Automotive News - May 12, 2008 - (Page 8)

8 • MAY 12, 2008 advertising OUR DEALERS ARE GROWING Fla. law: Automakers can’t force dealer upgrades Mark Rechtin mrechtin@crain.com AND SO CAN YOU! “With Zimmerman as a partner we have grown to be the # 1 GM Dealer in Albany, NY.“ Kara DePaula DePaula Chevrolet A bill awaiting the Florida governor’s signature would limit how far manufacturers can go to force auto dealers to upgrade their stores. The state’s already dealer-friendly franchise laws also would be bolstered in areas such as warranty payouts, incentives, exports and fraud. The legislation “turns the tables and prevents manufacturers from using their 800-pound gorilla status against dealers,” said Alex Kurkin, a Miami lawyer who helped draft the bill. The measure also would require automakers to pay retail customer rates for warranty labor and parts. Manufacturers would be prohibited from auditing warranty claims from dealers that demand retail payment or taking other punitive measures against retailers — tactics some automakers are accused of. Florida dealers have complained that some manufacturers bully dealers into building showrooms. Dealers also have complained about unfair warranty payout procedures. The bill “prevents coercive actions,” Kurkin said. “Dealers who had asked for retail warranty payouts got audited. Then they get pushed into the new facility du jour because the factory hired a new VP of marketing.” Both houses of Florida’s Legislature unanimously passed the bill last week. Gov. Charlie Crist is expected to sign the legislation. If unsigned for 15 days, the bill becomes law automatically. Only a veto can pre- vent passage. The bill says carmakers cannot: Terminate a dealer’s franchise or change or cut vehicle allocations for failure to upgrade a facility, within certain limits. Withhold incentives for facility renovation from dealers who already comply with program standards. Deny Florida dealers incentives offered elsewhere in the country. Punish dealers who sell vehicles that are later exported — without proof the dealer knew the vehicle was to be exported. Revoke a dealer’s franchise for fraudulent action unless the dealer principal had full knowledge of the fraud. Manufacturer-backed lobbying organizations mounted a last-ditch ef- fort to get Crist to veto the bill. The Alliance of Automobile Manufacturers — representing the Detroit 3, Toyota and five other automakers — has created FairAutoRepairs.com, a lobbying group to oppose the bill. The group has aired radio commercials promising more expensive repair bills, should the bill be signed. Consumers are urged to demand that Crist veto the legislation. “This is an issue that should be handled internally between dealers and manufacturers, not through legislation,” says alliance spokesman Charles Territo. “This legislation would be bad for manufacturers, consumers and, ultimately, could hurt dealers, if manufacturers are forced to increase the cost of vehicles as a result.” c Partnership seeks ‘premier’ stores Michael Dell-Jeffrey Rachor team could spend as much as $500 million over 5 years Mary Connelly mconnelly@crain.com RESULTS! • KEYES AUTO GROUP • IRA MOTOR GROUP • TOM WOOD AUTOMOTIVE • CHECKERED FLAG • AUTONATION • DIEHL MOTOR COMPANY • CORAL SPRINGS AUTOMALL • RUSTY ECK FORD • AUTOLAND • HENDRICK CARY AUTOMALL • PATRICK AUTO GROUP • HUBLER AUTOMOTIVE • PLEASANTON AUTOMALL • DEPAULA CHEVROLET • WALLACE NISSAN OF KINGSPORT • SUPERIOR CHEVROLET Dealers Prove Our Advertising Gets Big deal Here are key elements of the dealership acquisition strategy underlying the auto retail venture formed by Michael Dell and Jeffrey Rachor. Focus on U.S. dealerships that sell luxury and high-volume import brands Emphasis on Sun Belt states Minority equity stakes for dealership general managers No plans to go public GET A COMPLETE MARKETING PROGRAM! Guerrilla TV Marketing Radio Print Hispanic Direct Mail Web Design The new partnership of computer billionaire Michael Dell and veteran auto retailer Jeffrey Rachor will focus on buying “premier” U.S. dealerships that sell luxury and high-volume import brands, Rachor said. “We have the capital available to pursue virtually unlimited growth,” said Rachor, a former president of the public dealership group Sonic Automotive Inc. “We have no specific growth or revenue targets at this time. We want to grow at a measured pace.” Dealership broker Sheldon Sandler predicted that the new venture, MSD