A month-old Volkswagen dealership in Rogers is open and thriving, but an established Fayetteville dealer is asking the courts to put the brakes on its new rival.
The dispute has placed a spotlight on two of Arkansas’ better known auto dealership names, Crain and Everett.
Crain Volkswagen of Fayetteville has filed suit against Volkswagen Group of America Inc., saying it had an agreement with the German auto manufacturer to be its exclusive dealer in Washington and Benton counties.
But when the Volkswagen Group asked Crain around 2020 to build another VW dealership in Rogers, Crain balked, arguing it didn’t have enough inventory to supply its existing Fayetteville site, according to Larry Crain Sr., president of Crain Imports of Fayetteville LLC, which operates as Crain Volkswagen.
So Volkswagen turned to the Everett Automotive Group, which built a dealership in Rogers and opened as Everett Volkswagen of Rogers in early December. That site is about 15 miles from the Crain lot.
“There is no basis for adding another point in Arkansas for a Volkswagen store, especially in northwest Arkansas, where we already … had that assigned area,” Crain told Arkansas Business. “And so it’s just a mess. That should never have occurred.”
Crain Volkswagen’s suit claims Volkswagen Group of America violated the dealer agreement. Crain has also filed a separate suit appealing the Arkansas Motor Vehicle Commission’s decision to award Everett a franchise dealer license to sell Volkswagens.
Volkswagen Group responded with court filings asking for Crain’s lawsuit to be dismissed, or for Crain to amend its complaint with more specific allegations against the company.
Crain Volkswagen “does not specifically identify which contractual provisions have been violated,” according to a filing by one of the Volkswagen group’s attorneys, Paul Collins of Nelson Mullins Riley & Scarborough LLP of Columbia, South Carolina.
A spokesperson for Volkswagen didn’t respond to a call for comment.
The Motor Vehicle Commission said it doesn’t comment on pending litigation. But in its court filings, it asked that the case be dismissed.
Kevin Wilson, the general manager at Everett Volkswagen of Rogers, told Arkansas Business last week that the Everett dealership has no dispute with the Fayetteville location, and that sales in Rogers have been “absolutely wonderful.”
“The first month we did great,” Wilson said.
The lawsuit provides some insight into the auto businesses affiliated with two groups ranked on Arkansas Business’ annual list of the state’s 75 largest private companies. The Crain Management Group of Sheridan reported $791.4 million in revenue in 2021, and Everett Automotive Group of Bryant reported $748 million in 2021.
Coming to Fayetteville
In 2014, the Volkswagen Group sold 367,000 units, a drop from 408,000 a year earlier, according to Crain Volkswagen’s suit, which is pending in U.S. District Court in Little Rock.
In 2015, “Volkswagen represented to us that they were going to get their total annual sales to more than 800,000 units” within four or five years,” Crain told Arkansas Business.
Within a year or two VW was supposed to have sales of 600,000 units.
Based on the manufacturer’s projections, Crain’s company, Crain Automotive Holdings LLC, spent $2.25 million in 2015 to buy the assets of Volkswagen of Northwest Arkansas, operated by J.B. “Bryan” Hunt Jr. of NWA Imports LLC.
At the time, Crain Volkswagen’s dealership in Springdale was the only Volkswagen lot in Washington and Benton counties. The closest VW dealerships were in Fort Smith and Tulsa.
Crain Volkswagen then spent another $7 million to build a VW dealership in Fayetteville, which opened in 2017, absorbing the Springdale location.
The Volkswagen Group “agreed to the construction of the new facility and for Crain VW to be the exclusive VW dealer in Washington and Benton counties,” the suit said.
Crain VW also planned to build a second facility in Rogers about two years after the Fayetteville location opened, Crain told Arkansas Business. But by the time the Fayetteville location opened, the VW brand had taken a blow and sales had plummeted.
Diesel-gate
In 2016, the U.S. Department of Justice, on behalf of the Environmental Protection Agency, sued Volkswagen, alleging the company violated the Clean Air Act through the sale of about 600,000 diesel vehicles that had software designed to cheat on emissions tests. Volkswagen agreed to pay $4.3 billion to settle.
The automaker stopped selling diesel vehicles in the U.S., “which severely impacted Crain VW’s sales and services,” Crain’s suit said. Diesel models accounted for about 20% of Volkswagen’s total sales, Crain said.
He said his company declined to build the dealership in Rogers, even though VW told it to do so. “We said when you get your sales back up to 600,000 like you represented, then we will build that,” Crain said. He said sales didn’t justify another location.
Crain said that Volkswagen told him that if his company didn’t build it, it would find someone to do it.
Enter the Everetts
Dwight and Susie Everett had been in the automotive industry in central Arkansas for more than 30 years when they co-founded the Everett Automotive Group in 2006, according to Everett Volkswagen’s website.
The Everetts own four other dealerships: Infiniti of Central Arkansas, Everett Chevrolet and Everett Ford, all in Benton; and Everett Buick GMC in Bryant. In 2021, the Everett Automotive Group announced it was building a dealership in Rogers to sell Volkswagens. Rogers was selected because of the area’s growth, according to a news release in April 2021.
Crain Protests to State
On Nov. 15, Crain filed a protest urging the motor vehicle commission to deny “any request for an additional new VW dealership” in Washington and Benton counties.
Crain Volkswagen said the manufacturer couldn’t provide “adequate units for sale to meet the current demand of its current dealers,” according to a letter by Crain’s attorney, Skip Davidson of Little Rock.
Crain Automotive Holdings LLC owns more than 20 dealerships in Arkansas, including Crain VW.
Davidson told Arkansas Business the commission awarded Everett the licenses without giving Crain a hearing. “We should have been allowed to present our protest and introduce information about the … lack of availability of inventory,” he said. “And how that additional dealership would be detrimental to the public because of the limitations on inventory.”
He also said a new location wouldn’t result in more sales, but only a change in sales from one to another.
“And that commission said no, we have to issue the license if the new dealership is more than 10 miles away.” Davidson added that the appeal is asking Pulaski County Circuit Court Judge Herbert Wright reverse the commission’s decision on the license and grant Crain Volkswagen a hearing.
That case is pending.
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