Ken Ganley drives toward $2 billion

Who: Ganley Auto Group

What: Bought Central Cadillac for an undisclosed sum

Why it matters: Latest deal moves company closer to $2B sales goal for 2018

Ken Ganley is a natural when it comes to sales, moving his first car while still a gangly teenager.

“I was so excited that I had sold a car,” he says. “There is nothing better than that feeling you get when you make a sale.”

Well, maybe one. Buying a bunch of cars. All at once.

Which is what Ganley did a few weeks ago when he bought Central Cadillac, the latest in a string of acquisitions that has catapulted Ganley Auto Group from $400 million in sales in 2006 – when Ken took over from father Tom – to $1.5 billion this year and a projected $2 billion in 2018.

“I’m the guy who is actively out there looking for potential opportunities,” Ganley says. “I prefer a dealership that is underperforming, where I know I can improve it, rather than an extraordinarily successful dealership that might also be extraordinarily expensive.”

Here’s an inside look at how Ganley finally bought Central Cadillac, an extraordinary dealership he had sought for years.

An irresistible opportunity

Frank PorterFounded in 1942, Central Cadillac has been Cleveland’s Cadillac dealer since the end of World War II. The dealership can boast of an iconic, made-in-America brand, an impeccable reputation for customer service and a state-of-the-art facility on Carnegie Avenue in downtown Cleveland.

Despite his preference for turnarounds, Ganley couldn’t resist the opportunity to pursue the business and add the Cadillac brand to the list of brands he offers to customers.

“Growing up in this business as a kid, I was always fascinated by Central Cadillac,” he says. “Everyone in Cleveland knows where it is.”

On paper, it seemed like an ideal next chapter for the business. CEO Frank Porter was the third generation to lead Central Cadillac, following his grandfather and founder, George H. Lyon, and his father, Frank H. Porter.

When Ganley initially reached out to Porter several years ago, however, he wasn’t quite ready to sell the business.

“I put a note in a file and didn’t think much more of it,” Porter says of the conversation with Ganley. “As an auto dealer and a franchise business, you’re not a master of your own ship.”

Indeed, auto dealers typically serve at the pleasure of the manufacturer that they represent, in this case General Motors.

“They have to approve any transfer and they don’t give that approval lightly,” Porter says. “They also have the right of first refusal. You could present a deal to them and they could come back and say, ‘We want this person to take over and they are going to mimic the deal you turned into us.’ You never know when that’s going to happen.”

So both Ganley and Porter went on with their lives and their businesses. But Porter knew the day was coming when he’d have to make a decision on the future of his business. He just didn’t have a lot of confidence that a fourth generation of family ownership was going to happen.

Trying to keep Central in the family

Porter had made several attempts over the years to convince his sons, Allan and Scott, to take the reins of the company. Both sons had spent time in the business when they were younger, but had established successful careers in other fields.

“I said, ‘Guys, I know you have your own careers. But I’m going to do something here and I’d love to have you in the business with me. I’d probably treat things a little differently if you were here,’” he says.

Porter gave it his best shot. But in the end, the lure of Colorado’s fresh mountain air and Northern California’s warm Pacific breezes proved to be too much to overcome.

“The automobile business just wasn’t something that lit either of their fires,” Porter says.

Porter regrouped and considered his next steps. He sought the advice of Curtice L. Johnson, his long-time general manager. Johnson was interested in making a deal, but it wasn’t that simple.

“He was going to buy the entire stock of the company, which would have made it more affordable for him,” Porter says. “We still needed to do some bank financing. But when it was all said and done, he was going to have to mortgage everything to do the deal. He didn’t feel totally comfortable taking on that much debt.”

A move made with great care

With Johnson no longer an option, Porter made some calls to other dealer groups in the Midwest.

“These were people who had a number of franchises and enough financial wherewithal to step up to the plate for a Cadillac dealership and also had the ability because of their experience to get factory approval,” Porter says. “Those are the two ingredients you need.”

As he reviewed the options on the table, Ganley’s name stood out from the rest. The time he took to reach that conclusion wasn’t a matter of discomfort with selling to Ganley. Rather, he wanted to take the time to make the right deal for an organization that meant so much to him, his family and everyone connected to the business.

