The Issue Petitioners, Chevrolet Motor Division, General Motors Corporation (Chevrolet), and Bill Heard Chevrolet Corp.-Orlando d/b/a Bill Heard Chevrolet (Bill Heard), propose to relocate Bill Heard from its current location at 3455 Orlando Drive, Sanford, Seminole County, Florida, to a site at State Road 46 at Oregon Avenue and I-4, in Sanford, Seminole County, Florida. Respondent, Fred Bondesen Chevrolet, Oldsomobile, Cadillac, Inc., (Fred Bondesen), whose address is 2800 South Highway 17-92, Deland, Florida, is protesting the proposed relocation pursuant to the provisions of Section 320.642, Florida Statutes. For the relocation to be approved under Section 320.642, Florida Statutes, the Petitioners must demonstrate that existing franchise dealers who register new motor vehicle retail sales or leases of the same line-make in the community or territory of the proposed dealership are not providing adequate representation of such line-make motor vehicles in such community or territory. Adequate representation is the basic issue in the proceeding. Other issues are derived from the considerations listed in Section 320.642, Florida Statutes, including impact of the proposed relocation on the protesting dealer, Fred Bondesen.
Findings Of Fact Stipulated Background Chevrolet is a distributor and licensee as defined by Section 320.60(5) and (8), Florida Statutes. Fred Bondesen and Bill Heard are motor vehicle dealers as defined by Section 320.60(11), Florida Statutes, and are existing franchised Chevrolet dealers. Chevrolet proposed to relocate Bill Heard from its current location at 3455 Orlando Drive, Sanford, Seminole County, Florida, to State Road 46 at Oregon Avenue and the I-4 interchange, Sanford, Seminole County, Florida. The distance of the relocation is approximately five miles to the northwest of Heard's current location. Fred Bondesen's protest of this relocation is governed by the provisions of Section 320.642, Florida Statutes, and he has standing to maintain this protest, as the proposed relocation is within 12.5 miles of his location. Bill Heard Mr. Heard inherited his father's Columbus, Georgia, Chevrolet dealership which, in 1958, was doing about $3 million in business. Mr. Heard now owns Bill Heard Enterprises, with 9 Chevrolet dealerships throughout the south and approximately $200 million in business annually. Bill Heard Enterprises is the largest Chevrolet dealer in the country. Mr. Heard's Chevrolet dealerships sold about 27,000 new retail cars and trucks in 1997. Although Bill Heard also continues to own Cadillac and Oldsmobile dealerships in Columbus, he specializes in Chevrolet and he considers that he is able to do a better job marketing Chevrolets to the public through that specialization. Where his facilities are appropriately located he has had no trouble competing with Ford or Toyota. Bill Heard purchased what was formerly Rummel Chevrolet in Sanford, Florida, in May or June of 1997. At the time he purchased the dealership, Heard did not have an arrangement with General Motors that would allow him to relocate the dealership. Heard did not request permission to relocate the dealership until after he had purchased it. Chevrolet has no investment in the relocation; Heard is paying for both the land and the buildings at the relocation site. The current facility on US 17-92 in Sanford has material physical deficiencies and, in Bill Heard's words, has the appearance of an oyster house rather than a car dealership. The current facility has only 2,000 square feet in the sales facility, and only 9 service bays. The current facility has no body shop. The current facility is at the end of an auto row with only Ford and a Cadillac/Oldsmobile dealership in sight. The Ford dealership will be moving in the near future to I-4, one exit south of the proposed Heard location. The next closest dealership is a Chrysler/Plymouth/Jeep store which is over a mile away from Bill Heard and not within sight. There is an abandoned drive-in movie theater between it and Heard's current location. The remainder of the auto row, beginning with the Chrysler/Plymouth/Jeep dealership, and going south from there another 6-7 miles, is on a congested street, with stop lights, decayed and abandoned buildings, and deteriorating retail environment. Coming from Orlando, a customer would have to drive a congested highway past virtually every other line make of dealership to get to Heard's current location. To Bill Heard, an experienced successful automobile entrepreneur, it does not make economic sense to spend many millions of dollars to build a first class facility, such as the one which is proposed, at the current location. Prior to Heard's purchase of Ken Rummel Chevrolet, the dealership was selling approximately 20 new units per month. Through aggressive marketing and advertising, Heard has been able to increase sales to over 100 a month, but they cannot be increased much more at the current location. Heard already spends approximately 1.2 million dollars a year on advertising. The proposed location is one exit north of the Ford relocation site at I-4 and State Road 46A, and directly across the street from Auto Nation. Both of these operations will bring exposure to Heard by people shopping for new Fords and other types of cars. Also on I-4, beginning in the southeast corner of State Road 46, running south almost to the proposed Ford location at State Road 46, is a major regional mall, Seminole Town Center. The mall location has made this intersection the retail center of Sanford. The proposed location of Bill Heard Chevrolet will draw considerable exposure from the mall, and its proximity to the mall will afford it visibility to the entire Orlando market. Customers coming north from Orlando will use the same route to get to the dealership that they used to get to the mall. In addition, customers will be able to leave their cars at Heard to be serviced while shopping at the mall. The proposed Heard location encompasses 25 acres in the northwest corner of the intersection of I-4 and State Road 46. The facility Heard intends to build at the relocation site is similar to what he has built at his other successful Chevrolet dealerships, and was developed over his forty years in the automobile business. The showroom will be 30 feet high with a lighted roof. It will have about 75 sales offices on the ground floor. The dealership sign will be in lighted letters six to eight feet high. The sales operation will have 30,000 square feet, compared to 2,000 square feet at the present location. The proposed facility will also include a 100,000 square foot state- of-the-art service center, with 80 to 100 service stalls and a body shop with two paint booths and approximately 30 preparation stalls, compared to only 9 service bays and no body shop at the current location. The proposed location will include a 10,000 square foot used car facility. The dealership is being oriented so that it faces south, towards Orlando, rather than towards Deland, where Fred Bondesen's facility is located. The new facility, land and buildings, will cost approximately $15 million. Fred Bondesen Fred Bondesen purchased his dealership known as Fred Bondesen Chevrolet, Oldsmobile, Cadillac, Inc. in December 1986. The facility is located in Deland, Volusia County, Florida. Mr. Bondesen had previously worked approximately 8 years for a dealer in Ft. Lauderdale, Florida, starting out as a service advisor and moving up to the parts department, the body shop, finance and insurance department, sales, and then to general manager. When the facility was purchased in 1986, it was inadequately designed. Fred Bondesen had major renovation done on the buildings, added pavement for parking and inventory and essentially remodeled the entire facility. He currently has invested approximately $1.8 million in the dealership, including $1.4 million that was used for initial capitalization and other retained earnings over the years. Fred Bondesen considers himself a "home town dealer" for the general southwest Volusia County area: Deland, Deltona, DeBary and Orange City. He considers himself to be in a good facility and a good location in the growth area of west Volusia County. His corporation has remained consistently profitable since 1988 after turning the dealership around in 1987. Geographic Definitions All Chevrolet dealers have a contractually defined geographic Area of Primary Responsibility (APR). In metropolitan markets, such as Orlando, two or more Chevrolet dealers share the same APR called a Multiple Dealer Area (MDA). In other areas, one dealer is uniquely assigned the APR, which is called a Single Dealer Area (SDA). MDA's are further subdivided into an Area of Geographic Sales and Service Advantage (AGSSA) for each Chevrolet dealer. An AGSSA is not the dealer's contractual APR; rather, it is that portion of the APR in which that dealer enjoys a competitive advantage over all same line-make dealers due solely to the dealer's geographic location. Heard is one of five dealers located in the Orlando MDA, the others being Holler, Mealey, Classic, and World. Heard's APR, the area in which he is contractually obligated to represent Chevrolet, is the entire Orlando MDA. Heard is located in AGSSA 4. Bondesen is located in Deland, Florida, in an SDA. Bonesen's APR comprises the western part of Volusia County and parts of Seminole and Lake Counties. Dealers are free to sell to customers outside their APRs, and indeed are encouraged to do so. The statutory community or territory (comm/terr) is a market area defined with reference to the proposed dealer location. It is a geographically described market in which most consumers buy from dealers within the market area and where those dealers make most of their sales. The starting point for determining the community or territory was the Orlando MDA. Both the existing and proposed Heard locations are within the Orlando MDA boundary. Once the Heard store is relocated it will be closer than any other dealer to several census tracts that are not currently part of the Orlando MDA, including five census tracts around Lake Monroe (census tracts 909.01, 909.02, 910.07, 910.08, and 910.05). In addition, in 1997, Orlando MDA dealers outsold Bondesen in census tracts 910.05, 212.01, and 212.02, which are currently in Bondesen's APR. The census tracts that will be closer to the relocated Heard or that were dominated by MDA dealers should be assigned to the proposed Orlando community or territory. The relevant comm/terr in this case is the Orlando MDA with the addition of the census tracts identified by the Petitioner's expert, Mr. Anderson, as depicted on Chevrolet Exhibit 1, p. 13. In his Proposed Recommended Order Bondesen accepts this definition of the relevant comm/terr. (page 6, paragraph 11.) AGSSA 4 is an identifiable plot within the larger comm/terr. An Objective, Reasonable Standard In order to judge the adequacy of representation afforded by the existing dealer network in the comm/terr and establish opportunity available in the marketplace, it is necessary to develop an objective, reasonable standard. Dealer network performance for a brand in a local area is judged by comparing market penetration in the local area to the market penetration in a suitable comparison area. When choosing a comparison area against which to compare the market penetration in a local area, it is essential that the comparison area must itself be adequately represented. In determining whether a comparison area is adequately represented, national average market penetration is an extremely conservative measure because it includes all of the adequately represented, in- adequately represented, and unrepresented areas within the United States. Florida average retail penetration for Chevrolet is not an appropriate standard because Florida is presently inadequately represented. Florida ranked 44th worst out of 50 states in retail penetration in 1997, and fell short of the national average from 1994 to 1997. It is necessary to determine how much of the shortfall between the Florida penetration average and national average is due to unique consumer preferences over which the dealer network has no control, and to appropriately adjust for those preferences through segmentation analysis. Unique consumer preferences can influence the market share that Chevrolet achieves in Florida relative to national average, because certain vehicle types or "segments" are more or less popular in Florida than they are nationally. The segmentation analysis applies Chevrolet's national average penetration rate for each vehicle segment in which Chevrolet has a vehicle entry, weighted by the actual number of industry registrations occurring in that segment in that local area. The resulting "expected penetration" may be higher or lower than the national average based on the preferences of customers in the local area. The segment adjustment process takes into account all of the demographic factors affecting consumer sales: age, income, education, size-class preference, product popularity, and retail lease transactions, among others. After adjusting for local Florida consumer preferences, however, there is still a significant shortfall between the expected penetration rate of 14.31 percent and the actual Florida penetration rate of 11.14 percent. Competent statistical analysis reveals that the shortfall in Florida's penetration rate is due to dealer network deficiencies. The national average performance for Chevrolet, adjusted for local consumer characteristics in AGSSA 4, the Orlando comm/terr, and the Orlando comm/terr plus Deland, is the appropriate standard for measuring the performance of the Chevrolet dealer network and for establishing the level of opportunity available to Chevrolet dealers in those areas. Reasonableness of the expected penetration standard was tested by comparing all of the markets in Florida to the expected standard for each market. Forty-one out of 78 Chevrolet APRs in Florida met or exceeded the standard, some by as much as 170 percent. Significantly, markets immediately surrounding the Orlando comm/terr met or exceeded the expected standard: Eustis exceeded the expected standard every year between 1993 and 1997, with retail registration effectiveness ranging from a low of 109.2 percent of expected to a high of 122.1 percent of expected. Kissimmee exceeded the standard every year from 1993 to 1995 by as much as 127.1 percent of expected, dipped to 98 percent in 1996, but exceeded the standard again in 1997. Daytona Beach was 115.6 percent effective in 1997. New Smyrna Beach was 109 percent effective in 1997. Even Deland exceeded the expected standard in 1993 and was 99.5 percent effective in 1994. An analysis of the demographic factors of age and income in AGSSA 4 and the Orlando