King of the Mountain

AGRR Magazine's Exclusive Interview with Allan Skidmore of TCG International
by Debra Levy - September/October 2002

"I try to push Vancouver whenever I can," says Skidmore, standing on a balcony outside the company's board room.
Thereís no good way to describe Allan Skidmore, and after you interview him, you start to think he likes it that way. The 55-year-old co-executive chairman and chief executive officer (CEO) of TCG International (TCGI) defies the neat label or easy characterization. What he is, rather, is a 36-year veteran of the auto glass business, who has seen and done just about every type of business in the automotive glass industryófrom manufacturing to wholesale, retail, network operations and claims administration and distribution.

When Skidmoreís father Arthur and his Uncle Herb opened a small auto glass replacement shop in New Westminster, British Columbia (B.C.), in 1946, they never anticipated its growth into the multinational, mega-million-dollar company that it is today. TCGI is comprised of two groupsóautomotive and communicationsówith 3,000 corporate-owned and franchise operations in 43 countries operated by 2,200 employees.

Skidmore and his brother, Thomas, have fueled most of that growth through a unique arrangement that divides responsibilities exactly in half. Skidmore is CEO of the Automotive Group, which is known by the brand name Autostock International. It includes Autostock Distribution, the retail operations in the United States (Speedy Glass) and Canada (Apple Auto Glass), the well-known Novus Windshield Repair and Replacement, and a three year-old Airbag Service division that specializes in airbag diagnostics. It also includes Shat-R-Proof windshields and car-care products, a product development and manufacturing subsidiary that also offers paint removal services, and 1st Report Claims Services, a group of Canadian call centers (Premier Appel operates as a satellite call center in the Quebec market).

Thomas is in charge of the Communications Groupówhich provides cellular and wireless services throughout Canada and includes Glentel, Glentel Business Centres and Wireless Wave. The brothers operate in a unique arrangement under which both also serve as vice- chair for the otherís group. Each owns exactly the same amount of stock as the other and is totally, independently responsible for his own group. I met with Skidmore at his offices high atop the Metrotown building in Burnaby, B.C., on August 13. He had just returned to the office after a three-week absence, yet was kind enough to spend nearly three hours being interviewed on a variety of subjects. Our discussion follows.

TCGI's headquarters is atop a 28 story building in Burnaby, British Columbia, with a fantastic view of Vancouver and the surrounding maountains.
Q. Thank you so much for agreeing to this interview. Itís something Iíve wanted to do for nearly 20 years. So this is where it all happens.

A. [laughing] This is where my head works when itís not too pooped. Twenty years, eh?

Q. I think we know a bunch of the same characters. Can you tell me how you got started in this business?

A. My father was really good. He never pushed us, but I just always knew I would work here. I never had a desire to go anywhere else. Still donít. I had done all sorts of jobs growing up, but really became involved in purchasing for the company when I was 20. From that point on, I did all the purchasing. It was great training. I met all the suppliers, learned a lot.

Q. At what point did you decide that TCG International would enter the U.S. market?

A. In í84 we decided to come down to the United States.

Q. Did anyone tell you not to do it?

A. [raising voice] EVERYONE told me not to do it. Bankers, lawyers, customers, everyone. But when everyone tells you not to do it, thatís when you do it. So we did.

Q. Why?

A. When youíre in a father-son thing, you have to show youíre gifted Ö that you can do it.

Q. So was this your proving ground?

A. No, I didnít need to prove anything. I already had. My father was really out of the business by 1983 as an operator. Anyway, we continued to expand aggressively. We had got into cellular in 1985 just when it was beginning. There were lots of expansion and lots of acquisitions.

Q. What did you look for in an acquisition candidate?

Skidmore in the afternoon at table in the board of directors' conference room.
A. What did they have that we couldnít get? People and the phone ringing. We bought human resources.

Q. So what do you think of these acquisitions in the U.S. AGR businessówhere they buy the companies and the first thing they do is let half the people go?

A. Never understood it. What else to you need to buy that you canít get? Buildings are easy to get, trucks can be leased. The people were the most important part. They still are. After 20 years, Iíve gotten to the point now where I donít work with people I donít like.

