06/03/2007 - 22:00

Family ties bind DVG Automotive

06/03/2007 - 22:00

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In 1994, while Lou Di Virgilio was working in the financial markets in New York, two of his younger brothers, Dominic and Robert, were running a small used car yard in Maddington.

Family ties bind DVG Automotive

In 1994, while Lou Di Virgilio was working in the financial markets in New York, two of his younger brothers, Dominic and Robert, were running a small used car yard in Maddington.

At 3am one fateful New York morning, Dominic rang Lou asking for a loan so he could buy the car yard and expand the business.

“I said yes and that’s pretty much how it started,” Lou told WA Business News, as he recounted the creation of DVG Automotive Group.

Lou returned to Perth two years later and took an active interest in the business, which has grown to be one of Western Australia’s largest automotive dealers.

DVG operates dealerships from five locations in Perth, employs 340 staff and is aiming to generate sales of $300 million in the current financial year.

As managing director, Lou Di Virgilio has never sold a car; but that isn’t a problem, because he has six brothers in the business.

“One of the first questions I am always asked is: how do you get on? We do get on, and one of the reasons is because there is one person in charge, and that is me,” Mr Di Virgilio told WA Business News.

“I don’t know how it’s worked out that way. I’m not the smartest or the best and I’ve certainly never sold a car in my life, but I’ve been elected in charge and it works well.”

Since 1998, the group has strongly promoted the DVG brand across all of its car yards.

Mr Di Virgilio acknowledged that the branding process was difficult because the group had to navigate its way through existing dealer agreements.

“Companies like Nissan and Mitsubishi and Hyundai have their own brand and they don’t like any other brand next to them,” he said.

“It’s certainly helped in the selling of used cars, it’s given that side of the business a lot more credibility.”

DVG’s business model involves selling a range of marques on each of it five sites. It has seven marques, or vehicle franchises, including Mitsubishi, Hyundai, Chrysler and Nissan, and also sells used cars at most sites.

Like the move to a single brand, this part of the strategy has involved some challenges

“I like to have as much as I possibly can on each site whereas the manufacturers like you to have stand-alone dealerships,” Mr Di Virgilio said.

Despite this, Mr Di Virgilio is confident that multi-franchise sites are the way to go.

“Its cheaper to run and you can make a greater profit,” he said.

“The cost efficiency and economies of scale are a huge factor, particularly in the service department.”

Mr Di Virgilio said multi-franchise sites could be a trend in the industry. He was aware of one dealer in Sydney who bought a large site and built seven or eight adjoining buildings for different brands, with a single service department.

“It keeps costs down and it’s a drawcard for the customers,” he said.

Another advantage of the DVG strategy is that it insulates the group from industry trends.

With seven new car franchises, used cars and service and parts departments, the group has a relatively stable cash flow.

A major initiative, starting three years ago, was the creation of DVG’s central corporate office in Morley to handle all administration, finance, IT and marketing functions.

“That has led to every site doing everything the same, and a reduction in staff numbers,” Mr Di Virgilio said.

This change took nearly two years, which was far longer than anticipated. The IT costs were higher than planned and the group had to re-educate its staff, but Mr Di Virgilio said the benefits were now emerging.

“I can see the cost savings now but the real savings will be in additional dealerships, where you just plug it into your existing system and off you go,” he said.

Having established the corporate head office in Morley, Mr Di Virgilio took the unusual step of relocating his own office to Melville.

“I’ve just recently moved to here, which has been a blessing. I go there every day but it’s nice being removed,” he said.

“You get too close to it and I’d rather sit here and look at all the reports.”

DVG is currently one year into a five-year plan, and by the end of the plan Mr Di Virgilio is aiming to have sales of $500 million with a profit margin of 3 per cent.

He anticipates continued organic growth and expects further acquisitions will play a big part in the group’s planned growth.

While the business is currently run by the seven brothers, Mr Di Virgilio said their jobs were not guaranteed.

“It’s imperative to have the right staff. If there are people out there who can do the job better than any of us, they get the job.”

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