Car Guy Moves Beyond L.A.

When “L.A. Car Guy” Mike Sullivan first heard the idea of buying two car dealerships in Lancaster, the decision was an easy one – even though it represented a new strategy for his company. “I studied the deal for a half hour and it was a go,” said Sullivan, who is known from his radio commercials as the voice of LACarGuy, his chain of 11 dealerships in Los Angeles, Santa Monica and now the Antelope Valley. Honda Lancaster is Sullivan’s entry to selling that brand while Subaru Antelope Valley is LACarGuy’s third location for that Japanese carmaker. He also has dealerships for Porsche, Lexus, Volkswagen, Toyota and Audi in addition to two body shops. Purchasing two dealerships in the Antelope Valley is a big step for the company geographically, as they will be the first locations outside of the Los Angeles basin. But Sullivan sees the High Desert as a market that meshes well with his business and environmental views. It’s a market Sullivan is still learning, so he plans to rely on the dealerships’ staff, particularly General Manager David Clutter, whose father Rick Clutter was the previous owner. “I wanted a store that was a successful store,” Sullivan said. “I wanted it to be the same people just with a new infusion of energy and growth.” Sullivan would not disclose the purchase price of the dealerships. Facility upgrades As part of the acquisition, he had to put the finishing touches on a new building already under construction for Honda and this summer will renovate the previous Honda facility for the Subaru dealership. That work is expected to take about four months. The construction comes at a time when new car sales are reaching their highest point in a decade, just prior to the recession. Brian Maas, president of the California New Car Dealers Association, said that 2.1 million new cars were sold in the state last year and a similar number is expected this year. The strengthening economy, low unemployment and low interest rates make it a good opportunity to acquire dealerships these days, Maas said. “It is a pretty strong business right now,” he added. The brands that Sullivan purchased are doing well, according to statistics from the association. Honda is the second most popular car brand in the state when it comes to new registrations. Last year, Honda had a 12.6 percent market share with sales of 262,300 new cars. The Civic was the best-selling compact car while the Accord was tops in the mid-size category. Toyota was the top-selling brand with 345,700 new sales and a market share of 16.6 percent in the state. Subaru as a luxury brand had smaller sales last year with 65,800 new sales, topped by Mercedes-Benz, BMW and Lexus. In going with a Honda dealership, Sullivan said he picked a company that has great products and is consumer-oriented. The carmaker, he added, picks dealers to sell its cars who understand its vehicles, are contemporary and create an environment where a deal can be made in an hour. Subaru, Sullivan continued, has a great retention rate for its dealers who will sell their cars for years. “Once you are in the Subaru family, they keep you,” said Sullivan, whose other Subaru dealerships are in Santa Monica and Hawthorne. Sullivan said his plan is to nearly double the number of Subarus sold at the Lancaster location, from 50 cars a month to 90 cars. He has earned a right to grow with the carmaker, having had strong sales at his two other stores even though Subaru provides one of the smallest model inventories in the auto industry. The increased sales that Sullivan foresees at his Lancaster stores will of course benefit the city. He said that city staff has been great to work with. “I have never worked with a city that so wants me to succeed and wants to know what they can do to help me succeed and generate more tax dollars,” Sullivan said. According to Vern Lawson, Lancaster’s economic development director, the auto mall brings in about $3.5 million in sales tax, or 17.5 percent of the approximately $20 million the city receives in sales tax. Sullivan credited Mayor R. Rex Parris with creating the right atmosphere in which he, the City Council and city staff have a business-friendly environment. “Rex certainly is the face of that attitude now,” Sullivan said. Parris, at an event at the Honda dealership on May 17 to welcome Sullivan and LACaryGuy to the city, said the difference between his city and others is that he allows the city staff to swing big and say yes to ideas, whereas the default position of municipalities is to say no. “Nobody gets in trouble if you say no,” Parris said. “We have a rule that if we don’t fail at least once a year, we are being too conservative in what we try.” Sullivan complimented the city for its environmental stance through its use of alternative energy sources such as solar. It meshes well with his personal beliefs and how he has worked to be “the greenest car guy in America,” Sullivan said. He plans to install solar panels at the Honda, although he’s not sure if they will be placed on the roof or out in the parking lot. Billion-dollar business Sullivan has been in the car business nearly all his life, having started with his father back in the 1970s. The elder Sullivan operated a Volkswagen dealership in Santa Monica that LACarGuy still owns. “My father was a great car guy and was happy being the Volkswagen dealer and I came in and saw that as an opportunity to grow,” Sullivan said. The growth, however, was at times paired with contractions. Some of the brands that Sullivan sold and later got out of include Isuzu, Mitsubishi, Lincoln-Mercury and Hyundai. Seven years ago, the company racked up more than $600 million in gross revenue. This year, LACarGuy is projected to bring in about $1.3 billion in sales, Sullivan said. Even with such a large number, Sullivan maintains a modest demeanor. “We have grown into a nice family business still run by me and the guys I grew up with,” Sullivan said. “We are still who we were 40 years ago.” That “nice family business” is now on to its third generation. Three of Sullivan’s children work for the company, with son Sean as the president handling much of the day-to-day operations. Maas, of the new car dealers association, said that the family ownership is a typical story in the industry. “We have dealerships that are now in their fifth generation,” Maas added. “It is one of the last types of businesses still handed down generation to generation.” Yet it is also a business that comes with its own set of challenges. Razor-thin margins, an educated consumer due to internet research and diversification beyond car sales are the headwinds Sullivan said he faces. Land values are another issue, especially when it comes to developing car dealerships. He owns property in Santa Monica and Hollywood but it would be too expensive to turn them into proper dealer locations, Sullivan said. It was among the reasons for taking the deal outside the auto group’s Los Angeles core market. “I have been so tired and frustrated in dealing with metro L.A. that we jumped at the opportunity to come to Lancaster,” Sullivan said. The Honda and Subaru stores may be just the beginning for Sullivan in the Antelope Valley. He said it would make sense to have at least two more franchises there to create a stable platform to grow from. “All of the things that I’ve seen – the environmental attitude, the business attitude – would lend us do more here,” he said.