Nov. 14, 2024

Family-owned Sioux Falls auto dealer Schulte Subaru has become part of Minnesota’s largest auto dealer.

The second-generation Sioux Falls business sold this week to Twin Cities-based Luther Automotive Group.

“We had several offers and turned them down over the last two years,” co-owner Mike Schulte said. “When we finally did sit down (and consider what it would take to sell), we said here are the terms. It has to be a family business. It has to be someone who puts our employees first and would retain the employees, and that’s a pretty tall order.”

Luther Automotive was founded in 1952 by Rudy Luther and has remained family-owned. The dealer represents more than 27 automotive brands and has more than 4,000 employees. There are more than 45 dealerships across Minnesota, North Dakota and Wisconsin. Schulte Subaru, which will continue to carry that name, is the first in South Dakota.

The Schultes were connected with Luther Automotive through a third party that helped facilitate the deal. It was one of two prospective buyers identified that met the Schultes’ requirements.

“We interviewed them both back-to-back, and Luther being in Minneapolis was the clear fit for us because … they came in and said, ‘Your general manager will get to run the place autonomously,'” Schulte said. “They don’t have a mold. Not every store has to operate the same way. Things we do uniquely at our dealership are still going on. It’s literally business as usual minus the three of us.”

Schulte’s father, Terry, somewhat accidentally brought Subaru to Sioux Falls. In 1970, when he traveled to Chicago to physically stand in line to buy the Honda franchise, Vern Eide “was literally two people in front of him the same day and bought the Honda franchise,” Schulte said.

When it was Terry Schulte’s turn, he learned the distributorship of a Japanese company called Subaru had just become available. He paid about $4,000 for the rights to bring it to Sioux Falls.

Throughout Terry Schulte’s career, he had dealerships for many other makes – among them Chevy, Ford, Chrysler, Kia, Lincoln, Mitsubishi and Jeep – but in 2000, he sold off all but Subaru.

From 85th Street and Minnesota Avenue, the Schultes grew the dealership to become broadly recognized, including being named retailer of the year in 2020 out of all Subaru stores nationwide. It was named South Dakota dealer of the year for all brands in 2021 by the South Dakota Auto Dealers Association and was in the top 50 finalists for Time magazine’s dealer of the year.

“The Sioux Falls market loves Subaru,” Schulte said. “We’re one of the only markets in the country that outsell other major brands.”

While Schulte and his wife, Sarah, became the faces of the business in recent years, promoting it through advertising and social media, “the bottom line is our staff and their culture is what made the store successful,” he said.

“If the store didn’t produce as it did, what we did would equal nothing,” Sarah Schulte added. “The staff are phenomenal, and that’s why we were successful.”

Inside the deal

About 30 days before the acquisition was set to close, the leaders of Luther Automotive came to Sioux Falls for a joint meeting with the Schultes and their 140-person team.

Chief operating officer Andrew Gadient was back at the dealership the next day at 7 a.m. “and was actually giving customers service rides that were dropping their cars off at work,” Schulte said.

“He and (CEO) David Luther on Saturdays go visit stores together. And that’s incredible to me.”

The Schultes did something similar in considering the sale: They went to Minnesota and visited several Luther dealerships.

“They said no one has ever done that,” Schulte said. “We were pulling employees aside left and right and asking what’s the 411, and everyone we talked to was in line with the culture and the feeling, and their intensity toward customer service was so incredible.”

The transaction includes the dealership at 85th and Minnesota, along with a new 50,000-plus-square-foot collision and tire center next door.

General manager Jason Hanson continues to lead the location.

“Our staff have been so amazing,” Sarah Schulte said. “We’ve had such great, supportive response from our staff — it just confirms how awesome they are.”

When the couple brought the option to sell to Terry Schulte, “I was completely opposed to selling until I learned more about them,” he said. “And as we got into the nuts and bolts of the deal, I could see that if we left the franchise life, they were the right fit for us.”

The scope and scale of Luther Automotive has multiple benefits, Mike Schulte said.

“The resources they have in-house for training — they own their own technical school — so the training they have is amazing, and being a larger company, they’ve got benefits that we could never provide,” he said. “There’s not one (community) program they’ve told us they want to cancel, and actually they have the ability because of their size to do more things than we could do. They’re committed to being everything we were in the community and even more.”

New venture

The Schultes already are working on their newest business venture, which draws on the father and son’s shared passion for classic cars.

The family is launching AutoWerks Foreign and Classic Repair and Sales, with a new location at 1725 Mindy St. in Tea.

It builds on a side business Terry Schulte has had for more than 30 years offering vehicle restoration.

“If you had an old ’57 Chevy and wanted it completely restored, there’s only a handful of people in this part of the country that do that, and we’ve been doing it a long, long time,” Mike Schulte said. “In the last four or five years, we really branched into classic and import repair, and that’s really become the mainstay, and there’s a big need for that in Sioux Falls.”

The business will service the many foreign imported cars that now are found in Sioux Falls, including Ferrari, Lamborghini and Porsche, in addition to restoring classics. The location also will offer marine and automotive upholstery “because there’s only a handful of places in town if you need seat repairs or a new interior or convertible top,” Schulte said. “And then the last part of it, which is exciting … is we’re going to have room for 100 inside climate-controlled storage units if someone has a Mustang or Ferrari or whatever … and the fact that it’s connected to the repair shop is huge.”

The business also will pick up and deliver vehicles to the shop.

The location in Tea is understated by design, Sarah Schulte added.

“We want it to be nice on the outside but underwhelming and then come in and be wowed,” she said. “Anybody that’s interested definitely knows about it, but it’s not something that’s in your face.”

The dealership also will be licensed to sell vehicles but likely will have only a handful of specialty cars on display at any given time, Schulte said.

“But most of it is by request,” he said. “You want a Ferrari or Porsche or Mustang and … we’ll find that car and provide it for you.”

They plan to begin repair work soon and be fully operational in the new location by early next year.

“What they’re doing is their favorite part of the business,” Sarah Schulte said. “So it has a neat ending.”