Automotive News - September 29, 2008 - (Page 30) 30 • SEPTEMBER 29, 2008 HEARD 3 major problems helped cause demise continued from Page 1 What went wrong? units per dealership, more than five times the volume of the average Chevy store. But those sales volumes were generated via a mix of hard-sell tactics that got Heard into deep legal trouble with regulators in several states. In November 2007, General Motors threatened to yank Heard’s franchise at a Georgia store over a fake recall notice mailed to 10,000 consumers. That fake recall triggered lawsuits that could result in civil penalties of $50 million or more. Whodunnit? Exactly what prompted the group’s demise is unclear, but three problems played a major role: 1. GMAC yanked his floorplanning, and Heard could not finance his inventories. 2. Slumping Chevy truck sales hurt the group. 3. State regulators threatened to impose huge fines for deceptive sales practices. These three factors caused a rapidfire sequence of events this summer that doomed Heard’s empire. On Aug. 21, GMAC yanked Heard’s floorplan line of credit over what a Heard spokesman called a “financial matter.” On Sept. 12, Heard closed his store in Scottsdale, Ariz. Two years earlier, that dealership had moved into a new $12 million store. And just a week before he closed his remaining stores, Heard tried to negotiate a deal with GMAC to restore his floorplan. The deal fell through, said a source familiar with the situation. Two other lenders provided floorplanning, but at least one of those yanked its financing, too, the source said. After losing the GMAC financing, Heard tried to sell his stores, said another knowledgeable source. But his financial situation was too dire, the source said. It was too late. Months before Bill Heard closed all his stores, cracks were beginning to show in his empire. June: Bill Heard Chevrolet in Scottsdale, Ariz., agrees to a $225,000 settlement with the Arizona attorney general. The store allegedly engaged in deceptive advertising and sales practices. July: Heard tells the LedgerEnquirer of Columbus, Ga., that he is looking to sell “two or three” of his dealerships because of slow sales. Heard also puts his $17 million lakefront home on the market. Aug. 21: GMAC halts floorplanning line of credit for all Heard dealerships it finances. Heard breaks off negotiations with the Georgia Governor’s Office of Consumer Affairs regarding a lawsuit seeking $50 million in civil penalties over deceptive advertisements. Aug. 22: Office of Consumer Affairs amends its lawsuit, seeking higher penalties. Sept. 12: Heard closes Scottsdale dealership 2 years after moving it into a new $12 million store. Mid-September: GMAC, Heard try to negotiate a new floorplan. The talks fail. Sept. 24: Heard closes all 13 remaining dealerships in Alabama, Florida, Georgia, Nevada, Tennessee and Texas. Source: Automotive News MICHAEL HASKEY/LEDGER-ENQUIRER A week before Bill Heard closed his remaining stores, he tried to negotiate a deal with GMAC to restore his floorplan. Readers’ comments on Bill Heard’s collapse Autonews.com readers responded heatedly to the news that Bill Heard Enterprises Inc. had closed its doors. Here are a few comments from our Web site. Probably not very many of us former employees are surprised that the inevitable came to fruition. What was once a well-respected business had become the biggest cathouse in the industry. Good riddance. — Dale As a vendor who has dealt with the Heard organization, I must agree that their business practices drove them to this point. I always got the creeps walking into one of their stores and felt like their sales techniques were stuck in 1978. — DealerVendor This is a sad day when a man builds an empire only to have it fall. More than anything else, be it the economy, shrinking credit to consumers or whatever, the Heard Operations Business Practices contributed overwhelmingly to their demise. Their business practices were predatory in nature and shoddy at the best. They also created as much ill will toward dealers by consumers as any organization I have seen in 37 years in the car business. I feel sad for Mr. Heard, a gentleman, but his management team was deplorable and the laughingstock of good car men everywhere. I was a GM Dealer in the Atlanta market for over 10 years and did quite well doing business the right way so I have very little sympathy for an organization that seemed to go out of their way to be unethical. The only real shock is that it didn’t happen sooner. My sympathies go out to all of the Good Heard Employees, which there were many, but the Heard Management Team reaped what they sowed. — Roswell,GA Too bad for all the employees. GM and GMAC had a hand in all this as well by turning a blind eye for years when they were profitable. They moved a ton of inventory for them and no one really complained until the money train stopped. — 323703 What goes around comes around. I feel very bad for the employees but the organization got what it deserves. — SAR52366 When credit is not available to dealers and customers alike, the world looks pretty scary. Who’s next? — Jeff_Spear Champagne corks In 2004, GM gave Heard a Dealer of the Year award and the Jack Smith Leadership