Is George Soros looking to join the Car Club?

Reports suggest that talks are well underway between business magnate George Soros and major dealership groups

First it was computer tycoon Michael Dell and the former President of Sonic Automotive, Jeffry Rachor, who entered the retail automotive business.

Then, Edward Lampert and Bill Gates bought into AutoNation – the United States’ number one dealership chain. And most recently, billionaire Warren Buffett purchased the Van Tuyl chain of 78 dealerships through his company Berkshire Hathaway.

Closer to home American billionaire Roger Penske recently signed a deal with MTU Detroit Diesel and V8 Supercar Team Dick Johnson Racing.

Now people are speculating that billionaire George Soros wants to travel down the same road and buy a large US retail automotive group after two of his executives were spotted meeting with Dealers at NADA in San Francisco recently.

For those who are not familiar with George Soros or his business dealings, he is a Hungarian-born American businessman, investor, and philanthropist.

He is the chairman of Soros Fund Management which is currently in talks with an undisclosed number of dealership groups.

Soros is also known as ‘The Man Who Broke the Bank of England’ because of his short sales of US$10 billion worth of pounds, giving him a profit of $1 billion during the 1992 Black Wednesday UK currency crisis. He is, unsurprisingly, one of the thirty richest people in the world.

So what’s the big attraction for Soros in buying dealerships?

Firstly, automotive dealerships represent a unique opportunity for Soros to diversify his fund’s holdings and boost his cash flow.

While profit margins in retail automotive are getting slimmer, helped in part by the price transparency provided by the internet, ‘cash flow is (still) king!’ thanks to new and used car sales, service, insurance and finance.

Furthermore, industry observers say that large numbers of vehicles will be coming off lease in the next few years which means owners will need to replace them with new models.

Then there’s the security of Dealers’ PMAs which in the US are protected state laws.

Another bonus for Soros – and other cashed-up investors, is that dealerships are relatively easy to buy, although much harder to run.

On the other side of the coin, OEMs are not that enamoured with Private Equity funds owning dealerships as in the past they have tended to buy-in then load up the ‘shop’ with debt only to off-load them down the track.

Also, corporate taxes in the US are as high as the costs of funding vehicle inventories and dealership renovations requested by automakers.

While some may argue that Soros doesn’t have the necessary skills and experience to successfully run a large dealership group, he may follow Warren Buffet’s lead and leave the original management team and culture in place to do what it does best.

Vale Noel Gould

In July 2015 I interviewed Noel for Automotive Dealer magazine. Here's what he had to say about his long career in the automotive industry.

Having owned numerous dealerships in Melbourne and regional Victoria during his long and successful career as an auto dealer it is easy to see why Noel’s profile is up there with some of the biggest names in the industry – thanks in part to Noel’s outgoing personality and his preference for starring in his own TV commercials and voicing his own radio spots. After briefly stepping out of the industry to run his own consultancy, Noel is back ‘in the game’ with his purchase of Swan Hill Holden, Swan Hill Nissan and Swan Hill Ford. His story makes fascinating reading.

How long have you been selling cars?
Since late ’54.

Where was your first job?
It was in my home town of Rainbow, with a Holden dealer, Strauss Brothers.

What made you choose a career in the automotive industry?
It actually chose me.  I was crossing Federal Street, Rainbow, and Jack Strauss – who became a wonderful friend and mentor of mine – approached me and said ‘What are you doing next year, Noel?’ and I said ‘I’m going to work for the Austin Dealer.’  He said ‘Bullshit.  He’s not much of a Dealer, come and see me.’

What’s the major thing that has changed since you first started selling cars?
There’s more of an emphasis on treating the customers better, and the computerisation of the industry has just been dramatic.

Who inspires you?
I’ve been inspired by Paul Keating and Adam Goodes who I think is an exceptional person.

How many dealerships have you owned?
13.

What are you passionate about?  
Watching the Sydney Swans win, playing golf and spending time with my family.

What does it take to run a successful dealership?
Capital, location and product.

Of the three franchises you now own, which brand is the most popular with your customers?
In Swan Hill we sell more Holdens than anything else.

Is there a special relationship between a Dealer and his local community?
Absolutely.

How do you foster that?
We sponsor several football teams, bowling clubs and the race club.

If you weren’t a Dealer, you’d be?
A lawyer. But I’ve always considered law as common sense. You can usually work out what is a fair legal outcome if you just apply common sense.

You’ve always wanted to own?
A house in Port Douglas.

What does Noel Gould do to relax?
I play golf and enjoy lunching with family and friends.

What are you looking forward to?
Mentoring a successful Dealer Principal in my business.

What was the biggest disappointment of your life?
The 2006 premiership when we got beaten by a point.

What’s the most challenging aspect of running a dealership?
Finding the right people, nurturing them and getting them to do the things that they should do.

Why aren’t there more female sales consultants in the industry?  
Well we have two exceptional ones in Swan Hill. In our dealership of 36 people, we have 14 females, which I think has been something of a record.  That’s almost 40 percent of our staff.  Also, we didn’t do it by design, it just happened that they were the best applicants for the various jobs we were looking to fill.  We have them in every department and I think it’s made a hell of a difference to the way the business runs.

Your favourite travel destination is?
France.

What have you learned about yourself over your career?
That I’m a gypsy, I can never settle in one spot.

The first car you ever owned was?
An FX Holden, a black one. The registration number was RM-828.

Can you remember your first sale?
I may not remember the first sale, but I recall my brother-in-law who was in the Defence Force recommending his lift driver to buy a car from me.  And I suffered from asthma in those days and my wife had to drive me to Dustings in Burwood. She drove me there and I did the deal and she drove me home.  So I’ve always remembered that one.

In three words, describe Noel Gould.
Show-off. Amiable. Passionate (about my sporting interests).

What issues do you think the AADA should be tackling on behalf of Dealers?
I think a fair go for the Dealers.  In particular, what manufacturers expect in terms of capital expenditure on dealerships, particularly the ones that have lost market share.

Finally if they were going to make a movie about Noel Gould, who would you like to play you?
George Clooney or Richard Gere
– but, probably Boris Karloff.

Noel's funeral will be Webcast live and can be accessed by visiting the tribute page for Noel at: www.tobinbrothers.com.au