Pick a Car, Any Car

Automobile dealers have traditionally been a loyal lot, sticking by their carmaker through ups and downs. If a new-car dealer sold Ford Motor Co. products, buyers had to shop elsewhere for a General Motors car. But after the auto recession of the late 1970s and early 1980s, when some 5,000 dealers closed their doors, the survivors tried to reduce their dependence on a single company by carrying a host of different cars. Today so-called megadealers sell many makes, sometimes out of one-stop auto supermarkets, where customers can buy either a Mercedes-Benz or a Jeep. Other megadealers have showrooms in several states.

Reigning champion of the new breed is New York City's Victor Potamkin, who last year sold $722 million worth of cars, including 3% of Cadillac's production line. Potamkin will not sell competing makes in the same store, but his 29-dealership empire, spanning the East Coast, has a total of ten different brands. In Denver, Leo Payne sells cars built by GM, Ford, Chrysler, AMC, Volkswagen, Volvo, Daimler-Benz, Subaru and Nissan. San Francisco's Martin Swig explains the megadealer's credo: "I don't care where a car comes from as long as it meets the needs of the market."

The auto companies originally did not like the move to megadealers. General Motors tried to control its dealers by limiting them to just one GM franchise. Potamkin avoided that constraint by keeping only one GM dealership in his name and letting his sons own the others. Other dealers who wanted to increase revenues started taking on hot-selling imports. Owners of Chevrolet or Cadillac franchises were soon selling German and Japanese cars as well. This year GM changed its rules, allowing dealers to own five separate GM franchises and invest in five more.

The automakers recognize that many small auto lots are going the way of the corner grocery. While megadealers represent only 11% of the 25,000 car dealers in the U.S., they account for 30% of the industry's profits. Explains Auto Consultant Leonard Sherman of Booz, Allen & Hamilton: "It drives Cadillac nuts when they hear Potamkin advertising Cadillacs by emphasizing lower prices. They don't want that image. But the company dares not try to stop him because they'd be shooting themselves in the foot."

The typical dealer sells about 400 cars a year; the megadealer sells at least 1,000.

Customers like the megadealers because they generally offer lower prices and a staggering supply of cars. At Robert Ciasulli's 14-acre Arrow Auto Mall in Little Falls, N.J., shoppers can select from cars made by GM, Chrysler, AMC and Renault. The experience, though, may be disorienting for those accustomed to traditional showrooms. Some megadealers are like assembly lines. One floor person shows the car, another closes the deal, and still another handles paperwork after the sale. Also, local dealers' repair shops may be less helpful to customers who bought cars from out-of-town megadealers. Many car buyers, however, seem willing to put up with such troubles to get a bounty of bargains and choice.