Warren Buffet motors into auto dealership market

Billionaire investor Warren Buffet has announced that his Berkshire Hathaway company is to buy the Van Tuyl Group, which is ranked fifth amongst all US auto dealership groups and is the largest privately-owned operation.

The company will become known as Berkshire Hathaway Automotive and will continue to be led by Larry Van Tuyl as chairman of the new business, and Jeff Rachor who becomes chief executive. The terms of the deal have not been disclosed.

“The Van Tuyl Group fits perfectly into Berkshire Hathaway from both a financial and cultural viewpoint. Larry Van Tuyl along with his father, Cecil, spent decades building outstanding dealerships operated by local partners,” Buffett said. “The Van Tuyl Group enjoys excellent relations with the major auto manufacturers and delivers unusually high volumes at its 78 locations.”

Berkshire Hathaway Automotive will be headquartered in Dallas, Texas, and will “continue to pursue its strategy of operational excellence and disciplined acquisition growth, which is no change to the business model the company has pursued for the last 62 years,” according to Buffet’s statement.

Van Tuyl Group started as a single Kansas City Chevrolet dealership in 1955. It now has over 100 franchises in 10 states selling some 240,000 vehicles a year and posts about $8 million a year in revenues.

The transaction is expected to be completed in early 2015, subject to gaining regulatory approvals and agreement from major automotive manufacturers.
Buffet said: “This is just the beginning for Berkshire Hathaway Automotive” and the acquisition is likely to provide a platform for buying other dealers and achieving market consolidation. The deal also presents a natural complement for Berkshire’s Geico insurance unit, the second largest auto insurer in the US, and could potentially even open the way to new auto financing initiatives from the Berkshire Group.