GPB's troubles mounted last year. In a Dec. 20 letter to investors obtained by Automotive News, GPB said it failed to meet performance expectations in 2018 and expected to have an intangible asset impairment charge — essentially writing down the value of its assets — on its audited financial statements. It also planned to divest underperforming stores this year, after already disposing of "certain underperforming assets, which will report a net loss from operations for the company for fiscal year 2018."
GPB said it would provide more detail on divestitures in forthcoming audited financial statements. In February, GPB sold two Pittsburgh-area Kenny Ross dealerships that it had held a majority interest in since 2017.
Some industry sources expect Prime Automotive is unlikely to buy many new stores as the investigations play out. Rosenberg told Automotive News in late March that Prime is negotiating to acquire a dealership in New England.
GPB rapidly grew its dealership portfolio from four stores in 2013 to more than 60 by the end of 2017, according to court documents.
Prime Automotive formed in fall 2017 through the combination of Rosenberg's Prime Motor Group and GPB Capital's Capstone Automotive Group. It now has 61 dealerships in eight states. That number will drop to 60 after the scheduled closing of a Prime store in Maine is completed, likely this week.
There are two units that carry the Prime name — Prime Automotive, the Westwood, Mass., umbrella company that includes all of GPB's majority-owned dealerships, and Prime Motor, the two dozen-plus dealerships in New England that are part of Prime Automotive and in which Rosenberg has a stake. GPB owns 76.25 percent of the Prime Motor stores, Rosenberg said. Rosenberg owns the remainder of those stores and oversees all Prime Automotive dealerships. He does not have ownership interest in the other Prime Automotive stores. GPB is the majority owner of those other dealerships, and some of the dealers who sold those stores to GPB retain an ownership stake.
Prime Automotive rose to No. 11 on Automotive News' list of the top 150 dealership groups based in the U.S. ranked on 2018 new-vehicle retail sales. That was up two spots from a year earlier, when it surged 53 spots in the ranking in the wake of the Prime Motor-GPB deal. In 2018, Prime Automotive retailed 45,665 new vehicles and reported revenue of $3.29 billion.
Rosenberg grew up in the car business working alongside his father, Ira Rosenberg, who founded Ira Motor Group in Massachusetts. (Ira Rosenberg died March 28.) In 2000, the Rosenbergs sold Ira Motor Group to Group 1 Automotive Inc., of Houston, now the fourth-largest new-vehicle dealership group in the U.S.
David Rosenberg ran Group 1's platform in New England until 2006, when Abrams Capital founder David Abrams said he would sponsor a new dealership group led by Rosenberg. That group became Prime Motor. Abrams Capital sold its majority stake in Prime Motor to GPB in 2017.
GPB's foray into auto retail is part of a larger surge of outside investors entering the industry. In 2015, Warren Buffett-led Berkshire Hathaway bought Van Tuyl Group, the largest privately owned U.S. auto dealership group at the time, renaming it Berkshire Hathaway Automotive. The same year, Soros Fund Management, the family office of billionaire George Soros, invested in McLarty Automotive Group.