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Old 11-03-2015, 02:14 PM   #1
XDCX
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Default GM placed an ad in Automotive News for California Open Points

I was surfing the Classifieds section of Automotive News the other day and I was somewhat surprised to see there was a Dealership listing that mentioned "No blue sky" as part of the ad.

When I studied the ad more carefully I noticed the contact person had a General Motors email address.

Initially I thought GM must be selling off some of their factory stores or perhaps a struggling Minority Store but then I re-read the ad and noticed the ad mentioned "Greenfield locations" and after a quick Google search I realized GM must be advertising two Open Points and soliciting Dealer interest.

With all of the Public Groups and the Megadealers looking to buys stores I'm surprised that GM would resort to an ad in Automotive News to solicit interest in two Open Points in California.

Here's an illustration of the ad:

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Old 11-03-2015, 05:22 PM   #2
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yep...totally new points it sounds like. I expect the "well capitalized" requirement is paramount with the costs of those "greenfield" real estate sites plus the multi-million dollar facilities that would have to be built on them in the SF area.
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Old 11-04-2015, 06:41 AM   #3
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In talking to a current Chrysler dealer over the weekend, it looks as though Chrysler is looking to add points in the Minneapolis area. One in a town that they closed a full line guy back in '09.
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Old 11-04-2015, 07:55 AM   #4
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yep...totally new points it sounds like. I expect the "well capitalized" requirement is paramount with the costs of those "greenfield" real estate sites plus the multi-million dollar facilities that would have to be built on them in the SF area.
I had to look up the term "greenfield" via Google - I wasn't familiar with that term.

I agree with your "well capitalized" comment. The SF Bay Area can be insanely expensive when it comes to real estate and historically the market has not been strong for the Domestic Brands.

I remember back when Plymouth was still alive the San Francisco Zone Manager used to relent that Porsche actually outsold Plymouth in the Bay Area.
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Old 11-04-2015, 08:00 AM   #5
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Originally Posted by steve_biegler View Post
In talking to a current Chrysler dealer over the weekend, it looks as though Chrysler is looking to add points in the Minneapolis area. One in a town that they closed a full line guy back in '09.
I know of at least one instance where Chrysler created an Open Point in a market where they wiped out an existing dealer as part of the OLDCO cuts - I'm sure there must be a number of markets where that's happened.

Concerning Chrysler, I can remember an era when Open Points were only awarded to Dealers who could facilitate a Project 2000 consolidation and another time when Open Points were reserved exclusively for minority Dealers. I guess priorities change with the times.....
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Old 11-04-2015, 08:58 AM   #6
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I wasn't certain, but assumed that "greenfield" meant raw undeveloped land...which almost always winds up costing more to prep for construction than everyone anticipates it will. I'm just finishing up a small project and the amount of dirt work and leveling to correct a drainage issue (that nobody was aware of until we had 13" of rain in a 48 hour period last month) wound up quadrupling the cost for that work.
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Old 11-04-2015, 10:21 AM   #7
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I wasn't certain, but assumed that "greenfield" meant raw undeveloped land...which almost always winds up costing more to prep for construction than everyone anticipates it will. I'm just finishing up a small project and the amount of dirt work and leveling to correct a drainage issue (that nobody was aware of until we had 13" of rain in a 48 hour period last month) wound up quadrupling the cost for that work.
Here's what I relied on when I Googled the term "greenfield":
The term greenfield was originally used in construction and development to reference land that has never been used (e.g. green or new), where there was no need to demolish or rebuild any existing structures.
And like you mentioned there can be a lot of expenses incurred to get an undeveloped piece of land ready for construction.

Concerning the rain you've had in Texas, I remember hearing the predictions for heavy rainfall as a result of the hurricane that hit Mexico and the weather forecasters were certainly correct.

On the plus side I've read that the water level at Lake Travis and some other major lakes in Texas has increased as a result of the much-needed water.
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Old 11-04-2015, 10:32 AM   #8
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Default I wonder if most OEMs handle Open Points in a similar fashion?

I think I'll send Mosche Stopnitzky from Performance Brokerage Services an email and ask him if he has any insight on how most OEMs handle their Open Points.

In past conversations with Mr. Stopnitzky I was impressed that he knew all of the Open Points in a market for a particular OEM and had an assessment of which points were most attractive.
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Old 11-12-2015, 03:42 PM   #9
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Default Open Points

Over the past 6-years, GM had four Buick GMC stores close in the East Bay: Oakland, Pittsburg, Walnut Creek, and Vallejo. Insofar as re-opening a couple of locations, Walnut Creek is out because Lehmer’s Buick GMC is located less than 10-miles away, in Concord. California has a 10-mile law, which has been waived a number of times, but it is a good bet it would never be waived to open a new Buick GMC store in Walnut Creek.

Insofar as open point procedures are concerned, factories usually give NAMAD a heads-up before they release the information to the public. In turn, NAMAD will distribute the information to its members.

Some factories go so far as to put their minority preferences in their official materials. See example below:
“(Factory) has made a commitment to seek qualified diversity candidates for every open point that it identifies. Qualified NAMAD diversity candidates will be given strong consideration for any open point, even over existing (factory) dealers who meet the requirements stated above.”
(Note: I left out factory names because I am not interested in crossing swords with any particular factory; I am just interested in giving our members a heads-up on the procedures.)