comm/terr plus Deland produced a higher expectation than the registration-based expected standard, further confirming the reasonableness of the expected standard. Bondesen's expert, Dr. Schink, contends that Florida dealers cannot perform at an average (or better) level compared to the national segment adjusted standard because Floridians are somehow "import biased." But this theory is belied by the real world experience of Bondesen, which used to meet the expected standard, and of Eustis, Kissimmee, Daytona Beach, and New Smyrna Beach, which currently meet or exceed the standard. In the Orlando MDA, moreover, Chevrolet outsold two imports- Nissan and Toyota- in combined car and light truck sales. The reason Chevrolet dealers in MDAs with high import competition have not performed as well is that Chevrolet developed its dealer network in the 1920s-1940s. By contrast, the import manufacturers developed their networks in the 1970s- 1990s, specifically in urban areas. As a result, the imports have a greater proportion of newer, better-placed dealerships than Chevrolet in the large metropolitan areas, and in general they outperform Chevrolet in those markets. Before adding Classic in 1998, Chevrolet had not increased its dealer count in Orlando since the 1920s. Ford achieved 101 percent of its national average in the same Chevrolet MDAs across the country in which Dr. Schink would perdict Chevrolet could not compete against the imports. In fact, Ford does better in the Chevrolet MDAs than it does in the Chevrolet SDAs, where Dr. Schink says import competition is less intense. If Ford can compete against the imports in metropolitan markets, so can Chevrolet. Current Inadequate Representation and the Proposed Relocation's Anticipated Benefits Once the standard is developed and tested for reasonableness, the next step is to measure the actual penetration achieved by the existing Chevrolet dealer network against the expected standard and, for the purpose of illustration, against the lower Florida standard in the three study areas. Any shortfall below the expected standard reflects inadequate representation, although the greater the shortfall, the more severe the inadequacy. Three relevant study areas fell significantly short of the expected standard in 1997: The expected penetration in AGSSA 4 was 15.3 percent, compared to actual penetration of only 9.5 percent. In the Orlando comm/terr, the expected penetration was 14.9 percent, while actual was 9.6 percent. In the Orlando comm/terr plus Deland, expected penetration was 15 percent, but actual was only 10 percent. The fact that Chevrolet penetration in the Orlando comm/terr and the Sanford AGSSA respectively were the 73rd and 76th lowest ranked areas in Florida suggests that they are performing poorly under any standard. Chevrolet's representation in the Orlando comm/terr and AGSSA 4 has been inadequate and declining for at least the last three years. Performance in the Orlando comm/terr has ranged from a high of 77.2 percent of expected in 1995, to a low 64.2 percent of expected in 1997, resulting in a net registration loss in 1997 of 3,525 units. In AGSSA 4, actual penetration was worse, ranging from a high of 68.2 percent of expected, to a low of 58.1 percent of expected, with a net registration loss in 1997 of 425 units. Net registration loss is the number of additional Chevrolet units required to raise penetration in an area such as the comm/terr or AGSSA 4 up to the expected penetration rate. Even using the lower Florida average adjusted for local consumer preferences, Chevrolet's representation in the Orlando comm/terr and AGSSA 4 is inadequate now, has been inadequate for at least the last three years, and is declining. Chevrolet's poor performance in the Comm/Terr and AGSSA 4 from 1994 to 1997 reflects that Chevrolet's dealer network has provided an inadequate level of inter-brand competition in the Comm/Terr over this three-year period. Bondesen does not deny that Chevrolet's performance in the Orlando comm/terr falls short of the national segment adjusted average. Dr. Schink does not dispute that Chevrolet's performance in the Orlando comm/terr and AGSSA 4 was inadequate compared to either the national or Florida standards in 1997, and he does not know whether Chevrolet's performance in the Orlando comm/terr would meet the lower Florida standard today. Complete data from calendar year 1998 was obviously not available at the time of hearing. While Chevrolet made some significant improvements in representation due to the addition of the Classic dealership and the increased sales by Heard over his predecessor, the activity by these two dealers was still not anticipated to close the gap between actual and expected penetration rate. Chevrolet has a plan to add another dealership in Orlando in the Red Bug Road area. There is no evidence as to when that dealership might come on-line, as neither the owner nor property has been selected, and no indication whether the addition of a new dealership will require an administrative proceeding. At this time it is impossible to speculate on the impact such new dealership will have on Chevrolet's sales penetration at an unknown point in the future. From 1980 to 1997, total population, driving age population, households, employment, and retail registrations-all key measures of opportunity for motor vehicle dealers-have all grown at tremendous rates in AGSSA 4, the Orlando comm/terr, and the Orlando comm/terr plus Deland, and are projected to grow continually at significant rates through the year 2002. Employment and retail registrations in the comm/terr have more than doubled. Retail registrations in AGSSA 4 have almost tripled. Virtually all of the households in the study areas fall within the $15,000 to $60,000 income range characteristic of the typical Chevrolet buyer. Chevrolet enjoys a 9.8 percent share of industry franchises nationally, but only a 5.6 percent share in the Orlando comm/terr plus Deland. With below average share of franchises, the Chevrolet dealers in the comm/terr plus Deland enjoy a huge opportunity per dealer. However, in order to capture the opportunity, the existing dealers must be ideally located. Growth creates traffic congestion as increasing numbers of people use the roadways to shop, go to work, and go out for entertainment, producing a greater demand for convenient access to motor vehicle dealerships. Orlando already has a poor road network. In order to achieve at least average penetration effectiveness in the Orlando comm/terr with its tremendous growth, fewer than average dealer outlets, and poor road structure, Chevrolet must have better than average locations, better than average operators, or both. Traffic flows more easily with fewer interruptions on an interstate, making it easier for Heard to draw customers from Orlando on I-4. Visibility on I-4 is important because it will increase Chevrolet's profile as a brand in the comm/terr, having the dual effect of helping Chevrolet gain market share and benefitting consumers by enhancing competition among existing dealers, resulting in more competitive prices and better selection. Mr. Bondesen admits that I-4 is the primary traffic artery used by Orlando consumers. Dr. Schink testified that the relocation will make Heard more convenient to consumers in the Orlando MDA as well as to customers in the southern part of Bondesen's APR. The average daily traffic count at the proposed location is 76,000 vehicles on I-4 and 25,000 on State Road 46, making a total of about 100,000 vehicles, whereas the average daily traffic count at Heard's present location is only 42,000 vehicles. An increase in traffic count is likely to enhance Heard's ability to sell vehicles throughout the greater Orlando area. The site of the proposed relocation is a growing retail area close to the Seminole Town Center Mall, Auto Nation, and other shopping opportunities. The Seminole Town Center Mall is the only mall in Sanford and the retail center of Heard's AGSSA. Having retail activity nearby creates a good environment for selling cars. Heard's visibility on the interstate close to the shopping area would assist Chevrolet in drawing customers in the market to the dealership. When Seminole Ford, currently across the street from the existing Heard location, relocates to its I-4 site just south of the proposed Heard site, there will be an advantage to both because Ford and Chevrolet dealerships create traffic for one another. Moving the Ford and Chevrolet stores to the interstate will create a new "auto row" offering much better access for customers in the Orlando area. The proposed relocation is consistent with Chevrolet's Year 2000 Plan, which calls for maintaining representation in the Sanford AGSSA and taking advantage of opportunities to relocate dealerships to newer and more visible locations in major shopping areas. Relocation Impact On Bondesen Based on his long experience and success in Chevrolet sales, Mr. Heard anticipates that he can easily sell 3,000 Chevrolets a year at his new location and projects as many as 7,000 or 8,000 a year after a 5-year period. He also estimates there are 7,000 to 10,000 unsold Chevrolets in the Orlando market. Whether Mr. Heard's expansive figures or his expert's more precise scientific statistical analysis is applied, Bondesen's predictions of a devastating impact on his Deland dealership are less credible. Gross registration loss is a measure of the opportunity Chevrolet has lost to inter-brand competitors like Ford and Toyota, as measured by the number of additional registrations Chevrolet would need to achieve the expected penetration rate in each census tract that is presently below expected. Gross registration loss measures lost opportunity within the comm/terr, in contrast to net registration loss, which offsets losses within the comm/terr against gains within the comm/terr. In 1997, the gross registration loss in the Orlando comm/terr plus Deland was 3,653 units. In-sell measures losses to intra-brand competitors by counting the number of Chevrolets registered within the Orlando comm/terr plus Deland that were sold by dealers outside this area. In-sell represents lost opportunity to dealers within the market because while those dealers were more convenient to the customers who bought those cars, the more convenient dealers failed to offer their consumers the price, selection, service, or selling approach necessary to make the sales. In-sell in the Orlando comm/terr plus Deland in 1997 added another 1,684 units of lost opportunity. Total lost opportunity in the Orlando comm/terr plus Deland, measured by the sum of gross registration loss and in-sell, was 5,337 units in 1997, more than ample opportunity for the proposed relocation to occur without taking away sales from Bondesen or from other dealerships in the comm/terr. The sufficiency of the opportunity to support this relocation can be proven by projecting the number of incremental sales (ie., sales over and above current levels) Heard is likely to make after the relocation, assuming certain penetration profiles for Heard and for the new Classic dealership. Assuming Heard has the same penetration profile as the average of Holler, Mealey, World, and Bondesen in 1997, his incremental registrations from the proposed location into the area within 20 miles of its dealership would amount to 387 units or only 7.3 percent of the total lost opportunity in the market. If Heard performs like Holler's 1997 penetration profile, which would produce the highest number of sales of any of the existing MDA dealers, Heard's incremental sales within 20 miles of its dealership still would amount to only 628 units or 11.8 percent of the total available opportunity. Heard could double the Holler profile and still not capture all of the available gross registration loss. Even with Classic Chevrolet going into business in 1998, and assuming that it performs at either the MDA average penetration profile or the Holler penetration profile, the sum of the projected Classic sales and the projected incremental Heard sales still equals only 36.2 percent of the available opportunity if Classic has the average dealer profile, or 45.5 percent of the opportunity assuming the Holler profile. In each of these scenarios, all of the incremental sales could be made at the expense of inter-brand competitors alone. In short, even with the addition of Classic, this relocation will not come close to capturing all of the lost opportunity and solving Chevrolet's penetration problems in the Orlando comm/terr. Dr. Schink assumed (at the high end) that Heard would make between 2,261 and 3,085 sales nationwide. Orlando Chevrolet dealers typically capture about 85 percent of their nationwide sales from the comm/terr plus Deland. Therefore, Dr. Schink's nationwide sales estimates would translate into 1,922 and 2,622 sales within the comm/terr plus Deland. Even if Heard sells 1,922 vehicles and Classic sells 1,800 nationwide or 1,530 within 20 miles (the highest projected number of sales for Classic), this results in a total of 3,452 units. After deducting the 460 sales Heard made from his present location in 1997, the total incremental sales of 2,992 is only 56 percent of the available lost opportunity. If Heard sells 2,622, the equivalent result is 3,692 incremental units, or only 69 percent of the available opportunity. Bondesen's current APR has a gross registration loss of 190 units and in-sell of 419 units (excluding sales from MDA dealers) for a total lost opportunity of 609 units. Assuming Heard matches either the average dealer penetration profile or the Holler profile, Heard's incremental sales into the Deland APR would capture less than 15 percent of the lost opportunity available there. If Heard doubled Holler's penetration profile, the incremental sales in Bondesen's APR would be 258 units or 42 percent of the lost opportunity. Even if Heard tripled Holler's profile (which would result in over 3,600 units nationwide), the incremental sales in the Bondesen APR would be 430 units, or 71 percent of the lost opportunity. In 1997, Herd registered 16 percent of his sales in Volusia County. Even if, as Dr. Schink projects, the relocated Heard sells 2,261 units nationwide, only 16 percent of those or 362 units would be registered in Volusia County. Since Heard already makes 90 sales into Volusia County from his existing location, his incremental sales into Volusia county would be 272 units. This assumed scenario would capture only 45 percent of the 609 units of opportunity that was available in Bondesen's APR in 1997. The same calculation, using Dr. Schink's highest estimate of 3,085 units nationwide, results in Heard capturing only 66 percent of the opportunity that was available in 1997 in Bondesen's APR. From 1995 to 1997, the