Public dealership groups have already changed the landscape of automotive retailing in America. And according to a top retail analyst, the change has just begun.
Four publicly traded companies popped up in the top 10 dealer groups for 1997 - including three companies that were not even selling new vehicles in 1996.
The 10 biggest dealer groups sold 65.2 percent more new cars and light trucks in 1997 than the top 10 groups sold in 1996. The main reason: the mammoth sales of No. 1 Republic Industries Inc.
And for the first time, the dealers on the Automotive News Top 100 Dealer Groups list delivered more than 10 percent of all new vehicles sold in America in 1997. That's 1,534,936 vehicles in a market of 15.16 million.
Sales of the Top 100 groups were up 17.9 percent from the Top 100 in 1996. That reflects both public ownership and the consolidation of dealership groups as promoted by the Big 3.
For 1998, public companies will lead the Automotive News list even more dramatically.
'I predict that next year, the top five will be public companies,' says Sheldon Sandler, managing director of corporate finance for Landenburg Thalmann & Co., a New York City investment bank.
Public ownership gives dealership groups access to cheaper capital and the courage to grow, Sandler says. He predicts that four or five of the larger private companies will go public this year and that some of the large public companies, such as Houston-based Group 1 Automotive Inc. (No. 10 on the 1997 list), will get even bigger.
The Automotive News Top 100 Dealer Groups list ranks the groups by 1997 retail unit sales of new vehicles.
Six of the nation's top 100 dealership groups are publicly traded.
No surprise at No. 1 is the first appearance of Republic, headed by co-CEOs H. Wayne Huizenga and Steven Berrard. On this list, Republic's 1997 revenue of $7.13 billion includes only its new-car dealership operations. Republic's acquisition of new-car dealerships began in 1997.
At year-end, Republic had 111 dealerships and 151 franchises, which sold 233,569 new units in 1997.
And Republic is already bigger than in 1997. Making their last appearances on the list are Charlie Thomas Dealerships of Houston (No. 17) and Southern California Auto Group of Torrance, Calif. (No. 53). Republic bought both groups this year.
Second and third places on the list are held by privately owned companies.
The long-time leader - Hendrick Automotive Group based in Charlotte, N.C. - dropped to second place in 1997 with 58,448 new vehicles. Hendrick was down from 60,057 in 1996. The company sold some stores in 1997.
Rick Hendrick, the group's founder, stepped down as CEO last August after pleading guilty to mail fraud as part of the Honda bribery scandal. Jim Perkins, who retired as Chevrolet general manager in April 1996, was appointed president and CEO of the Hendrick group.
V.T. Inc. in Shawnee Mission, Kan., owned by Cecil Van Tuyl and son Larry, was third. The group sold 56,966 new cars and trucks in 1997, up 15.4 percent from 1996.
UNITED RANKS No. 4
No. 4 was publicly owned United Auto Group Inc., based in New York. United's new-vehicle sales jumped 16.4 percent to 50,985 in 1997.
Charlotte, N.C.-based Sonic Automotive Inc., which went public last November, was eighth with 25,146 new vehicles sold.
Sonic COO Scott Smith says two things set his company apart from some other public auto groups: modest, achievable financial goals and long experience in automotive retailing.
Smith's father, Sonic CEO Bruton Smith, has been in retail automotive sales for 30 years.
MORE TO BE DONE
Scott Smith agrees there is still a lot of retail consolidation to be done. But for the short term, he predicts it will be done by the large private companies, such as the Van Tuyls. 'The Van Tuyls are extremely good operators and can continue to grow without access to public money,' Smith says.
He says the trend toward public offerings has slowed as private groups wait to see what happens with the current group of public companies, and to see if the generally low stock prices rise.
'The sector is so new, nobody knew what to do when companies started to miss their numbers,' Smith says. 'As we put some stability back in the market, that will help the sector.'
ASBURY: NOT YET
One company poised for an initial public offering is No. 39 Asbury Automotive Group of Consho-hocken, Pa. With 14 dealerships and 18 franchises, Asbury sold 12,000 new units in 1997.
Asbury's first acquisition, in 1996, was Roswell Jeep-Eagle in Roswell, Ga. In 1997, it acquired three dealership groups and signed contracts of intent with three others.
Asbury Chairman Tom Gibson is the former president of Subaru of America Inc.
Gibson predicts that automotive retail consolidation will continue and that Asbury will eventually go public.
But for the time being, private ownership enables Asbury to focus on acquiring quality dealerships and eliminates the pressure of meeting quarterly earnings goals, Gibson says. Asbury is owned by Ripplewood Holdings and Freeman Spogli & Co, investment firms that also have holdings in fast food, retailing and manufacturing industries.
Says Gibson: 'We are building a base of dealerships that are high quality, profitable and have high CSI (customer satisfaction index) scores.'