The Auto Man's Empire

Street smarts and boardroom savvy, plus a "buy low, sell lower" strategy, make Dick Downey's auto parts business one of the fastest growing in its field.

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Samuel Richard Downey, founder and chief executive officer of Downey Automotive Inc., in Chattanooga, begins each working day with a simple and immutable ritual "among the racks." At 8 a.m., he darts through the front door to his own office and out into the warehouse. He is lean, low-key, and intense, dressed in slacks and a short-sleeved shirt. Against a backdrop of pallet racks and steel shelving, hand trucks and forklifts, Downey greets each employee by name and spot-checks stock in a random walk up and down the aisles. Most of the workers are young, and half of them are women. None is standing still.

At the far end of the 140,000-squarefoot warehouse, Downey pokes his head into the sales and order-processing departments before invariably backtracking past the loading docks. He speaks to a driver or two, raps an outgoing shipment with his knuckles, and proceeds to his office. The entire trip takes about 30 minutes and covers a quarter of a mile. It is at once the pulse of the business and the measure of the man.

The sole objective at Downey Automotive is to sell auto parts -- more parts and accessories, in fact, than anyone else in Tennessee, Alabama, and Georgia. And, as most competitors have discovered the hard way, the company is well on its way to achieving that ambition.

A start-up just six years ago, Downey Automotive is churning out $19 million in sales at its warehouse, with 110 stores in three states. In the dog-eat-dog jungle of the automotive aftermarket, Downey succeeds by constantly wheeling and dealing; by cutting prices, sometimes below cost; by ruthless, hard-nosed tactics that add up to one man's brand of guerrilla marketing. Competitors agree that this is how he operates.

In most businesses, such an assessment borders on slander. In this case, however, it is a fact that Dick Downey neither flaunts nor denies. But there is far more to the man and his formula for success than any competitor's appraisal will expose.

At 48, Dick Downey is driven by a Vince Lombardi-like spirit of winning, his own sense of the Golden Rule, and an incessant desire to maintain absolute control. They are the qualities one would expect of a former wrestling champion at Auburn University turned ardent tennis player at middle age. Downey grew up in Alabama, one of two sons in an automotive sales-oriented family. His father, Herman J. Downey, started out in the 1920s as the first Chevrolet dealer in the state, becoming an inventor and maker of tire patches, and, finally, a manufacturer's agent in the auto parts business.

As a rep, the elder Downey sold to automotive jobbers and wholesalers, who in turn sold to repair shops, retailers, and consumers. It was a fairly simple business until the 1950s, when options and styles became the rage in Detroit and entire model lines began changing every year. It was the era of built-in obsolescence, and it left auto jobbers and wholesalers overwhelmed by burgeoning lists of parts numbers and the insatiable demands of car-crazed consumers. Traditional distribution channels were demolished. Wholesalers started selling to other wholesalers and retailers, evolving into what became known as warehouse distributors (WDs). Herman Downey saw it coming.

In 1955, about the time Dick Downey came home from college with degrees in business and science, Herman established one of the first WDs in Birmingham. It would become an automotive wholesale business built by two sons, under the thumb of their father.

"Looking back on it," Dick Downey reflects, "my father set that thing up for my brother Ray and me. And he spent every working hour teaching us how to run it, mostly by chewing us out. He was a stickler for the details of buying, stocking, and selling auto parts. But he hammered away at buying. If we were going to sell right, we had to buy right. And 'buying right' meant one thing: by the truckload."

During the next 15 years, the Downey boys translated the truckload mentality into their own very simple logic: Quality, quantity, and price equals success. And working that logic to its limits, Dick and Ray Downey built a $4 million business. It ran smoothly, grew a little each year, and kept the two brothers preoccupied with parts numbers rather than operating figures. "The only time we looked at a financial statement," insists Downey, "was at the end of the year. It always read 'profitable." What they didn't know was that in late 1970, a simple phone call would totally alter their lives.

The call came from a major New York conglomerate that saw chaos in the auto parts industry and an opportunity for acquisition, consolidation, and a big power play. The company offered to buy out the Downey boys. "I was a little naive at the time," Downey chuckles. "I wondered if they had enough money to buy us." He soon stopped wondering. After three weeks of negotiation, Dick and Ray Downey sold their company for 11 times earnings, to International Telephone & Telegraph Corp.

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