Used-vehicle sales are an important part of franchised dealers’ operations – so important that some dealers are turning in their new-car franchises and selling used vehicles only.

That’s what happened this year with a Ford store in San Diego, CA; a Buick-Pontiac-GMC store in Charlotte, MI, and a Pontiac-GMC dealership in Syracuse, NY.

After 28 years as a San Diego Ford dealer, the Bob Baker Auto Group in August month gave back its Ford franchise. It will sell used vehicles only from the former Ford store, while continuing to sell new vehicles for its remaining brands.

“We were once the top Ford dealer in the market,” says Michael Baker, CEO of the 10-franchise group founded by his father.

The Baker Ford store was one of four within a 5-mile (8-km) area at a time when Ford sales are down and in a market where “one out of four vehicles sold is a Toyota,” says the younger Baker, whose remaining franchises include Toyota.

Ford Motor Co. wants to reduce its dealership ranks overall and “as I considered this,” says Bob Baker, “it struck me that the timing is right for the move.”

In 2004, Ford blocked dealership chain Asbury Automotive’s $88 million bid for the Baker dealerships. Ford said it didn’t want Asbury to acquire Baker’s Ford store, claiming Asbury underperformed at Ford dealerships it owned elsewhere.

“We’ll never forget that,” Michael Baker says of the killed deal.

Turning in the Ford franchise, rather than trying to sell it, allows the Baker group to retain site control, he says.

Ford says it holds Bob Baker in the highest regard.

“We will miss his contribution, but we respect his decision and we are fully confident that Bob Baker Ford’s customers needing factory warranty service will be well served by the surrounding Ford dealers,” says Hal Dewsnap, Ford’s California regional manager.

Charlotte, a small town near Michigan’s state capital of Lansing, lost its Pontiac-Buick-GMC dealership May 1. This happened despite the Lansing area being home to two General Motors Corp. plants, where thousands of employees work and can purchase GM vehicles at generous discounts.

The Davis Auto Mart franchise business became too costly to operate because the auto maker required it to carry an inventory of 56 new units from among its three franchises, says sales manager John Simpson.

After deciding to let the franchises go, rather than sell them, the Davis dealership has become a mecca for all brands of used vehicles, Simpson says.

Losing the GM-employee customers with factory discounts won’t be a major blow because the profits are greater on late-model used cars, he says.

“Customers are used to finding a variety of brands of merchandise at Wal-Mart and Target – now they can find a mix of cars and trucks at our place, too,” he says.

Performance Auto Mall in the upstate New York city of Syracuse also has faced franchised dealership issues. Owner Ron Boukair says the dealership found a buyer for the Pontiac and GMC franchises in April and now has access to a larger and more diversified inventory.

“Years ago, with new-car shingles, we could go to factory auctions and buy good cars of all brands below market,” Boukair says.

That’s not the bargain it once was. “I now can buy a Chevy Impala for $1,000 less on the Internet than I could get at a closed factory auction,” he says.

Other advantages of being an “independent” dealer are freedom from costly and labor-intensive factory-mandated programs that could cost the dealership up to $4.5 million in annual gross sales just to operate because of requiring six or seven employees and special equipment and signage, Boukair says.

The Performance store plans to carry about 75% foreign brands and 25% domestic, a vast turnaround from the GM franchise days. Boukair says a multi-brand store will draw import-brand shoppers who would not usually patronize a domestic franchise store.

– with Mac Gordon

sfinlay@wardsauto.com