“Ken very much wanted the dealership,” Porter says. “One of our understandings was that he would hire all of our employees. That was really important to me because we have so many long-time employees and customers. I wanted to see them continue.”

Ganley says there was never a moment of doubt about what he would do with the team Porter had assembled.

“I’ll never forget my dad telling me that the only time you have a successful, good transaction is when the buyer is happy and the seller is happy,” Ganley says. “He said, ‘Ken, if you can’t accomplish those two things, something is going to go wrong.’ It’s important that the seller walks away thinking, ‘I got the right value for my business.’”

Ganley’s track record of success earned the blessing of GM and the deal closed on Oct. 2 for an undisclosed sale price. Ganley also took on a partner in the deal, bringing Chevrolet dealer Bob Serpentini into the transaction.

Living the dream

From the moment he sold his first car, Ganley has not only thought about selling more cars, but buying more dealerships.

“I always wanted to own a lot of car dealerships,” he says. “What’s exceeded my expectations is how our volume and profitability have grown. Our profitability is about 500 percent higher than it was from 2006 to 2008.”

The company sold between 15,000 and 20,000 cars when Ganley first took over the business in 2006. He expects to sell 58,000 cars this year.

“Ken has stepped in and redone almost every location that they own, which is a continuation of Tom’s work,” says Lou Vitantonio, president of the Greater Cleveland Automobile Dealers’ Association. “He knows the market well, the name is very recognizable and he has a very good reputation. The hardest thing in the world is to find the right people to run a store efficiently and profitably and have that upper-level customer experience. He’s done that.”

As Ganley strives to maintain and even enhance that reputation, he’ll continue to stay true to what motivated him to reach out to Porter in the first place: The search for the next great deal.

“I certainly don’t see myself slowing down,” Ganley says. “My phone may not ring at all for the next year. But if it does, I’ll be ready.”

How to reach: Ganley Auto Group, www.ganleyauto.com

DETROIT, Wed Jan 23, 2013 — General Motors Co.’s North American president, Mark Reuss, was considered for the top job at the U.S. automaker in 2010 before his lack of seasoning led the board to the current chief executive, Dan Akerson, according to an excerpt from a forthcoming book by GM’s former CEO, Ed Whitacre.

As GM, which restructured in bankruptcy with the help of a $50 billion U.S. taxpayer bailout, moved toward its fall 2010 initial public offering, Whitacre told the board he would not continue as CEO. His idea for his replacement was Reuss, according to the excerpt published on Wednesday by Fortune magazine.

“Mark had zoomed up the executive chain in record time; he went from midlevel engineer to the No. 2 person in the company in the space of a year, more or less,” Whitacre said of Reuss. “The plus was that Mark was showing a lot of poise and management potential. The downside was that he hadn’t been in the job long enough to prove himself as a CEO.”

Whitacre’s book, “American Turnaround: Reinventing AT&T and GM and the Way We Do Business in the USA,” is scheduled to be published early next month.

GM announced Whitacre’s exit in August 2010, and Akerson assumed leadership of the Detroit company the following month.

Reuss declined to comment on Whitacre’s book.

GM said the comments were Whitacre’s and the company was focused on the future.

GM to recall 15,575 cars to fix safety flaws

DETROIT, Wed Nov 14, 2012 – General Motors said it is recalling 15,575 Cadillac, Buick and Chevrolet cars to correct potential safety flaws.

The recalls, posted Wednesday by the National Highway Traffic Safety Administration, involve 2,949 2012-model Buick Verano, Chevrolet Cruze and Chevrolet Sonic compacts with driver-side air bags that might not deploy in a crash, and 12,626 2013-model Cadillac XTS sedans with rear-seat head restraints that might not lock in position.

The problems could increase the risk of injury to occupants, NHTSA said.

GM said it will replace the steering-wheel air-bag coil on the compact cars and replace the head restraints on the Cadillac sedans.

GM dealers will provide the repairs free of charge.

