Texas dealer David McDavid saw the writing on the wall when his dealer group fell from the nation's 13th-biggest in 1992 to No. 26 in 1996, despite substantial growth.
'I was seeing the industry change almost daily,' McDavid says. 'I did not want to be the guy with the corner appliance store when Wal-Mart came to town.'
Last summer, McDavid finalized what would become a seamless transition from a three-generation, family-owned dealership into part of a chain owned by a group of private investment firms.
McDavid sold 70 percent of his David McDavid Auto Group to Asbury Automotive, one of the top dealer groups in the nation.
McDavid's father started the family business in 1936 in Houston, and his son opened his first store in 1962 near Fort Worth, Texas. After his father's death in 1969, McDavid expanded to locations in half a dozen Texas cities. Combined new and used-car sales last year topped $500 million and 30,000 vehicles.
McDavid, 56, and his two sons who work with him, had watched the big consolidators changing the auto retail industry and had worried about their own future.
'While we thought our $500 million in sales was a reasonable size, we realized it was nothing compared to the big consolidators in the billion-dollar category,' McDavid says. 'We concluded that if we wanted to stay competitive, we had to be part of the economies of scale.'
McDavid had been approached by several consolidators, and had considered pursuing a succession plan. But he was attracted to Asbury because the company allowed the seller to retain a minority interest in the dealership and continue to operate it.
'In 62 years in the car business, we have always enjoyed a good reputation,' McDavid says. 'When Asbury came in with their consolidation plan, it was important to us that it was viable and that it was with people who would continue to operate the way we always had.'
McDavid, his children and a few veteran employees still share 30 percent ownership of the business, now known officially as Asbury Automotive of Texas Ltd., but doing business under the old name. Probably the only customers who are aware of the change are those who ask, because the signage has remained the same, as have the positions of the family and staff who work there.
After two years under contract and closing the transaction in mid-1998, McDavid describes his new career as a minority owner as delightful.
'Asbury leaves us alone,' he says. 'They have their CFO and overseers based in Pennsylvania and Wall Street, and they want a lot of regular reports as to the direction we are going. But they have relied on us to manage, and I can hardly tell the difference.'
Even when an idea does filter down from Asbury, 'if we point out why we, as the operator, don't like it, they listen to us,' he says. 'They realize we are the automobile people and allow us to operate the stores.'
The Asbury contract is a little like having one's cake and eating it, too, according to McDavid. His family reaped the financial rewards of selling a big chunk of the business, yet they still get to run it in almost the same manner as in the past.
'I could have sold it to my sons, but this way we all get the cash and still operate the business,' he says.
That day 'when Wal-Mart comes to town' might not be too far down the road, according to McDavid.
'It's my view - and I could be wrong - but I can see 10 years from now that it will be difficult for small independent automobile dealers to compete,' he says.
McDavid foresees concentrating on other holdings: his real estate business, his cattle business, his cutting-horse business, his insurance business.
'What do I think I'll be doing 10 years from now? Probably out riding my cutting horse.'
And it will be in a place where there's no Wal-Mart in sight.