Q. Speaking of working with people you like, you work closely with your brother Thomas Ö

A. Yes, we have a great relationship. It goes back to the first days of the company that my Dad and his brother started. When my father founded the company in 1946, his brother Herb was a great supporter. His son is still a shareholder, but doesnít work in the business. He wanted to do other things.

Thomas and Iówe really have no jealous turf wars. No ďI-made-money-and-you-didnít,Ē no ďwhoís number one and who is number two?Ē Once you start even asking those questions, you are already on the path to destruction. I donít question what he does and he doesnít question me. Itís so simple. I am more concerned that we make money than which one of us does it.

Q. Thatís so unusual, because most family businesses have problems Ö

A. I know itís hard for you to believe, but try. Think about it. This whole business is based on relationshipsórelationships with vendors, suppliers, customers. Relationships are important.

We are not Safelite and we donít pretend to be. We are family-oriented. My door is open. Any employee can come in and talk to me and many do. We work to keep it family-oriented. Every employee gets a personal birthday letter from me. We have some people here 25, 30 years. My assistant, June, has been with me for 20 years. I work to have special touches that tell people we appreciate them.

"Never, ever underestimate Belron and don't hit them when they are down." Skidmore says with gravity, "because, in the U.S., I see them coming back."
Q. Iím sure your competitors would say they appreciate their employees as well.

A. I am not worried about other companies. I want everyone here to do well. Not everyone may believe in my philosophy and it may not work for them, but it works for me and thatís what counts. When we have a problem, all parts of the company have problems. We try and distribute ďthe painĒ equally. I donít like closing stores, but if a store canít make it happen, then we do. Itís painful, but we do it.

Q. What do you see as the biggest challenges the Automotive Group has?

A. Keeping up with new technology, no doubt. We have tried to bring people along with it, but that doesnít always work and thatís when change happens. We changed management and put a new structure in place in October 2000. The marketplace had changed and we have to change with the marketplace. We try to make it as painless as possible for people to focus, but they have to focus.

Q. Do they know when they are not cutting it?

A. Oh yes. We tell íem exactly what they are supposed to do. They have goals. The deal is the return, the margin. Itís not hard to see where things stand. I get four reports every single morning: our cash position, our daily sales, our gross margin and our inventory. It doesnít take rocket science to figure out how we are doing. It takes good financial reporting, thatís allóand thatís something we could even do better.

Q. Do you ever find people working for you who donít want to give you bad news?

A. No, but I find suppliers very hesitant to give you bad news. They hesitate. They make it worse. We are one of the largest retailers in the world and probably the only one of our size that doesnít have any manufacturing plants. We rely heavily on our suppliers. We donít control it.

Q. Why did you decide to go public in 1969?

A. It was a very popular thing for companies with small caps to do at the time. We thought it was a great way to pick up business. Lots of customers bought in. At the time we were under $8 million in sales.

Q. But then you bought it back in 1996.

A. Ford wanted to sell its shares [at the time Ford owned 17 percent]. My brother and I went back to do some selling to the investment bankers and they asked if we wanted to take it private again and said theyíd help us.

Q. Doesnít it give you a much greater degree of privacy?

A. [big smile] Yes it does.

Q. You have seen a lot of changes in the auto glass industry. How would you characterize the industry today?

A. Our industry is in a terrible state of turmoil. There has been more change in the past five years than there has been in the past 25 before it. It was a father-to-son business, a cottage industry. Now that has become impractical.

Lookólots of companies were bought for ridiculous prices. I did it myself. I even put a group together and sold it to Safelite. I figured out that Iíd make more money on the sale than I would running the business. Safelite was anxious to do it and I took advantage of it. I couldnít make as much running those stores as I did selling them for $1 a sale while keeping the real estate.

In 1992, LOF [now Pilkington] couldnít get their retail stores to work so we bought them and they bought our wholesale division. They gave us them along with cash. The day after our non-compete was over, we were back in the wholesale business. I told them I would do this and I did. It hasnít ever been a secret.

