By Leow Ju-Len

Mr Cheah Kim Teck has probably led a more eventful life in the motor trade than most of his contemporaries. Not only was he there when DaimlerChrysler announced that it would take back the distributorship of Mercedes-Benz, relegating Cycle & Carriage to dealership status, he was also seconded to DaimlerChrysler Singapore for a two-year stint as President.

That gives him a rare position within the motor trade as a man able to view the world through the eyes of both factory and dealer. His secondment done, Mr Cheah rejoined Cycle & Carriage as managing director of Singapore motor operations, and has since been on the move again, with a promotion to CEO of group motor operations last month.

Jardine Cycle & Carriage, as the group is now known, announced record half-year results, and also made public the news that it signed a contract extension with DaimlerChrysler to remain Singapore’s exclusive Mercedes-Benz dealer until 2010, after which the arrangement continues indefinitely until terminated by either party.

Along with the contract extension, Cycle also announced that it will be spending $35.5 million to acquire a site on Alexandra Road and develop it into an exclusive Mercedes-Benz showroom and service centre.

In this extended Q&A, CarBuyer caught up with the straight-talking, fast-moving former national runner about all things Cycle & Carriage: its relationship with its German partners, its ability to carry a brand, and its strategy for winning at the car game.

Q: Congratulations on your new position. How does it affect your job scope and responsibilities?

A: Not a lot has changed. At our interim results announcement, one of the points we made is probably more in line with this: C&C is now a subsidiary of Jardine and one of the things we have been doing is consolidating our business and in a way, tidying up our structure.

We exited from Australia and NZ to focus on Southeast Asia. The thinking was that somebody should supervise the motor operation business in Singapore, Malaysia and Tunas in Indonesia, and Thailand as well. I’ll try to be a conduit for resources, a sounding board for ideas and get more attention for them at (our) board level.

Q: Uniquely, you have a pretty intimate perspective of how both Cycle & Carriage Industries and DaimlerChrysler Singapore (as it was then known) are run. How would you describe the relationship between dealer and principal?

A: Firstly, the two companies are very different. DaimlerChrysler is a manufacturer and we are traders, so essentially each of us brings our own culture. We have to think like a retailer while they spend a lot of time thinking about manufacturing processes and engineering. Fundamentally, this is a big difference, although behind the scenes I’m sure everyone wants to make money, and that’s where the commonality is.

It’s not a question of who is better. When you’re in retailing and distribution, you can move a lot faster, you can be a bit more nimble. But when you’re into product development and factories, the constraints are slightly different. The capital employed is different. So that’s the main difference between the two of us.

Q: How important was the contract extension for Cycle & Carriage?

A: I think any extension of business is important to the company. So, if you ask us, we always aspire to have longevity in our business arrangements. Not only for Mercedes, but also all the other brands we represent. I wouldn’t read too much into ‘2010’. We actually have an arrangement where it just continues to 2011, 2012, 2013 and so on.

Q: At $35.5 million for a new Mercedes-Benz showroom seems a little expensive. Or have I oversimplified things?

A: No, it is expensive, but I guess if you look at the drawing board, I don’t even know if the word ‘showroom’ is a justifiable term, because it will be more than just that. Hopefully the place will enhance your shopping experience, improve your affinity with the brand, strengthen the entire consumer franchise between Mercedes-Benz and the customer – a place you’d like to visit. It’s going to be exclusive (to Mercedes), a free-standing building, so it’s like your own house, and that alone brings a different aura and presence.

Q: You do have more than one brand, though. How do you reap economies of scale if one brand seems to be run so seperately?

A: Basically you’ve got to learn to be a multi-franchise operator objectively and at arm’s length. All the managers running it are independent. I supervise it, and my view is I run every one of them like a pure profit entity. It’s not a Robin Hood thing where you rob the rich and give to the poor. There isn’t this sort of approach. We take every business, we look at it, we decide how we can make money with it, and if we’ve got to compete, we’ve got to compete.

In a way we encourage internal competition, so say, here I’ve got a great launch coming for one of my franchises, and I’m going to have a hell of a bang, and maybe a week later another brand can say: ‘We also have this’, and I’d say: ‘Fine’.

Q: What will happen to the current Mercedes showroom?

A: One natural thing we’ll do is move Kia in, since it’s on a rented premise. Now the (Kia) range is huge. I think we’re struggling already with our space. This could be quite timely.

Q: Is there room for another brand under the Cycle & Carriage umbrella? And is another brand even permitted?

A: My philosophy is, ‘Never say never’. It’s a question of ‘how’ and ‘when’. When? I think it’s a matter of opportunity. Frankly, everything has been taken up by everybody in town, but you never know when someone wants to give up, or someone wants a fresh face. ‘How’ is pretty obvious. We’ve got to respect that there cannot be a conflict of interest. Professionally, we can’t take things
that are directly in conflict, because it makes no sense.

Q: Of the brands you do have Mitsubishi seems to be looking a little shaky. Do you have plans if the unthinkable happens?

A: My answer to you is that I think the Mitsubishi brand itself is very strong. I don’t even think they’re shaky, they’ve raised quite a lot of money recently. But then the event itself (DaimlerChrysler’s decision to stop funding the company – Ed ) is earth-shattering. You’ve got one major player who put in a lot of money and then decided to opt out. It’s like a marriage gone sour: you’ve got to let the divorce settle down and everybody will lead their own life.

Q: But you’re friends with both parties in the marriage. Isn’t that a little uncomfortable?

A: We stay out of it and we’re in no position to interfere, to be very honest. But locally, we’ve never really had any adverse publicity. A lot of people seem to have faith that if we carry a brand, we’ll honour what we do. Our sales are not bad, you can see that.

Q: Indeed, under Cycle & Carriage, Kia went from practically zero to 2,000 units in the first year. Is there something about C&C?

A: Very clearly the answer is yes, but of course, once again we don’t own the brand, so to be fair, I would say we have our core competency in our ability to distribute and sell cars, and I wouldn’t discount after-sales. But by the same token, we don’t want to claim credit for everything. I think the business is also driven by how good a product is.

Sometimes a product may come in and people don’t love it then we have to struggle along and persevere. The key thing is, we have a credible image and by that I mean that we honour what we say and we respond to our customers. Secondly, we’re financially strong, which means we are able to deliver. People who buy a product from us know we don’t play games. Thirdly, we leverage on our financial position. If we have faith in a product, we invest.

Q: Lastly, a question about the car game in general. It seems to be a volume game these days, rather than a margin game. Do you see it that way?

A: I don’t. If you look at the state of our results, we have record profits. Our volume grew, but some (other) brands’ volumes also doubled. I think (these guys) are in a position to do it with the power of their brands and the prices they were willing to offer.

If we try to emulate them then we’re going to go into volume at the expense of margin. So we take a realistic stand and we said: “Yes, the market is growing, we should be able to grow, but we’ve got to pace our growth if we want to maintain our margins.” And that’s what we did.