RACINE, Wis.-Educators CU is exiting the auto sales business after reaching an agreement with this state's Office of Credit Unions.
Under the agreement, Educators has until April 30, 2010, to divest its successful car sales operations. The $1-billion Educators withdrew an appeal filed earlier this year that allowed it to continue selling autos after the state's credit union regulator ordered Educators to cease selling vehicles on its property here.
The order found that Educators' used auto sales were impermissible under the state's credit union statute, which explains that activities undertaken by state charters must be "routine daily operations of credit unions." The order does not prevent the credit union from selling repossessed vehicles or cars coming off lease from credit union members.
Jim Henderson, Educators SVP, said the CU reached the agreement after weighing the impact of a denied appeal. "The Office of Credit Unions approached us and asked if we wanted to look at options that might create a win-win. Because of the uncertainties around what might transpire if we were not successful with our appeal-would we have to divest immediately?-we felt is was in our members' best interest to take this settlement."
The agreement gives Educators time to find "partners" to sell the business to, and keep operations going and not affect service to members, Henderson explained. "We have a game plan for the next 12 months. We will keep things the same as they are today as we look toward a long-term solution during that time. That gives us time to develop the solution and monitor and review it. Then we have another six months to actually move to it. In this case the business would never close."
Henderson said Educators hopes to stay connected with the new entity, providing financing, and that many of the current employees of the auto dealership would be retained.
The Wisconsin Automobile & Truck Dealers Association said it may fight Educators' agreement with the state Office of CUs, claiming it not only gives Educators a year and a half to keep selling cars, but time to try to get Wisconsin law changed to make it legal for credit unions to do so.
Henderson said that getting the law changed is not likely. "While we want to pursue that as another avenue, we are not confident that's going to be something we can accomplish."
As for the auto and truck dealers potentially challenging the agreement, Henderson added that it "does not look like they have any jurisdiction to do anything more than not like it."
Educators' dealership has allowed it to keep auto lending near 2007 levels, said Henderson. The dealership provides car sales, new and used car leases, and a preferred dealer network.
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