DELRAY BEACH, Fla. - When Bill Wallace met with officials from Republic Industries Inc. on Feb. 28 to close the sale of his dealership, he got a surprise, albeit a very pleasant one.
The 48-year-old owner of Wallace Automotive Inc. learned Republic had just made a $29 million wire transfer to Ford Motor Credit Co. to pay off the balance of the mortgage on his 31-acre property here.
Now, when he looks out his window, he realizes wistfully it does not belong to him anymore.
'Even though I don't own the dealership any longer, it's nice to be debt free,' said Wallace.
Wallace Automotive is one of more than 20 dealership groups Republic has bought since the Fort Lauderdale-based conglomerate embarked on a buying binge late last year. That shopping spree has quickly made Republic the largest dealership group in the country.
Republic is bringing vast changes to Wallace and all its new dealerships. Wallace, for example, is:
Taking over the 3,000-vehicle Alamo Rent A Car fleet for Palm Beach County.
Assuming warranty work and body shop work on Alamo cars.
Buying used cars for AutoNation USA.
Converting the dealership to Generally Accepted Accounting Practices (GAAP).
Stopping ad buys in territories that have other Republic dealers.
Preparing to join Republic employee benefit plans. Employees may eventually receive Republic stock options.
CHANGE IS COMING
One might assume the ex-sole proprietor of Wallace Automotive is going to sell some of his $55 million in Republic stock and glide into well-heeled retirement.
On the contrary, Wallace wants to make a couple of things clear: No. 1, he has not sold a single share of stock; No. 2, he will be toiling even harder than he did when he owned the business.
'I'm obsessed with making my end of it work,' he said. 'To tell you the truth, when I do read what some of the critics are saying, it motivates me even more to prove to the world this is going to work.'
The changes are coming rapidly at Wallace Automotive. The dealership has terminated its agreement with Thrifty Rent A Car and is preparing a lot to accommodate the entire Palm Beach County business for Alamo.
That means a fleet of about 3,000 rental cars will arrive shortly.
Wallace Automotive will get the revenue from all the body shop, service and warranty business that comes with the fleet.
Republic also plans to be an active player in the South Florida fleet business, bidding for municipal fleet contracts and rental units, Wallace said.
In addition, used-car managers at Wallace's six dealerships have all received lists of cars needed by AutoNation USA, the used-car superstore chain also owned by Republic. When Automotive News visited, the managers had each received lists of 200 cars AutoNation USA needed in the next two weeks.
For Rusty Wallace, general sales manager at Wallace Dodge and nephew of the owner, that is good news.
He will now be able to offer customers more money on off-brand trade-ins. Formerly, Wallace Dodge offered only below average book value for, say, a Chevrolet pickup. That's because there is no natural market for Chevrolet pickups at a Ford dealership. So the vehicle would have gone to auction.
'Now we're able to give that customer over average book or close to clean book,' said Rusty Wallace. 'The car is worth more if we know we're going to retail it rather than have to wholesale out of it.'
COMPETITORS NO MORE
Just a few months ago, the employees at Wallace Ford here used to think of their rivals at Mullinax Ford, just 20 miles or so south in Margate, as a major pain.
Until both were bought by Republic earlier this year, the two big dealerships raided each other's territories regularly with advertisements, trying to get new customers.
No more. Wallace Ford has stopped advertising in Mullinax's Broward County territory, and Mullinax has stopped advertising in Wallace's Palm Beach County turf. It is almost as if the Hatfields and McCoys suddenly decided to make peace.
Instead of competing, they are now partners.
'Mullinax was a thorn in our side,' said Lee Smith, corporate vice president and controller for Wallace Automotive. 'Now we use them as an information source.'
Mullinax has been selling one-price for nearly 20 years, and Wallace just converted to the selling system late last year.
For the folks here at Wallace Ford, Dodge and Nissan, this means they can buckle down to the job of competing with other dealerships - those not owned by Republic.
Whereas Wallace once spent $1 million a year in the Sun Sentinel newspaper, Republic dealers combined will now spend about $10 million.
'You can imagine the volume discount,' said Wallace.
The mortgage payment is not the only area where Republic money will help Wallace.
The dealership is looking to double the size of its 15,000-square-foot body shop, according to Phil Yelvington, parts and service operations director at Wallace Automotive.
But that project may wait awhile, since Republic may set up regional body shops.
Yelvington said Republic wants employees like him to be able to spend more time doing their core jobs without outside distractions.
'My job is to make a profit - customer satisfaction,' he said. 'But I also handle garbage disposal and sanitation problems. I spend a lot of time on it. They want to take that away. People will be doing what their main duties are.'
Employees like Yelvington, Smith and Rusty Wallace are also looking forward to the day when they will join Republic's employee benefits program, including the 401(k) and health insurance plans.
'Each of those things is better than our plan,' said Wallace.
Because Republic eventually plans to consolidate back-office staffs, some layoffs may occur. But Wallace said he believes Republic's clout will bring a larger volume of business to his dealerships, meaning those employees may still have jobs, albeit different ones, in a couple of years.
The employees at Wallace Automotive said they believe their new bosses at Republic, including co-CEOs H. Wayne Huizenga and Steve Berrard, are changing the auto retailing business fundamentally - and for the better.
Said Yelvington: 'One of the differences between good dealerships and great dealerships is that great dealerships aren't afraid to change.'
Smith concurred: 'I think we're probably on the verge of the greatest change this industry has ever seen. I'm just glad we're on this side of it.
'They're going to bring an honesty into the business that's been long gone,' said Smith. 'The unpleasantness of the dealership is going to go away at an AutoNation store.
'There's a new sheriff in town.'