Heartland Automotive Holdings, the largest U.S. Jiffy Lube franchisee, and its affiliates on Jan. 7 filed for Chapter 11 bankruptcy reorganization. The company claimed it was brought about by a breakdown in negotiations with Jiffy Lube International to resolve long-simmering disputes and by a decline in financial performance attributed to rising gasoline and oil costs that reduced customer visits and squeezed margins in 2007.
Heartland Automotive has 438 stores in 20 states, employing more than 4,000 people. In the Chapter 11 filing, the company said that as of Nov. 29, 2007, its books and records on a consolidated basis showed assets totaling $334 million and liabilities totaling $396 million.
In its bankruptcy filing, Heartland blamed increased prices of oil and gasoline for its decline in revenue. “High gasoline prices affect the number of miles a potential customer drives, which in turn directly impacts automotive maintenance spending,” the company said in its bankruptcy filing. “When customers drive less, their vehicles require fewer oil changes and other services, and the demand for the debtors’ services decreases.”
“The U.S. consumer’s budget for their car is ‘X’ amount of dollars per month,” Christie explained to Lube Report. “If you turn around, and say, ‘Are you going to put money into another tank of gas to go to work, or are you going to change your oil?’, guess what the answer is? They’re going to put the gasoline in. It’s not even a choice, it’s a necessity.”
McKinnon said extended drain intervals for oil changes may also be a factor. “We’ve seen that maybe drivers are extending their maintenance intervals just a little bit,” he said. “That could be a combination too of automakers extending intervals for several years. I think it’s a combination of factors. Certainly it’s a tough market out there.”
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