By Alysha Webb, Editor and Publisher
“You never know how you will end up with a dealership,” Steve Zabawa, a partner in Rimrock Auto Group in Billings, Montana, told Automotive Buy Sell Report. Rimrock recently acquired a Chevrolet dealership in Laurel, Montana from Leonard Fichtner. The acquisition started with Rimrock’s loss of its Chrysler Jeep store in Billings way back in 2009 and involves a dispute with a publicly-owned dealership group and a right of first refusal.
Steve Zabawa, left, with wife Susan Sullivan, and John Soares, with wife Ann, are partners in Rimrock Auto Group.
The addition of Rimrock Chevrolet, as the store is now known, brings Rimrock’s franchise count to 8 including a Sprinter commercial van dealership. The group has already started adding sales staff at the Chevy store and boosted marketing, said Zabawa, who is an equal partner in the group with John Soares. It has created an internet sales department and will carry more inventory than the former owners, who weren’t running the store with a “modern business model,” said Zabawa.
He figures he can immediately more than triple the store’s monthly new car sales to 75 units a month with just those changes. Zabawa thinks pickup trucks will be big sellers. Montana and North Dakota are going through an oil boom, driving up demand for trucks. And all those oil people pass through the Billings airport, less than 20 miles from the Chevy store.
That potential boosted the store’s price above the 4 times net earnings that is typical for a Chevrolet store in the area, said Zabawa. The store’s Corvette sales were another price booster. It is the 41st largest Corvette dealer in the country, said Zabawa. “That is one reason for the higher multiple.”
Ken Fichtner, son of the owner, is staying on as head of Corvette sales. His father wanted to retire and Ken did not want to run the store, nor did the other Fichtner children, said Zabawa. Hence the family’s decision to sell.
All down to right of first refusal
Zabawa, who is based in Billings, didn’t go to Laurel to look at the Chevrolet dealership on that fateful day back in January. He was looking at a piece of land next to the Chevy store on which he wants to build a Chrysler Dodge Jeep Ram store. Zabawa decided to also ask the Fichtners if he could buy the land the Chevy store was on and lease it back to them. “A week later they said they were willing to sell the whole store,” said Zabawa.
He bid on the store but the Fichtners wanted a higher price. They received two additional bids and chose one of those bidders. In early May the chosen buyer completed an asset purchase agreement and sent it to General Motors for approval. GM has 60 days to decide if it will turn down the chosen buyer. On the 60th day, the auto maker exercised right of first refusal, meaning it told the Fichtners their chosen buyer was not acceptable. A GM executive said the candidate’s past performance was “below par.” GM offered the Chevy store to Rimrock.
Under a right of first refusal the candidate who is awarded the store has to match the price that the rejected candidate was going to pay. So Rimrock paid more for the store than it had previously bid but “there were some other incentives built into the deal,” said Zabawa. “It was a very attractive deal.”
Meanwhile, Zabawa is still fighting to open a Chrysler Dodge Jeep Ram store in Laurel. His opponents are Lithia Motors, which owns the only Chrysler Jeep Dodge dealership in the county, and the Department of Motor Vehicles.
Rimrock lost its Chrysler Jeep store in Billings in 2009 when Chrysler went through bankruptcy. It sued and won the store back and has a Letter of Intent from Chrysler granting it the right to open a Chrysler Jeep store.
Because Lithia, which has built a four-brand Genesis store in Billings, protested the opening of another store in Billings, Rimrock proposed it open the new store in Laurel. But Laurel is in the same county as Billings and “in Montana it is done by county, not miles,” said Zabawa. The Department of Motor Vehicles has refused to grant Rimrock the right to open a Chrysler Jeep dealership in Laurel.
In fact, Zabawa and his partner John Soares want to open a Chrysler Dodge Jeep Ram store in Laurel, but Chrysler has thus far only approved Chrysler and Jeep. He figures Chrysler is missing a huge opportunity to sell more pickups. There are two Ford stores in the area and “Chrysler is absolutely getting crushed on market share,” said Zabawa. He is waiting for Chrysler to “figure it all out” and also award him Dodge and Ram.
Rimrock will take its case against the Department of Motor Vehicles to the Montana Supreme Court. That’s more time and more money in legal fees. But, said Zabawa, “If we get awarded a Chrysler Dodge Jeep Ram store in lower Montana, it is worth it.”
And, he has a Chevrolet store now as well. Zabawa figures the new Silverado will be hot.