Automotive Partners LLC, could spend as much as $500 million over five years to acquire dealerships. The auto retail partnership is an offshoot of MSD Capital LP, a private investment firm that manages more than $12 billion in assets for Dell and his family. Dell, 43, is CEO of Dell Inc., of Round Rock, Texas, the No. 2 maker of personal computers. Last year, Forbes magazine ranked Dell the eighth-richest American. Rachor, 46, is CEO of the auto partnership announced last week. The venture is based in Chattanooga, Tenn., Rachor’s hometown. Rachor said Dell will not be “actively involved in the day-to-day management or investment decisions” of the auto retailer. In an interview, Rachor told Automotive News he is “investing a significant portion of my personal net worth in this venture.” He declined to specify the value of his minority stake. But he said he and Dell “will be owner-operators with major skin in especially interested in dealerships in Sun Belt states, he said, “we are prepared to go anywhere we can find great assets and management. Love of luxury “We love the luxury brands — European, Asian and domestic,” Rachor said. “And we particularly like the high-volume Asian import brands.” But he said he and Dell will be open-minded about domestic-brand dealerships “in the right situations and markets.” Rachor said the company does not plan to impose a corporate brand on the dealerships it buys: “The branding or name of the dealerships would be a local decision.” And the new venture has no plans to go public, Rachor said. Company executives “believe strongly that the auto dealership business model is best operated as a privately owned enterprise.” Sandler, CEO of Bel Air Partners LLC in Skillman, N.J., said he expects the Dell venture to focus on acquiring large private dealership groups that gensee PARTNERS, Page 36 SEAN BUSHER Jeffrey Rachor is “investing a significant portion of my personal net worth in this venture.” the game.” MSD Capital “is prepared to invest what is necessary” to achieve the goals outlined by Rachor, a spokesman said last week. Rachor would not say how many dealerships the partnership seeks to buy. Although the company is GM payback for Axle bailout: Lower prices, innovation David Barkholz dbarkholz@crain.com GM’s truck, SUV supplies rise ➤ 36 such as the Chevrolet Malibu. “There almost certainly was some hook that GM will get recompense either in pricing or innovation or both,” said Aaron Bragman, a research analyst at Global Insight Inc. “This isn’t a gift,” said Dave Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. GM and American Axle spokespeople declined to comment on whether the GM offer had a quid pro quo. The GM money would pay for $140,000 buyouts of American Axle workers. It also would fund $90,000 lump-sum payments to lessen the Internet Website Optimization In-Store CALL OR E-MAIL THE AGENCY THAT WILL WORK FOR YOU 24/7 (SERIOUSLY) 1-888-878-ZADV zauto@zadv.com or visit www.zadv.com General Motors’ $200 million proposed donation to American Axle & Manufacturing Holdings Inc. is a limited-time, no-strings-attached offer, according to a GM filing with the Securities and Exchange Commission. Yeah, sure. GM will seek to get its money back in lower axle prices and first crack at product innovations, analysts say. That’s beyond the immediate goals: hasten the end of a 10-week-old UAW strike at American Axle that has hit light-truck production at 30 GM plants and head off local strikes at GM plants building popular cars © GM CORP. GM wants to head off strikes at plants that build the Chevy Malibu. pain of permanently lower compensation for workers who remain. Since GM spun off its axle operations in 1994 to create American Axle, the axle maker has enjoyed a premium on the prices it fetches from GM. The automaker also has contracts that allow American Axle to match competitors’ bids on future work. Those advantages have kept American Axle profitable — and heavily reliant on GM business, Cole said. GM represents about 80 percent of American Axle’s business. But axle competition has intensified in North America. Dana Holding Corp., a key rival, cut labor rates during Chapter 11 reorganization. Newcomers such as Magna International Inc. have pushed into the market. American Axle CEO Richard E. Dauch cited that competition when he sought to halve wages and benefits of 3,650 workers at five plants. They responded with picket lines. c http://www.zadv.com http://www.zadv.com

