Publicly owned dealership chains have intensified their dealership realignment strategies of selling domestic-brand franchises while seeking out luxury and premium stores. Each reports a pattern of disposing of “under-performing” domestic-brand stores and acquiring luxury or premium domestic and foreign brands.
AutoNation, which had a record-high 298 stores in 2000, now has 248. Most of the sold stores handle domestic brands.
AutoNation reacted to a slide in its second-quarter revenues and profits by purchasing Don Mackey BMW in Tucson, AZ, its 13th BMW stores, and a Chrysler-Dodge-Jeep store in Bellevue, WA.
“We're near the end of our sell-off phase,” says AutoNation Chairman and CEO Mike Jackson. “Our vehicle sales in the quarter plunged 11% in our key markets in CA and FL, due to impact of the housing slump, but we're counting on a leaner organization and dealer portfolio to facilitate our rebound.”
The domestic-brand sales slowdown hit hard at Houston's Group 1 Automotive. Group 1, whose stores saw a Ford vehicle sales decline of 20% from a year earlier, responded by unloading five franchises in the quarter and 15 for the year-to-date.
President and CEO Earl J. Hesterberg says 96-store Group 1 made no acquisitions in the second and third quarters and was “aggressively” hunting for luxury and import dealerships outside its Texas and Oklahoma platforms.
But, like other megadealers, Hesterberg reports sales and margins were reaching plateaus or even receding in Toyota and Honda brands. Toyota accounts for 37% of Group 1's brand mix; Honda and Ford account for about 12.4% each.
The slow market for new vehicles has crept into even the high-line imports, both Hesterberg and Sonic CEO B. Scott Smith agree.
Sonic's CFO David Cosper says Sonic had divested itself of a subprime lender, Cornerstone Acceptance, for $33 million, regarding non-prime financing as “a business we never were comfortable in.”
The 154-store Sonic acquired a BMW/Mini dealership in Long Beach, CA, during the third quarter and continued its program of divesting “under-performers” on a gradual basis, selling 15 franchises so far this year.
“We're primed for growth in an upcoming environment we feel will be ripe for acquisitions,” says Smith. “Several of the luxury makers are asking their dealers to invest millions into dealership renovations or new stores — and some of these guys may be ready to sell out in one to two years rather than spend the money.”
“On the remarketing side, we're changing our luxury import used-car lots to an all-brand culture,” Smith says. “We see that as growth.”
Penske Automotive Group, whose quarterly brand mix for the first time was topped by BMW at 21% and year-to-date share at 22%, sold no stores in the period, but purchased one of the United Kingdom's largest Ferrari stores.
Penske has divested 10 U.S. franchises this year and said it was considering deploying a “virtual” online vehicle auction in the U.S. similar to one now operational in the UK.
Penske's central region stores in the U.S. are undertaking remarketing “best practices” programs developed by Chicago-based First Look, Penske said. First Look is a Ryan Enterprises company offering dealers upgraded pre-owned and new vehicle programs.
Ex-Retired Dealer Ira Rosenberg Is Back in the Game
Prime Motor Group of Saco, ME, has purchased nine dealerships in three states from the Clair Auto Group.
Dealerships in Massachusetts include Toyota, Scion and Honda on the West Roxbury/Dedham Line, Acura in Walpole and Mercedes Benz and Porsche-Audi in Westwood.
An Acura dealership in Hampton, NH, was also acquired, as were Honda, Volkswagen and Ford, Lincoln Mercury and Mazda dealerships in Saco.
Ira Rosenberg, previous owner of the Ira dealerships in Danvers, MA, came out of retirement five years ago to form Prime Motor Group.
It operates Toyota, Scion, Hyundai, Nissan and Mercedes-Benz dealerships in Maine and in Massachusetts.
In discussing his return to the automotive business, Rosenberg says, “Our success in Maine proves that if you treat people right, you'll have a customer for life.”
Clair Auto Group was started in 1964 by Ernie Clair. When he retired, his sons, Joseph, James, Mark and Michael, took over the individual dealerships.