"We really have no jealous turf wars," said Skidmore of himself and his brother Thomas, left. "No 'I-mad-money-adn-you-didn't,' no 'who's number and who is number two?' Once you start even asking those questions, you are already on the path to destruction."
Q. Do you think deals like this contribute to your reputation?

A. Reputation? What reputation? I am not aware I have a reputation.

Q. Well, I talked to a lot of people before this interview. They all said variations on the same theme: ďyou canít read him,Ē ďyou canít find out where he is coming from,Ē ďhe walks to a different drummer.Ē One person said that people think you are crazy and to ask you, so I will. Are you crazy?

A. Oh yeah. Ask him if heís crazy and heíll say ĎOh yeahí with a smile on his face, Ďbecause he really doesnít care what other people think.í

Q. Speaking of reputation, you must have known some great characters in the industry.

A. [laughs] Oh yes. I got to know a lot of them through the Ford tripsóthe Golden Circle Clubóand Chrysler trips. They were great. Iíd get to know people on the trips and then buy them. Thatís how we bought Belknap. I had gotten to know Les Ross after the trip from my dad. He had four locations. So I said ďLes, let me take over your debt, pay you a buck and we will go 50-50 on it. I bought my first retail stores in Seattle from Nevil Hermer two months later. I told Nevil I wanted to open eight retail locations in three months. Now, he looked at me like I was crazyómaybe thatís where the reputation came from. Anyway, we went to have dinner at a fish restaurant. I found a phone book, opened it and saw a company with óNiemen Glass I think it wasówith the right number of shops. In three months we had eight locations. That got us in the United States. I drove back and forth to Seattle every week for a long time. Nevil Hermer ran our U.S. operations until 1993. He did a good job, and we parted friends.

Those trips were great. I like to take people out of their misery when they wanted to sell. ďHelp me help you,Ē Iíd tell them.

Q. Whatís creating the turmoil weíve been discussing?

A. The way the insurance industry is being approached by some major retail companies. Iím not saying Iím right and theyíre wrong, Iím not knocking them. But think about it. Could Al Skidmore take over the entire glass cottage industry? No, and neither can they.

The rule is that you donít mess up your best customers, you donít rip them off. Yet these guys appear to be doing it. So now the insurance companies think they are being ripped off. They say ďWe think you ripped us off so much and so often that we donít know where your bottom is. We cannot figure out your pricing.Ē

Q. Up to now, I thought the large companies told insurers that the small companies were ripping them off and the small companies think the large companies are. It never occurred to me that the large insurance companies would think the major glass companies had been cheating them.

A. They think they do. They just donít know where the bottom is ... and this is the whole key to why the industry has come apart. The networks canít service rural America without the small companies. The small guys canít create a national network on their own, they donít invest in technology and they become subservient to the network for which theyíre most upset and sometimes theyíre asked to do jobs with no return.

Q. Do you include your company in this?

A. No, we donít believe we do. We believe in honest adjusting. We have no desire to rip anyone off.

Q. What do you think of the recent anti-dumping duties imposed by the U.S. and Canada?

A. I was baffled, totally baffled. PPG is squealing like a stuck pig on this one. Itís like Custerís last stand. It will help them for awhile but not in the long run. I still am baffled. Frank Archinaco [PPGís recently departed executive vice president of glass and chemicals] came up here in a private plane to tell me about it. He said it was nothing personal, but he had to do it for his shareholders. He said he needed to keep his shareholders happy. I asked him if alienating his customers would make his shareholders happy. He wasnít concerned. Of course it was about us, because who else would you go up against in Canada besides little Al?

I told Frank I have to look after our shareholders and our 2,200 associates, tooóand our shareholders are the family. I hold nothing against them. They had to do what they had to do and I had to do what I had to do.

I donít understand PPG because it [the anti-dumping complaint] is thinking short-term. Iím a strategic player, I think five years out.

PPG should really understand that the purchase of auto glass is not driven by the U.S. itís driven globally. If the glass doesnít come from China, it will come from Brazil or Mexico, but it will come. PPG had companies in China and they couldnít make them work. Thatís not my problem. PPG, as a company, is not focused on glass right now, I believe. They make chemicals. They want a return on investment of 18 percent I believe, and chemicals gives that to them.