minimum level of opportunity available to Bondesen in his own APR far exceeded his actual sales nationwide. Bondesen's APR was only 89.4 percent registration effective in 1997. Of the Chevrolets registered in the Deland APR, only 39 percent are attributable to Bondesen's sales. Bondesen admits that his APR is performing below its potential and that he should be capturing more sales. He testified that all of Volusia County is a growth area and he acknowledged that this growth represents opportunity for him to make more sales. Dr. Schink concedes that household growth is one of the key factors driving motor vehicles sales, and that household growth in Bondesen's APR is expected to increase at a rate of 1.1 percent per annum from 1997 to 2001. Product allocation cannot explain Bondesen's poor sales performance relative to expected, since all Chevrolet dealers nationwide operate under the same "turn and earn" allocation system. Bondesen's gross profit per new vehicle, which he controls, exceeded the Tampa Zone average in 1997 on every model that Chevrolet makes except Corvette. Bondesen's high profit margin in the presence of high lost opportunity and low market share reflects that Bondesen could be more price competitive, that Bondesen faces inadequate intra-brand competition, and that consumers are paying uncompetitive prices for new Chevrolets at Bondesen's store. Dr. Schink's financial impact model assumes that Bondesen is either a stand-alone Chevrolet store or a Chevrolet/Oldsmobile/Cadillac store without his satellite used car operation. Contrary to this assumption, however, Bondesen Chevrolet, Oldsmobile, Cadillac, Inc. is a fully integrated operation. It is a single corporate entity. It prepares a single set of financial reports for combined dealership operation, including the satellite used car operation, because doing so saves accounting costs. It has a substantial number of company-wide expenses, such as a single overall sales manager, a single clerical staff, and one group of office personnel, all of which are utilized in and supported by the combined dealership operations. Bondesen has no plans to dispose of his Oldsmobile, Cadillac, or satellite used-car operations. Trade-ins on his new-car sales feed Bondesen's satellite "buy-here/pay-here" lot, where he is able to profitably retail the less desirable trade-ins that other dealers typically dispose of wholesale. In fact, Bondesen's operation is substantially geared toward its used-car operation and, from 1993 to 1997, derived most of its profit from used-car sales. Because of this heavy emphasis on used cars, the loss of some new Chevrolet sales as a result of the proposed Heard relocation will not cause substantial financial hardship to the Bondesen operation. Bondesen is a well-capitalized, well-managed, highly profitable integrated dealership that is fully capable of responding to competitive forces in the marketplace. In 1998 Bondesen had to face the opening of Classic Chevrolet, which was projected to sell some 1,500 to 1,800 new units, the increase in Heard's sales to twice the level Rummel and Heard sold in 1997, and Auto Nation going into business and competing for used-car customers; yet despite all of this new competition Bondesen increased his sales of new Chevrolet cars and trucks slightly over the prior year, and he was projected to be more profitable in 1998 than he was the prior year. Overall Benefit of the Proposed Relocation The proposed relocation would benefit consumers in the Orlando comm/terr by providing more convenient access to Heard, a more competitive environment leading to lower prices, a better inventory, and a state-of-the-art showroom in which to shop. Heard's Customer Service Index (CSI) is poor but improving at his current facility. It takes time to build CSI after purchasing an existing dealership. Heard has a CSI specialist on staff at every one of his stores, and has improved CSI performance at other dealerships he has purchased. There is no evidence to suggest that the level of customer service Heard can offer consumers would decline as a result of his relocation. CSI alone does not govern a dealer's market share. Customers often trade off one dimension of the buying experience against another, so a dealer can make up for a negative in one area, such as CSI, by offering a positive in other areas, such as selection or price. Bondesen also has low CSI scores, having failed to meet his contractual obligations regarding CSI from 1992 to February 1998. The public will benefit from the relocation through employment that the new facility construction will generate, and through increased tax revenues from the new dealership. The licensee, Chevrolet, will benefit from the relocation by improving its chances of achieving the minimum level of expected market share in the Orlando comm/terr and AGSSA 4 through enhanced sales from the relocated store. Through the process known as stimulated competitive response, existing Chevrolet dealers, including Bondesen, will benefit from the relocation if they respond positively to the competition by increasing their sales due to the increased advertising, brand awareness, competition, and customer traffic that the relocated Heard dealership will generate.
Recommendation Based on the foregoing, it is hereby, RECOMMENDED: that the Department of Highway Safety and Motor Vehicles issue its final order approving the Petitioners' application to relocate Heard's Chevrolet dealership. DONE AND ENTERED this 1st day of February, 1999, in Tallahassee, Leon County, Florida. MARY CLARK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 1st day of February, 1999. COPIES FURNISHED: Daniel E. Myers, Esquire John W. Forehand, Esquire Myers, Forehand & Fuller 402 Office Plaza Drive Tallahassee, Florida 32301 Counsel for Fred Bondesen Chevrolet Oldsmobile, Cadillac, Inc. Fred Lotterhos, III, Esquire Holland & Knight, LLP 50 North Laura Street, Suite 3900 Jacksonville, Florida 32202 Counsel for Chevrolet Motor Division, General Motors Corporation Louis Anders, Esquire Joseph Letzer, Esquire Burr and Forman 3100 Southtrust Tower Birmingham, Alabama 35203 Co-Counsel for Bill Heard Chevrolet Corporation-Orlando d/b/a Bill Heard Chevrolet Dean Bunch, Esquire Sutherland, Asbill & Brennan, LLP 2282 Killearn Center Boulevard Tallahassee, Florida 32308 Co-Counsel for Bill Heard Chevrolet Corporation-Orlando d/b/a Bill Heard Chevrolet Michael Alderman, Esquire Office of the General Counsel Department of Highway Safety and Motor Vehicles A432 Neil Kirkman Building 2900 Apalachee Parkway Tallahassee, Florida 32399-0500 Charles J. Brantley, Director Division of Motor Vehicles Department of Highway Safety and Motor Vehicles Room B439, Neil Kirkman Building Tallahassee, Florida 32399-0500 Enoch Jon Whitney, General Counsel Department of Highway Safety and Motor Vehicles Neil Kirkman Building Tallahassee, Florida 32399-0500
The Issue The issue is whether the Dealer Sales and Service Agreement which Gus Machado Buick-GMC, Inc., has with Buick and GMC Truck Divisions of General Motors Corporation may be terminated by General Motors for abandonment under Section 320.641, Florida Statutes (1989), because Machado Buick failed to engage in business for more than ten consecutive business days.
Findings Of Fact Gus Machado is a Cuban-American. He purchased a Buick-GMC Truck dealership formerly known as Seipp Buick in Hialeah on March 3, 1982, after Mr. Machado had been in the automobile business for more than 30 years. The purchase price for the dealership, including the 6.25 acres of real estate on which the dealership was located, was about $4.5 million, $3 million of which was financed. The loan was secured by a mortgage on the dealership's real estate. Shortly after Mr. Machado purchased the dealership, he transferred the ownership of the real estate to himself, and leased it back to the dealership entity known as Gus Machado Buick-GMC, Inc., of which Mr. Machado is the sole shareholder. When he did this, General Motors told Mr. Machado that it regarded the rent to be charged to the dealership as excessive, but Mr. Machado believed that the rental payments were set in the amount which the dealership could pay given his projected sales volume. Mr. Machado was the only Hispanic dealer for the Buick Division in Dade County, Florida. The City of Hialeah is overwhelmingly Hispanic. The staff of the dealership was about 80 percent Hispanic. Mr. Machado focused his marketing efforts on Hispanic customers. The dealership's sales volume increased from about $19 million fiscal in year 1982, to $26 million in fiscal year 1983, the first full year Mr. Machado owed the dealership, to as much as $36 million dollars in later years. Buick recognized Mr. Machado's achievements in the sale of Buick motor cars by designating him the No. 1 Hispanic dealer in the country for a number of years. From 1983 to 1985, the dealership was profitable, and that profit enabled Mr. Machado to purchase a $2 million home in 1985 in an exclusive area. He renovated it from 1985 to 1990 at a substantial cost (about $7 million dollars) which Mr. Machado paid for with cash from his personal funds. 1/ Profitable times continued through the 1987-1988 models years. In 1987 Mr. Machado refinanced the dealership real estate for $4 million, which increased the amount of the mortgage on the property by $1 million. He then distributed that cash to his various companies, which included 1) a separate Ford dealership also located in Hialeah, Florida, 2) a Budget Rental Car day rental business in Puerto Rico, and 3) a long-term automobile leasing business in Puerto Rico. In 1987, Mr. Machado received a $1,306,000.00 dividend distribution from Gus Machado Buick-GMC. Mr. Machado received no salary from Gus Machado Buick-GMC in 1987, but he did receive the annual rental payments from the dealership over and above the dividend distribution and the $1 million obtained from refinancing the real property on which the Buick-GMC Truck dealership was located. After the increase in the mortgage obligation, Gus Machado Buick-GMC Truck paid $107,100.00 in rent to Mr. Machado, in addition to repayment of the mortgage, taxes, insurance, and repairs on the property. The automobile business is inherently cyclical, and sales of cars from the Buick-GMC Truck franchise began to fall off in the 1988 model year and matters became worse in 1989. At the same time, Buick generally lost market share in 1989 and 1990. This difficult period coincided with the closure of several General Motors dealerships in Dade County. The evidence is insufficient to demonstrate exactly why any one of those dealerships failed. The relative increase in popularity of foreign, especially Japanese, automobiles may have played some part in their financial difficulties. Too little is known of their management to make any finding about whether those failures resulted from poor management, poor times for the automobile industry as a whole, problems with the design, engineering, sales or service of General Motors automobiles, or some combination of all of these factors. Mr. Machado also had an unusual problem because of his Hispanic market. The fall of communist regimes in Europe led many Hispanics to believe the downfall of Castro was imminent. They became inclined to save money to invest in a new free market in Cuba. This also depressed sales of new cars and trucks to some degree. The extent of lost sales due to these beliefs was not, and probably could not be quantified. During this period of decline, Mr. Machado came to believe that it would be an advantage to add another line of automobiles to his dealership. Multiple point dealerships were becoming more common, and his dealership was large (6.25 acres) and could handle another line. He sought the assistance of the Buick Division in adding another franchise to his dealership. Mr. Machado also attempted to reduce his inventory, labor and advertising expenses in an effort to control costs. Mr. Machado's problems were greatly compounded when he discovered, in 1989, that his two Puerto Rican companies were in serious financial difficulty as the result of mismanagement. Mr. Machado had not been deeply involved in their day-to-day management. One of the problems in Puerto Rico was that vehicles in the lease fleets were being disposed of "out-of-trust," which meant that automobiles for which Mr. Machado had received financing through General Motors Acceptance Corporation were being disposed of at retail without repayment of their financed purchase price. In the automobile industry, this is regarded as a serious breach on the part of the borrower in his dealings with his financing source. The total outstanding obligations for the two Puerto Rican businesses exceeded $12 million. The magnitude of the Puerto Rican losses required that these businesses become the focus of attention by Mr. Machado. From July 1989 to November of 1990, he began to devote the greatest portion of his time to management of those distressed companies by spending four days of each week in Puerto Rico. Mr. Machado's management efforts were rather successful. Ultimately, the two Puerto Rican companies were sold or liquidated, and at that time the debt owed to GMAC for the Puerto Rican operations had been reduced from $12 million to $2 million. While Mr. Machado devoted most of his attention to his Puerto Rican businesses, the responsibility for the day-to-day operation of the Buick-GMC dealership in Hialeah was left to Mr. Machado's wife, who had worked in real estate, but never in the automobile business, and the senior employees at the Buick-GMC Truck dealership. The operation of a new car dealership is quite complex. A dealership contains five distinct profit centers, new vehicle sales, used vehicle sales, parts sales, vehicle service, and finance and insurance. One of the most difficult aspects of the management of a new car dealership is maintaining adequate cash flow. For example, a dealership does not realize its profit immediately after performing warranty work on a vehicle or upon the sale of a car. Through billing cycles the profit may not show up on the books for some time. Having adequate working capital is necessary so that the dealership is able to pay its obligations as they mature, even though when comparing total assets to total liabilities, the dealership may be solvent. Mrs. Machado did attend a 30 day dealership management course, but that course is not one designed to qualify a person to manage a dealership, rather it is designed by General Motors to provide family members of a dealer with an introduction to dealership management. That training, plus active participation in dealership management, may ultimately qualify that family member, such as a daughter or son, to take over a dealership. It