Warren Buffett’s New Dealership Group Expects to Buy More Stores

NEW YORK – Billionaire investor Warren Buffett’s newly formed Berkshire Hathaway Automotive dealership group is poised to purchase more stores.

But Buffett says he’ll largely leave such decisions to dealer veteran Larry Van Tuyl who sold his 79-store Van Tuyl Group to Buffett’s Berkshire Hathaway investment company. They sealed the deal in March.

“Larry will (acquire) new dealerships,” Buffett says at the J.D. Power/National Automobile Dealers Assn. 2015 Automotive Forum held here in conjunction with the New York Auto Show.

“The acquisition team right now is myself and Jeff Rachor,” Van Tuyl says at the conference, referring to a former Van Tuyl dealership group executive who became CEO of Berkshire Hathaway’s automotive unit. Van Tuyl is the chairman.

Asked if he had ever thought about owning dealerships before, Buffett says, “I think about owning everything.” He goes on to describe auto retailing as “a huge, profitable business, when run properly.”

He bought the Van Tuyl operation because both the time and price were right, he says.

Van Tuyl says the group founded by his late father was always on the lookout for good dealerships to buy. That acquisition strategy is expected to gain more momentum with Buffett’s firm bankrolling it.

“We plan to be entirely in the U.S. for now,” Van Tuyl says of future growth. “Anything that makes sense, we are interested in talking about. Right now we’re in 10 states, and we would expand beyond those.”

Buffett says of prospective purchases: “That would be up to Larry. We don’t get into that. We own all kinds of businesses. We bought an RV business in Indiana from a guy I’ve talked to twice in 10 years.”

Conference moderator Becky Quick, a CNBC TV co-anchor, tells Buffett the event’s audience consists of many dealers who might want to do business with him.

That prompts him to list his firm’s finer points. “We always do what we say, we always have the money and manufacturers are likely to approve us (for a franchise).”  

He doesn’t expect much haggling over future dealership acquisitions. “Prices are fairly well established. You can look at an operation and see what they are doing. In most cases you can guess within 5% to 10% of what it is worth, whether we buy it or not.”

He adds: “If we had a chance to buy a dealership at a sensible price, we’d buy it within five minutes. You want to keep doing things that make sense.”

Since venturing into the auto retailing, he has met with Mary Bara and Mark Fields, the CEOs of General Motors and Ford, respectively. “They gave me a good Detroit welcome to the car business.”

Tesla Motors is challenging the dealer system by selling its electric vehicles factory-direct, but Buffett doesn’t see that as disrupting the industry.

“The dealer system works,” he says. “It has been around for a long time. Usually, when a distribution system has been around for a while, there’s a reason. I don’t see that changing.”

Conference attendees at the Buffett-Van Tuyl session include Fritz Hitchcock, owner of three Toyota dealerships in Southern California.

Hitchcock says of Buffett, “He’s a very practical guy who doesn’t take the short view.”

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