Six months ago, dealer Mike Kahn put Superior Chrysler-Jeep-Dodge in suburban Los Angeles up for sale. He's still waiting for the phone to ring.
"It's probably one of the nicest dealerships on the busiest freeway," Kahn told Automotive News. "And we have not had one offer at any price, even for zero blue sky."
The dismal U.S. economy, rapidly rising gasoline prices, plunging vehicle sales and bad press have conspired to slash the values of Detroit 3 dealerships to a fraction of what they were just last year, say dealers, brokers and industry executives.
Dealer and property developer Bruce Toll owns and operates two auto malls in suburban Philadelphia. He says a domestic brand dealership, including its real estate, that might have sold in his market for $4 million a few years ago would be lucky to fetch $500,000 today.
Toll says all of his 13 franchises, Detroit 3 and import brand, are profitable. But he has seen at least 10 domestic brand competitors go out of business in the past year.
When Detroit 3 dealerships sell at all these days, many bring only the value of their real estate and parts inventories. "Blue sky" — the intangible value of a franchise — is often virtually nil for a Detroit 3 store.
"I would not go out and pay someone $2 million to $3 million for a franchise unless it came with a great piece of real estate," Toll says. "I don't believe the blue sky is worth that much today, and neither does anybody else."
Sheldon Sandler, an investment banker in Skillman, N.J., specializes in working with big auto retailers to buy dealerships.
He says his company, Bel Air Partners, "won't bother" with Detroit 3 dealerships. "They are just worth parts," Sandler says.
Dealership brokers say typical valuations of domestic franchises have reverted to what they were a dozen years ago, before newly formed public dealership groups began bidding up prices.
Mark Johnson, a broker in Seattle, says some buyers of domestic brand stores are leasing rather than buying dealership property. They fear they may be stuck with real estate they can't sell if a Detroit 3 automaker decides to kill a brand, Johnson says.
Such dealers "would rather lose $15,000 a month for the next year or two vs. buying a single-use property for $6 million," Johnson says.