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Buffett Won’t Steer F&I, Defends Franchise Model

The Billionaire investor weighs in on a host of topics, from Tesla and the franchise system to his acquisition of the Van Tuyl Group and the opportunities that lie in F&I.

by Tariq Kamal
April 2, 2015
Buffett Won’t Steer F&I, Defends Franchise Model

 

2 min to read


NEW YORK — Billionaire investor Warren Buffett and auto group magnate Larry Van Tuyl engaged in a lively discussion with CNBC’s Becky Quick at the NADA/J.D. Power Automotive Forum on Tuesday. The pair appeared several months after Buffett’s investment company, Berkshire Hathaway Inc., acquired the family-owned Van Tuyl Group, the nation’s fourth-largest auto retailer. The company was renamed Berkshire Hathaway Automotive and now includes 81 dealerships in 10 states.

The Q&A was the highlight of the Automotive Forum, which convened at New York’s Grand Hyatt Hotel and also included sessions devoted to the global economic outlook, the state of U.S. auto sales and advances in digital marketing. Buffett and Van Tuyl appeared relaxed and jovial as they reflected on the acquisition and fielded questions from Quick and audience members. Much of the discussion revolved around whether Buffet would seek to effect a change in business operations, a notion he quickly dismissed.

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“We own all kinds of businesses. We own a railroad. I don’t know where they buy their diesel fuel from,” he joked. “I’m not even sure I know what diesel fuel is.” He pointed out that his investment in Forest River, an Elkhart, Ind.-based RV manufacturer, had yielded only two phone conversations with the company’s owner in the past 10 years.

“It’s going to be business as usual,” Van Tuyl added.

When asked what opportunities he saw in the F&I space, Buffett deferred to Van Tuyl. “That will be up to Larry. He’s got his own bank arrangements. We don’t get into that.”

Both men were asked to comment on advances made by Tesla, the electric-vehicle manufacturer led by Elon Musk, a proponent of the direct-to-consumer sales model. Van Tuyl noted that, as a small-volume manufacturer, Tesla was not likely to influence his operation or the wider auto retail market.

“However, new technology is always good,” Van Tuyl said. “It always forces us to take a look and challenge ourselves, so it certainly isn’t a bad thing. But I don’t see it as a threat.”

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Buffet added: “The dealer system works well for the manufacturer. It works well for the dealer. It works well for the consumer. And it’s been around now for a very long time. Usually, when a distribution system becomes that firmly established, there’s a reason for it. … And I just don’t see that changing.”

Look for a comprehensive report in the May issue of F&I and Showroom.

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