Mega Dealers Switch Gears

Publicly-owned megadealers this summer underwent a reversal of the expansion trend which led to their growth over the past 10 to 12 years.

AutoNation Inc. CEO Mike Jackson says the Chrysler LLC and General Motors Co. downsizings and bankruptcies brought about the sale or shutdown of 21 of AutoNation's 232 stores.

Twenty-eight additional stores were added to the No.1 megadealer's endangered list, also mostly Chrysler and GM stores. Seven of the dealerships were Chrysler Group outlets.

AutoNation's president and COO, Mike Maroone said the shakeout of dealerships would significantly raise the through-puts (sales per dealership) and profit margins of surviving stores in overdealered markets.

“We have contended since our beginnings that the Detroit 3 are carrying far too many dealerships in metro markets,” Jackson says. “Closing underperforming stores is a traumatic situation, but we are endeavoring to transfer terminated employees to other AutoNation stores.”

The second-ranked Penske Automotive Group, by contrast, lost only three stores — two Chevrolet and one GM dual. But Chairman and CEO Roger Penske offset that debit by announcing the addition of three Smart minicar dealers to the brand's 75 in the U.S.

He discloses plans to sign on a “goodly number” of the 350 Saturn stores Penske expects to acquire from GM.

A report that Penske had approached Renault to produce cars for Saturn was not confirmed by Penske, but he did reveal that the brand would be “globalized,” going on sale in Germany and the United Kingdom with vehicles produced by another auto maker.

The smallest of the publicly owned chains, Lithia Motors, was shorn of three GM and two Chrysler stores.

Lithia Chairman and CEO Sid DeBoer says that “far from losing ground with fewer dealers, we've added seven Dodge franchises to Chrysler-Jeep stores and expect to gain market share wherever we wind up with fewer dealerships.”

Group 1 Automotive escaped from any GM or Chrysler dealership cutbacks, although it did sell a Ford store in March and terminate a New York Volvo franchise in June.

President and CEO Earl Hesterberg says the Houston-based network of 100 stores was about to return to a serious look at potential acquisitions, having ended its status quo position by purchasing a Hyundai franchise last April.

“Purchasing prices for dealerships have become more attractive since the GM and Chrysler bankruptcy store reductions and more stores are for sale, but we'll be conservative in what we do,” Hesterberg says.

Sonic Automotive, the third largest megadealer, with 130 stores, was pared of six GM dealerships and 12 franchises. Jeff Dyke, Sonic's executive vice-president for operations, says 16 Sonic dealerships have been listed for disposition as underperformers.

The Asbury Automotive Group, which is combining its nine separate dealership operations into one centralized entity based in Duluth, GA, is disposing of four Chrysler and six GM stores, leaving it with 78.

Asbury sold a Mercedes-Benz store in Sacramento, CA, for $8 million during the second quarter. Two GM and one Chrysler store were terminated as part of the bankruptcy downsizings. Asbury is the sixth largest megadealer.