Remember that old commercial, when EF Hutton talks, people listen? Well, Warren Buffet is talking with his money, and we’re listening. Berkshire Hathaway, Buffet’s giant money-making machine, has just announced it will be purchasing Van Tuyl Group, Inc., which is the fifth largest auto dealership group in the country. There are close to 80 dealerships under the Van Tuyl name, and they cover every state. The new name will be Berkshire Hathaway Automotive. With car dealerships having been around for a century, we have to wonder why Buffet is buying the business now. In an interview with CNBC, Buffet said that auto dealerships that are family owned have long-term value and are “ripe for consolidation.” He also said he expected they would be purchasing more over time.
So why is he buying these? You have to think that when Berkshire Hathaway does something, it’s with a bigger plan in mind. If you’ve never head of Berkshire Hathaway, Inc., then you might know Dairy Queen, Fruit of the Loom, Coca-Cola and Heinz. BH either owns these subsidiaries or is a major stockholder. And that’s just a small list of the companies under this conglomerate. Plus BH owns about two percent of General Motors, so he’s already got some automotive under his belt. But as everyone knows, the dealership owners have almost all the say when it comes to how the dealership is run.
So what’s the logic behind this purchase? Is it to diversify the holdings? BH has its hand in almost everything but automotive (Exxon Mobile, Procter & Gamble, Wal-Mart, and Wells Fargo). Are they going to change to a Tesla-type way of auto purchasing? Are they buying them for the land grab? BH owns plenty of property, and has a residential brokerage firm. Is he trying to corner the market on EV sales, where he starts a dealership that sells nothing but EVs new and used? Will he start putting in hydrogen-based infrastructures? Is he planning on taking over an automotive manufacturer? Will he set up his own financing through Wells Fargo? Or maybe he’s just in it for the large cash flow generated through parts and service sales. So many questions, but no answers…yet. This will be an interesting scenario to follow.