TRENDS DAWN OF THE MEGADEALER
When Joe Tigue sold the area’s most recognizable auto dealership, he gave in to a new era of consolidation in the industry.
IF I SAY, "WESTWAY FORD," I BET you can sing it.
A dancing "Joe Greed" and that ’50s jingle literally made Westway Ford a household name in North Texas, where the auto dealership has enjoyed better recognition than any other for more than a decade. So why would Joe Tigue. who grew West-way to such status over his 16 years of ownership, sell his grown-up baby-as he did on June 30-and go do it all over again from scratch at Texas Toyota of Grapevine?
"The car business is like a disease," Tigue says, "and I’ve got it-terminal."
That’s the easy reply. The more complicated answer is that a major consolidation is going on in the auto industry and Westway, sitting on expensive urban real estate along auto row on Airport Freeway in Irving, was swal-lowed up by one of the top megadealers in the country- Kansas-based V.T. Inc. Now with eight dealerships in the Dallas-Fort Worth area and counting. V.T. Inc. has the largest presence of any single owner here.
Well-managed and well-capitalized, the organization can take advantage of economies of scale and, as one of the biggest groups in the country, has leverage in negotiating for services and supplies. V.T. is also known for giving local general managers the power to run their dealerships without overly burdensome approval from the corporate headquarters.
Industry watchers think the company is in Dallas for the long haul. The city’s love affair with cars and trucks is still hot and shows no signs of cooling, though nationally, Americans are putting new cars lower on their wish lists. Dealership consolidation-which has been going on for decades-is partially in response to this trend, as dealers take lower margins to keep sales up. In 1970. there were 30,800 fran-chised dealership outlets in the country. That number dropped to 22,750 by 1995 and is expected to be at around 17,000 by the year 2000.
This consolidation has heated up recently for a variety of reasons. Many of the smaller independent dealerships are having a tough time staying profitable. The capital demands to successfully operate fran-chised dealerships are intensifying, margins are declining on new cars, and used car and service department profits are being eaten up by specialty shops hawking everything from mufflers to a quick oil change-in 10 minutes and just around the comer. Located on prime real estate, these independents are often worth more on an asset sale basis than on an operating basis.
Another major reason for the consolidation is that older dealer principals, businessmen in their 60s and 70s who don’t have a successor in line to take over the business, are looking for a way to cash out. The publicly traded megadealers, most notably H. Wayne Huizenga’s Republic Industries Inc.-which this year acquired Dallas-based W.O. Bankston Enterprises-are actively looking to buy. According to Automotive News, about 14 percent of dealerships across the country were approached about selling out during the last quarter of 1996 and first quarter of 1997.
Tigue says none of the above scenarios exactly fits his sale strategy. Instead, he says, the sale to V.T. Inc., which owns a total of 35 dealerships primarily in the Midwest and Texas, made it possible for him to do again what he really likes to do- sell cars. Westway had grown to 21 acres of cars and buildings, including Westway Imports and 350 employees.
Today Tigue has five employees and he’s watching the dirt fly on a seven-acre site in Grapevine half a mile north of the Main Street 114/121 interchange. By November, that real estate will be covered with cars and Tigue will be out there making sure they sell.
And what of the fate of Joe Greed?
"I’m not at liberty to say what Joe Greed’s plans are," says Tigue. "He’s retired from Westway Ford and Westway Imports and is contemplating the future but doesn’t want to telegraph his moves."