Buffett senses auto revival

Investment mogul Warren Buffett soon will be the name behind a collection of automotive monikers around town.

Buffett’s Omaha-based Berkshire Hathaway Inc. (NYSE: BRK) announced earlier this month its acquisition of Irving, Texas-based Van Tuyl Group Inc., which owns 79 dealerships, including 12 auto lines in Springfield. In the Queen City, Van Tuyl Group’s properties fall under the management of three franchise partners: Reliable Chevrolet, 3655 S. Campbell Ave.; Reliable Imports and RV, 438 S. Ingram Mill Road; and Reliable Toyota, 3521 E. Sunshine St.

Terms of the deal, which is expected to close in the first quarter, were undisclosed. The move represents a significant investment in the automotive space for Berkshire Hathaway and the next chapter in a nearly 50-year history of investments in Springfield by the Van Tuyl family.

Tony Stubblefield, president and managing partner of Reliable Toyota, said he has worked with the Van Tuyl Group for over 21 years in Springfield. He has helped grow the dealerships – selling Lexus, BMW, Scion and Audi on 30 acres at U.S. Highway 65 and Sunshine Street – to an estimated $145 million in 2014 revenue from $28 million in 1993. While there would be some changes to his partnership agreement – which he declined to disclose – Stubblefield said after the transaction closes, he foresees no operational changes.

“(Berkshire Hathaway) doesn’t buy companies to come in and run them. It buys well-managed, well-run companies where there is opportunity for growth,” Stubblefield said. “I think the public’s perception that Warren Buffett is in the automotive business puts our business in a positive light.”

The investment is on the heels of Berkshire’s stock milestone of $200,000 per share in August.

It starts with Cecil
Stubblefield said Van Tuyl Group founder Cecil Van Tuyl traces his roots in the Queen City back to 1968, when he and Bob Price bought the local Chevy dealership and launched Reliable Chevrolet.

Through the years, the Van Tuyl Group has worked with local partners to add new dealerships. For instance, the group acquired the local Toyota dealership in 1992, and Stubblefield came on as managing partner a year later. Over time, Stubblefield and Van Tuyl have added dealerships on Sunshine – such as Reliable BMW in 1996 – and expanded the footprint from five acres.

Van Tuyl, who died in 2012, also invested in Springfield real estate, partnering to develop Rivercut subdivision in the mid- to late 1990s. According to Greene County assessor records, Van Tuyl Real Estate LLC still owns a portion of 12 lots at the southwest Springfield development.

Also in the late ’90s, Stubblefield said Reliable Imports, which is run by managing partner Craig Reiserer, took off after St. Louis-based Behlmann Automotive left the Springfield market. Also under Reiserer is Reliable Hyundai, Subaru and Mazda, and Reliable RV and Motorhomes. On South Campbell, Mike Reynolds is the managing partner over Infiniti of Springfield, Elite Mercedes and Reliable Chevrolet.

“The reason the business model for the Van Tuyls has been so successful is that we are partners. They gave a guy like me an opportunity to not just be a general manager, but to have an equity ownership in the store,” Stubblefield said of the $9 billion company. “When you have someone in there and running a store like that, they tend to watch every little thing. They are looking at who you are hiring, how you’re spending your money, and they are developing things for the long-term.”

Stubblefield said his dealerships are collectively investing $15 million in upgrades within three years at the Sunshine and 65 car lots.

Van Tuyl Group CEO Jeff Rachor said the Berkshire Hathaway deal would leave the Van Tuyl management structure intact, allowing the company to operate as it has since its 1955 founding in Kansas City.

The deal, according to Rachor, came about because Chairman Larry Van Tuyl was looking to sell as retirement approached. Van Tuyl is slated to stay on as chairman with the company, which will take on the name Berkshire Hathaway Automotive after the sale closes.

“He was looking for a buyer that shared his and his father’s values and would look to preserve the entrepreneurial business model that’s been the hallmark of the Van Tuyl Group’s success,” Rachor said. “The great thing about Berkshire Hathaway and Mr. Buffett is they have a long history of acquiring local businesses, often family-owned businesses, and giving management the autonomy to continue to operate consistent with past practice.”

Numbers made sense
Kenneth Scislaw, an associate finance professor at Drury University who has followed Buffett for years, said Van Tuyl Group’s family-owned nature likely made the deal more attractive, but in the end, Buffett is a numbers’ guy.

“Buffett views his Berkshire holdings in a similar manner as a portfolio manager who buys stocks for a Fidelity mutual fund. Buffett is often considered to be a value investor, someone who tries to buy companies selling for less than they are worth,” Scislaw said in an email. “In my mind, Buffett found something cheap. He ran the numbers. The company fit his criteria.”

Having followed Buffett’s career in his work as Creighton University’s chairman of regional economics, professor Ernie Goss said the Berkshire purchase demonstrates the Oracle of Omaha’s belief that new car sales have room to grow.

“The automobile industry has had a pretty good run of it lately,” Goss said.

According to the National Automobile Dealers Association, light vehicle sales in September were up 9.3 percent from the previous year, and annual sales were 5.4 percent higher through Sept. 30. Truck sales were up 29.3 percent last month and up 10.3 percent during the first nine months of the year.

“There is still a lot of purchasing to be made out there by consumers because of cutbacks during the recession,” he said.[[In-content Ad]]