was too limited to give Mrs. Machado the training, or especially the experience, to lead the dealership through a trough in the automobile sale cycle. Mrs. Machado did have the assistance of the dealership's general manager, comptroller, and the managers of the various departments. This is not a substitute for the experienced oversight of the dealership owner, however. Misplaced reliance on on-site managers for Mr. Machado's Puerto Rican operations had lead to the very serious financial problems of those businesses. Gus Machado Buick-GMC Truck sold a larger number of Buick automobiles and GMC trucks in 1989 than the dealership had sold in 1987. Ironically, 1987 was a profitable year, but 1989 was not, even though the gross profit per unit sold in 1989 ($1,171 for cars and $1,210 in trucks) was slightly higher than the gross profit per unit sold in 1987 ($1,166 for cars and $1,019 for trucks). Mr. Machado ultimately requested assistance from Buick in attempting to identify a potential purchaser for his Buick-GMC Truck dealership. General Motors commonly receives these sort of requests from its dealers. A manager for Buick did locate one prospective buyer and Mr. Machado had some contact with him, but nothing came of it. The most serious problem which Gus Machado Buick-GMC Truck ultimately encountered, and which forced its closure in February 1991, was the loss of its floor plan financing through General Motors Acceptance Corporation (GMAC) in late May or early June of 1990. Although credit difficulties began earlier, they came to the fore in mid to late December 1989 after Mr. James R. Hardesty became the branch manager for the GMAC office which handled dealerships in Miami. Mr. Machado met with Mr. Hardesty in January of 1990 because Mr. Hardesty was concerned about Gus Machado Buick-GMC Truck's credit worthiness. A check written to GMAC by the dealership to pay off a vehicle sold at retail had been dishonored by the dealership's bank, Consolidated Bank. This was not a good footing on which to begin Mr. Machado's relationship with Mr. Hardesty. GMAC had extended floor plan financing for new and used vehicles at the Buick dealership, and also had made a $600,000 loan to the dealership, but Mr. Hardesty believed that the books of the Buick dealership showed insufficient working capital available for the day-to-day operation of the business. Under the separate Dealer Sales and Service Agreement which Mr. Machado had with General Motors, the dealership was required to maintain a minimum net working capital of $2 million. Mr. Machado agreed to infuse additional working capital into the business, although Mr. Hardesty did not require that Mr. Machado obtain a specific amount of additional capital. Mr. Machado acknowledged at hearing that he knew the business needed $600,000 to $700,000 in working capital. Mr. Hardesty knew that the dealership was losing money and was being run on a day-to-day basis by Mrs. Machado, not Mr. Machado. This did not give him a great deal of confidence in the dealership's management team. GMAC had other problems in its relationship with the Machado dealership. Even before Mr. Hardesty came to Miami, GMAC was not receiving timely interest payments on the Machado Buick inventory it had financed, on the $600,000 loan GMAC had made to the dealership, or timely payment on dealer reserve chargebacks. Audits of the dealership inventory revealed GMAC was not being paid in a timely manner when cars were sold at retail, which required GMAC to conduct audits of the cars on the Machado lot more frequently than had been customary. One of the things Mr. Hardesty did was to require that for any unit which Gus Machado Buick-GMC Trucks sold, the floor plan financing for that car would have to be paid off within 24 hours of sale. This requirement was consistent with the written agreements which Mr. Machado had with GMAC. It was the practice in the industry, however, for GMAC to permit dealers in good financial condition more time to pay off cars, perhaps as much as three to four days. By insisting on the 24-hour pay-off, Gus Machado Buick-GMC Truck had less float, and consequently needed more working capital. The 24-hour pay-off requirement had the effect of requiring Mr. Machado to infuse the equivalent of about $120,000 working capital into his business in order to keep current on the dealership's bills. Mr. Machado understood Mr. Hardesty's position. When Mr. Hardesty also attempted to obtain additional security through a mortgage on the dealership property, however, Mr. Machado declined. After the initial meeting, the relationship between GMAC and Gus Machado Buick-GMC which began on a difficult footing because of the returned check became more rocky. Mr. Hardesty discovered that checks written to GMAC were being paid only because the bank used by Gus Machado Buick-GMC Truck, Consolidated Bank, provided the dealership with overdraft protection. In effect, the Machado dealership did not have sufficient working capital to pay off the wholesale financing on cars it was selling and was relying on ad hoc extensions of credit by its bank in order to pay off the GMAC liens on those cars. This was an indication of severe lack of working capital in the dealership. Overdraft protection gives the bank the option to hold a check for up to three days before deciding whether to pay it. This put the floor plan financing entity at considerable risk because cars sold by Gus Machado Buick-GMC Truck had an average pay-off due to GMAC of $15,000 per unit. Over three days Consolidated Bank could accumulate substantial dollar volume in checks presented by GMAC for payment. GMAC would not know for three days whether checks it received from Gus Machado Buick-GMC Truck to pay off the financing on those units which had been sold to third parties would be honored. Moreover, the dealership had significant loans from Consolidated Bank, which could exercise a set-off right against the funds in the Machado account to be used to pay off the GMAC liens. For these reasons Mr. Hardesty insisted that Mr. Machado move his dealership account to a bank which did not provide overdraft protection and did not have other loans to the dealership. The checking account was moved to Southeast Bank. The Machado dealership still did not make timely payments on its wholesale interest obligations and on the $600,000 capital loan which GMAC had made to the dealership. Audits conducted by GMAC of the cars on hand at the dealership revealed that vehicles were being delivered to retail customers without payment being made to GMAC within the time period allowed. Perhaps worst of all, GMAC found that the debt which it had loaned Gus Machado Buick-GMC Truck $600,000 to pay off (see Finding 17) had not been paid, and no satisfactory explanation could be made about what had happened to that money. Over several meetings, Mr. Hardesty stressed to Mr. Machado that it was imperative that additional working capital be provided to the dealership in order for GMAC to continue its relationship as the floor plan financing entity for Gus Machado Buick-GMC. Mr. Machado had difficultly in obtaining additional capital because he had chosen to make substantial investments in real estate, including the purchase and renovation of his home. Mr. Machado repeatedly gave assurances to Mr. Hardesty that he would infuse additional capital into the dealership, but did not do so. After the dealership account had been moved to Southeast Bank, in May of 1990, GMAC received checks for seven or eight cars which had been delivered to retail customers which were dishonored by Southeast Bank. Had the Machado account remained at Consolidated Bank, those checks might have been paid by Consolidated Bank using overdraft protection. The significant point, however, is not only that the checks were returned, but that the returns demonstrated that the Machado dealership continued to have inadequate working capital to pay the business' debts as they matured. This lead Hardesty to put Mr. Machado's credit line on hold, which meant that GMAC would not automatically finance new cars for the dealership. Mr. Machado would have to discuss any new purchases with Mr. Hardesty, who would make a decision of whether or not to finance them. Thereafter, Mr. Machado presented to Mr. Hardesty a deposit slip showing that $300,000 had been deposited in the Gus Machado Buick-GMC Truck dealership's working account as additional working capital. Mr. Machado asked that the normal credit relationship be reestablished. Mr. Hardesty discovery shortly thereafter that two days after that deposit was made, $200,000 had been withdrawn and applied elsewhere, and the remaining $100,000 had been used to cover a bank overdraft. The dealership's recent history of problems, including 1) the manipulation of the $600,000 GMAC loan which had been extended to extinguish a dealership debt, 2) the failure to make timely payments to GMAC on that loan and on interest due on floor plan financing, 3) the dealership's repeated overdrafts, 4) the several returned checks, 5) the lack of candor of Mr. Machado in attempting to mislead Mr. Hardesty into believing that $300,000 had been deposited into the business as additional working capital, 6) the dealership's monthly operating losses, and 7) the operation of the dealership by Mrs. Machado, who was not an experienced dealer, led Mr. Hardesty to believe that Gus Machado Buick-GMC was not credit worthy. He suspended the dealership's floor plan financing. The effect of that suspension was dramatic. General Motors will not build cars for a dealer unless the dealer posts a large cash deposit or had an arrangement with a financial institution to pay General Motors for the cars to be built. Mr. Machado was unable to purchase any new automobiles and had to operate only with its remaining inventory. GMAC did not, as it might have, repossess the existing inventory. Without floor plan financing, however, the only way for Gus Machado Buick-GMC Truck to acquire new vehicle inventory was to pay for it with cash, which Mr. Machado could not do. Mr. Machado did attempt to obtain alternate financing. Due to the difficult conditions in the banking industry, Mr. Machado was not able to find a bank willing to take on floor plan financing for his dealership, and although he approached Ford Motor Credit to provide floor plan financing for the automobiles at his Buick dealership, it was unwilling to do so. The suspension of the line of credit by GMAC, as a practical matter, scared off other lenders. The reasons GMAC had for suspending the line of credit should independently have lead any prudent lender in possession of all the facts to a similar conclusion. Lending money to Gus Machado Buick-GMC Truck at that time was risky business. As the inventory of new cars dwindled, so did sales. Many dealership employees were let go. By early November of 1990, Buick Motor Car Division learned that Mr. Machado was considering converting his dealership property into a shopping center. A Buick employee spoke to Mr. Machado and expressed concern about the use of the dealership property in a manner contrary to the terms of the Dealer Sales and Service Agreement. Mr. Machado stated that if the plan to change the use of the dealership property came to fruition, he would like to discuss relocation alternatives with Buick at that time, but it was too premature to consider a relocation of the dealership yet. Mr. Machado acknowledged that any request for relocation would have to be made in writing. In the fall of 1990 Mr. Machado was sued for $7 million by AmeriFirst for a default with respect to the $4 million loan on the dealership property and a separate mortgage on Mr. Machado's Ford dealership for $3 million. Suits were also filed against him by Universal Bank for $210,000, the Bank of Boston for $300,000 for loan defaults, and another suit was filed by a former employee for $21,000. As late as November of 1990, Mr. Machado believed that the Buick dealership could become profitable if it had the necessary inventory of new vehicles and he was able to devote all of his time to management of the dealership. By February 1, 1991, the Machado Buick-GMC Truck dealership ceased operation. It did not have a sales and service facility open and available for work eight hours a day, five days a week, excluding holidays. General Motors advised Mr. Machado on March 5, 1991, that 15 days from the date of that notice the Dealer Sales and Service Agreements Mr. Machado had would be cancelled because the dealership had been closed for more than ten business days, in violation of the agreement. By letter of March 11, 1991, Mr. Machado asked to relocate his dealership to a facility which was then a Mohawk Tire store. That facility did not meet the requirements for dealer operations, and would require extensive modification and enlargement. In addition, Mr. Machado did not have any assurance that if he could arrange to remodel that location he could also obtain the necessary floor plan financing to operate the Buick-GMC dealership. Later, on July 25, 1991, Mr. Machado entered into a Sales Agreement for the Buick-GMC Truck franchise with Alan Potamkin, who either owns or is involved in the ownership of more than 55 automobile dealerships around the country, including General Motors dealerships. Mr. Potamkin has proposed to move the Buick-GMC Truck dealership to other locations in Hialeah or in Dade County. Mr. Potamkin submitted the necessary paperwork for review of a possible transfer of the Buick-GMC Truck dealership from Mr. Machado to Potamkin, but the acquisition agreement which was presented in evidence specifically shows that Mr. Machado is not selling the existing dealership's land or facilities to Mr. Potamkin. Consequently, he would have to find some other location for the Machado dealership. He could not merely take over the dealerships on the same terms and conditions which Mr. Machado had. The location and facilities necessarily would be different. Mr. Machado would be free to use the 6.25 acres on which the dealership was located for some different endeavor.
Recommendation It is RECOMMENDED that a final order be entered by the Department of Highway Safety and Motor Vehicles finding that Gus Machado Buick-GMC Truck, Inc., abandoned its Dealer Sales and Service Agreement with Buick and GMC Truck by failure to engage in business with the public since February 1, 1990, and that Mr. Machado has failed to prove that the closure of the dealership was due to any reason which would excuse its failure to conduct business under Section 320.641(4), Florida Statutes (1989). DONE AND ENTERED in Tallahassee, Leon County, Florida, this 9th day of April 1992. WILLIAM R. DORSEY, JR. Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9th day of April 1992.
