Dealer Mike Rueff had two choices.
He could continue to own and operate the dealership his grandfather founded, Walter Rueff Buick-GMC in San Fernando, Calif. Or he could sell it to General Motors, which is buying and consolidating dealerships in the area. Like several others, Rueff chose to sell.
'There's no doubt that the San Fernando Valley has been underperforming for some time (for GM dealers). I think consolidation is necessary,' Rueff said.
Swamped by imports in California and facing growing competition from superstores and large dealer groups, GM concluded it no longer could rely on traditional dealerships in the area.
GM so far has acquired six stores in the San Fernando Valley, including Rueff's, and the rights to one franchise from a dealer. And last week it said Wes Rydell, an innovative dealer based in North Dakota, will take charge of the stores in suburban Los Angeles, north of downtown.
'We made a decision the individual dealers couldn't tackle this,' said Edd Roggenkamp, GM's general manager of dealer network investment and development.
In the San Fernando Valley, imports control 60 percent of the market and GM has only 13 percent. The former owners will not be offered a stake in the project.
GM and Rydell, 56, are working out a deal in which Rydell Automotive Group, a subsidiary of North Dakota-based Rydell Co., will own a portion of the stores and have operational control. Eventually, Rydell will be able to buy the San Fernando dealer group from GM's Motors Holding Division, Roggenkamp said. The deal is the largest Motors Holding project ever, he added.
Neither GM nor Rydell would say how much they are investing in the project. Both sides expect to complete an agreement within 60 days.
GM and Rydell want to increase annual unit sales of GM brands, excluding Saturn, in the valley to about 11,000 from about 6,000 today, Roggenkamp said.
He would not say how long this would take.
'The whole idea is to do a different kind of concept where traditional things weren't working,' Roggenkamp said.
He said the Rydell dealership group in the valley will have a number of advantages over the old stores, including:
Rydell Automotive will be able to consolidate the valley stores. GM has begun this by relocating at least one franchise and re-establishing a couple others.
The group will be able to establish used-car superstores.
The group will be able to better focus the advertising of the dealerships 'for much more impact.'
The stores will have a higher inventory of vehicles to choose from, thus lowering the chance of product shortages.
The group will be able to establish centralized parts operations, which can fill customer orders faster.
Jim Lynch, executive general manager of Rydell Chevrolet, Rydell's flagship store in Grand Forks, N.D., will be responsible for day-to-day operations in the San Fernando Valley.
'Wes Rydell is an extremely successful and very innovative dealer,' Roggenkamp said. Rydell has taken good practices into widely different markets, he said.
Rydell currently oversees a group of 30 stores in North Dakota, South Dakota, Wisconsin, Minne-sota, Iowa and Nebraska.
GM gave the San Fernando Valley a glimpse of the future this month when it took three Van Nuys, Calif., dealerships - formerly owned by Gil Schneider -added two more franchises and renamed the stores the Century Van Nuys GM Super Center. The super center stores, all on Van Nuys Boulevard, carry Pontiac, GMC, Buick, Oldsmobile and Chevrolet vehicles.
However, Roggenkamp said the super center idea is 'a long way from the final state.'
Local dealers believe GM plans three superstores: one in Van Nuys, one in Northridge, and one in the more affluent western end of the valley.
Roggenkamp would not reveal the automaker's plans.
GM has targeted about 12 dealerships in the valley with annual unit sales of about 6,000, according to Roggenkamp. Some acquisitions are still pending, he said.
And some dealers so far have declined GM's offers, including Steve Livingston of Livingston Pontiac-Buick and Jim Wilson of Casa de Cadillac.
Livingston and Wilson's son-in-law, salesman Howard Drake, said GM has not pressured them to sell and their talks have been amicable.
'The dealers that are remaining are content that we are doing a good job,' Livingston said.
However, the two are concerned about GM possibly setting up stores too close to their own. Livingston also wonders why he has not been offered a GMC franchise under GM's franchise dualing or channel strategy.
'They just have chosen not to channel me. My employees deserve it, and my customers in this market deserve it,' he said.
Roggenkamp said he would not discuss individual dealerships.
Scott Irvin of Scott Irvin Chevrolet, just north of the valley in Valencia, said some dealers are afraid the acquired stores will get all the 'hot' vehicles. But otherwise he said he agrees with the move.
'I think the Los Angeles market has been overdealered for many years. And I think the dealers have been hurt by that,' he said.
As part of the plan, the 60-year-old Rueff dealership has been rechanneled as a Buick-GMC-Pontiac store. Mike Rueff will remain at his old dealership as general manager.
'My goal is to continue working for the new organization,' he said.
'And honestly I'm quite excited about the prospects of their plan.'