GM Dealer-Succession Bulletin Causes Consternation

MCCALL, ID – Family auto dealerships prevail in Idaho, so a General Motors bulletin to its dealers caused consternation for at least one auto retailer. 

The May 20 correspondence says it seeks to clarify the “successor addendum” of GM’s Dealer Sales and Service Agreements. But dealer Dave Edmark says it seems to go beyond that. His attorney concurs.

GM requires its dealers to have a succession plan on file naming a qualified successor. Under that setup, named  and qualified successors virtually were “preapproved” as subsequent dealer principals, although subject to a 2-year tryout period, Edmark says. 

He’s bothered by the bulletin saying “upon the death or incapacity of the Dealer Operator, GM will consider a proposal submitted by the Dealer Company to appoint as Dealer Operator the individual named on the Successor Addendum…”

“That’s a quantum change,” says Edmark, a Chevrolet, Cadillac, Buick, GMC and Kia dealer in Nampa, population 55,000.

He tells WardsAuto: "This goes from what was essentially a done deal under the succession plan to a mere consideration.”

GM spokeswoman Ryndee Carney says the automaker’s policy on the matter remains unchanged. She says the bulletin and another “were sent to add clarity, and to provide policy information for changes in ownership and management.”

The current 5-year dealer sales and service agreement expires in October.

Dealer-successor requirements “are pretty simple,” Carney tells WardsAuto. She  summarizes them:

If a dealer dies or becomes incapacitated, “the proposed operator is vetted again at that time,” Carney says.

Many Idaho dealers began working at their family stores as kids. Edmark and his brother-in-law each own shares of a dealership founded by Edmark’s father. The son, president of the 5-franchise business, is the designated successor.    

“I just want what’s fair,” he says, urging the Idaho Automobile Dealers Assn. to challenge GM. “We built these businesses and own them, and should be able to decide succession.”

Carney says: “To the best of our knowledge, we have had no other questions regarding this from other dealers since (the bulletin) was published last month.”

Edmark speaks during a panel discussion at the Idaho dealer association’s annual convention here. It’s a casual-dress affair in a meeting room that’s quintessentially Idaho with features such as a stone fireplace and wrap-around windows providing a view of a lake and mountains beyond.

The state is large geographically, but with 1.5 million registered vehicles, it is not a particularly large automotive market. In contrast is California with 27 million registered vehicles.

Idaho dealerships are mostly small to midsize, but there’s a notable exception: Dave Smith Motors in Kellogg. It ranks No.2 on the WardsAuto Dealer 500. Its business model uses the Internet to sell cars well beyond its home market.

Dealers at the state convention seem happy with their stores, and express strong views on the advantages of on-site ownership. They disdain publicly owned megadealers as well as a trend of private investment firms buying dealership points.

“You want a store where the owner is there, someone who smells the smoke and is able to quickly put out the fires,” says IADA President David Taylor, who owns four stores and sells about 230 vehicles a month. “I think factories cringe when big groups want to buy up their franchises.”

Dealer Mark Peterson agrees, saying, “Bigger isn’t always better. Jumping on an airplane and visiting your stores (as an off-site owner) changes your business model.”

Phil Meador runs three new-car and two used-car dealerships, all of them in Pocatello. “I like staying in my own backyard,” he says. “There are plenty of autos to sell there. Stores are easier to buy than to run. I don’t want to be a roadrunner.”  

His two sons are in business with him. Dealership work isn’t for everyone, Meador says. “We’re lucky to be in it, but some people are lucky to be out of it.” 

Peterson owns four dealerships representing 11 brands in a family operation that dates to 1928. “I have the greatest job in the world, and I thank my dad for giving me the opportunity.”

Taylor is from a family of dealers. His father at first resisted when the son, out of desperation, asked to join the family business.

“In the early 1980s, I got out of college, and couldn’t find a job because of the economy,” he says. “My dad said, ‘I don’t think you want to work here.’ I said, ‘I’ll work for nothing.’

“He agreed to take me on – and he didn’t pay me. But it worked out great in the end. My dad said his worst decision was telling me not to join the dealership.”

Idaho dealers speak of good and bad times in the auto business. Edmark lost franchises when GM folded Oldsmobile, Hummer and Saturn. Taylor is resigned about losing two Pontiac and two Olds stores. “That’s the way it goes,” he says.

Peterson recalls sales plunging during the recession year of 2008. “I remember thinking we’ll have to sell refrigerators at our Dodge store because we aren’t selling any cars. Now, it’s great.”

Taylor notes the cyclical nature of vehicle sales. “You hunker down, save your rubles in the good times and prepare for the next down cycle.”

When the next one comes, he predicts “there will be great fire sales of dealerships as private-equity owners (scramble to) get out.”       

Idaho is a business-friendly state without a plethora of regulations, Peterson says. “You look at California, Washington and Oregon, and I’m just glad to be in Idaho. We do our best to run good, clean, ethical businesses, so we don’t need lots of laws regulating us.”

Adds Taylor: "It’d be great to live in California until you run a business there.”

Still, Idaho is like all states in one regard: collecting taxes.

Tongue in cheek, Meador proposes a flip-flop that would put more money in his pocket as a dealer: “I’d like to keep the sales tax and send the sales profit to the state.”

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