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16 ARKANSAS BUSINESS
MAY 7, 2007
Crain Automotive’s Recent Activities
Crain: Car Company
Confronts Complaints
Crain a total of $23,000 for the violations, most of which are for violating
advertising regulations.
Half of Crain’s violations were
decided in December, when the AMVC
fined Crain $5,000 for running ads
on Sept. 1 in the Arkansas DemocratGazette that obscured what the “manufacturer suggested retail price” was.
“The issue there was the MSRP and
list price,” said Greg Kirkpatrick, the
AMVC executive director. “They are
generally accepted as the same thing,
and Crain was advertising an MSRP
price and a list price as two different
prices. … What they were calling a list
price was a price after the vehicle had
some add-ons.”
One ad, for example, featured a
truck that had $15,000 worth of addons; Crain’s ad listed the truck’s MSRP
as $15,000 more than the actual MSRP,
he said.
“The commission’s view is if you’re
going to sell a vehicle with all these
add-ons, it’s got to be explained more
clearly to the consumer that it’s not
a manufacturer’s suggested price,”
Kirkpatrick said.
Crain said one reason his company
has been the favorite target of the AMVC
is that his dealerships are more visible
than others. He said every problem that
led to a fine had been corrected.
Sexual Harassment Alleged
More exposure of Crain Automotive
also has been accompanied by more
lawsuits.
Two former employees have sued
Crain dealerships, one in 2005 and one
last year, alleging they were sexually
harassed while on duty.
Cynthia Maltbia filed her lawsuit
in U.S. District Court in Little Rock in
September 2005 and alleged that while
working at Crain Chevrolet of Little
Rock, she was subjected to unwelcome
sexual advances, requests for sexual
favors and other verbal and physical
contact of a sexual nature. Maltbia
said the alleged harassment came from
the used car manager, who wasn’t
named as a defendant in the lawsuit.
Maltbia is seeking at least $300,000
in damages. Her case is pending.
Jayla Collins alleged in her June 2006
lawsuit, also filed in U.S. District Court
in Little Rock, that she was the victim
of sexual harassment while working as
a salesperson at Crain Mitsubishi in
Sherwood. She alleged the harassment
came from her supervisor, who wasn’t
named as a defendant.
Collins is seeking an unspecified
amount of damages and her case is
pending.
Crain denied any wrongdoing and
has vowed to fight the accusations.
“We, as a company, try to have the
Michael Pirnique
(continued from Page 1)
Crain Mitsubishi on Landers Road in Sherwood, just one of several Crain
holdings.
October 2006 November 2006
January 2007
February 2007
April 2007
Opened Crain Kia of West Little Rock.
Purchased Little Rock Dodge, renamed Crain Chrysler Dodge Jeep.
Purchased Little Rock Dodge Truck Center, renamed Crain Chrysler Dodge Jeep.
Purchased Landers Ford, renamed Crain Ford University.
Purchased Landers Ford North, renamed Crain Ford Jacksonville.
Purchased Camper Capps in Little Rock, renamed Crain RV.
Sold Crain Ford, renamed Landers Ford Lincoln Mercury.
Purchased North Point Hyundai North, renamed Crain Northland Hyundai.
Purchased North Point Hyundai South, renamed Crain Southland Hyundai.
Closed Crain Kia in Benton.
Closed Crain Suzuki.
Source: Crain Automotive Holdings, the Arkansas Motor Vehicle Commission
very highest of standards of how we
comply with any kind of laws, regulations or morality,” Crain said. “We
believe that we’re always going to try
to do what’s right.”
Crain said the company holds extensive training sessions that deal with how
employees are expected to behave.
“In our view, we are in no way in
violation of those issues, but people
today tend to bring frivolous lawsuits,
and because they do, we don’t have
any choice but to defend us,” he said.
Crain said the company’s philosophy is to defend against frivolous lawsuits vigorously or more will come.
“And so you may bring a $10,000
action against us, and we may be
willing to spend $50,000 to defend it
because we are going to defend anything that we believe that we’re not
guilty [of].”
Crain is also defending itself against
a lawsuit filed March 7 in Pulaski
County Circuit Court that alleges Crain
charged too much for document fees.