GM to recall about 41,000 cars over fuel leak problem

DETROIT, Mon Oct 1, 2012 – General Motors Co. is recalling about 41,000 Chevrolet, Pontiac and Saturn cars in the United States because of concerns that a defective plastic part might cause a fuel leak, according to the National Highway Traffic Safety Administration.

GM’s latest move follows the company’s recall of 473,841 Chevrolet, Pontiac and Saturns in September to fix a condition that could lead the cars to move when the drivers think they are in ‘park’.

Potentially, 40,859 vehicles sold in Arkansas, Arizona, California, Florida, Nevada, Oklahoma, or Texas could be affected in the latest recall.

As a remedial measure GM will notify owners, and dealers will replace the fuel pump module, free of charge, the NHTSA said.

GM recalls 4,300 Malibu Eco cars in U.S. for airbag issue

DETROIT, Thu May 24, 2012 – General Motors Co. said on Thursday it is recalling 4,304 Chevrolet Malibu Eco cars sold in the United States to reprogram a module that controls airbag deployments.

The U.S. automaker said in what it described as rare cases under extremely aggressive turning, the roof rail airbags in some 2013 model year Malibu Ecos might inflate. It also said in another scenario it described as rarer that the airbags and safety belt pretensioners might not deploy.

GM said no crashes or injuries have been reported related to this issue.

GM said it discovered the problem during a development test in which one of the cars was performing extreme maneuvers. It said letters will be mailed to car owners on June 1 with instructions to have the reprogramming done at no cost at a dealer.

GM recalls more than 6,000 vans, SUVs in the U.S. over steering

DETROIT, Mon Mar 26, 2012 – General Motors Co. is recalling 6,159 big vans and sport-utility vehicles in the United States for possible loss of steering.

The U.S. automaker is recalling certain 2012 model-year Chevrolet Express and GMC Savana vans, and Chevy Suburban and GMC Yukon XL SUVs because the gear shaft could fracture, which could lead to a loss of steering and increased risk of an accident, according to documents filed with the National Highway Traffic Safety Administration.

GM said the issue was discovered by the supplier during the testing of steering gear units and testing suggested a failure would not occur until at least five months after the most severe use. The automaker said there were no known crashes, injuries or complaints related to the recall.

GM said its dealers will inspect the steering gear shaft and replace it if necessary. Letters to owners will be sent April 4.

Porsche is recalling 1,232 2012 model-year 911 Carrera S coupes in the United States as interference between a coolant line and fuel line may cause the latter to become disconnected, according to documents filed with NHTSA. A fuel leak could lead to vehicle stalling or a possible fire, according to NHTSA documents.

Porsche said in documents filed with NHTSA that it was not aware of any accidents or injuries related to this issue.

Porsche will replace the fuel line and the recall is expected to begin in April, NHTSA said.

February auto sales rise; GM posts surprise gain

DETROIT –  March 1: A surprising sales gain by General Motors Co. and strong performances by Ford Motor Co. and others helped push U.S. February auto sales to their highest annual sales rate in nearly four years as consumer confidence improved and drivers gave in to the need to replace their aging cars and trucks.

The sales gains came even as fuel prices shot up last month, spurring consumers seek out smaller, more environmentally friendly cars. Sales of Ford’s Focus small car more than doubled in February.

The annual sales rate, a closely watched industry yardstick, was on track to reach 14.7 million vehicles, JP Morgan analysts said. That would be the best monthly showing since March 2008, before the financial crisis that sent Detroit into a tailspin.

GM said the rate could be as high as 14.9 million vehicles, topping the high end of analyst estimates.

GM’s U.S. sales chief, Don Johnson, told analysts on a conference call that this could be the best monthly seasonally adjusted annual rate since 2008.

Peugeot and GM discuss production deal: sources

DETROIT – General Motors and PSA Peugeot Citroen are discussing a broad manufacturing alliance designed to stem losses in Europe and lower production costs elsewhere, sources with knowledge of the matter said.

Talks between GM, the world’s biggest automaker, and European No.2 Peugeot are focused on sharing vehicles and parts rather than a capital tie-up, according to the people. Any new shareholdings that emerged would be small and symbolic.

