Online auto broker CarsDirect.com has bought its rival Greenlight.com in a deal that will send yet another automotive e-commerce company to the Internet scrap heap, according to a Feb. 1 Associated Press story by Michael Liedtke.
CarsDirect, a privately held firm based in Culver City, Calif., hasn't disclosed the specific terms of the all-stock purchase. Once the takeover is complete, which is expected to occur this month, Greenlight will essentially go out of business and most, if not all, of its remaining 75 employees in Livermore, Calif., will be fired, according to the AP story.
Among the valuable assets that CarsDirect gains in the deal are Greenlight's partnerships with about 500 dealers and links to two Web sites with heavy traffic, Amazon.com and Autotrader.com.
Seattle-based Amazon, the nation's biggest online retailer, acquired a 5 percent stake in Greenlight a year ago and began featuring a car sales link to the service in August 2000.
Despite the backing of Amazon and the prominent venture capital firm of Kleiner Perkins Caufield and Byers, Greenlight never caught up with CarsDirect, which started in 1998.
CarsDirect, which got its start at Pasadena-based incubator Idealab, has assembled a network of 2,500 dealers and raised more than $300 million in capital from business heavy hitters such as Michael Dell and George Soros.
Both online car sites sell most makes and models of automobiles at prices previously negotiated through their dealer networks and also provide financing. Once the deal is done, consumers still must go to the dealerships to pick up the vehicles.
Top executives from both sites said there is room for just one dominant company. "It just made sense for us to consolidate," Greenlight CEO Joel Manby told the AP. Manby will remain with CarsDirect in an advisory role until the layoffs are complete.
Although millions of consumers rely on the Internet to research automobiles before buying a vehicle, industry analysts say relatively few transactions are completed on sites like CarsDirect, Autobytel and Autoweb. Online sales account for about 1 percent of the roughly 50 million new and used cars sold nationwide each year, according to industry estimates.
J.D. Power and Associates and Gomez.com estimate online car sales could account for one of every ten transactions by 2005 as consumers and dealers grow more comfortable with the no-haggle process.
Although it is privately held, CarsDirect last spring filed plans to make an initial public offering of its stock. With investors spurning online retailers, CarsDirect withdrew the offering in December.
In the 15 months ending March 2000, CarsDirect lost $144 million on revenues. CEO Robert Brisco acknowledged Jan. 31 that the company still hasn't made money.
In 1999, CarsDirect sold 6,622 vehicles for a total of $165 million. Brisco said the company's car sales more than doubled last year and predicted the Amazon link acquired through Greenlight will increase sales by as much as 25 percent this year.
Greenlight was quickly burning through $39 million in venture capital raised last August, according to the AP story. In an effort to save money, Greenlight laid off 25 percent of its staff in December.