Findings Of Fact Burruss is a licensed and franchised American Motors dealer. Burruss has been the sole AMC dealer in the Tarpon-West Pasco County area since 1960. Burruss is in compliance with its franchise agreement with American Motors Sales Corporation. Both Burruss and New Port are located on U.S. Highway 19, a distance of six miles from each other. U.S. Highway 19 is the only major north-south thoroughfare in the Tarpon-West Pasco area. Portions of U.S. Highway 19 have been improved in the past years so that much of the highway is six-laned in the Tarpon-West Pasco area; the unimproved portions of the highway are four-laned. The recent improvements to U.S. Highway 19 in the Tarpon-West Pasco area have improved the traffic flow along U.S. Highway 19. (Findings 1 through 6 are contained in the Prehearing Stipulation.) Burruss is located in Tarpon Springs, which is in the northernmost part of Pinellas County. New Port is located in New Port Richey, which is in Pasco County. There is presently no AMC dealer in Pasco County. The closest AMC dealer to the north of Burruss his in Brooksville, some 35 miles to the north. The AMC dealers in the area are in Tampa, some 27 miles south of New Port Richey; in Clearwater, some 25 miles south of New Port Richey; and Burruss in Tarpon Springs, some six miles south of the proposed location. New Port has been a franchised Lincoln Mercury automobile dealer for three and a half years and is fully qualified to operate the proposed franchise. New Port has agreed to build a 1600 square foot showroom, to have mechanics factory-trained, and to spend in excess of $41,000 in advertising the AMC products during its first year of operation. It has also agreed to maintain a 60-day supply of automobiles in stock. Pasco County has been one of the fastest growing Florida counties in the past ten years, with most of this growth in the western part of the county near U.S. 19. In 1970 Pasco County had a population of 76,000, which increased to 193,643 in 1980 (Exhibit NP-1). In 1981 a study was conducted in the Pasco County area to determine if there was an open point in this area. A copy of this report was submitted as Exhibit NP-2. From this study AMC determined that the area previously serviced by Burruss should be divided into two areas with the southern area comprising the areas containing the zip codes of Tarpon Springs, Crystal Beach, Holiday, Ozone, and Palm Harbor. This is designated the new Tarpon Springs area. All of these communities are in Pinellas County except Holiday, which is in Pasco County. The northern area, which comprises west Pasco County and is the area in which it is contended that AMC is inadequately represented, includes the zip codes for New Port Richey, Aripeka, Elfers, Odessa, and Port Richey. After obtaining the results of this study, American Motors Sales Corporation solicited dealers in this area to apply for an AMC franchise. Burruss became an AMC dealer in 1960, a Jeep dealer in 1970, and a Renault dealer in 1979. Burruss also sells Datsun vehicles, the sale of which runs 25 to 30 percent, by number of units, above its sales of the AMC-Jeep- Renault line, despite the fact that a competing Datsun dealer is located in Pasco County approximately three miles north of Burruss on U.S. 19. During the past ten years ten major shopping malls or plazas have been built in the New Port Richey-West Pasco area, the number of banks or savings and loan institutions have grown from ten to more than 65, and six new car dealerships have been established, to bring the total to nine. Burruss' sales of AMC vehicles reached a peak of 200 per year in 1975 and have steadily declined since that time. Cross-sales figures show that from 45 percent to 75 percent of the AMC-Jeep-Renault vehicles sold in the New Port Richey area are sold by dealers other than Burruss. Of the three AMC dealers in Pinellas County, Burruss has consistently sold the fewest vehicles. Since the population has been greater in the service area of the other two AMC dealers in Pinellas County, this lower rate would be expected. However, Burruss sales have not kept pace with the population growth in the New Port Richey-West Pasco area. In 1977 AMC automobiles accounted for 1.8 percent of domestic new car sales in this Central Florida district, 2.6 percent of the sales in the Tarpon Springs area, and 1.7 percent of the sales in the New Port Richey area. In 1982 AMC automobiles accounted for 1.4 percent of the district sales, 1.0 percent of the Tarpon Springs area sales, and 0.9 percent of the New Port Richey area sales. In 1977 Jeep automobiles accounted for 14.1 percent of the four-wheel drive vehicle sales in the Central Florida district, 13.5 percent of the sales in the Tarpon Springs area, and 13.8 percent of the sales in the New Port Richey area. In 1982, Renault vehicles accounted for 1.4 percent of the district sales, 1.0 percent of the Tarpon Springs area sales, and 0.5 percent of the New Port Richey area sales. Thus, while AMC penetration in the Tarpon Springs area is comparable to district penetration (although Tarpon Springs penetration seems to be declining), the penetration in the New Port Richey area is well below the district average. Not only has Burruss spent less on advertising than other dealers, but also it has not maintained a 60-day supply of vehicles based on "planning potential." (A minimum estimated number of sales a dealer should make in a year.) Based on the planning potential for the combined Tarpon Springs and New Port Richey areas, Burruss should stock 14 AMC, 10 Jeep, and 36 Renault vehicles. As of January 31, 1982, Burruss had in stock 8 AMC, 3 Jeep and 17 Renault vehicles. AMC consistently allots Burruss more vehicles than it purchases. AMC has received more complaints directly from customers in the West Pasco service area about the products they purchased, but not necessarily from Burruss, than from other service areas in the same district. This is indicative that insufficient attention is paid to providing warranty services in the area by the franchised dealer. That a separate market area in Pasco County exists and has been recognized by several other automobile manufacturers was admitted by Herman Burruss, the principal stockholder of Burruss Motor Company, who was the chief operations officer for Burruss for some 45 years until approximately five years ago when he turned the job over to his son and retreated into semi retirement.
The Issue Whether there is probable cause for petitioner to bring an action against respondents, or any of them, for violation of the Florida Deceptive and Unfair Trade Practices Act?
Findings Of Fact Mark Sherwood Turner started working for Gulf Coast Motors in 1982. At the time, Charles E. Pace owned all of the inventory and other assets of the business, a used car lot at 301 Beverly Parkway in Pensacola, Florida. When Mark Turner's name was added to the fictitious name papers, it was not because he had acquired an ownership interest in the business; it was done in order to effectuate an agreement between him and Mr. Pace: They had agreed that Turner could use the lot to display his own cars and otherwise to operate his own, independent used car sales business, without incurring the expense of obtaining his own motor vehicle dealer's license. In exchange, Turner was to run Pace's business in Pace's absence. They kept separate books, and neither Turner had an ownership interest in the cars sold to Messrs. Hayes, Allen and Crutchfield, or Ms. Youmans. Later Pace sold one Richardson the accounts receivable generated by Gulf Coast Motors. Richardson subsequently assigned to Mark Turner everything he had acquired from Pace. On March 11, 1983, the corporate respondent was organized and Mark Turner acquired an interest in Gulf Coast Motors, Inc. Mark's brother David Jerry Turner began working at the used car lot a year or two before the final hearing. He came in three days a week, worked in the office and occasionally acted as a salesman. On June 25, 1984, he also acquired an interest in Gulf Coast Motors, Inc. Crutchfield On March 15, 1984, Joel Harold Crutchfield bought a Dodge Monaco for $1531 after Joe Smith told him it was in good mechanical condition. He signed a form contract that had "GULF COAST MOTORS" at the top with "Charlie Pace" and "Mark Turner," printed underneath. Respondent's Exhibit No. 1. Nobody else signed this undated form contract, which provided, among other things: Any payment late will include a late charge of $5.00 for every three days late . . . GULF COAST MOTORS has full rights to repossess any vehicle with a payment three days late. If any vehicle is repossessed the buyer has up to 10 days in which to pay the vehicle off in full and a $100.00 repossession charge to redeem the vehicle. Mr. Crutchfield also signed a form warranty disclaimer, stating "THIS USED MOTOR VEHICLE IS SOLD AS IS WITHOUT ANY WARRANTY . . .". Respondent's Exhibit No. 2. Mark Turner and Glen Padgett witnessed his signature on the warranty disclaimer. Mr. Crutchfield understood that he was buying the car "as is." Under the agreement, Mr. Crutchfield made a downpayment of $250 and undertook bi-weekly payments of $60 to retire a balance of $1281. Joe Smith signed an undated receipt for $250 on which "GULF COAST MOTORS" was stamped. David J. Turner signed a similarly stamped receipt for $60 on March 31, 1984. Mark Turner's and David Turner's names were on front of the office building at the car lot. The night following the purchase, Mr. Crutchfield had to buy a new starter for the car. When he drove the car home, he discovered that the brakes, the brake lights and the horn did not work. Only three lug nuts held each tire to its wheel. About a month after he had the car, the front end dropped and the car was "so low it looked like it would hit the road"; the frame was broken. Eventually Mr. and Mrs. Crutchfield decided to give the car back because Joe Smith and Charlie Pace refused to fix the frame. They made their last payment on or about September 17, 1984. Mrs. Crutchfield left the car on the lot and walked off ignoring calls to come back. A couple of days later the car was gone. The Crutchfields never received any correspondence in connection with the car thereafter. Youmans Frances Gayle Youmans also purchased a car on March 15, 1984, and also made a down payment of $250.00. She also dealt with Joe Smith. For a sales price of $1495.00, which with the dealer handling charge of $25.00, tag and title transfer fees, came to $1636.00, Ms. Youmans acquired a 1974 Buick that had been driven 78,482 miles. She agreed to pay the balance of $1380.00 in $25.00 weekly installments. On the vehicle registration certificate "GULF OOAST MOTORS" is shown as the "SELLER, FLORIDA DEALER, OR OTHER PREVIOUS OWNER," and as the first lienholder. Joe Smith, C. E. Pace, David J. Turner, Mark Turner and Lisa Russo signed receipts for various weekly payments she made. The day she bought the car it backfired on a test drive. Mr. Smith told her that it was the carburetor and that he would get a mechanic to fix it. Ms. Youmans is not an automobile mechanic; she works as a maid. She signed an "as is" disclaimer, which she did not understand. On March 16, 1984, she spoke to Joe Smith about fixing the car. He promised her repeatedly that he would arrange for a mechanic to fix it and told her not to take it to anybody else. She left the car parked at her home for more than two months, making weekly payments the while, on the strength of these assurances. On March 16, 1984 Ms. Youmans made application for a temporary license tag. A form application for vehicle registration was partially completed on April 19, 1984. Petitioner's Exhibit No. 4. Ms. Youmans asked Joe Smith to arrange for the car to be picked up and taken to the car lot, because she was afraid to drive it. After she had made the last in an unbroken series of weekly payments, on June 15, 1984, the car was towed. The next day Joe Smith told her to continue the weekly payments so that she could have the car back when she paid the mechanic's bill. About a week later the car "ran," and about a week after that she appeared with $155.00, enough to pay for the mechanic, for towing ($50.00) and to bring payments (with late charges) current. Mark Turner refused the money, pounded his fist on a table, and told her to leave. Still later she noticed that the car was no longer on the lot. Allen On March 24, 1984, Donald Gene Allen purchased a 1973 Volkswagen from a salesman named Smith, making a down payment of $300.00 and agreeing to weekly payments of $35.00 to retire a balance of $2180.00. He signed a form contract that had "GULF COAST MOTORS" at the top with "Charlie Pace" and "Mark Turner" printed underneath. Respondent's Exhibit No. 4. Nobody else signed the form contract, which provided, among other things: Any payment late will include a late charge of $5.00 for every three days late . . . . GULF OOAST MOTORS has full rights to repossess any vehicle with a payment three days late. If any vehicle is repossessed the buyer has up to 10 days to pay the vehicle off in full and a $100.00 repossession charge to redeem the vehicle. Respondent's Exhibit No. 4. Mark Turner and C. E. Pace witnessed Mr. Allen's signature on a form warranty disclaimer, which stated, "THIS USED MOTOR VEHICLE IS SOLD AS IS WITHOUT ANY WARRANTY . . ." Respondent's Exhibit No. 3. A week and a half after he had acquired the Volkswagen, the transmission failed and Mr. Allen called for the car to be towed back to the used car lot. He asked that the car be repaired and the car was taken to a Volkswagen mechanic's shop. This shop refused to release the car to Mr. Allen without payment of the repair bill. He was refused, when he asked that his down payment be returned. Mr. Allen dealt only with Charlie Pace and Joe Smith and never spoke to the Turners. Hayes Willie Hayes, Jr. bought a car from Gulf Coast Motors in 1982 or 1983 for about $1200.00. He fell behind in his bi- weekly payments once in a while, but always let somebody know when he would be unable to make a payment. In May of 1984, when he was $60.00 or $70.00 behind, he told Mr. Pace that he would bring payments current in a week's time. He showed up at the used car lot with all but $20.00 of what he had intended to bring, but was told that he had to pay everything he still owed on the car, a balance of $420.00. Mark Turner asked him for the key to the car when it became clear that he could not pay. Mr. Hayes refused, got into his car and started to leave. Mark Turner got into another car and blocked his egress while another driver pulled another car in front of Mr. Hayes, penning his car. Eventually a Highway Patrolman arrived, wrote Mr. Hayes a ticket for having backed into the car Mr. Turner had placed in his way, determined that Mr. Turner had no judicial process authorizing repossession, and sent Mr. Hayes on his way. Motley Burtis O. Motley bought a 1980 Ford Granada from Gulf Coast Motors on October 11, 1984. He dealt with a Jerry Murph who signed an odometer mileage statement reciting that the odometer "now reads 131,527 miles . . . [and that] the odometer reading . . . reflects the actual mileage." Petitioner's Exhibit No. 6. In fact, however, the odometer read 131,528, understating the mileage by 99,999 miles, a point on which Mr. Motley, a retired carpenter, was confused. During negotiations he commented to the salesman, "I see the low mileage." Cataracts impair Mr. Motley's vision. He did not read the odometer mileage statement or the other documents he signed when he paid $500.00 down, traded in his old car, and undertook to retire a balance of $3206.75 with monthly payments of $70.00. He realized he was buying the car "as is," however, and signed a disclaimer to that effect. Two or three days after the purchase, Mr. Motley began having repairs done, first on the brakes: the front brakes pulled to the left and the back brakes "went haywire." Grease seals were replaced at K-Mart. New shock absorbers were needed. Mr. Motley decided that he had had enough. On the telephone he told one of the Messrs. Turner that he was going to stop making payments and that he would "turn the car in." On November 24, 1984, somebody took the car. Mr. Motley later saw it on the Gulf Coast Motors lot, but there was never any communication as to its disposition after November 24, 1984. Pugh On July 7, 1984, a Saturday, Marshall Everett Pugh bought a 1972 Toyota from David Turner purporting to act as a salesman for Gulf Coast Motors. Most of the paperwork he signed in blank but he was aware of the import of the form warranty disclaimer he signed, and acknowledged at hearing that he purchased the car "as is," after David told him that the car "ran good." At the time of the purchase he was aware that the driver's door did not open and that the ignition key was prone to stick in a way that kept the starter operating even after the engine was running. On the 9th or 10th of July, after he had taken the car to mechanics to be looked at, Mr. Pugh learned that only one cylinder was functioning properly. On July 10, 1984, he took the car back to the used car lot and asked Mark Turner where David was. Mark pointed out that Pugh had bought the car "as is," ending his remarks on an obscene note that precipitated a tussle. The fight ended with David pulling Pugh off Mark by the hair. Pugh left without the car and never heard further from the Turners or Gulf Coast Motors about the car. He had given them an erroneous address at the time of purchase and left town shortly afterward. Castello Under her then (married) name of Graves, Cathy Sheree Castello bought a 1979 Cougar from a salesman named Bill on the Gulf Coast Motors lot. He told her it was a good car. She had effected a few repairs when, two weeks after the purchase, she was told that the car needed a new engine, because the one it had was "totally blown." The car would only go about 30 miles per hour. She, too, had signed an "as is" warranty disclaimer. Ms. Castello returned the car to the lot where it was offered for sale while she and the used car lot personnel tried to reach a settlement. Without notice to her, the car was sold and somebody forged her stepfather's signature in transferring title to the new buyer. Before the final hearing in this case, she had settled her claim against respondents amicably.
