The Major Automotive Companies, Inc. Business Information, Profile, and History
Long Island City, New York 11101
History of The Major Automotive Companies, Inc.
The Major Automotive Companies, Inc. is a holding company for the Major Dealer Group, a leading consolidator of automobile dealerships in the New York City metropolitan area. It sells new cars through a number of retail automotive franchises, including Major Chevrolet; Major Dodge; and Major Chrysler, Plymouth, Jeep Eagle. These franchises are located on Northern Boulevard in Long Island City, a community in New York City's borough of Queens; Hempstead, Long Island; and Orange, New Jersey. Major Automotive sells used cars and provides parts and services from other Long Island City locations. It also leases cars and trucks and offers financing through third parties. In addition, it distributes new General Motors vehicles to countries of the former Soviet Union.
Major Automotive Group and Fidelity Holdings: 1985-96
Bruce Bendell and his brother Harold began operating a Brooklyn carwash and auto repair shop in 1972. Subsequently they and their father sold used cars and leased new cars in Brooklyn before purchasing Major Chevrolet, a Long Island City distributor, in 1985. At this time the dealership was in decline, with only 500 cars and $10 million in annual sales. By 1990 sales had increased tenfold. In 1996 Bendell's Major Automotive Group was doing about $180 million a year in business. One of New York's largest auto dealerships, it now consisted of six franchises, including Major Chevrolet/Geo; Major Dodge; and Major Chrysler, Plymouth, Jeep Eagle, in Long Island City, plus, in Woodside--another Queens community--Major Subaru, in addition to Major Fleet and Leasing, the leading supplier of taxis and police cars in New York and also a lessor of trucks.
Fidelity Holdings Inc., founded in October 1995 by Bruce and Harold Bendell and Doron Cohen and based in Kew Gardens--another Queens community--was a holding company engaged in two different businesses. Its Voice Processing and Computer Telephony Division was developing the Talkie, a device invented by an Israeli that promised high-speed, broadband multimedia transmission over the telephone, including voice, data, videoconferencing, voice mail, automated-order, and other applications. This division also was developing proprietary software for making low-cost, long-distance international telephone calls. The Plastics and Utilities Products Division consisted of a development-stage company acquired in 1996. It was planning to market a prefabricated conduit for underground electrical cables and a line of spa and bath fixtures. Fidelity Holdings began appearing on the NASDAQ OTC Bulletin Board in 1996 and initially traded at $4 to $5 a share. It had revenue of $3.43 million that year and net income of $675,966.
Avi Nissanian, the largest wholesaler of jewelry to the Home Shopping Network, owned 27 percent of Fidelity Holdings at this time. He had put the Bendells in touch with Cohen, president of the company. Bruce Bendell held about 40 percent of the common stock of Fidelity Holdings and was its chief executive officer and chairman in April 1997, when it announced an agreement to acquire Major Automotive Group in a transaction valued at about $10 million. Fidelity Holdings paid $4 million to Harold Bendell for shares of stock in Major Automotive subsidiaries and acquired certain real estate components from Bruce and Harold Bendell for $3 million. The transaction was completed in 1998 at a cost of about $14.7 million in cash and stock. Major Automotive had sales of $144.5 million and Fidelity Holdings had revenue of $3.86 million in 1997.
Although a combination of Major Automotive and Fidelity seemed a stretch, Bendell was seeking a way to increase sales without increasing overhead. Major Automotive had become one of the first auto dealerships with an Internet site and also had begun to sell cars over computer terminals owned by Bloomberg L.P.; the owner, Michael Bloomberg, was also one of its customers. Bendell said that marketing costs for auto dealerships in the New York metropolitan area averaged about $350 per vehicle and that Major Auto held its marketing costs to an average under $200, but that on the Internet the cost was only $25 to $50. Interviewed for Automotive News in 1998, Bendell told Laura Clark Geist, "We allow the customer to make an inquiry on any service in our dealership. The customer can request a quote on a vehicle, submit a credit application or request an appraisal on his or her current vehicle. They can make an appointment to visit any of our showrooms or service departments, plus a request for parts, or simply find out more about our dealership."
Bendell also was enthusiastic about the Talkie, which he employed to receive loan applications from his customers, and foresaw other uses for it in his business, such as calling clients to offer specials, remind them to bring their cars in for oil changes, and allow them to make service appointments and check on parts supplies. Ultimately, he envisioned his customers conducting virtually all their dealings with his dealerships by telephone. He thought that the prepaid phone cards that a Fidelity unit planned to offer could be used as giveaway items in Major's marketing. In addition, the merger enabled Major Automotive to go public without having to share with an underwriter the proceeds of an initial public offering of common stock.
Bendell was also mindful of the trend toward consolidation among auto dealers. Some 850 U.S. dealerships went out of business between 1992 and 1997 as consolidators such as United Auto Group, Inc. and AutoNation USA combined them into chains. Manhattan-based United Auto Group had already gone public and developed a major presence in the New York metropolitan area with its purchase of the DiFeo Group and Staluppi dealerships. In 1997 Carl Spielvogel, chairman of United Auto Group, told Tom Incantalupo of Newsday, "We try to surround a market because it gives you the ability, in particular, to move used cars from one dealership to another." Bendell was about to adopt the same strategy, thereby building on the most profitable part of the business, used car sales, along with servicing and financing.
