The acquisition strategy pursued by the six publicly-owned megadealerships since their advent in the late 1990s was abruptly curtailed as rare losses struck four members of the group in the third quarter.
Although two other publics, Asbury Automotive and Penske Automotive Group, stayed profitable, the entire group united in turning off the acquisition faucet.
Divestiture of domestic-brand dealerships took hold as a priority tactic for the ‘public’ group.
The quarter's largest loss came from top-volume megadealer AutoNation, Inc., amounting to $1.41 billion. The 244-store AutoNation, based in Fort Lauderdale, FL, saw its third quarter revenues plummet 21.5% to $3.54 billion from a year ago.
Chairman and CEO Mike Jackson pointed to a ‘full-blown credit panic’ in September, and AutoNation's new-vehicle sales tumbled 24% in the full quarter. AutoNation's nine-month revenues fell to $11.4 billion from $13.2 billion a year ago. The giant network's nine-month net loss of $1.3 billion compared to net income of $230 million in the same 2007 period.
AutoNation opened a new Mercedes-Benz dealership (its 14th) in Delray Beach, FL, during the third quarter, while joining other publicly-owned groups in trimming its dealer count. Four domestic-brand stores were sold and one terminated.
Lithia Motors, reporting a net income loss of $2.63 million in the July quarter, said it had divested 14 dealerships in the past year out of 29 in the for-sale category.
Fifteen of Lithia's original collection of Chrysler stores have been put up for sale or sold, the latest being a Chrysler-Dodge store in Wenatchee, WA, Lithia Ford and Lithia Mercedes of Omaha and Lithia Chrysler Jeep Dodge of Butte, MT.
Based in Medford, OR, Lithia also unloaded two used-car superstores it had built as the kickoff of a “CarMax”-like strategy.
Sonic Automotive, based in Charlotte, NC, and Houston-headquartered Group 1 Automotive, also report ongoing divestitures and proposed selloffs of domestic brands, reflecting reaction to unaccustomed net income losses in the third quarter.
Sonic president Scott Smith says 12 of its original 144 stores were left on its for-sale list, after divestiture in the summer of two domestic brand stores in CA and FL.
Group 1's president and CEO, Earl J. Hesterberg, says five franchises had been added early in the year, but a “handful” of domestic-brand stores were for sale and one, a Buick-Pontiac-GMC-Cadillac dealership, was sold during the third quarter in Beaumont, TX.
“There are a lot of buyers out there for domestic brands, even though we have stores making a lot of money despite the sales downturn, like our Ford store in Lubbock, TX,” says Hesterberg.
In suspending acquisition activity, Penske Automotive Chairman and CEO Roger Penske reports net income for the quarter of $24.2 million, off from $43.4 million in the prior year. Revenues fell from $3.4 billion to $3.0 billion as new-vehicle sales slid 19.3%.