Peugeot earlier acknowledged that alliance talks were taking place with an unnamed partner, sending its shares soaring after online newspaper La Tribune reported that discussions with GM had been underway for months.

“There can be no certainty at this stage that these discussions will result in any agreement,” the Paris-based company said, without elaborating.

“We routinely talk to others in the industry but have no comment beyond that,” GM spokeswoman Kelly Cusinato said.

While potential synergies have been identified, Peugeot is treading cautiously to avoid building expectations, mindful of the 2010 failure of advanced tie-up talks with Mitsubishi Motors.

Like Peugeot, GM’s European Opel division faces heavy restructuring to reverse losses compounded by the region’s slumping auto market and cut-throat price competition.

Peugeot on Feb. 15 announced new cost cuts and put its Gefco logistics business up for sale to help finance the overseas expansion it badly needs to reduce exposure to stagnating home markets.

GM posts weaker-than-expected fourth-quarter

DETROIT – General Motors Co. posted a weaker-than-expected fourth-quarter profit as disappointing performance overseas offset strong results in North America.

“We obviously have work to do still and a long way to get to the objectives we ultimately want to get to,” GM CFO Dan Ammann told reporters.

“We clearly have work to do in Europe. We have work to do in the South America business. Frankly, we have work to do all around the company in terms of cost opportunity,” he added.

Ammann said GM has not gone far enough in cutting costs in its European operations, but declined to provide a 2012 financial forecast for a unit that the No. 1 U.S. automaker has struggled to return to profitability. Overall, GM expects 2012 sales to top the $150.3 billion it saw in 2011 and its market share to remain flat.

Net income attributable to common shareholders was $500 million, or 28 cents a share, compared with $500 million, or 31 cents a share, in the year-ago quarter.

Excluding one-time items, GM earned 39 cents a share, two cents below analysts’ average forecast in a poll by Thomson Reuters I/B/E/S.

Sales in the quarter rose 3 percent to $38 billion, compared with the $38.21 billion analysts had expected.

For 2012, GM expects to raise vehicle prices and contain cost inflation, but the sale of more cars than trucks will hurt profit margins.

GM said its U.S. defined pension plans earned asset returns of 11.1 percent last year, but they ended the year $13.3 billion pension shortfall in pension funding compared with $11.5 billion in 2010. GM expects returns of 6.2 percent in 2012 due to a greater shift to fixed income investments.

GM offers fix to Volt battery pack to prevent fire risk

DETROIT ― General Motors Co. said on Thursday it has developed a proposed fix to the battery pack for the Chevrolet Volt to eliminate the risk of a fire being triggered days after a crash.

GM said it would strengthen structural protection for the 400-pound lithium-ion battery in the Volt and take other steps to prevent coolant fluid from leaking and triggering a fire.

GM has made the Volt the symbol of its determination to seize a leadership position in fuel economy and green technology, and its engineers have been racing to respond to a safety investigation by U.S. regulators since late last year.

“This remains a halo vehicle for us in technology and design,” Mark Reuss, GM’s chief of North American operations, told reporters.

The National Highway Traffic Safety Administration opened a probe of the Volt’s battery pack in November. NHTSA, which has the power to review proposed safety fixes by automakers, had no immediate comment on GM’s announcement.

GM will notify Volt owners of the fixes in the coming days. Owners will be able to have Chevrolet dealerships conduct the needed repair work starting in February, the automaker said.

The repair will take two to three hours to complete, Mark Reuss, GM’s chief of North American operations, said. GM has built about 12,400 of the battery-powered Volts and sold about 8,000 of those.

Reuss said he was “optimistic” that the proposed Volt remedies would address NHTSA’s concerns.

A lithium-ion battery pack in a Volt that went through a crash test in May caught fire three weeks later at an NHTSA test facility.

In lab tests completed in late November by U.S. regulators, a second Volt pack began to smoke and throw off sparks while a third battery pack caught fire a week after a simulated crash.

The Volt’s battery is designed to provide about 40 miles of electric-powered range. The plug-in hybrid also has a gas-powered 1.4-liter engine to provide additional driving range after the battery has been drawn down.