The two plaintiffs in the case, B.
Shawn Travis and William Bainter, are
seeking class-action status for their lawsuit. When they financed the vehicles,
through a Texas lender, the paperwork
“says very clearly the documentary fee
may not exceed $50. And they charged
$199 in each of the plaintiff’s transactions,” said Marie-B Miller, a Little
Rock attorney who is handling the case
for the plaintiffs. “So it’s our position
that Texas law has to be applied here.
And in your transaction you have to
abide by Texas law and you cannot
charge more than $50.”
Crain doesn’t dispute the dealership
charged $199 in fees, but he said he
thought it wasn’t violating any regulations.
“It was financed with a Texas company … and we were told by the
finance company that was fine,” Crain
said. “And that’s the question: Is it fine
or not to do that in Arkansas? … And
so we relied on something that somebody told us what we could charge,
and that’s what we charged.”
That case is pending.
Used Cars
Crain’s strategy of consolidating its
market is not unique. Car dealers prefer to own all the dealerships in a given
area, said Dennis Jungmeyer, executive
director of the Arkansas Automobile
Dealers Association. That way, customers don’t have too far to travel to
comparison shop.
Owning several new-car dealerships
also helps Crain sell more used cars,
which Jungmeyer said was the more
profitable part of the auto business.
Crain wouldn’t discuss revenue or
profit numbers. (Crain Management
Group, which includes Crain
Automotive as well as the Rimrockers
basketball team and several radio
stations, confirmed total revenue of
$246.1 million in 2005.) Crain did say
he sells more new vehicles than used
ones, but his goal is to sell one used car
for every new one.
“We’re close to that, but we’re not
there yet,” he said.
And a new approach to that goal is
on the Internet. Crain’s improved site
— www.crainteam.com — allows Web
shoppers to see multiple photos of many
used vehicles on Crain’s lot. Few sales
are finalized on the Internet, but about
30 percent of vehicle buyers now start
searching for new wheels on the Web.
“Instead of maybe having 100 used
vehicles to choose from in one location, they may actually have 1,000
vehicles that they can choose from,”
Crain said of the Internet site.
Other changes are taking place at
the dealership.
In January, Crain bought Camper
Capps at 9801 Interstate 30 in Little
Rock, which was renamed RV Crain.
He said one reason he bought the
dealership was to get the land so he
can move the three dealerships on
University Avenue to the new location
on Interstate 30.
Crain said it could take up to two
years to make the move, and then the
Crain buildings on University could be
converted to used-car sales.
Crain said he’s not done shopping
for more dealerships.
“I think we’re always looking for
ways to expand our business, especially from a franchise point,” he said.
Motor Vehicle Commission
The AMVC executive director, Greg
Kirkpatrick, said most disgruntled customers don’t bother to — or don’t
know to — file a complaint with
the commission. So he said it’s up to
AMVC investigators to look into any
matters — mainly advertising — they
think blur the line into a violation.
The largest fine the AMVC has
levied against Crain, $10,000, came in
January. It involved Crain’s Chevrolet in
Little Rock engaging in bait-and-switch
advertising, the AMVC order said.
In August, an AMVC investigator
went to Crain Chevrolet to follow
up on a television advertisement that
said the dealership had new and used
vehicles for a $49 acquisition fee with
payments as low as $99 a month and
vehicles priced as low as $2,888.
The vehicle featured in the ad was
a 2002 Chevy Cavalier. But when the
AMVC investigator arrived on the lot,
the sales associate said the only available
Cavaliers were priced above $10,000.
About a week later, the same investigator went back to the lot after seeing a
newspaper ad that offered the same deal
and again featured the 2002 Cavalier.
When the investigator asked to see
the car, he was told that it had been
sold. He was shown the closest thing to
the 2002 Cavalier, a 2004 model that
was selling for $8,397.
Upon further investigation, the
AMVC learned the 2002 Cavalier had
been sold some weeks earlier, a violation of the AMVC requirement that a
dealer have a vehicle available at the
time it is advertised.
Crain said the manager of the dealership didn’t realize the vehicle had
been sold before the ad ran.
“We made a mistake,” Crain said.
“So it was human error, really. It wasn’t
like we did anything that I would call
devious.” n