82.1 F
San Fernando
Saturday, Mar 2, 2024


By CHRISTOPHER WOODARD Staff Reporter With his string tie, big belt buckle and jeans, Wes Rydell looks more like a cowboy than a car dealer, but the North Dakotan has hit the San Fernando Valley’s car-dealing community like a twister on the plains. Rydell, who has opened 35 dealerships nationwide, was brought in by General Motors Corp. to consolidate its poor-performing dealerships and boost GM’s dismal market share in the Valley. But GM’s self-described “San Fernando Valley experiment” isn’t sitting well with other area GM dealers. They say GM is trying to drive them out of business after they refused to sell out. Now they’re accusing the automaker, among other things, of selling cars to Rydell at cut-rate prices and giving him first dibs on new inventory. The outcry has prompted state regulators to promise an investigation, but Rydell insists he has nothing to hide. “We’re not getting any special treatment,” said Rydell, during a phone interview from his office in Grand Forks, N.D. “GM approached us because of our track record, for our ability to increase customer satisfaction and market share, and that’s what we’ll do.” The showdown in the Valley, and how state regulators handle it, has national implications as other automakers, including Ford Motor Co., set up similar joint ventures with high-volume dealers elsewhere to boost market share and institute uniform business practices. The faceoff has attracted the attention of Galpin Ford owner Bert Boeckmann, who took the unusual step of speaking out in support of his GM competitors at a recent meeting of the New Motor Vehicle Board, the state agency that oversees car dealerships. Boeckmann said after the meeting that GM appears to be picking off its competitors, a tactic that might eventually lead to higher retail prices for GM products. Boeckmann’s interest in the issue doesn’t surprise Rydell. “Bert has done a tremendous job in the market. He’s the largest Ford dealer in the country,” Rydell said. “But remember, if we do well, theoretically that could have an impact on his market share.” Boeckmann enjoys an environment in which GM has a meager 13 percent Valley market share, less than half of its 30 percent national market share. It was GM’s concern about its poor showing in the Valley that prompted it to launch its Valley project last year. GM bought and then consolidated nine franchises Oldsmobile, Chevrolet, Buick, Pontiac, Cadillac and GMC and invited Rydell to run the four surviving stores. One of those stores is in San Fernando, another in Van Nuys, and two are in Northridge. Under terms of the deal, Rydell will ultimately be able to buy those dealerships from GM. But during a Feb. 26 meeting at the Warner Center Marriott, a room full of independent dealers from Simi Valley to Monrovia gathered to tell the New Motor Vehicle Board, a state regulatory body that oversees licensing for car dealers and manufacturers, that GM is giving Rydell Automotive Group a sweetheart deal. Steve Livingston of Livingston Motor Car Co. in Woodland Hills told the board that Rydell is selling whole inventories of cars for less money than Livingston and other GM dealers would have to pay the factory, indicating GM is giving Rydell a price break. He also accused GM of refusing to sell him a nearby GM truck franchise when it became available because he had refused to sell his auto dealership to GM. “This is the first accumulation of us (independent dealers) as a group standing up and speaking out,” Livingston told the board. Fred Bell, owner of Community Chevrolet in Burbank, said he also declined GM’s takeover offer, and that he has had difficulty replacing his inventory as cars are sold. Bell said all he has to do is pick up a newspaper ad to see that Rydell has 75 Silverado pickup trucks to his seven, 40 Suburbans to his four and 17 Corvettes to his zero. “What’s the effect on the consumer if GM controls the Valley?” he asked. “You’re going to have to pay whatever they want for a car, parts and service.” The independent dealers made several other allegations, saying GM provides special financing to Rydell to cover his inventory, that Rydell customers are more apt to be approved for loans through GMAC (the automaker’s financing arm) even if they have marginal credit, that Rydell is receiving rent subsidies from GM, and that the automaker is providing special rebates or incentives to Rydell that the other dealers don’t enjoy. Jim Lynch, president of Rydell Automotive Group, said his employer can afford to sell cars at relatively low prices because of high-volume sales. The group may appear to have a larger inventory than its competitors because Rydell’s newspaper ads tout the combined selection at the group’s four dealerships in the Valley, said Lynch. At the same time, Rydell’s inventory is quickly replaced because GM has an inventory system that rewards dealers for moving lots of cars quickly. Specifics on how successful Rydell has been in its attempt to increase GM sales in the Valley will not be available until after the end of the first quarter, Lynch said. But sales will undoubtedly be up, he said, because the combined sales staff is already 50 percent larger than its pre-consolidation size. At the crux of the dispute between the independent dealers and Rydell is a fundamental difference in philosophy, said Lynch. Traditional dealers, from the front-line sales rep to the owner, are conditioned to try to make as much money as possible from each customer. But a no-haggle dealer like Rydell tries to set one price that is low enough to quickly move merchandise. Chris Denove, director of consulting operations for J.D. Power and Associates, said the one-price system has not worked for the vast majority of dealers who have tried it. That’s because most people feel they can get a better deal if they haggle, and for the most part they’re right. “If you want to spend the time and effort to squeeze every last dollar out of the negotiations, you can get a better deal at a traditional dealer,” said Denove. But not everyone is willing to go through that hassle, and those who don’t know how to deal or who come unprepared are going to end up paying more, said Denove. Lynch argues that in an information-driven age with Internet shopping and better-informed, more-sophisticated consumers it’s just a matter of time before the traditional haggle approach to selling cars dies out. “The whole car business is obsolete,” said Lynch. “You aren’t going to prevent changes in the car business any more than you’re going to stop summer from coming.” Lynch said it’s just a matter of time before the other GM dealers in the Valley are forced to change with the times. Meanwhile, he said he’ll enjoy the publicity that comes with being accused of selling cars too cheaply. “I’m out here to sell a lot of cars, and we’ll do that,” he said. The dispute seems to be heating up now that the New Motor Vehicle Board has taken an interest in the situation. The board which is made up of nine members, four of them independent car dealers is soliciting evidence from Valley GM dealers before formally asking the Department of Motor Vehicles to investigate GM’s local business practices. Tom Novi, chief of the DMV’s occupational licensing branch, said that while the California vehicle codes allow manufacturers to own dealerships on a temporary basis within 10 miles of an affiliated dealer, automakers are precluded from giving preferential treatment to one of their own operations. If GM is found to have engaged in preferential practices, the DMV could fine the automaker and place it on probation, suspend it, or revoke its license to do business in California. “There’s been a number of allegations, but nothing’s been proven at this point,” said Novi, adding that he’s waiting to see what evidence the independent dealers have to back up their claims. GM representatives declined to attend the hearing, saying no formal complaint had been filed. GM spokeswoman Anne Marie Sylvester said the automaker would be foolish to provide special treatment to Rydell when its business partnership in the Valley is under such close scrutiny. “We firmly believe we’re treating each dealer fairly,” she said. “We would be hurting ourselves if we weren’t fair to everyone. Independent dealers throughout the country handle our greatest percentage of sales.” Denove of J.D. Powers said he finds it hard to believe GM would engage in such blatant favoritism, because the downside risks would be too great. Not only could the automaker lose its license to operate in California, but it would likely face a massive lawsuit from its independent dealers. Lynch said he welcomes an investigation. “We’ve got nothing to hide. We sell a lot of cars cheap, and we make a profit,” he said. “I’m not any more worried about the outcome of this than I am about not making the Lakers team.”

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