Chris Haydocy can still smell the fresh paint on his new Oldsmobile dealership.
Just three years ago, the Columbus, Ohio, dealer spent $700,000 for the rights to the Oldsmobile franchise in his market area. Since then, Haydocy paid another $1.9 million building a stand-alone Olds dealership to meet the standards of the General Motors image program.
'GM mandated the exact chairs we had to buy for the showroom,' said Haydocy. 'We have always watched our pennies, but at GM's insistence we spent $942 apiece for 18 leather chairs.'
Haydocy is not the only frustrated Oldsmobile dealer. GM's decision to cancel Oldsmobile last week opened a financial can of worms for the brand's 2,800 dealerships.
Many dealers have made substantial improvements in their stores in the past few months, and they expect compensation from GM. The value of their stores plummeted, and many customers won't want to buy from a lame-duck brand.
Dealers expect heavy employee turnover in the next few months. The revolving door could force them to close their operations much sooner than they would like.
'You can't keep a single point dealership open for three years,' said Ed Bozarth, owner of a stand-alone Oldsmobile dealership in Colorado Springs, Colo. 'A 33-year-old who has three children isn't going to work for three years and look for another job at 36.'
Ferman Motor Co., which has sold Oldsmobiles since 1902, spent about $500,000 in upgrades in the past four years. It holds four Oldsmobile franchises, including one stand-alone Olds store, and has invested $3.5 million in new vehicle inventory, $3 million in real estate and $200,000 in parts.
'This is an emotional event for all our employees, owners and customers,' said Preston Farrior, vice president of automotive operations. 'We have been in business a long time.'
Bozarth, president of Ed Bozarth No. 1 Oldsmobile in Colorado Springs, just spent $200,000 repaving his lot. His stand-alone Oldsmobile dealership nets $1 million on $30 million in annual revenues and he expects to sell 500 new Oldsmobiles this year.
'They (GM) have considered me their best dealer since 1997,' said Bozarth, who learned Oldsmobile would be phased out through the local newspaper. 'They (GM) didn't talk to their best dealers (about closing Oldsmobile) and they still haven't talked to us.'
Real estate brokers say the value of Oldsmobile dealerships has been declining for at least eight years.
To advance its 'Project 2000' plan, GM started exercising the right of first refusal, which is a provision in the dealer agreement that lets GM reject a prospective buyer of a dealership, purchase the store and turn it over to another dealer.
'The right of first refusal had a chilling effect on buyers' willingness to negotiate the sale of a GM dealership,' said Charlie Walton, partner of Mironov and Walton Associates, an Edison, N.J., broker handling dealership sales. 'There have been very few GM dealerships that have changed hands in the last five years.'
Oldsmobile dealerships were hurt the most by GM's strategy, Walton said.
Oldsmobile dealerships used to be a hot property in Florida. Dusty Troyer, an Orlando broker who has sold car dealerships for 23 years, said that eight years ago an Oldsmobile dealership in a medium-sized market would fetch $1.5 million. But in the past year the same store might sell for one-tenth of that.
Of course, last week's announcement is the final nail in the coffin when it comes to dealership valuation.
'With this news the Oldsmobile brand has lost virtually all value. There is no blue sky, which represents the future earnings power of the franchise,' said Sheldon Sandler, founder of Bel Air Partners, an automotive investment firm in Princeton, N.J. 'An Oldsmobile dealership is just worth what you can sell it for at a used furniture store.'