The auto-salvage company's CEO talks about his recession-proof business: "Car accidents just happen"
If you ever total a car, chances are pretty good that Willis Johnson will be behind the effort to find a use for the mangled remains. Johnson is chief executive of Copart (CPRT
), the nation's leading provider of car-salvaging services and No. 2 on this year's list of top-performing companies in the Standard & Poor's Mid Cap 400 index (see "Mining Gold in Wrecked Cars").
Benicia (Calif.)-based Copart specializes in selling many of the nation's wrecked vehicles through auctions (Copart does not disclose actual numbers.) Insurance companies pay Copart a percentage when the cars are acquired by buyers such as dismantlers, rebuilders, and used-car dealers.
Although the company's $254 million-a-year business is perhaps not the most glamorous, it's profitable. Founded by Johnson in 1982, Copart now has 88 auction facilities in 39 states, with more opening every year.
An Oklahoma native, the 54-year-old Johnson says the field is a bit like the mortuary business as the service his company provides is essential -- but not something the public chooses to dwell on. Recently, BusinessWeek Online's Eric Wahlgren caught up with him to find out more about the wrecked-car business. Here are edited excerpts of their conversation:
Q:You started out as an auto-wrecker. How did you break into the business? A: Basically, after I got out of Vietnam, I landed in California. I was faced with the choice of either going back home to milk cows for a living or finding something else. I decided to buy a little car-wrecking business. But I couldn't compete with the big dismantling yards. I realized pretty soon I had to grow the business, and that's what I started to do.
Over the years, I added more facilities. I had seen one company in this field go public. I managed to find private investors. And we went public in 1994. Obviously, we've changed somewhat the things we do. But we keep growing. We've been adding a [facility] about once every six weeks on average.
Q:You've likened your business to the mortuary field -- preparing dead cars for an afterlife of sorts. What do you like best about your job? A: I like doing what I'm doing right now -- the acquisitions of private companies and starting up new facilities. I like watching over the growth of the company. I have a really good management team that takes care of the day-to-day stuff. My job is to keep the future growth of the company going.
I like meeting the entrepreneurs who built their companies from scratch. It's nice to hear their stories and to meet the people who started with a truck or two and built their companies. If we can agree on a price, I buy their companies so they can retire or go off and do other things.
Q:What do the current trends in your business tell you about what's going on with the U.S. economy. A: Not much. The trends in our business don't change a lot. Car accidents just happen. It doesn't matter whether the economy is good or bad. Body shops tend to fill up more in a bad winter. If you have a good winter -- from a weather standpoint, not a business one -- you get fewer cars. This has been a good winter -- we've had pretty nice weather -- but it really doesn't make a huge difference in the number of cars we get.
Q:On the subject of body shops, what are the cars that are in most demand for parts? A: Most dismantlers [those who buy the cars that Copart sells] are pretty specialized. You might have one that specializes in Toyota. Or you might have another that specializes in Peugot. So it really depends on where you are. In Mill Valley, Calif. [in Marin County], people want BMW and Mercedes parts. In Bakersfield, Calif., they want parts from Pontiacs and cars like that. In Oklahoma, they want pickups. In Florida, they want convertibles.
Q:And what kind of cars should you drive if you don't want your wheels to end up at a body shop in the first place? A: That's tough because most cars today are made to fold in an accident to protect the occupant. The cars are supposed to absorb the impact, so they usually are totaled. You always see these reports on a car that was wrecked after hitting something going five miles an hour. But they never say they're designed to do that to protect the person inside.
That being said, SUVs are the best vehicles to be in. But even they are designed to fold in an accident -- and blow six airbags. The weakest cars are the small ones obviously. They end up getting hit by the SUV or a van.
Q:What's the most that's ever been paid at a Copart auction for a car? A: It was a two-door Mercedes. I think it was about $102,000. It was wrecked. We've also sold a lot of motor homes in the $200,000 to $300,000 range.
Q:The least that's been paid? A: We get a lot of cars that burned to the ground, and they go for about 25 bucks.
Q:Where's the best place to auction a Ferrari Testarossa? A: It used to be Florida, New York, or California. But with the Internet, it really doesn't matter. The right buyer is going to find the right car.
Q:What about a Ford Taurus? A: That's a generic car. That's among the No. 1 car wrecked in America -- not because it's a bad car, but because there are a lot of them on the road. I guess the Detroit area would be a good place for them.
Q:What kind of car do you tool around in? A: A Mercedes 420.
Q:Did you buy it at an auction? A: No, I bought it new. I used to find cars, but I don't have time anymore. I'm busy working for the shareholders.
MARCH 3, 2002
Edited by Beth Belton
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