Q. Gee, are you still a customer?

A. Yes, and I still think they are a great company.

Q. But if you could get one thing through to them what would it be?

A. To PPG? Anything you are going to do, PPG, think about it first. How many Pandoraís boxes are you prepared to open? The anti-dumping sanctions come up every two years. You canít stop the world economy every two years. Hopefully, you will do things to benefit the industry and they will benefit you.

Q. Wasnít a big part of the argument that OE glass is different than aftermarket glass?

A. Gee, Iíve paid extra for years to have those OE marks on my glass, but suddenly before the ITC [the International Trade Commission, which heard the anti-dumping case] Iím told itís not OE glass anymore. Why did I pay a premium all these years? The others in the business who did this are gone now. Iím one of the few left and I have a long memory. I spoke before the Commission. The other side got the lawyers to twist words to hide the fact that they choose not to compete with the Chinese head-on, in much the same way as the little guy has to compete with Safelite. Is OE glass different than aftermarket glass? No, this is an absolute lie. Somewhere along the way, they forgot I had owned a glass factory, so I know.

I represent all the small glass stores. I went to the Trade Commission because of them.

Q. So you are sure the small shop will survive?

A. Oh yes, because they know there are two types of real customers. The real customer is not just the insurance company. Donít forget this business is still a big cash business, most of which isnít involved with insurance at all. I want the small glass store to survive.

Q. But those shop owners say they canít make money in the business any more.

A. Well, if we donít buy from offshore, then the domestic OEMs try to squeeze you like a lemon which results in higher prices. They need competition. Canada sees the Chinese auto glass industry as a market economy. Canada did a great deal of investigation during its hearings, much more detailed than the United States. The United States will get to use all these notes, Iím sure.

Q. Hasnít pricing in Canada been extremely volatile?

A. Yes. Remember, I think outside the box. Itís the guy who makes the carówhether we like it or notówho has the right to establish a suggested retail price. Computers change everything. Soon, the insurance companies will compare which prices are lower; the made-up prices or the dealersí.

Some of our people have had some general discussions with Catherine [Howard of NAGS] about this. You canít make Canada the United States any more than you can make the United States into Canada. The pricing canít be the same, no matter how much NAGS wants to make it so.

Q. What do you think of Safeliteís new flat fee/per incident pricing?

A. Thereís an old saying in Canada: ďwhat you lose on the peaches, make up on the bananas. They now charge the same for repair as for replacement. A repair can cost $200. You can bet that repair is really popular at Safelite now Ö I know exactly what they are doing. They need to get every installation to make it work. They need the volume. Nobody gives nothing for nothing, there is always a catch. What have they got to lose?

Q. Because their real estate is in a separate company Ö

A. I wasnít going to mention this, but since you did, yes, exactly. What difference does it make what they do? They can sewer the industry, take the assets and walk away. Theyíve still end up with the real estate and the trucks are leased, just think of the rest of the equation.

Q. We are seeing signs that Belron is getting ready to re-emerge in the States, so I am wondering if you think they will be Safeliteís future buyer?

A. I know the family well and say this [voice becomes grave, serious]: never, ever underestimate Belron and donít hit them when they are down because, in the U.S., I see them coming back.

Q. Why couldnít they make it work the first time?

A. Too many partners. [Joe] Kellman may have been the only one who made out great on that deal.

[voice rising] Look at what that company has been through. First Morosky selling windshields like dresses, then Barlow taking all his direction from John Mason in the U.K. and now the investment bankers have control. Doesnít Bank of America own them?

Investment bankers disappear as soon as they make their money. Some of us live our whole lives in this industry, but the bankers donít. Safelite is owned by bankers. When they get tired of it, they will sell it. Maybe Iíll be right, maybe wrong; time will tell.

Q. What do you think of Safeliteís almost mobile programóhaving mobile installers and installing in the bays of their partners?

A. What I think doesnít matter, itís what the customer thinks. Itís a short-lived effort. Let them work from a van up here in the rain all the time, or install windshields in Chicago in the winter. How mobile can you be then? Iíd like to know how you find and keep good installers that way. Another important point, what about the drive-away times for the urethanes in different climates?

