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Chief selected for Imperial’s newest business venture

12th May 2017

By: Irma Venter

Creamer Media Senior Deputy Editor

     

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The automotive business of the JSE-listed Imperial group has a new leader. Former Imperial CFO Osman Arbee was named the CEO of Imperial’s newest business venture, the Motus Corporation, in January.

Arbee has been with Imperial for close to 13 years.

Manny de Canha’s retirement from Imperial’s Associated Motor Holdings – with Imperial buying out his 10% share of the business – has allowed the JSE-listed group to restructure its interests into two businesses.

Imperial now consists of the Motus and Imperial Logistics divisions, which currently generate roughly R70-billion and R50-billion in revenue a year respectively.

Motus came into existence on January 1, consolidating all Imperial’s vehicle import, distribution, retail, rental, aftermarket parts and financial services businesses into one division, operating through 1 360 dealerships, depots, and car rental and franchise outlets.

Imperial Logistics was formalised as one business unit in July 2016.

The restructuring has prompted the question whether Imperial will consider listing these entities as separate units on the JSE.

“Before we consider listing either of these divisions, we need to run them as two focused, increasingly self-sufficient effective businesses, and we think that will take us to 2018,” says Arbee.

“Once we get to June 2018, we will be in a better position to decide whether a separation is the right decision for stakeholders. Right now we are trying to focus two large independent businesses and see how we can maximise our returns.

“Currently, these divisions are still held together by the Imperial group balance sheet. Once we get some rubber on the road, we can question if they still fit together as a family.”

Arbee’s task for the next 12 months is to pull a relatively young team of leaders together, and to create “whatever synergies, whatever cost savings and economies of scale we can get in terms of warehousing, our footprint [and] the way we distribute our cars and manage our parts. We are one family now in the Motus division, and we need to run the business as one”.

Arbee also wants Motus to sell all its available motor-related financial services “across the family”.

The longer-term goal is to ensure the sustainability of the business going into the future.

“In current market conditions, things are changing constantly, such as people’s buying patterns,” says Arbee. This includes the way people choose cars – the way they see the ownership of vehicles. Disruptive service offerings, such as Uber, are coming naturally to younger people, for example.

“We need to invest in information technology, we need to make sure we understand the consumer, and we need to make sure we are more efficient in the way we sell vehicles.”

In short, says Arbee, the way forward for Motus is to “pull the businesses together, see where the industry is headed, and then ask ourselves how we make Motus sustainable in this industry”.

That sustainability, he adds, involves remaining an importer of vehicles such as the Hyundai, Renault, Kia, Mitsubishi and Tata brands.

Local assembly of these passenger cars offers no economies of scale. Motus will, however, continue to assemble commercial vehicles in South Africa, such as the Hyundai bakkie.

Looking to the future, Arbee notes that Motus faces three challenges.

The first is a volatile, unpredictable rand, more so than a weak rand.

In order to counter rand movement, Motus seeks to earn more revenue offshore. Around 13% of Motus’s profits are currently earned outside South Africa, mainly through vehicle distribution rights in Africa and dealerships in the UK and Australia.

The second challenge to the newly minted division is the lack of economic growth in South Africa and, as a result, the demand for new cars are low.

“No new jobs means no new vehicle buyers,” says Arbee.

The third challenge is that any downgrade in South Africa’s sovereign rating will probably lead to higher interest rates, which will negatively affect consumers’ spending power.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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