Buffett plans to acquire additional auto dealerships

David Shepardson
Detroit News Washington Bureau

New York — Billionaire Warren Buffett — who recently acquired the fifth-largest U.S. car dealership group — is expanding Berkshire Hathaway’s investments in the auto industry and says he expects to acquire more dealerships.

Berkshire Hathaway announced in October it would buy Van Tuyl Automotive, a group of 78 automobile dealerships in 10 states. “Our purchase was recently completed, and we are now ‘car guys,’ ” Buffett said Tuesday at a forum ahead of the New York International Auto Show.

Larry Van Tuyl, who was CEO of Van Tuyl Group Inc. and now heads Berkshire Hathaway’s automotive group, said, “We’re interested in buying real estate and dealerships.”

Buffett said Berkshire is will acquire more dealerships in the next few years. “We will make more deals,” the 84-year-old said.

He says nothing has changed in how the dealership group is being run under Berkshire.

Buffett met with Ford Motor CEO Mark Fields and General Motors Co. CEO Mary Barra to talk about Berkshire’s interest in auto dealerships. Buffett said despite Tesla Motors’ effort to upend the way cars are sold, he thinks the current auto dealership sales model will continue.

Buffett has made other investments in the auto sector. He held a 2.6 percent stake in GM as of Dec. 31, with 41 million shares worth about $1.5 billion. It added 1 million shares in the last three months of 2014, according to a filing last month. The firm initially purchased 10 million shares in 2012, when the stock was trading in the low $20-per-share price.

In 2008, Buffett’s Berkshire Hathaway invested $230 million investment in Chinese automaker BYD, acquiring a 10 percent stake in the company.

Earlier this month, Buffett backed GM CEO Mary Barra and said GM shouldn’t make moves to boost the short-term stock price.

A group of investors wanted former Obama auto adviser Harry Wilson to join the GM board and see the automaker return cash to shareholders. Soon after his comments, GM agreed to a stock buyback and Wilson withdrew his request.

“The auto business — you can go through a lot of cash very fast,” Buffett said. “The idea of doing something now that’s get a little pop in the stock should not be on her agenda or the shareholders’ agenda. The main thing to do is build the strengths of General Motors. ... It’s not easy running General Motors.”

Buffett told investors that his successor will need to be mindful of the near-collapse of GM in 2008, which is alive thanks to nearly $60 billion in U.S. and Canadian bailouts in 2008 and 2009.

In his annual letter to shareholders he wrote: “My successor will need one other particular strength: the ability to fight off the ABCs of business decay, which are arrogance, bureaucracy and complacency. When these corporate cancers metastasize, even the strongest of companies can falter.

“In their glory days,” he wrote, “General Motors, IBM, Sears Roebuck and U.S. Steel sat atop huge industries. Their strengths seemed unassailable. But the destructive behavior I deplored above eventually led each of them to fall to depths that their CEOs and directors had not long before thought impossible. Their one-time financial strength and their historical earning power proved no defense.”

He noted that investors can’t be biased toward the status quo. “We are free of historical biases created by lifelong association with a given industry and are not subject to pressures from colleagues having a vested interest in maintaining the status quo. That’s important: If horses had controlled investment decisions, there would have been no auto industry,” he wrote.

DShepardson@detroitnews.com