- Mar 18 2014
- Terry Box
- Dallas News
Only about a million miles separate the frenetic, ear-piercing Rolex 24 at Daytona from a small, sunny Hyundai showroom in Dallas.
But Bob Stallings, the workaholic executive chairman of Dallas-based Gainsco Inc., intends to stand tall in both - no matter how big the stretch.
"If I can be known to have the same orientation as a guy like Carl Sewell, yes, I'd like very much to be thought of as a car dealer," said Stallings, 64, who owns a successful IMSA Sports Car racing team.
In November, Stallings' company - whose primary business is car insurance - bought a Hyundai dealership off LBJ Freeway in southern Dallas and renamed it Bob Stallings Hyundai.
It's a fairly unusual investment for an insurance-based holding company, but Stallings wants more.
"If I could open or buy two dealerships a year for the next five years without blowing the company up, that would be a good start," he said.
The trouble is finding them.
Prospective dealership buyers far outnumber sellers in the Dallas area, one of the nation's hottest new-car markets.
Average net profits at new-car dealerships in the U.S. rose 10 percent last year to $923,248, the highest since the National Automobile Dealers Association began tracking data in 1970.
Moreover, the average return on equity - items such as vehicle inventory, employee pay and other expenses - increased to a healthy 29 percent, according to NADA.
As a result, demand for new-car dealerships, which was barely a blip six years ago, continues to spike, especially in Dallas.
"Dallas is the most desirable [car dealership] market in the country next to Houston, which is just on fire because of the oil industry," said Alan Haig, owner-founder of Haig Partners in Fort Lauderdale, Fla., a firm that helps dealers who want to sell their stores.
"It is good to be a dealer in Texas today, where you've got population growth, reasonable government and relatively low real estate prices," he said.
Five years ago, in the depths of the recession, with Chrysler Corp. and General Motors both in bankruptcy, the courts allowed automakers to close 4,000 dealerships, or about 25 percent of the total in the U.S.
So when sales started to rebound in 2011, the surviving dealerships typically prospered, picking up additional business almost overnight.
"For the survivors, that had a profound impact on their profitability," said Haig, who was involved in three Dallas-area dealership sales last year.
Since 2009, new-vehicle sales in the U.S. have grown 50 percent, from a low of 10.4 million to 15.6 million last year.
That trend - rapidly growing sales spread among fewer dealers - continues to push up the selling prices of new-car stores.
"If it's a highly desirable brand you're after - a Mercedes-Benz or BMW - you can spend $40 million for a metro dealership," Haig said.
Lee Chapman, president of the Dallas-Fort Worth Metropolitan New Car Dealers Association, said retailers learned to manage their businesses better during the recession, and it's paying off.
"Most are not back up at the employment levels that they were five or six years ago, but they have learned like other businesses how to do as many sales as they were," Chapman said.
Stallings, whose famous No. 99 Red Dragon Corvette racer is a large part of Gainsco's image and advertising, says he has wanted to be a car dealer since he was 8.
As a boy growing up poor in Malden, Mo., Stallings often accompanied his deaf-mute father on trips to sell cars to local dealerships.
"It became obvious to me even at 8 that there was way too much needless tension in buying a car," he said. "Essentially, I would tell my dad what I thought the dealer meant and I would tell the dealer what I thought my dad meant to make negotiations more pleasant."
Most weekdays, Stallings goes to the Hyundai dealership for a couple of hours before heading to his Gainsco office near Lee Park.
Though Gainsco is a publicly held company, it is a "pink-sheet" business that doesn't report earnings. Stallings, who owns 75 percent of the company with his partners, will say only that total revenue is "in excess of $10 million annually."
In the late afternoon, he generally returns to the dealership, where he stays until 8 or 9 p.m., soaking up the business and shaking hands with every customer.
"If you don't get all the pieces of a dealership working - sales, service, parts - you won't last," said Stallings, who has a background in mutual fund, banking and mortgage companies. "You have to be pretty sophisticated to make these things run well."
Turning it over to the pros
Stallings brings the same focus and drive to racing. As an amateur racer - and a good one - he joined MotorSport Ranch, the private track and racing club 70 minutes southwest of Dallas.
Despite all his business responsibilities, "I was there every single day for a year - every day," Stallings said. "It didn't matter if it was cold or raining. I was there."
When he decided to compete at the highest levels of racing, he said, he reluctantly stepped aside as a driver and hired professionals for the team he bought. "I was pretty good, but the pros function at a whole different level," Stallings said.
His team, sponsored primarily by Gainsco and General Motors, won national championships in 2007 and 2009.
In January, three hours into this year's Rolex 24 at Daytona race in Florida, Gainsco driver Memo Gidley crashed into another car, severely injuring himself and destroying the Red Dragon.
Stallings decided to suspend his team's racing efforts for the remainder of the season - a difficult move for someone so intensely competitive.
"It was a million bucks gone, but I really don't care," he said. "The decision to suspend our activities was partly financial and partly the emotional strain on me and the team from Memo's injuries."
Gidley, who suffered multiple serious injuries, faces a year of major rehabilitation, Stallings said.
The suspension, though, gives Stallings time to find more dealerships. "I'm working on a Chevy dealer now," he said. "We have about five we're negotiating with."
He has also bought 6.5 acres of land near his Hyundai store at 39550 LBJ Freeway for a new 26,000-square-foot dealership.
As he seeks more dealerships, Gainsco's MGA Insurance Cos. - which serves primarily lower-income, high-risk customers - may draw negative attention from automakers, which put a premium on customer satisfaction.
The Credit Karma website recently featured 33 mostly scathing consumer reviews of Gainsco, which received an average rating of one star.
Stallings insists that the consumer reviews don't reflect the corporate culture at Gainsco.
"If you're in the nonstandard side of the insurance business, the only people who pay attention to you in a review are people who have been hit by a Gainsco customer and are waiting on a check or a customer who's waiting for a settlement," he said.
He says his new Hyundai store already has customer satisfaction numbers "way above the national average."
"Look, I want to be a significant dealer," Stallings said. "I love cars. And I love building things."