Saturn Dealer Closes Sale for the Franchise

Pioneering auto dealer John B.T. Campbell has agreed to sell his Orange County Saturn franchise, including three existing dealerships and two in the planning stages, to the auto maker’s new retailing arm.

He is the first of California’s Saturn dealers to sell to the company since it announced last week that it is buying back dealerships to improve its competitive position.

Campbell said he is scaling back to a single Saab franchise in Santa Ana in order to conserve capital and to prepare a run for the Republican nomination for the state’s 70th Assembly District seat in the March 2000 primary.

An outspoken critic of his own industry--he once said car dealers have a bad reputation because they had subjected customers to high-pressure tactics for years--Campbell introduced one-price, no-haggle selling to the county in 1990. Two years later, he opened one of the nation’s first car stores in a retail shopping center--a Saturn showroom at Westminster Mall.

He was an early proponent of the idea that auto dealers should think of themselves as retailers who need to build customer loyalty to their own dealerships rather than to the brands of cars they sell.

He said Wednesday that he decided to sell his Saturn operation back to the company, a unit of General Motors Corp., because he doesn’t have the large amount of capital that will be needed to finance the business for the next few years as Saturn develops ambitious growth plans.

“I’m best at starting things up,” said Campbell. After 20 years in the business, he said, the process of nurturing an established operation holds little fascination for him.

While Saturn dealerships generally have been quite profitable, many analysts say the company has been hurt by a lack of new products to excite customer interest.

“It will be at least two more years of struggle before the new vehicles come on line,” said Jim Hossack, an industry consultant with AutoPacific Inc. in Santa Ana.

Additionally, Campbell said, with Saturn aiming to acquire as many as 150 of its 388 existing dealerships nationwide by early next year it “made sense to sell” rather than retain the franchise and have to compete with the factory. In California, Saturn has 10 dealers who own a total of 42 dealerships.

A Saturn spokesman said Wednesday that the company doesn’t know yet how many of its dealers want to sell--the company already owns 29 of its franchises, none in California--but that it expects to have a good idea shortly after the end of the year.

Saturn says the dealerships will be owned by the retailing unit, Saturn Retail Enterprises, and that it ultimately will spin the unit off as a publicly traded company in which it will retain only a minority interest.

The car maker says it is forming the new retailing unit as a competitive response to the rapidly changing auto retailing environment, including the emergence of big, publicly traded dealership groups such as Republic Industries Inc.

Another reason car companies like Saturn are rejiggering the retailing system is to help control skyrocketing distribution and selling costs.

Other auto makers have launched plans to take control of many of their dealerships.

Ford Motor Co. also is testing corporate ownership of its dealerships in several markets. And companies including Chrysler Corp., Nissan Motor Corp. and several other GM divisions are exploring alternate programs that include ties with Republic, CarMax and other nationwide dealership chains and franchise consolidations that would place all their dealerships in certain territories under a single owner.

“Distribution and selling costs are huge and manufacturers believe they can achieve big savings if they can be in charge,” said Hossack the AutoPacific consultant.

Campbell, who announced the sale Wednesday morning to his 200 employees, said the deal should close in March.

In addition to his Saturn dealerships in Santa Ana, Huntington Beach and San Juan Capistrano, Campbell is building a fourth in Anaheim and has been planning a fifth operation in or near Rancho Santa Margarita.

“All of that growth is going to take a lot of capital,” he said, “and I just don’t have it.”

The 43-year-old Irvine resident entered the auto business 20 years ago when his father recruited him to serve as controller for an investor group that owned several car dealerships in Orange and San Diego counties.

He ended up running the company, which became Campbell Automotive Group in 1984. At its peak, the chain had 12 franchises in Orange and Riverside counties.

In 1988, Campbell shocked the insular and largely independent U.S. auto retailing industry by selling a 50% stake in the company to a publicly traded British dealership chain, Lex Service PLC.

Campbell used the $13 million in cash from that sale to acquire the Saturn franchise for Orange County and to beef up the management and sales and service departments of his other dealerships.

He repurchased Lex’s interest in the company in 1995 to focus on the Saturn operation, which he had to build from the ground up. To help finance the deal and the expansion of his Saturn network, he sold his other dealerships.

He announced earlier this year that he was taking on a Saab franchise. The Swedish car company--in which General Motors holds a 50% interest--launched a completely redesigned line of cars that have won praise from auto critics for styling, performance and engineering.

Campbell said his general manager and 10% partner in the Saturn operation, Steve Coleman, will also sell his stake to Saturn and will join Saturn Retail Enterprises to run the Orange County dealerships.

As for his political ambitions, Campbell said that he has “been an innovator in a business that doesn’t have a very good reputation. And now I’m going to go into another line that doesn’t have a good reputation for innovation and try it again.”

He said he intends to run for the GOP nomination in the 70th Assembly District, which includes Newport Beach and Laguna Beach and has one of the largest Republican registration majorities in the state.

The seat now is held by Republican Marilyn C. Brewer, who cannot seek reelection in 2000 because of the state’s term-limit law.