Megadealers Love Those Vehicle Discounts

It's unanimous. CEOs of the nation's six publicly owned dealership chains liked the summer's employee-price incentives so much they want them renewed.

The third quarter, when the employee-price incentives were in effect, brought the megadealers substantially higher sales and profits compared to the same period a year earlier.

AutoNation, Inc. racked up a record performance in the quarter, with Chairman and CEO Mike Jackson declaring, “I fully applaud the manufacturers' programs to rationalize inventory.”

Jackson, whose top-volume AutoNation sold 109,766 new cars in the quarter (up 2%), had criticized the domestic manufacturers in 2004 for “over-supplying” dealer inventories.

UnitedAuto Group (UAG) entered the fourth quarter with inventories in “great shape,” asserts Chairman and CEO Roger Penske. UAG, the second largest megadealer, recorded the 26^th straight quarter of rising revenues, Penske says, despite the gasoline-price spikes and higher interest rates.

UAG is buying six Cush group import stores in the San Diego market — two Honda, two Acura, one Jaguar-Aston Martin and one Mazda. UAG sold 51,171 new vehicles in the quarter, up 10.2%.

Third-ranked Sonic Automotive retailed 39,825 new units in the quarter, a jump of 9.6%. President and CEO Jeffrey Rachor says, “We're watching to see if the auto makers resume incentives like those they had in the summer. They were a sales booster.”

Asbury Automotive boosted its new-vehicle sales in the quarter by 13.6%, to 29,256 units. Asbury President and CEO Kenneth Gilman says employee-price discounts had been so effective “we ran out of desirable vehicles.”

Asbury came up with a divestiture surprise, announcing it is seeking a buyer for the former Thomason stores in the Portland, OR market. Asbury offset its decision to divest of the “under-performing” Portland platform by building a new Lexus dealership building in St. Louis and acquiring BMW and Honda stores in Fort Pierce and St. Augustine, FL, respectively.

Lithia Motors' picture is equally upbeat. New-vehicle sales shot up 11.4% in the quarter to 18,926. Lithia President Dick Heimann says new-vehicle sales could be “leveling off in the fourth quarter, but we're preparing our used units for sales if that happens. Used cars are getting a lot of focus at Lithia.”

Group 1 Automotive joined in the segment sales trend despite sustaining the most dealership damage during Hurricanes Katrina and Rita that hit New Orleans and southeast Texas.