There are new mobile companies starting every day. The minute you let a glass installer go, the only thing he knows how to do is to buy a van and install glass. I am not knocking this, I donít mind this, I sell to them all if Iím in their region. But there are new mobile companies every day.

Q. It sounds to me so far that you donít have many worries about external threats, except maybe from body shops. Is that an accurate statement?

A. Body shops are not purely in the glass business. We are a glass company. We are a glass company for both auto and home. We do residential and commercial as well. Itís a good strategy for us. Body shops will never do commercial or residential glass work.

Q. Youíve had quite a history with Novus franchisees. Hasnít there been some nastiness over the years?

A. Franchising is a journey. You donít please everyone every day. Iím sure there have been some times when some of them [the franchisees] would have liked to smack me. But I told them they should act loud and proud. Repair is an important part of their business that is not going away. Itís going to be a vital part, but just a part. They need to become installers too. Some thought we were using Novus as a bait-and-switch/repair-to-replacement business. But I donít think anyone believes that still today.

Q. Donít the franchisees take a lot of time and resources for a low yield?

A. Is it a resource drain? Yes, sometimes. But Novus is the best system and itís worth the fight. There was a lot of problems before we bought the business and I think we became scapegoats for it. Itís a lot easier working with franchisees now than it was two years ago. And Keith [Beveridge, vice president and general manager of Novus] does an excellent job with franchisees. He is passionate about the business. We want them all to be successful, even in a business thatís hard to be successful in. Novus is more than repair. It has to be.

Q. I noticed that you seem to identify trends very early. You were in the cellular communications business early and you bought an airbag business in 1998. How do you hook on these trends early?

A. Look at it from my point of view. In every collision nowadays, at least two, sometimes up to six, airbags go off in a vehicle. Someone needs to repair those airbags and know these new technologies.

Q. Weíve run a number of articles about airbags as an excellent area of diversification, but very few readers have gravitated toward it. Why do you think that is?

A. Itís slow growth and no one has really caught on yet. But itís an excellent business and we have franchises available.

Q. Letís do some typical interview questions now. What types of things make you angry?

A. Betrayal bothers me. Betrayal can be a number of things. The anti-dumping effort is a bit of a betrayal. Why would these companies go against their customer? Itís a betrayal.

Q. Whatís important to you?

A. I am a believing Christian. It is very important to me.

Q. Thereís a good deal of discussion in the business press about whether or not business can ever be accomplished ethically, according to Christian values.

A. Oh, it can, because we do it. And Iím not a wimp either. Everyone knows how strong I am, but we all try to demonstrate a high level of ethics. Itís another reason I have such a problem with the way other people are screwing around with our industry. We have to show great integrity in all we do.

Q. Whatís the biggest mistake youíve made?

A. Not spending more time with my family. Weíve had quality, not quantity, and theyíve gotten to travel quite a bit, but I still regret it.

Q. Do the children work in the business?

A. All three do. Two work in Vancouver and my daughter works in the call center in Toronto. [Note: Son Garry is vice president of corporate purchasing and inventory management for Autostock. Son Brian is in real estate.]

Q. Any regrets? Things youíd do differently?

There are a few things, not many. Maybe I wouldnít have sold the U.S. wholesale division at all.

Q. What do you do for fun? I know you like to golf.

A. Golf and I like to powerboat. I have a boat; itís a beauty. I canít tell you how big or your readers wonít like it.

Q. I donít think theyíd begrudge you anything. You can tell me, how big?

A. No Ö no, I canít.

Q. Itís a big yacht, isnít it?

A. Itís a yacht, called Eagle Rock II.

Q. Anything else for fun?

A. I still like to travel. My brother and I take bus tours with our wives sometimes. In 2000, we visited the Passion Plays in Germany.

Q. What would you like our readers to know about you that I havenít asked?

A. That I didnít just parachute into this. I started just coming to the store, counting windshields, installing windshields. I have done it all. I saw recently that the Birkhauser children [daughter Jo and her husband] were retiring. It made me feel old. These are the kids and they are retiring. There are not many of us left. I have made great friends in the industry. And if you donít make any enemies, thereís nothing better than that.

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