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Old 02-08-2008, 12:29 PM   #1
Join Date: Nov 2007
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Default AutoNation Conference Call - Reflections on the Industry

I had a chance to review the AutoNation Conference Call and wanted to share the following excerpts:
  • Management feels that the country is 24 months into a downward cycle that typically lasts 30 - 40 months. They do not forecast a recovery for the retail car market until the first half of 2009.
  • Gross Margin was compressed on both New and Used vehicles for the Quarter.
  • The wholesale auction was very soft in December and they chose to "retail out" of some of their used vehicles - this contributed to the margin compression.
  • They purchased two dealerships (Lincoln Mercury and Nissan) and disposed of three dealerships in the Fourth Quarter. They did not indicate the Franchise or location of the stores that they sold. (They sold a total of 14 stores in 2007)
  • California and Florida are the weakest areas but they continue to perform well in Texas.
  • The lower rates by the Federal Reserve will have a favorable impact on Flooring expenses and profitability.
When asked about their ability to acquire more dealerships at a discounted price, management responded that although the pool of sellers has increased, the price they are willing to accept for their dealerships has not dropped.

Concerning Texas, they remarked that Texas had already been through an economic downturn when Enron collapsed several years ago. The downturn lasted for about 30 months - just like their prediction for the U.S. Economy.

Lithia has their Conference Call later this month - it will be interesting to see how the two companies compare.
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Old 02-08-2008, 02:53 PM   #2
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Texas is an amazing market. That being said, once the oil dries up, the vehicle market will be soon to follow. Right now, our most profitable Store is in Odessa, TX, where the oil drillers put 250,000 miles on their vehicles and purchase new vehicles every six months.
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