Table of Contents Feed for the Digital Edition of Automotive News - May 12, 2008

Automotive News - May 12, 2008 Factories Punish Rogue Exporters U.S. Firms Sink on Supplier List Clarke: Buyers Don't Know Saturn Brand Greer Takes Top Sales Post At Automotive News Sonic Sues Mercedes-Benz Fiat Ponders Mexico Plant Ford: Wait on Kerkorian Going Green: It's No Longer An Option LaSorda Reaffirms Axle Plant Plan Chrysler: Jeep Seats From India Make Sense Toyota Exec: Maybe It's Time to Raise a Prius Hybrid Gamily Chevy Traverse, Ford Flex Face Off This Year As U.S. Waits, Chrysler Sends Cars Made in China to Mexico Nissan Plans Wide Range of Electric Vehicles Honda: Sales are Flat, But Market Share Soars Kia to Bring Small Car to U.S. Changing Models Yearly Created Object of Desire Fla. Law: Automakers Can't Force Dealer Upgrades Partnership Seeks "Premier" Stores GM Payback for Axle Bailout: Lower Prices, Innovation UAW Vote May Be Nearing a Honda's Alabama Plant Suddenly, Small Was Big in April GM's Big Problem: Too Many Brands Irvin Was Smart, Friendly, Helpful Dealers Are Tuned in to Absorption Figures Dealers Should Sell Alternative Fuels Museum Funding is Bold Watch Your Car-Truck Inventory In Tough Times Dealers Must Coddle Customers Ford's Challenge: Long-term Reliability Nissan N.A. Unit Gets New Head of Communications Maserati North America Taps Luxury-Segment Veteran Eulberg as CEO Former GM PR Chief Joins BMW Nissan: N.A. Off the Hot Seat VW Uses Free Service to Improve Sales, Image Shops Cited For Labor Violations Survey: Consumers Like Indie Shops Report Cites Trends in Repair Costs Aftermarket Center Opens at Mich. College Dealers Mich. Stores Merge Under Project Genesis VW is Europe's Top Seller Honda Exec Red-Flags Detroit 3 Aid Court: Auction Not Liable for Truck Defect Retail Personnel Canada Sales Post 3.8 Percent Gain in April Chrysler Asks Dealers to Donate to Museum Obituaries Complaint Will Delay UAW Revote at JCI Plant Supplier Deals are Smaller, Fewer GM's Truck Inventories Up Despite Strike Profits Up at Superior Industries Autobytel Post $2 MIllion Loss eBay Motors Courts Automakers Ford Touts 6-Speed Transmissions Toyota Raises Some Prices No Pickup for Hyundai, Kia April Output Drops 7.8 Percent Trustee Must Untangle the Chamco Debacle Scientists Say Chysler's Gas Plan is Just a Dodge From Cookie Sales to Auto Dough? In Europe, Small SUVs Soar; GM's Snore Daimler Seems to Be Betting On Peace in Iraq When Soccer Booms, VW Will Be Ready Molder AMP is a Case Study in Auto-Suppliers' Travail Spinoff Dismatles ArvinMeritor Ambitions GKN Driveline to Grow in China Kia Supplier Builds Ga. Plant BorgWarner Adds Turbo Capacity Supplier Personnel Supplier IAC Consolidates Operations and Know-How Mann + Hummel Sees Growth

Automotive News - May 12, 2008

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