Woodburn Independent Online

Miles cuts ties with GM, Chrysler

The GM lot will be sold and everything consolidated to the Chrysler lot to sell used cars

• By: Jason Horton  
• Published: 9/8/2009 12:35:10 PM

Photo By: Jason HortonLooking to the future
Kip Miles said he has no regrets about how things turned out and is looking forward to new business opportunities.

WOODBURN — The Big 3 auto dealers is now down to one.

First, Hershberger Motors sold to Miles Chevrolet in 2003. Now, Miles Chevrolet and Miles Chrysler are closing shop, leaving just Hillyer’s Mid-City Ford as the lone new car dealership at the I-5 interchange.
Kip Miles announced last week he has terminated his franchises with General Motors and Chrysler and moving to a used car dealership only.

Miles said the economy has been tough and this move is a long time in the making.

“Back in January of this year, the mortgage holder on my building, GMAC (General Motors Acceptance Corporation), came to me and said they were going to be getting out of the mortgage business and they basically wanted me to pay off my building,” he said.

“At that time, I struggled mightily to find another mortgage company. But because of what was going on in the country, there was a general lack of appetite for auto dealerships and not only that, but a lack of appetite for General Motors dealerships because of the uncertainty and the looming specter of bankruptcy, it made it impossible to find a new mortgage.”

With the government takeover of the banking and auto industries, Miles said it has made it nearly impossible to do business the way he had been doing it the past 20 years.

“My new vehicles are floored, which means the bank owns them until I sell them, then I pay the bank off. The bank for probably 90 percent of all GM dealers is also GMAC, so at that point, with them wanting out of the real estate note, they used my flooring as a pressure point to do something, as far as getting my mortgage handled.”

“When Chrysler and GM went bankrupt, Chrysler Financial, which was my bank for the Chrysler store, the Obama administration essentially terminated them, so they would no longer floor the vehicles,” Miles said.
Ironically, however, the same company that was pressuring Miles to get his mortgage paid on the Miles Chevrolet lot — GMAC — became the flooring source for the Chrysler vehicles.

“GMAC leveraged the mortgage on the GM lot against new Chrysler cars,” Miles said.
Miles had two lots, virtually no new cars and had to come up with a plan.

“I started putting together a business plan several months ago,” he said. “I carved out the best parts of my business: buying and selling cars, talking to customers, servicing cars, selling parts and being an active member of the community. I took those things away and made a plan.

“It’s been an incredible nine months. My manufacturers both went bankrupt, my bank went bankrupt, the bank I had counted on, took TARP money (Troubled Asset Relief Program) and became an entity of the government. They severed ties with General Motors completely and became their own bank, Ally Bank, and because of that, all of a sudden, being a General Motors dealer with GMAC didn’t mean anything any more.”
On top of the country’s economic crisis, all GM dealers were waiting to hear whether they were going to be on the “good list” or “bad list,” Miles said.

“When we got the good letter, it was all very exciting, except that it didn’t solve my building issue,” he said. “And GM and Chrysler stopped making cars during that time, so not only did you not have new cars, but none were coming. Luckily, I felt comfortable with my new plan.”

On Aug. 1, GMAC told Miles he had 30 days to make a decision, and after making some inquiries about other mortgage options, he decided to sell.

“I came to the conclusion that ultimately, even over the last two to three years, when there was no issue with the building, new cars had become unprofitable and unfulfilling,” Miles said. “The amount of capital to be in that business, the return on the investment is not profitable.”

Unfortunately, however, terminating his agreement with those two franchises meant he also had to scale back his own employees.

“There’s going to be roughly 50 percent of my employees that will remain,” he said.

“However, we have already successfully placed about 70 percent of the ones we let go and I think when it’s all said and done, even in this economy, we will find jobs for everyone I had to let go. That was something I was very proud of — the people working here were that high quality.”

Miles can’t go into a lot of details with everything he’s planning on the old Chrysler lot, other than there will be used cars, and parts and service. Other things are in the works, he said, but no contracts have been signed. He expects to be able to announce everything by mid-October.

“The official kickoff date will be Nov. 1, but we’ll have something to announce before then and I’m excited about this,” he said.

Miles is jumping into a completely new model of business, and getting out of new cars is something he’s looking forward to right now.

“The biggest change is the mix of cars that will be available, There will be more imports, more Fords, and generally we wouldn’t hold on to those types of cars,” he said.

He also said that despite going to all used cars, customers can expect the same quality.
“Back in February we were forced to look at new revenue streams. The $1,500 cars and the $2,500 cars are traditionally cars we didn’t want to attach our name to because we were too good and smart. We would wholesale them,” Miles said.

“We really looked at that and thought maybe we don’t have to make them look brand new. Just make them safe, clean and tidy — one you could sell to your daughter and feel safe. We inspect them and have the inspection sheet that has everything that’s wrong with the vehicle posted right on the vehicle and we’ve had tremendous success. We make it safe.”

The new model will also give Miles a completely new customer base, something he couldn’t really expand on with the new car dealerships after the banks made it more difficult to get loans.

“It’s exciting because we’re going to have a big variety,” he said. “We’re still going to sell good cars.”

Miles also isn’t worried about his property, saying it will sell quickly.

“It’s a great location and there are offers already,” he said. “We have two other dealerships that have talked to me and two developers looking at it.”

Despite having his business world turned upside down, Miles has no regrets.

“I don’t regret anything. I’m disappointed but I’m not a victim. I have a great life. I employ great people, I have a great wife, great kids,” he said.

“There are people who have cancer, who have lost kids, guys who have owned companies that just go away one day. At 43 years old, I’m not too old to start over with something. I’m proud of what we did, and I’m excited about the next step.”

  (log in to rate)