MERGERS, PUBLIC OFFERS SEEN AMONG CAR DEALERS
Automobile dealerships have become
large, multi-store operations, and the largest sell more than 1
billion dlrs a year worth of vehicles a year.
    Around the auto industry there is talk of mergers and
buyouts among dealerships, and there are rumors that the
largest are considering offering shares to the public, analysts
say.
    Retail car sales "are at a point of transition. There's not
much that's off the table in terms of creative thinking" about
ways to sell cars, says David Cole, analyst with the University
of Michigan's Transportation Research Institute.
    The retail car market is "much more freeform now" than it
was in 1956, the year things began to change, says Detroit
analyst Arvid Jauppi of Arvid Jauppi and Associates.
    Thirty years ago, in 1956, the situation was different.
Dealerships sold one kind of car--a "Chevy" or a Ford or a
Studebaker. The average dealer had 17 employees and sold
738,000 dlrs worth of vehicles, according to the National
Automobile Dealers Association.
    That year a tiny car from overseas--Germany's Volkswagen
Beatle--began to gain popularity. The "Bug" caused "a
rebellion" among dealers, who demanded greater freedom from
restrictions placed on them by the major American automakers,
says Jauppi.
    One of the most visible changes in retail car sales has
been in the size of dealerships, auto analysts say. Last year,
the average dealership had 11.2 mln dlrs in sales--a 15-fold
increase from 1956--and employed 34 workers.
    "I had one of these guys tell me he makes six, seven mln
dlrs a year and didn't know what to do with all his money,"
says Cole.
    "There's a whole lot more rich guys who sell cars than that
make cars," he says.
    With the increase in size, large dealers have been buying
up other dealerships, and auto analysts see few signs the trend
will let up.
    Donald Keithley, vice president, dealer services, for J.D.
Power, a California-based market research firm, says that, by
1990, 12,000 people will own dealerships compared to 16,800
principal owners today.
    Many dealers are experimenting with owning several
franchises, some of which might compete against each other. "It
used to be a Chevrolet dealer was a Chevrolet dealer. Now a
Chevrolet dealer might handle several lines," Jauppi says.
    As dealers get bigger, industry officials are talking about
the possibility that some of them might become publicly-owned
or open international operations.
    Offering shares to the public is an option large dealers,
"are obviously thinking of very seriously," says Cole.
    Although some say the franchise system might get in the way
of a public offering, Jauppi says there are few obstacles to
trading in car dealer shares.
    "Dealers are large enough now to go public. The only thing
the manufacturer cares about is that the dealer sells those
cars. It could happen any time," Jauppi says.
    "If you look at the whole merger mania, and look at the
scale some of these dealers, it's going to be very hard to
resist taking them public," said another analyst.
    And Jauppi says that dealerships can be expected to become
international.
    "We're going to have international dealers--dealer networks
that are worldwide," he says. U.S. dealers will be attracted
particularly to Europe, where the market will expand faster
than the U.S., he says.
    "It's not totally off the wall," says Cole.
 Reuter
