Jaguar, Land Rover, Ford gain in blue-sky store values

[mryan55]

Automotive News had an interesting article on blue sky trends... Not too many surprises here:

http://www.autonews.com/article/2014...y-store-values

[XDCX]

Thanks for creating this thread - I've been meaning to read that report in Automotive News.

I agree that there were no real surprises in the report but it was still an interesting read. To me all of the Blue Sky multiples seemed a little high but maybe that's just a reflection of the fact it's a sellers market for most dealers at this point.

While I agree with Mr. Haig's position that Blue Sky values for a franchise are market dependent (e.g. Imports higher in California and Domestics higher in Texas) I think there's also a variance based on the size of the store and the overall profitability. I think a larger volume store would likely benefit from higher profits and a higher Blue Sky multiple where a smaller store would likely have lower profits and a lower Blue Sky multiple.

Part of the reason I think larger stores would be more likely to have a higher Blue Sky multiple is because these stores are attractive to large dealer groups and their price gets bid-up accordingly.

[mryan55]

It is certainly a sellers market in almost all instances, in all parts of the country. I imagine that the small, non full-line stores are probably so minuscule and their relatively smaller blue sky multiples don't have much of an impact when the sample set includes the mega dealers of the world.

I know of plenty of small town, 100% MSR stores in the Great Lakes Business Center that closed up shop after not being able to find a buyer last year. In the GLBC more of the small guys closed rather than change hands last year. I'm sure that their story goes largely untold in the Automotive News blue sky report.

[XDCX]

Originally Posted by mryan55

I know of plenty of small town, 100% MSR stores in the Great Lakes Business Center that closed up shop after not being able to find a buyer last year. In the GLBC more of the small guys closed rather than change hands last year. I'm sure that their story goes largely untold in the Automotive News blue sky report.

I agree on both counts. Sadly I think a lot of smaller stores, CJDR and others, close down because they don't have a succeeding generation that's interested in owning the store and they cannot find a suitable buyer. These situations are mostly ignored by Automotive News and the brokers who tend to focus on the stores that are in most demand and generate the highest Blue Sky multiples.

To be clear, I'm not suggesting that Automotive News and the brokers are wrong for telling the story they're telling, I just think the story falsely suggests that all dealers are experiencing a huge uptick in the value of their stores and that's not reflective of the real world.

[XDCX]

I was thinking about this thread last night and thought that if all things were equal (Market, facility, sales volume, net profit, etc.) the Domestic Franchise I think would be most valuable is Ford.

The Ford brand has a strong vehicle in almost every segment and with the exception of a few recall issues Ford has a decent quality image and appears to have a decent product pipeline. Ford dealers also have access to Ford Motor Credit which used to be a real asset several years ago.

Ironically, when I think of the lowest value domestic franchise I think of a stand-alone Lincoln store. I think I'd rather have a stand-alone Mitsubishi store instead of a Lincoln store - at least with MMC you get access to affordable small cars that have mass-market appeal.

[mryan55]

I'm the same boat... I would rather have Mitsubishi than Lincoln, or even some other domestic franchises. With Mitsubishi you get:

1) Subcompact from $11,990 (the Mirage DE... made in Thailand)
2) Three row SUV from the low $20's
3) Sales increase of 70% YOY in March...

A smaller dealer network and some warranty potential, too.

[XDCX]

Originally Posted by mryan55

I'm the same boat... I would rather have Mitsubishi than Lincoln, or even some other domestic franchises. With Mitsubishi you get:

1) Subcompact from $11,990 (the Mirage DE... made in Thailand)
2) Three row SUV from the low $20's
3) Sales increase of 70% YOY in March...

A smaller dealer network and some warranty potential, too.

Great post - I'm in complete agreement.

I've had my doubts about whether Mitsubishi will survive in the U.S. and I'm still not 100% convinced they're committed to the U.S. market given some of the mixed signals they've sent in the past. That said, for the reasons you mention I'd rather have a MMC store than a Lincoln store.

I drove by Mitsubishi of Everett the other day and if you didn't know better you'd think it was a Honda or Toyota store. The facility was large, looked pretty decent and was LOADED with vehicles. If inventory is an indication of sales volume than I'm guessing that Harris Mitsubishi has to be one of the top 50 MMC stores in the nation.

