Austin American-Statesman - - MONEY & MAR­KETS - Con­tact Bob Sech­ler at 512445-3645.

Texas con­sumers.

Berk­shire Hath­away, in con­sul­ta­tion with the Texas Depart­ment of Mo­tor Ve­hi­cles, had been work­ing on a po­ten­tial way around the law in which Berk­shire would tech­ni­cally “re­lin­quish con­trol” of For­est River while still own­ing it. Since the Texas law de­fines a man­u­fac­turer as some­one “af­fil­i­ated with” a man­u­fac­turer or “con­trolled by” a man­u­fac­turer, the idea was that Berk­shire Hath­away might be able to “cease to be af­fil­i­ated with” For­est River for the pur­poses of the law and still wholly own it and the deal­er­ship unit.

But Pax­ton shot down that plan, cit­ing in his opin­ion “the com­mon mean­ing of the word” af­fil­i­ate.

“A court is likely to con­clude that a com­pany that re­lin­quishes con­trol of a man­u­fac­turer but main­tains full own­er­ship of that man­u­fac­turer re­mains af­fil­i­ated with the man­u­fac­turer for pur­poses” of the law, Pax­ton wrote.

Spokes­men for Berk­shire Hath­away and Berk­shire Hath­away Au­to­mo­tive didn’t re­spond to re­quests for com­ment.

Berk­shire Hath­away Au­to­mo­tive is ap­peal­ing re­cent rec­om­men­da­tions by the en­force­ment di­vi­sion of the Texas Depart­ment of Mo­tor Ve­hi­cles that the com­pany’s li­censes for the 29 deal­er­ships it op­er­ates in Texas be re­voked be­cause of the law, and that it not be is­sued a new li­cense for its first Austin deal­er­ship — a Mercedes-Benz fran­chise it planned to open on a South In­ter­state 35 frontage road. Most of the com­pany’s deal­er­ships are in the Dal­las-Fort Worth metro area.

Hear­ings in those ap­peals have not been sched­uled yet, but Pax­ton’s opin­ion seems to blow a hole in a key Berk­shire le­gal ar­gu­ment.

“At this point, we’re re­view­ing the im­pact of the opin­ion to de­ter­mine what the next steps are,” said Adam Shaivitz, a spokesman for the Depart­ment of Mo­tor Ve­hi­cles.

The opin­ion from Pax­ton marks the sec­ond time since the spring that Buf­fett and Berk­shire Hath­away have been stymied in their at­tempt to en­list top state lead­ers in their ef­fort to find away around the law.

A lob­by­ing ef­fort in April that in­cluded a trip to Austin by Buf­fett him­self failed to re­sult in ap­proval of a leg­isla­tive fix, dubbed the “Buf­fett bill,” that would have per­mit­ted own­er­ship of both a man­u­fac­turer and a deal­er­ship if the ve­hi­cles aren’t of the same type. The bill — which was sup­ported by the Texas Au­to­mo­bile Deal­ers As­so­ci­a­tion — ini­tially ap­peared to be on a fast track be­fore en­coun­ter­ing strong op­po­si­tion from ob­servers, in­clud­ing some Tea Party groups, who crit­i­cized it as a sweet­heart deal for a deep-pock­eted po­ten­tial donor.

Some also ac­cused the Buf­fett bill’s leg­isla­tive sup­port­ers of hypocrisy for not tak­ing sim­i­lar in­ter­est in Tesla-backed bills that would have en­abled Tesla to sell its elec­tric cars di­rectly to Texas con­sumers with­out go­ing through third-party deal­ers. The Tesla bills, which lan­guished and died, were op­posed by the auto deal­ers as­so­ci­a­tion.

Banks, who pro­duces the Banks Re­port on­line pub­li­ca­tion an­a­lyz­ing the re­tail au­to­mo­bile in­dus­try, said the ul­ti­mate so­lu­tion to Berk­shire Hath­away’s Texas predica­ment in­creas­ingly looks like it will have to in­clude changes to the law that also en­able Tesla to op­er­ate more freely in the state.

“They tried the leg­isla­tive route al­ready with­out (in­clud­ing) Tesla, and they got ham­mered,” Banks said. “So it wouldn’t sur­prise me if the Texas deal­ers as­so­ci­a­tion will have to give in and al­low Tesla some free­dom to sell its cars. Re­ally, that is one of the holdups here. I don’t think (the deal­ers as­so­ci­a­tion is) go­ing to be able to main­tain that (an­tiTesla) po­si­tion if Buf­fet and Berk­shire are go­ing to be able stay in Texas.”

Bill Wolters, pres­i­dent of the Texas deal­ers as­so­ci­a­tion, couldn’t be reached for com­ment Tues­day.

If Berk­shire is forced to sell its Texas deal­er­ships, Banks said there won’t be any short­age of bid­ders be­cause they the deal­er­ships are well-run and ex­tremely lu­cra­tive.

Still, he said, “the mind­set, or the ex­pec­ta­tion (in the in­dus­try), is they will get it solved” one way or an­other.

Berk­shire Hath­away Au­to­mo­tive ex­ec­u­tives pre­vi­ously have said the com­pany em­ploys about 4,200 peo­ple in Texas.

Ac­cord­ing to the Na­tional Au­to­mo­bile Deal­ers As­so­ci­a­tion, the av­er­age U.S. deal­er­ship had about $59.6 mil­lion in sales last year, while the av­er­age lux­ury deal­er­ship had $94.1 mil­lion in sales.


Bil­lion­aire War­ren Buf­fett’s Berk­shire Hath­away has run afoul of a Texas law that pro­hibits mo­tor ve­hi­cle man­u­fac­tur­ers from also own­ing deal­er­ships.

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