The auto industry is on its way to its best sales year ever. Silicon Valley is flush with dot.com millionaires buying luxury cars. So why would Don Lucas, owner of 14 dealerships in the San Francisco area and Hawaii, choose to sell now?
For one, there's the buy-low, sell-high theory. In selling at a market peak, Lucas gets a premium price. But he also has other motives.
'I'm disillusioned by what I see coming,' said Lucas, who sold his stores late last month to First-America Automotive Inc., a San Francisco dealer group that is being bought by Sonic Automotive Inc.
Lucas says he's alarmed by automakers entering the retail business. And he fears what the Internet will do to the traditional dealer network.
'My deep-seated concern is the attitude manufacturers are taking toward retailing. The factory thinks we're uneducated bumpkins with street-smarts but without intelligence. They feel we don't deserve what we earn,' said Lucas, 65, who got into the business selling used cars while a junior at nearby San Jose State University.
Lucas sees these ominous trends at the automakers: cutting the dealer discount; eliminating reimbursements for predelivery inspections and service loaners; and tying holdback to specific customer satisfaction scores. Finally, Ford Motor Co. and General Motors are getting into the retail business themselves.
That leads into Lucas' concern about the Internet.
'The Internet will impact retail sales more than any other single event since the Model T. Marketing through the Net reduces everything to price and home delivery. Of course, the resulting effect is to reduce gross profit,' Lucas said.
Lucas' stores - six Saturn outlets, two Honda stores, two Cadillac and single Oldsmobile, BMW, Mercedes and Acura points - grossed about $500 million in revenues last year, with a 7 percent net return. Revenues are up about 30 percent this year.
Lucas said he sold out for the 'low nine-figures,' not counting about $50 million in real estate. He said he got an even higher offer from Republic Industries but declined it.