Life got more humbling for Thomas McKernan as this week’s Horatio Alger Award ceremony in Washington, D.C., approached.
The Costa Mesa-based chairman of the Automobile Club of Southern California is one of 12 honorees selected by the nonprofit Horatio Alger Association of Distinguished Americans Inc., which recognizes business, education and philanthropic leaders from around the country “who have triumphed over adversity to achieve success in their respective fields.”
“Ambassador [George] Argyros nominated me for the award,” McKernan said. “He talked to me about it, and I kept trying to put it off. There are a lot of people who’ve overcome adversity and fit that description. But Argyros is a difficult person to say ‘no’ to, so I agreed. It’s certainly a tremendous honor that I will value moving forward.”
McKernan called Argyros—a real estate and private equity investor who received the Horatio Alger Award in 1993—a mentor. Other Orange County honorees who followed in Argyros’ footsteps include Ron Simon, chairman of RSI Holding LLC; James Doti, president of Chapman University; Lawrence Higby, former chief executive of Apria Healthcare Group Inc.; and Glenn Stearns, chairman of Stearns Lending Inc.
McKernan spent nearly 50 years at the Auto Club, including 21 as chief executive until he stepped into the chairman’s role two years ago, with Robert Bouttier succeeding him as chief executive.
The Auto Club, founded in 1900 as one of the country’s first motor clubs, has its primary operations in Costa Mesa, while its on-the-books headquarters is in Los Angeles. It provides roadside services, insurance products and travel services, among others.
The Auto Club grew during McKernan’s tenure as chief executive from a 3.6 million-member organization in Southern California into a 21-state network of 14 million members, thanks in part to acquisitions of other motor clubs. It’s the largest club under the umbrella of the nationwide AAA federation, accounting for about 30% of overall membership.
Southern California members now total 6.4 million, representing about 52% of households in the region and nearly 70% in Orange County.
McKernan grew up in Arcadia in a “very modest” environment, the oldest of six children who was “encouraged to work at a young age to pay for his expenses,” according to the Horatio Alger Association. He had multiple paper routes, loaded trucks in a warehouse, and worked as a box boy at a market while still in school.
“I was in a Catholic seminary for high school and one year of college,” he said. “But I decided it wasn’t for me. … I was aimless for a while, until I found this job at the Auto Club.”
McKernan joined the company in 1966 as a service representative at its Pasadena branch.
“There was something about it, a higher purpose, a great history and tradition,” he said, enough that he turned down a better-paying job offer that came after he took the position at the Auto Club.
“I needed the money, but I went with my heart,” he said. “And I met my wife of 43 years, Judy, at the Auto Club.”
McKernan took evening courses at California State University, Los Angeles, where he earned a degree in business and information systems. He worked in computer programming for the Auto Club for the next 15 years and moved up the ranks.
McKernan got an MBA in finance in 1985, shortly after the Auto Club opened its Costa Mesa office. He became chief financial officer and was promoted in 1991 to president and chief executive. He later earned an advanced MBA from Claremont Graduate University.
McKernan helped steer the Auto Club through a challenging period in the 1980s, when the company “lost a lot of market share,” partly because of a climb in insurance prices.
“So in the 1990s, we had to repair a lot of that and restart the growth,” he said. “We had to revamp a lot of the operations and put more focus on service quality. And that’s what we did. By the mid-1990s, we were in much stronger shape.”
That’s when the opportunity came to bring other motor clubs into the fold. The Auto Club created a holding company called Auto Club Enterprises to manage mergers and affiliations. It acquired AAA clubs in Texas, New Mexico and Hawaii in 1996. A string of deals followed, including consolidations with AAA Northern New England in 2003, AAA East Central in 2010, and AAA Tidewater in Virginia in 2012.
“We are extremely strong in Southern California,” McKernan said. “That’s part of why others want to affiliate with us.”
The Auto Club now has more than 300 offices and 12,000 employees overall, including 80 offices and 6,500 workers in Southern California.
It had about $9.8 billion in assets by the end of 2011 and about $47 million in profit that year, the latest figures available.
“The Auto Club has been a steady, successful organization,” McKernan said. “I think it will continue to be so. Unlike a stock company, the focus isn’t about what you’ll do this year. That’s important, too. … But we also have the benefit of looking at the long term. We want to be still providing services as the Millennials come along and as vehicles change.”
The Auto Club of Southern California is the leader in that for AAA overall, said McKernan, who sits on the board of the federation.
He also serves on the boards of Santa Ana-based First American Financial Corp., the Forest Lawn Memorial Parks Association in Covina and Payden & Rygel Mutual Funds in Los Angeles.