The Issue The matters presented here concern rules challenges against the Rule 15C- 1.08, Florida Administrative Code, and certain other policies of the Respondent which the Petitioner claims to be rules within the meaning of Subsection 120.52(14), Florida Statutes. The initial challenge in this Petition deals with the aforementioned Rule 15C-1.08, Florida Administrative Code, and the Petitioner, by this attack, argues that the rules provision in question is an invalid exercise of delegated legislative authority within the meaning of Section 120.56, Florida Statutes, due to an alleged impermissible expansion of the statutory scheme for the licensure of new motor vehicle dealers in the State of Florida as contemplated by Section 320.642, Florida Statutes. The Petitioner, by this action, also takes issue with the alleged policy of the Respondent dealing with the acceptance of protests from previously licensed motor vehicle dealers selling motor vehicles of the same manufacturer as the proposed licensee, filed in opposition to the grant of a license to the proposed licensee which protests are filed prior to the time of application on the part of the proposed dealer. The Petitioner, in addition, challenges the alleged policy of the Respondent which would cause the Respondent to accept protests by existing dealers directed against the licensure of a proposed dealer, without reference to whether the protestant is located in the same "community or territory," based upon the fact that the existing dealership is located in a county adjacent to the county of the proposed dealership. Both of the described policies, according to the Petitioner, are invalid for reason that they fail to meet the requirements for rule adoption as set forth in Section 120.54, Florida Statutes, and for reason that they are an invalid exercise of delegated legislative authority within the meaning of Section 120.56, Florida Statutes, in that the policies are contrary to the enabling legislation found in Section 320.642, Florida Statutes. FINDINGS OF FACT 1/ This cause comes on for consideration based upon the Petition for determination of the invalidity of rules filed on June 16, 1981, by Petitioners Yamaha Motor Corporation, U.S.A. (Yamaha) and Daniel P. Schmitt d/b/a Gulfview Yamaha (Gulfview), as received by the State of Florida, Division of Administrative Hearings. The jurisdictional theory for filing this case was that provision Section 120.56, Florida Statutes. Subsequent to the receipt of the Petition, the Director of the Division of Administrative Hearings reviewed the Petition, and following case assignment on June 25, 1981, the case was heard by the undersigned on July 15, 1981. The Petitioner, Daniel P. Schmitt d/b/a Gulfview Yamaha, dismissed his rules challenge on August 7, 1981. This Notice of Voluntary Dismissal was acknowledged by an order of the undersigned dated August 10, 1981. The Notice of Voluntary Dismissal and attending order followed the closure of the case of Yamaha Motor Corporation, U.S.A. and Daniel R. Schmitt d/b/a Gulfview Yamaha, Petitioners, vs. The State of Florida, Department of Highway Safety and Motor Vehicles, Division of Motor Vehicles and Mike Thweatt d/b/a Mike's Yamaha, et al., Respondents DOAH Case No. 81-1104. The dismissal and closure of that Division of Administrative Hearings' case pertained to protests before the Division of Motor Vehicles, filed by existing Yamaha motorcycle dealers and the efforts on the part of the Co-Petitioners in DOAH Case No. 81-1104, to gain a Florida motor vehicle dealer's license for Daniel R. Schmitt. The Schmitt dealership is to be located in Pasco County, Florida. The four (4) protesting dealers located in counties adjacent to Pasco County had filed advance protests to the grant of the new license to Daniel R. Schmitt and had done so three (3) weeks prior to Schmitt's filing for licensure. One of the parties to that action, namely Barney's Motorcycle Sales, Inc., withdrew its protest and the remaining private parties stipulated to a settlement. This now allows Daniel R. Schmitt to be licensed as a Florida motor vehicle dealer, that Petitioner having fulfilled other requirements for licensure. There remains for consideration the claim of Yamaha Motor Corporation, U.S.A., for determination of rules invalidity. Petitioner Yamaha is an importer and distributor of motorcycles manufactured in Japan and the Petitioner controls the marketing of that merchandise in the United States and the grant of franchise agreements to independent dealers in this country, to include those dealers who must be licensed by the Respondent in order to sell motorcycles in the State of Florida. The Respondent, State of Florida, Department of Highway Safety and Motor Vehicles, Division of Motor Vehicles, is the agency assigned the ask of licensing meter vehicle dealerships in the State of Florida, as required by the terms and conditions of Chapter 320, Florida Statutes. In particular, this determination must be made in keeping with Section 320.642, Florida Statutes. 2/ In carrying out its responsibilities under Chapter 320, Florida Statutes, the Respondent has promulgated Rule 15C-1.08, Florida Administrative Code, dealing with the filing of a license application by a new motor vehicle dealer and the protest rights of existing licensed motor vehicle dealers of the same make. Rule 15C-1.08 states: Preliminary filing of an application for a motor vehicle dealer's license; procedure. Any person who contemplates the establishment of a motor vehicle business for the purpose of selling new motor vehicles, for which a franchise from the manufacturer, distributor or importer thereof is required, shall, in advance of acquiring building and facilities necessary for such an establishment, notify the Director of the Division of Motor Vehicles of his intention to establish such motor vehicle business. Such notice shall be in the form of a preliminary filing of his application for license and shall be accompanied by a copy of any proposed franchise agreement with, or letter of intent to grant a franchise from, the manufacturer, distributor or importer, showing the make of vehicle or vehicles included in the franchise; location of the proposed business; the name or names of any other dealer or dealers in the surrounding trade areas, community or territory who are presently franchised to sell the same make or makes of motor vehicles. Upon receipt of such notice the Director shall be authorized to proceed with making the determination required by Section 320.642, Florida Statutes, and shall cause a notice to be sent to tone presently licensed franchised dealers for the same make or makes of vehicles in the territory or community in which the new dealership proposed to locate, advising such dealers of the provisions of Section 320.642, Florida Statutes, and giving them and all real parties in interest an opportunity to be heard on such matters specified in that Section. Such notice need not be given to any presently licensed franchised dealer who has stated in writing that he will not protest the establishment of a new dealership which will deal in the make or makes of vehicles to be included in the proposed franchise in the territory or community in which the new dealership proposes to locate. Any such statements or letters of no protest shall have been issued not more than three months before the date of filing of the preliminary application. The Director may make such further investigation and hold such hearing as he deems necessary to determine the question specified under Section 320.642. A determination so made by the Director shall be effective as to such license for a period of twelve (12) months from the date of the Director's Order, or date of final judicial determination in the event of an appeal, unless for good cause a different period is set by the Director in his order of determination. On the subject of protests by existing dealers, Paragraph 5.A. of the Petitioner's Exhibit No. 5, admitted into evidence, a policy memorandum by the Respondent, contains language which states: Definition for community or territory: All licensed dealers of like franchise in the county in which a new point is being considered. Any geographical distance where the new point would be in a joining county of the same marketing area as an area previously served. (Example - northern boundary of county A and southern boundary of county B.) Surrounding counties where a new point is being considered in a county having no licensed dealers of like franchise. Inspectors are NOT REQUIRED to secure letters of no-protest or protest and DO NOT indicate to the new applicant that a license will be issued at District office level. Dealers in adjoining counties to the county of the new dealer of similar make, where there is no existing dealer in the proposed dealer's county, may file protests in advance of the new dealer's application. The Respondent will not accept protests in advance from dealerships in other counties in this State which are not adjacent to the county of the proposed dealership. A protest in advance accepted by the Department may form the basis for a Section 120.57, Florida Statutes, hearing on the question of new dealer license. Letters of advance protest are valid for one or two months. Nonetheless, they remain in the permanent file of the Department and if an application is received more than one to two months after the advance protest, the protestant will be contacted to ask him to state whether he still would be in opposition to the grant of a new license. The existing dealer must respond within a time certain. The Department will accept license protests claims from any dealer in the same county as the proposed dealership on those occasions when an application for new dealership has been filed for location in a county where there is an existing dealer of the same manufacture. Under those facts, the Department will also accept protests from any dealer outside of the county where the proposed dealership is to be located, if the existing dealer of similar make has a "geographical conflict" with the applicant, meaning the protestant is just across the county line in the same "general marketing or trade area." The criteria for determining the "geographical conflict" between an existing and proposed dealership are premised upon an examination of map distances. Any protest filed by a similar make dealer in an adjacent county to the proposed dealer, where there is no dealership in the county in which the proposed dealership would be located, will always be accepted by the Respondent. In addition to the participatory rights of existing dealers previously discussed, when an application is received for a new dealer license, those existing dealers who sell the same make of motor vehicle, who are located in the county of the proposed new dealership are notified of their rights to protest the grant of the new dealer license pursuant to Section 320.642, Florida Statutes. If there are no dealers in the county where the proposed dealership would be located, then a determination is made by the Department on the question of whether there exists other dealerships in the same "trade or marketing area" or "territory or community" of the applicant and if such dealers exist who sell the same make of motor vehicle, they are notified of their right to protest under the above-referenced provision of law. Should the determination be made that there are no existing dealers in the same county, or "territory or community," as that of the proposed dealership, then no existing dealers of similar make of motor vehicle are notified of their right to protest the proposed dealership. In making determinations in the notification process, after receipt of the application of the proposed dealer, the Department uses the term "territory or community" and the term "surrounding trade area" interchangeably; however, at times, "surrounding trade area" is considered to be smaller than "territory or community" and at other times larger. The ultimate determination of the rights of protesting dealers to participate in the de novo hearing, held pursuant to Section 120.57, Florida Statutes, to consider the propriety of granting a new dealer license under the terms and conditions of Section 320.642, Florida Statutes, are determined through that hearing process; notwithstanding the fact that they have been allowed to file protests in advance of or subsequent to the filing of an application for a new license and have received further notification of the pendency of a request for a new dealer license by the methods as stated before. In considering those motor vehicle dealers who sell motorcycles, their greatest sales success occurs during a limited number of months within the year, and it is important that the motorcycle dealer be in business during that season.