It is also wise to keep in mind some of the diversity requirements, if you are seeking a front man. Many factories require that:

“Any ownership proposal with a diversity operator whose ownership interest is between 20 and 50 percent shall have an executed buy-out agreement between the parties that enables the diversity operator to become the majority owner of the entity within five years from the date the Candidate is approved by (the factory).”


Another thing to keep in mind is that the factory numbers will not always be confirmed by your independent research and analysis.

Of the last five business plans and applications we completed, in one instance (20%)we recommended to our clients that they open the stores at their own risks because our analysis of the market indicated they would have a difficult time surviving in the market.

One reason, was that the state penetration percentage was way higher than our research and analysis showed possible in the proposed market.

One more thing to remember is that if you are going to hire someone to prepare the business plan and application for you, be certain you are the only client for that point.

There are a number of people that will complete a half-dozen business plans for the same point. I never could understand how someone could do that. If someone hires you to complete a plan for them to get the point, how can you then tell a half-dozen other people you will complete a plan for them to get the same point?

Last edited by johnpico; 11-12-2015 at 03:44 PM.
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Old 11-14-2015, 09:14 AM   #10
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Originally Posted by johnpico View Post
Over the past 6-years, GM had four Buick GMC stores close in the East Bay: Oakland, Pittsburg, Walnut Creek, and Vallejo. Insofar as re-opening a couple of locations, Walnut Creek is out because Lehmer’s Buick GMC is located less than 10-miles away, in Concord. California has a 10-mile law, which has been waived a number of times, but it is a good bet it would never be waived to open a new Buick GMC store in Walnut Creek.
Thanks for the information.

I think it's very revealing that GM has lost four Buick/GMC dealers in the Bay Area over the past six years. It would be one thing to lose four dealers to a recession but the car business has been very strong over the past four years.

Quote:
Originally Posted by johnpico View Post
Insofar as open point procedures are concerned, factories usually give NAMAD a heads-up before they release the information to the public. In turn, NAMAD will distribute the information to its members.

Some factories go so far as to put their minority preferences in their official materials. See example below:
“(Factory) has made a commitment to seek qualified diversity candidates for every open point that it identifies. Qualified NAMAD diversity candidates will be given strong consideration for any open point, even over existing (factory) dealers who meet the requirements stated above.”
(Note: I left out factory names because I am not interested in crossing swords with any particular factory; I am just interested in giving our members a heads-up on the procedures.)

It is also wise to keep in mind some of the diversity requirements, if you are seeking a front man. Many factories require that:

“Any ownership proposal with a diversity operator whose ownership interest is between 20 and 50 percent shall have an executed buy-out agreement between the parties that enables the diversity operator to become the majority owner of the entity within five years from the date the Candidate is approved by (the factory).”
Great information - thanks for sharing.

I wonder if most OEMs have either a stated or unstated policy that gives preference to minority candidates?

Quote:
Originally Posted by johnpico View Post

Another thing to keep in mind is that the factory numbers will not always be confirmed by your independent research and analysis.

Of the last five business plans and applications we completed, in one instance (20%)we recommended to our clients that they open the stores at their own risks because our analysis of the market indicated they would have a difficult time surviving in the market.

One reason, was that the state penetration percentage was way higher than our research and analysis showed possible in the proposed market.
Again, great information.

I remember several years ago hearing about a case where a Dealer in Northern California was planning to sue his OEM because he filled an Open Point using the OEM's planning potential numbers and later determined the numbers may have been artificially inflated.

The Dealer alleged that the OEM mistakenly sent him a FAX that listed the planning potential numbers that were being used internally for the location. The Dealer contended the OEM inflated the planning potential numbers to get him to invest and fill the Open Point.

I do not recall ever hearing how the legal challenge ended.

Quote:
Originally Posted by johnpico View Post
One more thing to remember is that if you are going to hire someone to prepare the business plan and application for you, be certain you are the only client for that point.

There are a number of people that will complete a half-dozen business plans for the same point. I never could understand how someone could do that. If someone hires you to complete a plan for them to get the point, how can you then tell a half-dozen other people you will complete a plan for them to get the same point?
Excellent information.

It would be very frustrating for a Dealer to learn that the research/presentation that they paid for was being resold to their competitors.

Do you get the impression most Dealers who are interested in an Open Point submit a package on their own or do they seek outside assistance?
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Old 11-22-2015, 07:41 AM   #11
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I do not know the percentages between those that prepare the apps and business plans themselves and those that hire some to do them. I do know we get a lot of requests to prepare packages and business plans. We have turned down duplicate requests for creating packages for the same point, but I have been told by the factory that some professional preparers do submit packages for half a dozen or more dealers on the same open point.
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Old 11-23-2015, 09:24 AM   #12
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I do not know the percentages between those that prepare the apps and business plans themselves and those that hire some to do them. I do know we get a lot of requests to prepare packages and business plans. We have turned down duplicate requests for creating packages for the same point, but I have been told by the factory that some professional preparers do submit packages for half a dozen or more dealers on the same open point.
Thanks for the information.

Based on my experience I've always had the impression that dealers who spend a lot of time/effort creating their proposal for an open point get more consideration than dealers who may have submitted a proposal on little more than letterhead.

I guess it's no different than a school teacher who subconsciously assigns a higher grade papers that were typed on a computer as opposed to hand written. Sometimes it's not always the content that counts.
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