 10- and a 2-year old. Running a worldwide glass business is much less exhausting then keeping up with the two-year old.

Q—What do you do for fun?
A—I love sports, absolutely love sports. I’m playing golf with Ernie Els in two weeks and I am looking forward to that. I love swimming, biking and running. I’m involved in a lot of charities. We are sponsoring a charity triathlon in three weeks. I am training to be ready. I really enjoy that.

Q—So how do you keep score? How do you define success?
A—I measure it in customer satisfaction, by the climate in the organization. I measure the climate in the senior team every year. This is a must.

Q—And who are your heroes?
A—[long pause] My father and my grandfather. They taught me the softer skills …it’s how you handle people, how you take people with you on the way up. 

My grandfather was the founder of the company. He had a tremendous attention to detail. He brought work home every night—even suitcases of invoices to review.

My father is a big risk-taker. He led the expansion in Europe and changed the rules of the game. He is also incredibly charismatic. 

I am a professional manager. I learned from John Mason too. There is really no one like him.

Q—Is there anything else you’d like to tell our readers?
A—I don’t want to come across like we’ve cracked it, because we haven’t. We need to keep improving. The only way to do this is by hi

HISTORY LESSON
With revenues in excess of $1 billion per year and a presence in 27 countries, Belron International is the world’s largest auto glass installation company. The company traces its roots back to Cape Town, South Africa, where it began as a major glass manufacturer that acquired the rights to curved windshield manufacturing technology. It continued making and supplying windshields throughout the continent for most of the century. Through various generations and machinations, the company came to be run by the Lubner family and Belron was born.

In the early 1970s, Belron began a strategy of international acquisitions. “Our goal was to acquire the most well-known and best run company in each country,” said John Robinson, sales and marketing director for Belron Technical. (Robinson also serves as CEO of Belron’s Glass Medic International.) It purchased Wind-screens O’Brien, the dominant player in the Australian market and continued its growth by expansion.
In 1983, it acquired the British company Windshields for approximately $1 million pounds ($1.8 million USD), when its value was dubious. “I felt it was about to turn around,” said Ronnie Lubner, “and besides, the seller told me there was a hidden bonus—a talented young entrepreneur named John Mason who would help us earn our money back and go on to generate a whole lot more.”

Lubner was right. Windshields quickly merged with Autoglass and the resulting company became the core of Belron. With Mason as its COO, and later CEO, it began a worldwide buying spree, buying Carglass in 1987 and expanding throughout Europe.

Known then as Plate Glass, (PG), the company had entered the United States when it took over the West Coast distributor West Coast Glass in 1977. By 1985, the distribution company had been renamed Solaglas and changed its direction. The wholesale business was sold to PPG in 1987, and the emphasis at Solaglas moved to retailing operations. “Ideally we’d have bought existing stores,” said Paul Markiles, who was part of the management of the U.S. operation, “but just then they were fetching crazy prices. Instead, we set about building green field operations even though it was more expensive.”

The emphasis wasn’t the only thing that changed, as the new retail chain was christened “Windshields America (WA).” By the end of 1995, its network had expanded to 195 stores in 40 states. 

U.S. Presence
The U.S. market was larger than any in which the company had worked. “The scale of the country is enormous,” said Ronnie Lubner at the time. “Texas and California each have more people than Australia. Even the largest motor glass company had only 14 percent of the total market.”4 Lubner felt he needed to speed up WA’s growth and set his sights on Globe Glass & Mirror and its US Autoglass network. 

“We could see it would make a perfect fit,” Ronnie Lubner said … “we very nearly clinched a deal with them—then at the last moment, they insisted on control when we’d said that was unacceptable.”5 Lubner, thinking the deal was dead, made a good-bye call. 

“I left a message for …[Joe Kellman of Globe Glass] wishing him well for the Sabbath. He invited me to stay on for a very liquid Sunday brunch. In time, we got around to talking about the deal. It was all very informal, but we discovered we had a lot in common and agreed to re-open negotiations.” 6 Vistar, the combination of WA and Globe, was born, sporting the familiar Belron yellow and red logo. 

With Globe safely under its belt, the company now turned its attention to Safelite Glass Corporation, then the largest auto glass installation company in the States. Safelite had been in play briefly in the mid-1990s, but had been purchased with speed by the Thomas H. Lee Company (THLC) of Boston. Belron quickly made overtures to THLC about a possible merger of the two companies.

The Deal is Done

The deal was done in December 1997. Under the terms of the agreement, Belron held 44 percent of Safelite’s stock and had the right to acquire control within three years. The same agreement also permitted THLC to get Safelite ready for an initial public offering.

At about the same time in Canada, Belron acquired both Standard Auto Glass from Pilkington and the Autostock Inc. chain in Quebec. These moves secured Belron in both the English and French speaking parts of Canada and gave it approximately 40 percent of the market there. Its North American dominance seemed assured.

Well not quite. 
Industry insiders familiar with the deal say there were problems with the Safelite deal. First, a good deal of credibility had been placed behind THLC’s due diligence before the merger, but THLC and Belron’s goals for Safelite were not the same. Belron, as minority owner, could only suggest, not mandate, changes, resulting in many lost opportunities for Safelite. Finally, human capital was a large issue, as the two companies merged their respective staffs. Safelite employees dominated and Globe and WA managers, generally considered at the time to be among the sharpest in the States, went out looking for new jobs.

Belron exited the deal at the end of its three years. Insiders say the relationship did not end well. Belron’s exit means it will need to start over if and when it decides to procure a presence in the United States. The U.S. remains an elusive holy grail for the company. Safelite, for its part, filed bankruptcy June 9, 2000 and emerged from Chapter 11 protection in September 2001. 

But Belron did not let one setback hinder its growth in any other area. The company is led by Ronnie’s son, Gary, who has been group chief executive officer of the company since 1998. 
 
Today, the D’leteren Group owns 70 percent of Belron. The Belgium holding company also owns a controlling interest in car rental giant Avis International and distribution activities for Volkswagen, Audi and Porsche, among others. 

What’s Next?
In February of 2003, the board of directors issued a statement saying that Belron will focus on “the centralization of the supply chain, further strengthening of management teams, the conclusion of solid partnerships and investment in research and development.” Specifically:-

• Increased support for the glass repair concept;
• Expansion of mobile services;
• Installation of a standardized IT platform; and interestingly enough, the final goal:
• Opening of new service points 
in markets with strong growth potential.

Belron also continues to concentrate on its growing franchise program, now having franchised eight countries with more expected in the future. “We want to go into more risky markets and franchising is the best way to do that,” said Marc Vanholst, general manager of franchising. “It means the whole world is open to us.”

 

AGRR

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