Award, which honors dealers for high sales and customer satisfaction. But Heard was notorious for business practices that generated consumer complaints, lawsuits and state investigations. Consumer advocates in Houston were “popping champagne” over the news that Heard had shut down, says Dan Parsons, president of the Better Business Bureau of Greater Houston and South Texas. Over the past three years, Heard’s Sugar Land, Texas, store generated 144 customer complaints with the Houston BBB. Most complaints involved deceptive advertising and sales practices. Parsons speculates that Heard’s legal troubles stemming from consumer complaints led to GMAC’s decision to yank financing. “I think everybody is kind of walking around the real issue, and the real issue is they got crosswise” with GMAC, Parsons said. But GMAC declined to indicate why it yanked the floorplan. And another observer says the credit crunch and low car sales — not legal problems — caused Heard’s downfall. “Nobody should take any solace and say, ‘Oh, it was just because they were bad dealers,’ ” said one well-informed consultant who advises big dealership groups. “It’s economics.” The source says Heard’s costly store renovations also may have helped sink the group. Heard built a new Scottsdale store in 2006, and he opened a new $30 million store near Tampa in 2004. Weak economy “They had wonderful facilities that were geared toward selling a large volume of vehicles,” the consultant said. “Manufacturers have been encouraging dealers — if not cajoling them — to build these mausoleums. That means there’s a lot of fixed cost to put them up. And when business (decreases), you’re left with the high fixed cost and not the revenue to cover your expenses.” Heard blamed his financial troubles on weak sales. In a rare interview last July, the 74-year-old entrepreneur told the Columbus, Ga., LedgerEnquirer that he wasn’t prepared for the steep downturn. “We didn’t react fast enough,” Heard said. “The sky is not falling,” he added, but the world had changed. “The domestic car business has all gotten pretty tough,” he said. “We should have been more diversified.” One of his stores sold Cadillacs and Saabs in addition to Chevrolet vehicles. He sold no other brands. Early in the afternoon of Sept. 24, the company’s senior staffers called all of the stores’ general managers and told them to shut down and send home 2,700 employees. A brief company statement blamed rising fuel prices, a heavy portfolio of pickups and SUVs, economic recession, unfavorable local market conditions and the credit crisis. “The company had worked to develop and implement a strategy and a course of action that would enable it to operate successfully,” the company said. “However, the conditions necessary to sustain the business through the current challenges were not present.” Jeff Barton, who worked at Bill Heard Chevrolet in Sanford, Fla., told Central Florida News 13 that workers were given two hours to pack up their belongings and leave. “Monday morning, they had a meeting saying, ‘No, don’t worry about it — we’re staying open’ ” Barton told the TV station. “Tuesday, they had a meeting and said, ‘Don’t worry about the rumors — we’re staying open.’ At three o’clock today, they came in and said: ‘We’re closed. Get your tools and get out.’ ” One open store As potential buyers evaluate Heard’s empire, others sort through the financial wreckage. In August, the Georgia Governor’s Office of Consumer Affairs filed a legal motion seeking penalties of more than $50 million for deceptive marketing and alleged signature forgery. But the lawsuit could all fall through if the company declares bankruptcy, said agency spokesman Bill Cloud. As of Thursday, Sept. 25, one Heard dealership remained open. A woman who answered the phone at Bill Heard Chevrolet in Sugar Land said the store was under new ownership. She said the employees of the store don’t know the name of their new owner or the new name of the dealership. When a reporter called the dealership later the same day, a woman answered with the greeting, “Chevrolet dealership.” That generic greeting may serve as the epitaph for Mr. Big Volume. c http://www.Autonews.com
Table of Contents Feed for the Digital Edition of Automotive News - September 29, 2008 GM, Ford and Chrysler place new-product bets Credit freeze could mean cash crisis Mr. Big Volume reaches the end of the line Korea's revolving door Mazda quits Ford Credit for Chase Mitsubishi, UAW reach tentative agreement Volt could break feds' 100 mpg ceiling Chase cuts back on auto leasing Target for Traverse: No. 1 in large crossovers BMW's new 7 series: Timing may be all wrong Tucson revisited Can Ford light fire under Fiesta? Lithia puts brakes on used-car stores Revived Mercury will focus on 3 segments VW taps 'zealots' to promote diesels Farley, Leuliette will kick off World Congress The new Soul (and nose) of Kia Hyundai: Drivetrain key to more mpg Taxpayers at risk if firms get fed loans - then fail GM plans high-tech small engines for Volt and Cruze Buick looks upscale Denso says U.S. woes will cut its profits Denso: No plans to make hybrid parts in U.S. Bailouts are a bad idea Chic small cars? Check them out at the Paris show