July 9, 1995 in Business

Succession Issue Can Mean The Death Of A Company

Rachel Konrad Staff Writer
 
Tags:auto

Succession doesn’t always equal success.

Too often, it equals death.

When Utter Cadillac/Infiniti announced it had filed for bankruptcy in April, the dealer grapevine was abuzz. Rick Utter shouldn’t have taken the helm of a multimillion-dollar corporation, some said. Fred Utter Jr. should have trained his son more, others said.

The rumors flourished because those are issues every family business faces. Succession is frequently an anxiety-fraught affair that ends with the dissolution of a company, experts say.

“It’s unusual for a business to transfer control to the children,” said Daniel DeRuyter, a Spokane attorney who specializes in business succession. “Sometimes it’s just time for the business to die.”

The problem is especially noticeable at auto dealerships, which often are among the largest family businesses in a community.

Studies suggest fewer than two-thirds of dealerships survive the second generation in family hands. About one-eighth survive the third.

In the ‘50s, a car-starved, post-war economy made the dealership world far more forgiving. Fewer government regulations and a lighter tax burden eased the way.

Now, dealers must be more shrewd.

“Parents often have had 40 years to learn the business. In today’s economic climate, you can’t afford 40 years of learning by trial and error,” said DeRuyter, who counsels more than 40 family businesses here.

For Spokane family dealerships, succession often proceeds cautiously. The key, family members say, is to differentiate family and business.

“You have to do what makes good business sense first, then plan the family around the business if it’s possible. Too often, people do it the other way around and it doesn’t always succeed,” said Jeff Barton, thirdgeneration president of Barton Oldsmobile.

Another key to smooth transitions, Barton said, is gradual turnover. His father, Lee, retired six years ago but is still active in the company.

“I don’t know if he will ever retire completely. It’s just a slow changing of the guard,” Barton said.

Tim Pring, another third-generation dealer, also relies on his father for advice at the Appleway Group. But Pring noted that his father’s advisory role works because he extricates himself from day-to-day operations.

“When my dad left, he said, ‘Tim’s the boss,”’ said Pring, who took over the 67 year-old dealership in 1981. “That’s key because probably the toughest thing for the employees is to have more than one boss.”

, DataTimes

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