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Auto dealer consolidation hits Meridian marketplace

MERIDIAN — General Motors’ “Project 2000” can be compared to rocks thrown into Meridian’s pond resulting in everlasting change. The first rock landed last November when Rick Justice Pontiac-GMC purchased the local Jerrel Davis Buick dealership.

GM’s major objective in Project 2000 is the consolidation of their dealers, and at least one other rock could land before October 2000, when all GM franchise agreements are up for renewal.

“We were first notified of it (Project 2000) about five years ago,” says Nelson Hall, president of Nelson Hall Chevrolet, a 45-year veteran of the car business. “This is dictated by market size (based on surveys) of their markets.”

Contrary to the national trend, which saw the number of new car dealers drop by almost 10% from 1988-98, Meridian’s number has been stable at eight. Mississippi’s total sank almost 21%.

The declines have been in small market counties, but now it’s “heads-up” for markets the size of Meridian where GM would prefer to have only two dealers. Deals resembling Meridian’s Justice-Davis consolidation have already happened in Columbus, Laurel and Tupelo.

Rick Justice readily acknowledges that GM “urged” his merger with Jerrel Davis. “We had talked back and forth for quite a while,” he says. “He (Davis) needed to bolster his line with a truck.”

Then two events coincided — Davis’ health problems and Justice completing the purchase of his own dealership — that gave the deal impetus. When asked if GM provided any sweeteners, Justice’s only comment is, “Well, they do different things in different places.”

Bob Sanford, GM’s market area manager says, “Those kinds of deals can be difficult and emotional. We try to make everyone happy. The main objective is to strengthen our brands.”

The obvious next step is for Nelson Hall Chevrolet and Sellers Oldsmobile-Cadillac to merge. “We’re trying to accomplish it, but it may not happen (in 2000),” Sanford says.

SHAKING UP THE MARKET

Project 2000 is just one part of the radical changes taking place on the global auto scene that will affect local dealers. There’s a lot more rumbling, both near and far.

“There have been more changes in the past 10 years than there were in the last 40 years,” according to Billy Weathers, vice president and general manager of John O’Neil Johnson Toyota.

Weathers ought to know. His father was an auto mechanic, so the younger Weathers learned to overhaul an engine before he could drive and has spent his life in the car business.

FORD`S EXPERIMENT

And then there’s Ford’s “experiment” to purchase all of their metropolitan dealers in certain areas. It recently scored a near-miss, according to reliable sources, when the Jackson dealers turned down an opportunity to sell out and join the Ford Retail Network. The FRN is already in Oklahoma City, Tulsa, San Diego and Salt Lake City.

Milburn VanVeckhoven, president of New South Ford, is skeptical about FRN and its “no negotiation” policy. He thinks “experiment” is a good word for it.

“When all dealerships were negotiating, people complained and said, ‘I’d just like to walk in like I do at Sears or Wal-Mart and get one price,’” VanVeckhoven says. “Now that there are dealerships where there’s just one price, and the dealer says, ‘That’s it,’ (the customer) gets mad and they go somewhere and negotiate.”

Billy Jack Ethridge, president of Bill Ethridge Lincoln-Mercury, can tell you about FRN. He served on Ford’s 12 member national dealer advisory board from 1996-98. Ford officials told the board that the FRN “experiment” was being considered. Four months later, it was a division of Ford Motor Co., so Ethridge thinks the word “experiment” was, to put it kindly, a misnomer.

ON THE HORIZON

Mathis also believes that, “…when everything is said and done, we’ll have less than five world-wide manufacturers of automobiles,” and cites Nissan and Mitsubishi as unprofitable and the next candidates for takeovers.

In addition to the Daimler-Chrysler merger, other global deals are simmering. Ford owns 50% of Mazda’s USA division, and 35% of the parent company, while GM owns about 25% of Isuzu. Recently, Renault has offered to buy 35% of Nissan.

Driving all of this consolidation and change are attempts to cut overhead. GM’s Project 2000, Ford’s FRN and the likely merging of Chrysler dealers (along with a report that the Plymouth line will soon be axed) will cut down on headquarters and staff costs and competition between brands manufactured by the same company.

All of the dealers interviewed brag about their business, but they are well aware there will be a lot more rocks thrown into Meridian’s pond causing unforeseen ripples — or possibly waves. October 2000, serves as a good benchmark for now.

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