Concerning Lincoln, while I'm convinced the brand can be fixed and volume could conceivably be increased to the point where the brand warranted a stand alone dealership, I don't think it would be a smart investment from Ford's point of view. The Billions that it's going to take to fix Lincoln would be better spent on strengthening the Ford brand in my opinion.

I believe the Lincoln brand could still survive, I just think it should be relegated to a niche status like Chrysler's old Imperial franchise back in the 60s and 70s.

[mryan55]

There's nothing inherently wrong with the Lincoln products. I actually have a used base, no option 2010 MKS FWD in stock right now. For a product conceived five years ago it is really light years ahead of the CTS and 300 of its vintage.

The brand is certainly misguided and probably priced out of the customer they really want... the situation seems quite similar to what did Saab in and makes Volvo only a niche player today. The new models like the redone MKZ seem to go after the same customer as Saab -- architect/engineer type who wants to "go against the grain"... unfortunately, it didn't work for Saab, even with a much smaller expense structure than Lincoln, so I don't think it will work long-term for Lincoln.

Which is quite unfortunate because the product is nice, save for the similarities with the Ford products... but hey, we all do the badge-engineering to some level, so I understand.

As for Mitsubishi, Indiana-Illinois-Iowa tri-state region seems to be pretty strong for MMC. Of course, the US manufacturing HQ for MMC is right in Normal, IL, so that certainly explains some of it. In the Indianapolis DMA there are no less than 7 Mitsubishi dealers -- 8 if you count Terre Haute, which is only a little outside of the Indy metro. In that same area we have only three Lincoln dealers -- two dualled with Ford, one dualled with former Ford step-child Mazda.

Of course, every market is different, but here in flyover country Mitsu is infinitely stronger than the Lincoln Motor Company.

[XDCX]

Originally Posted by mryan55

There's nothing inherently wrong with the Lincoln products. I actually have a used base, no option 2010 MKS FWD in stock right now. For a product conceived five years ago it is really light years ahead of the CTS and 300 of its vintage.

I agree that Lincoln's product from a quality standpoint is competitive but I personally do not care for their styling - especially the overuse of the waterfall front grill.

I also struggle with the names for most of the Lincoln vehicles. Using letters and numbers to name models seems to work great for BMW and Mercedes but for some reason it doesn't seem to work as well for Lincoln.

Originally Posted by mryan55

The brand is certainly misguided and probably priced out of the customer they really want... the situation seems quite similar to what did Saab in and makes Volvo only a niche player today. The new models like the redone MKZ seem to go after the same customer as Saab -- architect/engineer type who wants to "go against the grain"... unfortunately, it didn't work for Saab, even with a much smaller expense structure than Lincoln, so I don't think it will work long-term for Lincoln.

I totally agree.

Even Lincoln's current TV commercials seem to reinforce this "go against the grain" mentality. It appears Lincoln is targeting a very narrow demographic in a segment loaded with awesome vehicles that carry more image/prestige.

Originally Posted by mryan55

As for Mitsubishi, Indiana-Illinois-Iowa tri-state region seems to be pretty strong for MMC. Of course, the US manufacturing HQ for MMC is right in Normal, IL, so that certainly explains some of it. In the Indianapolis DMA there are no less than 7 Mitsubishi dealers -- 8 if you count Terre Haute, which is only a little outside of the Indy metro. In that same area we have only three Lincoln dealers -- two dualled with Ford, one dualled with former Ford step-child Mazda.

Of course, every market is different, but here in flyover country Mitsu is infinitely stronger than the Lincoln Motor Company.

It will be interesting to see how Mitsubishi does - I have mixed feeling regarding their commitment to the U.S. market. That said, I'm in complete agreement that a MMC point is more viable than a stand alone Lincoln point almost anywhere in the country.

[mryan55]

Mitsubishi is posting some very impressive sales increases this year with the new Mirage and the newly competitive Outlander.

It will be more interesting to see how much of the progress can be continued when we look at the numbers next year when these products have been on the market longer.