Credit's no problem, but a weak brand is Helping dealers helped GM Ford field rep didn't help at all Who knew? Electric cars are fun to drive Where is the power going to come from? Hyundai shifts its U.S. ad agency Hyundai, Kia mold separate identities Behind on hybrids, Hyundai sets high goals Dealers Flashes of genius, years of turmoil No cop-out; car designed for police use PICTURE THIS: A trip to the bank RV sales drop 31.9% in June Mexico sales off 4.8% in Aug., 1.2% for 8 mos. Suzuki to aim pickup at motorcycle owners Experts: Learn Korean hierarchies Readers' comments on Bill Heard's collapse Bill Ford sells some Ford stock CarMax net income falls ArvinMeritor raises forecast Toyota plans CNG concept Chrysler cuts 250-300 salaried workers Minority supplier drops stamping business Will Cerberus buy up Chrysler to wave bye-bye? Rioters kill supplier exec in India No pickup seen for pickups Piech's ploy was masterstroke in war with Porsche Honda's highway groove music: It sounded better on vinyl St. Louis dealer to paper that outsourced typesetters: 'Deal me out' Automotive News - September 29, 2008 Automotive News - September 29, 2008 - (Page Intro) Automotive News - September 29, 2008 - (Page Bellyband1) Automotive News - September 29, 2008 - (Page Bellyband2) Automotive News - September 29, 2008 - Mr. Big Volume reaches the end of the line (Page 1) Automotive News - September 29, 2008 - Mr. Big Volume reaches the end of the line (Page 2) Automotive News - September 29, 2008 - Volt could break feds' 100 mpg ceiling (Page 3) Automotive News - September 29, 2008 - Tucson revisited (Page 4) Automotive News - September 29, 2008 - Tucson revisited (Page 5) Automotive News - September 29, 2008 - The new Soul (and nose) of Kia (Page 6) Automotive News - September 29, 2008 - The new Soul (and nose) of Kia (Page 7) Automotive News - September 29, 2008 - Buick looks upscale (Page 8) Automotive News - September 29, 2008 - Buick looks upscale (Page G1) Automotive News - September 29, 2008 - Buick looks upscale (Page G2) Automotive News - September 29, 2008 - Buick looks upscale (Page G3) Automotive News - September 29, 2008 - Buick looks upscale (Page G4) Automotive News - September 29, 2008 - Buick looks upscale (Page G5) Automotive News - September 29, 2008 - Buick looks upscale (Page G6) Automotive News - September 29, 2008 - Buick looks upscale (Page G7) Automotive News - September 29, 2008 - Buick looks upscale (Page G8) Automotive News - September 29, 2008 - Buick looks upscale (Page G9) Automotive News - September 29, 2008 - Buick looks upscale (Page G10) Automotive News - September 29, 2008 - Buick looks upscale (Page G11) Automotive News - September 29, 2008 - Buick looks upscale (Page G12) Automotive News - September 29, 2008 - Flashes of genius, years of turmoil (Page 9) Automotive News - September 29, 2008 - Denso says U.S. woes will cut its profits (Page 10) Automotive News - September 29, 2008 - Denso says U.S. woes will cut its profits (Page 11) Automotive News - September 29, 2008 - Ford field rep didn't help at all (Page 12) Automotive News - September 29, 2008 - Ford field rep didn't help at all (Page 13) Automotive News - September 29, 2008 - Where is the power going to come from? (Page 14) Automotive News - September 29, 2008 - Where is the power going to come from? (Page 15) Automotive News - September 29, 2008 - Hyundai, Kia mold separate identities (Page 16) Automotive News - September 29, 2008 - Hyundai, Kia mold separate identities (Page 17) Automotive News - September 29, 2008 - Behind on hybrids, Hyundai sets high goals (Page 18) Automotive News - September 29, 2008 - Behind on hybrids, Hyundai sets high goals (Page 19) Automotive News - September 29, 2008 - Dealers (Page 20) Automotive News - September 29, 2008 - Dealers (Page 21) Automotive News - September 29, 2008 - RV sales drop 31.9% in June (Page 22) Automotive News - September 29, 2008 - RV sales drop 31.9% in June (Page 23) Automotive News - September 29, 2008 - RV sales drop 31.9% in June (Page 24) Automotive News - September 29, 2008 - RV sales drop 31.9% in June (Page 25) Automotive News - September 29, 2008 - RV sales drop 31.9% in June (Page 26) Automotive News - September 29, 2008 - Mexico sales off 4.8% in Aug., 1.2% for 8 mos. (Page 27) Automotive News - September 29, 2008 - Suzuki to aim pickup at motorcycle owners (Page 28) Automotive News - September 29, 2008 - Experts: Learn Korean hierarchies (Page 29) Automotive News - September 29, 2008 - Readers' comments on Bill Heard's collapse (Page 30) Automotive News - September 29, 2008 - Chrysler cuts 250-300 salaried workers (Page 31) Automotive News - September 29, 2008 - Minority supplier drops stamping business (Page 32) Automotive News - September 29, 2008 - Minority supplier drops stamping business (Page 33) Automotive News - September 29, 2008 - St. Louis dealer to paper that outsourced typesetters: 'Deal me out' (Page 34) Automotive News - September 29, 2008 - St. Louis dealer to paper that outsourced typesetters: 'Deal me out' (Page 35) Automotive News - September 29, 2008 - St. Louis dealer to paper that outsourced typesetters: 'Deal me out' (Page 36)
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