Conclusions This matter came before the Department for entry of a Final Order upon submission of an Order Closing File and Relinquishing Jurisdiction by R. Bruce McKibben, Administrative Law Judge of the Division of Administrative Hearings, pursuant to Petitioners’ Notice of Dismissal, a copy of which is attached, and incorporated by reference, in this order. The Department hereby adopts the Order Closing File and Relinquishing Jurisdiction as its Final Order in this matter. Accordingly, it is hereby ORDERED and ADJUDGED that Respondent, North Tampa Chrysler Jeep Dodge, Inc., shall be granted a dealer license for the sales and service of Chrysler passenger cars and light trucks manufactured by Chrysler Group Carco, LLC (CHRY); for the sales and service of Dodge passenger cars and light trucks manufactured by Chrysler Group Carco, LLC (DODG), and for Filed July 23, 2012 9:06 AM Division of Administrative Hearings the sales and service of Jeep passenger cars and light trucks manufactured by Chrysler Group Carco, LLC (JEEP) at 10909 North Florida Avenue, Tampa (Hillsborough County), Florida 33612. Upon compliance with all applicable requirements of Section 320.27, Florida Statutes, and all applicable Department rules the Department is authorized to issue said dealer license. DONE AND ORDERED this {9 day of July, 2012, in Tallahassee, Leon County, Florida. uJie Baker, Chief ureau of Issuance Oversight Division of Motorist Services Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room A338 Tallahassee, Florida 32399 Filed with the Clerk of the Division of Motorist Services this } | day of July, 2012. ) ca _Vtnariok wees, Lrragek Administrator NOTICE OF APPEAL RIGHTS Judicial review of this order may be had pursuant to section 120.68, Florida Statutes, in the District Court of Appeal for the First District, State of Florida, or in any other district court of appeal of this state in an appellate district where a party resides. In order to initiate such review, one copy of the notice of appeal must be filed with the Department and the other copy of the notice of appeal, together with the filing fee, must be filed with the court within thirty days of the filing date of this order as set out above, pursuant to Rules of Appellate Procedure. JB/jde Copies furnished: John W. Forehand, Esquire Kurkin Forehand Brandes, LLP Suite 1B 800 North Calhoun Street Tallahassee, Florida 32303 James Browne North Tampa Chrysler Jeep Dodge, Inc. 10909 North Florida Avenue Tampa, Florida 33612 Phil R. Langley Chrysler Motors, LLC 10300 Boggy Creek Road Orlando, Florida 32824 J. Andrew Bertron, Esquire Nelson, Mullins, Riley and Scarborough, LLP 3600 Maclay Boulevard South, Suite 202 Tallahassee, Florida 32312 R. Bruce McKibben Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399 Nalini Vinayak Dealer License Administrator
The Issue Whether Ed Morse Chevrolet should be granted a license to establish a new Chevrolet dealership in Seminole, Florida. If existing Chevrolet dealers are not providing adequate representation in the relevant territory or community the application should be granted.
Findings Of Fact Morse's application seeks a motor vehicle license for a new Chevrolet dealership at 8350 Park Boulevard, Seminole, Pinellas County, Florida. Quinlan and Ross, each a licensed dealer at the time of the filing of the application, separately filed letters of protest to the application and the case was forwarded to the Division of Administrative Hearings for a formal hearing. When Ross was purchased by Mahan, that protest was dropped. The Tampa Bay area is a Multiple Dealer Area (MDA) with each of the existing eight Chevrolet dealers/franchises covering all of Pinellas County and large portions of Hillsborough and Pasco Counties. Four of these dealers, Quinlan, Ross (now Maher), Tarpon and Dimitt are located on U.S. 19 in Pinellas County. Tarpon is located at approximately 21.8 miles north, Dimitt is located approximately 12.4 miles north, Quinlan is located approximately 6.4 miles north, and Maher is located approximately 7 miles southeast, respectively, of the proposed Morse location. It is appropriate to consider the contractual area assigned to multiple dealers, the Tampa MDA, in determining which area they should attempt to service. Since no one from GM ever informed any representative of these dealerships that they would be judged by looking at an area smaller than the Tampa MDA, Respondent contends it would now be unfair to consider other than the entire area in which they contracted to serve to determine whether GM was being adequately represented. GM, on the other hand, points out that dealers surrounding the Tampa MDA are not included within any homogeneous, interconnected shopping area within the Chevrolet, Tampa MDA and are not part of the relevant community or territory. Further, in the Tampa MDA, a natural barrier, Tampa Bay, separates Hillsborough County from Pinellas County and there is little cross-shopping for automobiles between dealers in the areas on opposite sides of Tampa Bay. The Tampa MDA is broken down into Areas of Geographic Sales and Services Advantage, (AGSSA) each representing an area where a dealer enjoys a competitive advantage over other dealers of the same line-make due to geographic locations, viz. proximity to the dealer. AGSSA 1 is the northern part of Clearwater, plus eastern Pinellas and Hernando Counties, in the area of Dimitt Chevrolet. AGSSA 2 is the southern part of Clearwater in the area of Quinlan Chevrolet. AGSSA 3 is the Seminole area of Pinellas County in the area of the proposed Morse dealership. AGSSA 4 is the southern part of Pinellas County, including St. Petersburg, in the area of Maher Chevrolet. AGSSA's 5, 6, 7, and 10 are generally located in Hillsborough County. AGSSA 8 is northern Pinellas and southern Pasco County in the area of Tarpon Chevrolet. AGSSA 9 is northern Pasco County and includes Harbor Chevrolet in Hudson. AGSSA's 3 and 10 are currently open points. AGSSA's are comprised of census tracts or, where census tracts cannot be used, other geographic descriptions, such as zip codes, C-towns and NTC's. Based on customer buying patterns, there are three separate market areas within the Chevrolet Tampa MDA. AGSSA's 1, 2, 3, 4, and 8 (St. Petersburg, Clearwater, Tarpon Springs (on the west side of Tampa Bay) is one distinct market while AGSSA's 5, 6, 7 and 10 (Tampa and Brandon) constitute a separate area. AGSSA 9 (Hudson) constitute a separate but less distinct area than the other two larger areas. GM concedes that Quinlan Chevrolet and the other Chevrolet dealers in Pinellas County have complied with terms of their dealership agreement with GM; that these dealers' sales and service facilities comply with the minimum standards established by GM; and that each is adequately representing the AGSSA in which it is located. The three dealerships closest to the proposed site were each rated effective dealers by GM in 1987. Respondent contends that no "identified plot not yet cultivated" exists in AGSSA 3. To support this position is the fact that only one other AGSSA in the Tampa MDA (AGSSA 7) outperformed AGSSA 3 in 1987; Chevrolet registrations in AGSSA 3 (where no dealer is located) were better than in AGSSA 2 and 4 (where Quinlan and Maher are located); and were better than the Tampa MDA rate. Yet the buy-rate analysis, which refers to the number of households in an area divided by the number of registrations in that area, for AGSSA 3 shows that it takes 131 households before one Chevrolet retail registration occurs, while the buy-rate for the Tampa MDA is 113.89. This fact supports GM's position that the area (AGSSA 3) is underrepresented rather than the populace does not buy as many cars per household or that households in AGSSA 3 are adverse to buying Chevrolet automobiles. Of the five AGSSA'S in Pinellas community or territory, Chevrolet is represented by a dealer located in all but AGSSA 3. Vehicle registration data compiled by R.L. Polk was used by GM and Quinlan in their respective analyses and is accepted as an authoritative source of such data within the automobile industry. The evidence here submitted clearly proves the proposition that statisticians and economists can, by selecting from the same pool of data, arrive at diametrically opposed conclusions and opine that their determination is the only appropriate conclusion to reach. GM contends that the national average retail market penetration is the proper standard by which to compare the penetration in AGSSA 3, while Quinlan contends the Tampa MDA penetration rate is the proper standard. Without detailing the extensive testimony presented to support the opinion of the respective experts, it is sufficient to say the national penetration standard is accepted as the appropriate standard. Chevrolet market penetration for both cars and trucks, for the Pinellas community or territory and the Tampa MDA has been substantially lower than the national average since 1986. In comparison to all other Florida markets, both the Pinellas community or territory and the Tampa MDA are generally in the bottom third of all markets while over 40 markets for cars and over 35 for trucks in Florida equal or exceed the national average penetration for Chevrolet. As a general rule, penetration rates are higher in single dealer areas than in multiple dealer areas. Considerable evidence was submitted that Chevrolet sales, i.e. penetration, was higher in inland areas than in coastal areas where foreign imports have had the greatest impact on car sales. Since Tampa MDA is a coastal area, Quinlan contends that the penetration rate in the Tampa MDA and AGSSA 3 should be compared with other coastal areas. Quinlan selected 6 MDA's, of the 11 having the lowest penetration rates by Chevrolet in the entire United States, to prove that the penetration rate in the Tampa MDA and AGSSA 3 is well above the average of those 6 selected and, therefore, AGSSA 3 is not underrepresented. GM, on the other hand, offered the comparison of the Chevrolet penetration rate in Pensacola, which is well above the national average, to the Tampa MDA and AGSSA 3 penetration rates to show AGSSA 3 is underrepresented. Both of these examples represent extremes and confirm the validity of the national average penetration as the appropriate norm. Using this norm, Chevrolet is underrepresented in AGSSA 3. GM presented evidence showing product popularity, age and income statistics of the Pinellas community compared to the nation. By dividing automobiles into five groups comprising subcompact, compact, mid-size, regular and high group, GM presented statistical evidence showing that the differences between the sales of these classes of vehicles in the Pinellas community and nationwide was small during the years 1986, 1987 and the first six months of 1988. Similar evidence was presented regarding truck sales. Respondent points out that the disparity in price of vehicles within each class casts doubt upon the validity of these classifications. For example, expensive sports cars are frequently classed as compact or subcompact, whereas their retail price exceeds the price of many vehicles included in the high group. Statistical evidence was presented by GM comparing the age of residents of the Pinellas community and AGSSA 3 with the population age nationwide to determine if these differences could account for the low penetration of Chevrolet products in the area in question. Again, no statistical difference in resident's ages was found to account for the low penetration rate compared to the national average. Respondent contends these comparisons are invalid and irrelevant because nationwide Chevrolet sales are higher in the 16-24 and 25-34 age groups which age groups are vastly underrepresented in AGSSA 3. GM also presented statistical evidence comparing the income of the residents of the Pinellas community and AGSSA 3 with the national average income. These comparisons are sufficiently close that the low penetration rate in Pinellas County compared to national average cannot be explained by income characteristics. However, those with annual income below $15,000 were omitted in the comparison. Respondent points out that many elderly residents of Pinellas County with incomes less than $15,000 annually could well have substantial savings and be economically capable of purchasing a new automobile. Neither party presented hard evidence to support their opinions regarding the validity of not including those with annual incomes of less than $15,000. However, it is noted that elderly people with substantial assets have some, if not most, of those assets producing income which, when added to social security benefits, could easily exceed $15,000 annually. Between 1970 and 1988, the population of the Pinellas community comprising AGSSA's 1-4 and 8 has increased from 582,232 to 910,310. During the same period, households increased from 222,827 to 417,202. Since 1970, the number of Chevrolet dealers in this area has held steady at four. The growth of these five AGSSA's have leveled off during the past few years and the area is no longer a rapid population growth area. Respondent submitted evidence that AGSSA's 2 and 4, those closest to the proposed new dealer location, have reached a near saturation point in population. However, these were opinions of individuals residing in the area and were not supported by numbers of building permits issued, changes in telephone and cable TV subscribers, etc. Automobile buyers today shop competitively to obtain the best price for a specific car. A 1983 survey by J.D. Power nationwide shows some 58 percent of Chevrolet buyers visited at least one dealer of another brand before buying a Chevrolet. Existing dealers in the Tampa MDA who testified in these proceedings were unanimous that there is keen competition among dealers for the new car buyer and that most buyers visit several dealers looking for the best price for the car they ultimately buy. An additional dealer will, to some extent, increase this competition between dealers. However, this competition is not just between the same line-make dealers. It is between all dealers selling cars in the price range in which the buyer is looking. It is not inconceivable that GM is looking to recapture some of the market share it lost to foreign imports during the last twenty years. By consolidating some of their operations with Japanese car makers, purchasing Japanese developed engines for some GM cars, and manufacturing components overseas for GM cars assembled in this country, GM has positioned itself to compete more effectively against foreign imports. AGSSA 3 is one location that could contribute to this endeavor. Respondent contends the appropriate way to measure the Tampa MDA Chevrolet dealers' performance is to compare their performance, in terms of penetration rates, against other similar MDA's. This is done through regression analysis. The regression analysis performed by Respondent's expert used penetration rates in 158 MDA's nationwide. By selecting MDA's from this group and labeling them comparable to the Tampa MDA, a reasonable penetration rate for the Tampa MDA was found to be 8.51 percent in 1987 and 8.60 percent for the first six months in 1988. Selecting different "comparables" would have resulted in a different "reasonable" penetration rate. By carefully selecting the MDA's to be used as comparables almost any "reasonable" penetration rate can be found. Respondent also challenges GM's use of six months registration data through June of 1988 alleging that it is flawed because seasonal factors were not considered which might influence or alter the penetration rates actually obtained by GM for the entire 1988. While this is true, no evidence was submitted to establish a seasonal pattern of car registrations in the Tampa MDA which would indicate inaccuracy in the use of such six months data. Respondent contends GM should compare penetration rates in Tampa MDA with other coastal MDAs where Chevrolet penetration rates are below the national average and to correct for the penetration rates and markets where GM has manufacturing/assembly facilities for that line-make where the penetration rates are high. If this line of reasoning is followed, GM would never be able to demonstrate need for a new dealer. Respondent attributed road construction along U.S. 19 to loss of business for Quinlan for the past two years this widening of U.S. 19 has been ongoing. While this widening of U.S. 19 undoubtedly disrupted customers coming to Quinlan's showrooms, the construction also affected the other dealers along U.S. 19. No evidence was presented to show the dollar value lost to Quinlan, or the sales drop for new Chevrolets during this construction work. The fact that this road construction slowed and inconvenienced vehicular traffic on U.S. 19 in Pinellas County is not disputed.
