As sales soar, VW stores are hot items
Blue sky rises, public groups show interest
 | Trivieri: The VW brand is in demand. |
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As Volkswagen sales have surged in the United States, so has interest in acquiring VW dealerships.
Fifty-five VW stores have changed hands this year, 50 percent more than in all of 2011, says Frank Trivieri, executive vice president of sales at Volkswagen of America.
"People who could get any franchise want the VW brand now," he says.
Trivieri says interest is especially high at four public dealership groups that have avoided the brand in the past: Group 1, AutoNation, Sonic and Penske Automotive.
Public groups currently own only 22 of VW's 607 U.S. dealerships. But Group 1 has picked up six VW stores in the past 18 months and now has eight. And the company says it wants more.
"The interest in the company is high, and the relationship that we have with their management is very good," says Pete DeLongchamps, Group 1's head of financial services and manufacturer relations. "We think they are doing an awful lot of things right that makes this a good value proposition."
Alan Haig, managing director of dealership broker Presidio Group says VW has been among the most acquired franchises by the 10 biggest dealer groups this year.
"VW has come up significantly," says Haig. "Many leading dealers were not interested in that franchise because they were focusing on Honda, Toyota, BMW and Mercedes. Now that VW's sales per franchise have increased, many buyers are saying 'that is the franchise I want to have.' "
Blue-sky multiples -- reflecting the intangible value of a franchise on top of the bricks-and-mortar value -- are between 4.0 and 4.75 times adjusted pretax income, compared with about 2.0 four years ago, says Haig.
He says VW's current blue-sky multiple is roughly the same as that of Hyundai, Kia and Nissan but lower than Honda and Toyota, which have multiples of 5.0 to 5.75.
Higher throughput
VW brand sales soared 37 percent through September to 323,089, making it the second-fastest growing volume brand in the United States this year after Chrysler. Average annual throughput per VW store has increased from 400 units in 2010 to an estimated 650 in 2012.
The sky-high interest comes not only from Volkswagen's strong sales, but its much talked-about sales target. VW aims for U.S. volume of 800,000 vehicles a year by 2018, up from a projected 430,000 in 2012. Trivieri says dealership groups tell VW they want stores long before that date.
"They see where we want to end up in 2018 and want to jump on it before the stores get more expensive," he says. "They see we are on a growth plan and we are delivering on what we are saying."
He says interest in the franchise is enabling VW to weed out underperforming stores that don't want to invest.
"We are being more aggressive," Trivieri says. "We need everyone committed."
VW benefits because new owners are required to make their stores exclusives. The brand currently has 362 exclusive stores in the United States.
New dealers also must comply with the brand's White Frame facilities standard introduced in 2009. The standard is only required for new and renovated stores.
 | Pordon: Penske is interested in VW’s brands. |
Visiting Germany
To pump up interest, VW has taken 46 non-VW-brand dealers to Germany in the past two years. The dealers met with senior executives and were shown future products.
"If there is an appetite when we come back we look at opportunities, whether it is a buy/sell or we have an open point we want to fill," Trivieri says.
An executive from Galpin Motors in Southern California went to Germany last year and Galpin was later awarded an open point in Los Angeles. Galpin Volkswagen opened in July and had the second-highest VW sales in the country in September, Trivieri says.
VW brought Group 1 CEO Earl Hesterberg and a Penske Automotive Group team to the Paris auto show last month to meet with senior executives. Tony Pordon, Penske's head of corporate development, said the VW Group, including Audi, Porsche and Bentley, represents about 20 percent of the dealership group's revenue.
"We are very interested in expanding with the brands," he wrote in an e-mail. "The products are excellent and aspirational for consumers."
Overall growth of the VW network is expected to be moderate. Trivieri says VW plans to add 10 to 15 dealer points annually for the next few years as it works to increase sales.
"We are not looking to expand from 607 to a huge number," he says. "We want them to grow and have a good return on investment and sales."
You can reach Diana T. Kurylko at dkurylko@crain.com. -- Follow Diana on 