Reversal of Fortune: 1999-2001
By the spring of 1999 Major Automotive had added a Kia franchise in Long Island City and had agreed to purchase Compass Lincoln-Mercury and Compass Dodge in Orange, New Jersey. (Acquisition of the Dodge dealership was not completed until 2000, and in that year the company also acquired a Mazda dealership in Hempstead, Long Island.) Bendell also consolidated the used car businesses of his five Queens franchised dealerships into a single lot, at the flagship Major Chevrolet location. This lot, which held 600 cars, was named Major World. Bendell said the company was saving money by advertising all of its used vehicles under the Major World name and was drawing more customers by enabling them to do their shopping at a single location. It also introduced a new web site for used vehicles only. By 2000 Major World was believed to be the largest seller of used vehicles in the New York City area.
Fidelity Holdings had 1999 revenues of $210.81 million but a net loss of $3.54 million. The technology division was the problem, with revenues of only $1.28 million and a net loss of $6.06 million, but its products were seen by investors as offering potential, and the stock was bid up to $20 a share in the spring and summer of 1999. It was still trading for more than $19 a share early in January 2000, despite a three-for-two stock split in 1999. A number of subsequent stockholder suits, however, charged Fidelity and its executives with improperly deferring expenses in the first three quarters of 1999 to avoid reporting losses until a fourth-quarter loss was disclosed in April 2000. As soon as the year-end result became public, the price of a share of Fidelity common stock nosedived to $3. By the end of 2000 stockholders had filed about a dozen securities-fraud suits against Fidelity Holdings and its officers, charging the company with making false and misleading statements in order to sell stock.
Fidelity Holdings announced in November 2000 that it intended to divest itself of Computer Business Services, Inc., its technology division, and to change its name to Major Automotive Companies, Inc. In March 2001 it sold its voice-processing technology, the IG2 Network, to Global Communications of New York, Inc. for $1.78 million. Global Communications was a new company being formed by IG2 employees in which Fidelity took a minority stake. The telephone calling-card subsidiary, ICS Globe, Inc., was sold to the same company in July 2001 for $240,000. In June 2001 Major Automotive sold its Canadian subsidiary, Info Systems, Inc., and its interest in its Israeli subsidiary, C.B.S. Computer Business Sciences Ltd., to GYT International Ltd. for $119,500 net. The company acquired a Daewoo franchise in April 2001 and a Suzuki franchise a month later.
Expansion of its auto business raised Fidelity Holdings' revenues to $322.14 million in 2000. This division's net profit of $1.3 million was extinguished by the company's $22.43 million loss taken from its discontinued technology operations. Its stock dropped as low as 23 cents a share before the company was renamed in May 2001 and issued a reverse one-for-five-share stock split, which raised the price level to about $2 a share. Bendell owned 37 percent of the stock in October 2001, two months after an announcement that Marshall Cogan, founder and formerly head of United Auto Group, would acquire about two-thirds of this equity position. The terms called for Cogan to become Major Automotive's chairman and chief executive and, with his nominees, to hold four seats on the seven-member board. Bendell would remain as president. In October, however, the company announced that Cogan had terminated the agreement. Major Automotive also disclosed that Chrysler Financial Company, LLC, its chief source for financing its vehicle inventory, was cutting off credit by the end of the year.
Major's Sales and Profits in 2000
At the end of 2000 Major Automotive Group, including its Major Dealer Group, was one of the largest-volume automobile retailers in New York City. Major Automotive Group owned and operated seven franchised automobile dealerships in the New York metropolitan area: Chevrolet, Chrysler, Plymouth, Dodge, Jeep, Subaru, and Kia. In addition, Major Dealer Group owned five franchised dealerships in the metropolitan area: Lincoln-Mercury, Mazda, Dodge, Nissan, and Daewoo. Seven of these franchises were at four locations in Long Island City, three franchises were at three locations in Hempstead, Long Island, and two franchises were in two locations in Orange, New Jersey. The parts and service and used-vehicle businesses were operating from three additional locations in Long Island City.
The company sold 5,369 new vehicles in 2000, of which Chevrolet accounted for 42.6 percent. New-car sales revenues of $132.5 million accounted for 41.2 percent of company revenues. Major Automotive sold 13,291 used vehicles for about $178 million, constituting 55.4 percent of company revenues. Sales of parts and services came to $11 million, or 3.4 percent of the total. In terms of gross profit margin, however, parts and services was, at about 51 percent, by far the most lucrative segment of company business. The 18.1 percent gross profit margin on sales of used vehicles was almost double the industry average. The company had a gross profit margin of 8.2 percent on new-vehicle sales, also significantly higher than the industry average of 6.1 percent.
Principal Subsidiaries: Hempstead Mazda, Inc.; Major Acquisition Corp.; Major Automotive of New Jersey, Inc.; Major Automotive Realty Corp.; Major Daewoo, Inc.; Major Nissan of Garden City, Inc.; Major Orange Properties, LLC.
Principal Competitors: Potamkin Auto Group; United Auto Group, Inc.
- Key Dates:
- 1985: Bruce Bendell, his brother, and his father purchase Major Chevrolet.
- 1990: Annual revenue has increased tenfold in five years.
- 1996: Major Automotive now holds six franchises with $180 million in annual revenue.
- 1998: Fidelity Holdings Inc. purchases Major Automotive Group for $14.7 million.
- 1999: A total of 600 used cars are placed on a Queens lot called Major World.
- 2001: Fidelity sells its nonautomotive businesses and assumes the Major Automotive name.
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