Recommendation It is Recommended that the application of Morse Chevrolet, Inc., to establish a Chevrolet dealership at 8350 Park Boulevard, Seminole, Pinellas County, Florida, be GRANTED. DONE AND ENTERED this 19th day of July, 1989, in Tallahassee, Leon County, Florida. K. N. AYERS Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of July, 1989. APPENDIX Treatment accorded Petitioner's proposed findings. 1-2. Included H.O.#s 1, 2. 3. Included in Preliminary Statement. 4-6. Included in H.O.#4. 7-8. Included in H.O.# 5. Included in H.O.# 6. Included in H.O.# 7. 11-12. Included in H.O.#8. Included in H.O.#9. Accepted. Included in H.O.#12. Included in H.O.#13. 17-18. Included in H.O.#16. Accepted. Included in H.O.#16. 21-22. Included in H.O.#20. 24. Accepted insofar as included in H.O.#20. 25-26. See H.O.# 14 otherwise included in H.O.# 21. Included in H.O.# 22. Included in H.O.#15. Accepted. Included in H.O.# 16. Included in H.O.# 16. Included in H.O.# 16. Included in H.O.# 15. Accepted that one track in AGSSA 3 exceeding national average is near Quinlan location. Accepted. Accepted. 37. See H.O.# 14. Included in H.O.# 19. Accepted. 40-42. Included in H.O.# 23. 43. Accepted. 44. See H.O.# 14. Included in H.O.# 25. Accepted. Included in H.O.# 23. 48-49. Included in H.O.# 24A. 50. See H.O.# 26. 51-52. See H.O.# 14. 53. See H.O.# 14. 54. See H.O.#s 25-26. 55.-57. Accepted. Included in H.O.# 15. Rejected as mere testimony of witness. Included in H.O.# 5. Included in H.O.# 16. Included in H.O.# 5. Included in H.O.# 18. 64-65. Included in H.O.# 28. 66. Included in H.O.# 29. 67. See H.O.# 14. 68. See H.O.# 14. Included in H.O.# 28. Included in H.O.# 28. Included in H.O.# 21. Rejected as recitation of witness testimony. Included in H.O.# 22. Rejected as recitation of witness testimony. 75-76. Rejected as irrelevant. Treatment Accorded Respondent's Proposed Findings Included in H.O.# 4. Included in H.O.# 3. Accepted as grammatically correct. Rejected as opinion. Accepted. Rejected. 9-10. Rejected. Rejected. See H.O.# 11. Included in H.O.# 11. Included except for last sentence which is rejected. Rejected. Included in H.O.# 11. Rejected. 17-18. Accepted insofar as included in H.O.# 24. Rejected as irrelevant. Rejected. Rejected. Accepted as testimony of witness. 23-24. Included in H.O.# 25. Accepted. Accepted. Accepted insofar as included in H.O.# 26. Rejected as immaterial. Included in H.O.# 10. Irrelevant. Included in H.O.# 4. 32-33. Irrelevant. Included in H.O.# 10. Accepted. Accepted. See H.O.#10. Rejected. 38-47. Accepted insofar as included in H.O.# 20, 21 and 22. Rejected. Rejected insofar as inconsistent with H.O.#s 20, 21 and 22. Accepted insofar as included in H.O.# 21, otherwise rejected. Rejected. 52-53. Rejected. Rejected insofar as inconsistent with H.O.# 22. Rejected. See H.O.# 14. Rejected. See H.O.# 14. Rejected. See H.O.# 14. Rejected. See H.O.# 14. Rejected. See H.O.# 14. Rejected. See H.O.# 14. Rejected. See H.O.# 14. 62. See H.O.# 14. 63. Rejected. 64. See H.O.# 14. 65. Rejected. See H.O.# 14. 66. See H.O.# 14. Rejected. See H.O.# 14. Rejected. Accepted except for last sentence. 70-71. Included in H.O.# 3. 72. Accepted. 73 Accepted. Rejected. Rejected. Irrelevant. Irrelevant. Irrelevant. Irrelevant. Rejected. 81. See H.O.# 14. 82. See H.O.# 14. Accepted that market share fluctuations are due to many factors. Accepted. Accepted. Rejected. Rejected. Rejected. Rejected. Rejected. 91-92. Rejected as argument - not fact. Rejected. Rejected. 9 5. Rejected. Rejected. Accepted. 98. See H.O.# 14. Included in H.O.# 18. Rejected. See H.O.# 14. Rejected. See H.O.# 14. Rejected. See H.O.# 14. Rejected. See H.O.# 14. 104-105. Rejected insofar as inconsistent with H.O.# 29. Accepted insofar as included in H.O.# 19. Accepted insofar as included in H.O.# 19. Rejected. See H.O.# 14. Rejected. See H.O.# 14. Rejected. See H.O.# 14. Rejected. See H.O.# 14. Rejected. See H.O.# 14. 113-116. Rejected. See H.O.# 31. 117. Accepted. 118-121. Rejected as irrelevant. 122. Rejected. Rejected. Rejected. Rejected. COPIES FURNISHED: Dean Bunch, Esquire 101 North Monroe Street Tallahassee, FL 32301 Vasilis C. Kastafanas, Esquire P. O. Box 1873 Orlando, FL 32802 William J. Whalen, Esquire New Center One Building 3031 West Grand Boulevard Detroit, Michigan 48232 Joseph H. Letzer, Esquire Robert H. Rutherford, Esquire 3000 South Trust Tower Birmingham, Alabama 35202 Enoch Jon Whitney General Counsel Department of Highway Safety and Motor Vehicles Neil Kirkman Building Tallahassee, FL 32399-0500 =================================================================
The Issue The issue is whether the Verified Complaint filed by General Motors for review of its decision to deny a transfer of Buick and GMC Truck franchises from Gus Machado to Alan Potamkin should be dismissed.
Recommendation It is RECOMMENDED that a final order be entered by the Department of Highway Safety and Motor Vehicles dismissing the Verified Complaint filed by General Motors for review of its decision to disapprove the proposed transfer of the Dealer Sales and Service Agreements from Gus Machado Buick-GMC Truck, Inc., to Alan Potamkin. The proposed transfer does not include the sale of the Machado land and facilities, and consequently the proposed transfer cannot meet the requirements of Section 320.643(1), Florida Statutes (1989). Moreover the Recommended Order in Case 91-1997 (Machado I) if accepted by the Department, will mean that Mr. Machado has no franchise for Buick or GMC Truck to transfer to Mr. Potamkin. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 9th day of April 1992. WILLIAM R. DORSEY, JR. Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9th day of April 1992. COPIES FURNISHED: Craig Edward Stein, Esquire Fine, Jacobson, Schwartz, Nash Block & England 100 Southeast 2nd Street Miami, Florida 33131 James D. Adams, Esquire 7300 West Camino Real Boca Raton, Florida 33433-9984 Edward W. Risko, Esquire Office the of the General Counsel General Motors Corporation 3031 West Grand Boulevard Detroit, Michigan 48202 Dean Bunch, Esquire Cabaniss, Burke & Wagner, P.A. 851 East Park Avenue Tallahassee, Florida 32301 Charles J. Brantley, Director Division of Motor Vehicles Room B439, Neil Kirkman Building Tallahassee, Florida 32399-0500 Enoch Jon Whitney General Counsel Department of Highway Safety and Motor Vehicles Neil Kirkman Building Tallahassee, Florida 32399-0500 =================================================================
Conclusions This matter came before the Department for entry of a Final Order upon submission of an Order Relinquishing Jurisdiction and Closing File by John D. C. Newton II, Administrative Law Judge of the Division of Administrative Hearings, a copy of which is attached and incorporated by reference in this order. The Department hereby adopts the Order Relinquishing Jurisdiction and Closing File as its Final Order in this matter. Said Order Closing File was predicated upon Respondent’s Notice of Withdrawal of Notice of Relocation and Motion to Dismiss, filed October 6, 2011. Accordingly, it is hereby ORDERED and that this case is DISMISSED. Filed October 26, 2011 9:16 AM Division of Administrative Hearings DONE AND ORDERED this_42 day of October, in Tallahassee, Leon County, Florida. Sandra C. Lambert, Director Division of Motorist Services Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room A435, MS 80 Tallahassee, Florida 32399 Filed with the Clerk of the Division_of Motorist Services this A day of October, 2011. he Vinayak, Dealer Hicense Administrator NOTICE OF APPEAL RIGHTS Judicial review of this order may be had pursuant to section 120.68, Florida Statutes, in the District Court of Appeal for the First District, State of Florida, or in any other district court of appeal of this state in an appellate district where a party resides. In order to initiate such review, one copy of the notice of appeal must be filed with the Department and the other copy of the notice of appeal, together with the filing fee, must be filed with the court within 30 days of the filing date of this order as set out above, pursuant to Rules of Appellate Procedure. SCLivlg Copies furnished: J. Andrew Bertron, Esquire Nelson Mullins Riley & Scarborough, LLP 3600 Maclay Boulevard South, Suite 202 Tallahassee, Florida 32312 Robert Craig Spickard, Esquire Kurkin Forehand Brandes, LLP 800 North Calhoun Street, Suite 1B Tallahassee, Florida 32301 Michael L. Gore, Esquire Shutts and Bowen, LLP Post Office Box 4956 Orlando, Florida 32802 John D. C. Newton II Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399 Nalini Vinayak Dealer License Section
