Two years ago, Lithia Automotive Group ranked 75th on the Ward's Dealer Business list of top 100 megadealers. Last year, Lithia went to No. 24. This year, the Medford, OR-based company climbed to the No. 12 slot on sales of 68,700 units and revenues of $1.24 billion.
This rise is the result of an aggressive acquisitions strategy that includes the addition of 13 dealerships (revenues of $585 million) in 1999.
It brings the company's total to 41 dealerships and 101 franchises in six states: Oregon, California, Washington, Idaho, Nevada and Colorado. Two-thirds of the company's business is in domestic makes, one-third in imports.
"We've added 10 to 13 dealerships a year since we went public in December of 1996," says Jeff DeBoer, VP of finance and investor relations. ", and account for about 70% of our sales."
With the exceptions of Denver and the San Francisco Bay area, Lithia eschews the large metropolitan areas in favor of mid-sized markets.
Mr. DeBoers says, "We're in Reno instead of Vegas, Spokane instead of Seattle. The mid-sized markets are less dealer-saturated.
"Plus, it's easier to keep employees in smaller markets, where employees tend to be more loyal. In a big metro area with hundreds of dealerships, it's a real challenge to get your people on board for the long term."
Careful market selection is not the only operational trait that distinguishes Lithia's acquisition philosophy; rate of growth is also deliberate and disciplined.
"We tend to buy dealerships one or two at a time instead of buying them in large groups," says Mr. DeBoer. "And we like to buy very average stores rather than great performers. That way we pay less for the stores, and the return on investment is higher, for us and our shareholders.
"Then we add value to our acquisitions when we put in our operating model."
Following an acquisition strategy similar to's "hub and spokes" approach, Lithia calls its strategy "platform and fillins."
A major difference is that Lithia builds its platform dealerships rather than buy them. Mr. DeBoer says it's cheaper to build than to buy, and the economies of scale can be realized sooner.
"Our operating model is a proven model," he says. "We're not experimenting with new theories about how to reinvent the auto retailing business, we're simply trying to maximize the franchise.
"We're especially strong in used cars and F&I. Most dealers concentrate on new cars, service and parts. But concentrating on used cars and F&I, we've been able to add tremendous value to the stores we've acquired.
"Our operating model calls for selling 1.5 used cars to one new. In some stores we're selling two and three used to one new. That's critical to making the dealership more profitable." In F&I, Lithia's company-wide sales rank it at the top in terms of dollars added per sale.
"We're doing just under $900 per vehicle in F&I compared with around $400 industry-wide," reports Mr. DeBoer. "It's a very quick fix that we're able to bring to most of our dealerships."
The DeBoer family has been in the dealership business since 1946, when Walt, Jeff DeBoer's grandfather, came home from U.S. Navy service in World War II and opened a single-pointstore in Ashland, OR.
Today,has 2,850 employees, 600 in Medford, OR, where the company is headquartered.
Lithia is headed by Sidney DeBoer, Jeff's father, and Dick Heimann, a former Chrysler executive.
"That's another reason for our success," observes Jeff DeBoer. "A partnership at the top that brings together a successful, entreprenurial dealer and a highly disciplined, detail-oriented industry veteran."