Is the iMotors.com Bubble Bursting?
29 July 2000
Layoffs and Rumors of Financial Problems May Forecast Doom for Year Old
Company
Sacramento - According to an article published in Friday's Sacramento Bee,
iMotors.com has suddenly laid off about 100 workers at the company's
reconditioning plant in Elk Grove, California. A spokesman for the company
stated that the figure is actually only between 50 and 100 workers.
iMotors.com had employed 200 workers at the Northern California facility.
The Bee's article states that some of the former employees "got together"
on Thursday evening, after picking up severance checks, to discuss possible
options and alternatives. Employment promises and assurances may have been
given to employees which could prompt legal action. In the news story, one
such worker told the Bee's reporter, Melanie Payne, how based upon
assurances that his job was safe, he recently purchased a house and
committed to a long term mortgage. Now, with just one mortgage payment
under his belt, he's out of a job.
iMotors.com is engaged in the sale of used vehicles, by taking specific
requests from customers and then searching for the vehicles. The
iMotors.com service includes "reconditioning" the vehicles before
delivering them to the customers. The company advertises that they can
save customers hundreds of dollars off the "Kelley Blue Book" price for the
vehicle, thereby implying significant savings and/or a "good deal".
However, the practice of using Kelley Blue Book retail pricing as a
legitimate benchmark for a vehicle's worth has been the subject for debate in
recent months. The Auto Channel, among others, feels that Kelley used car
retail pricing is at the very least, highly deceptive; often being
used to falsely inflate dealer prices and markups.
iMotors.com denied that financial problems are the reason for the layoffs.
Rumors about financial problems and lower than expected sales have been
circulating around the automotive industry for the last couple of months.
In June, iMotors.com's CEO and president Adam Simms spoke at a JD Power's
Automotive Conference in Boston, in which he also deflected questions concerning
financial matters. Simms' response to questions was that since the company
(iMotors.com) was not publicly traded, he didn't have to provide that
information. In the financial community, it was presumed that iMotors.com
would attempt an IPO. However, with the down turn of interest in "e-commerce"
pure-play companies, and the obvious failure of other online e-commerce business
models, such as Autobytel.com and Autoweb.com, analysts are not expecting
iMotors.com to file a notice of intention with the SEC to go public. As
iMotors.com 'burns' through the private funding it has received, the inability
to rely on a public offering as an exit strategy or for needed capital may
ultimately force the closing of iMotors.com's doors.
Marc J. Rauch
Co-Publisher
mjrauch@theautochannel.com
