Dealer Steve Germain is deeply invested in Volkswagen. He likes it that way.
In March, Germain opened Volkswagen of Ann Arbor. He spent $7.2 million building the Michigan dealership and a separate facility for his Audi and Porsche franchises. He acquired all three from another dealer in 2012.
Some might think his timing could not have been worse.
VW is embroiled in a diesel-emissions cheating scandal that erupted in September, weighing heavily on the value of its U.S. dealerships. Dealership buy-sell experts say Volkswagen's sagging sales -- which have fallen 13 percent through May, in part due to a sales freeze on new diesel models -- have dragged down dealerships' earnings and their blue-sky values.
Blue sky is the intangible value of a store beyond its physical assets and can vary enormously depending on an individual store's circumstances.
In fact, AutoNation Inc., the nation's largest dealership group, took a $9.6 million charge against fourth-quarter earnings to reflect the eroding value of some of the six VW stores it owned. It currently has four VW stores.
But Germain is upbeat about his just-opened stores. "The timing was perfect," he said. "That story hasn't ended yet. Those franchises were worth the investment, and the market can support that."
Germain is the CEO of Germain Motor Co., which has 18 dealerships across Michigan, Ohio and Florida, representing 17 brands. The Columbus, Ohio, dealership group ranks No. 70 on Automotive News' list of the top 150 dealership groups based in the U.S., with retail sales of 13,313 new vehicles in 2015.
Germain is a third-generation dealer. His children are also in the business. For that reason, VW's troubles and the ding to its values don't worry him.
"If I was in the market to sell, in the short term, I'd have a different outlook," Germain said. "Our plan is to transfer that business into the next generation of owners. When you look at it from a long-term perspective, the difference in the blue sky today and the long term is meaningless."