TOP CONSOLIDATORS ARE HIGH ON F&I

Publicly owned mega-dealers did their finance and insurance home-work, and made sub-stantial gains on all fronts, including share of gross revenues last year.

As more dealerships were added to their holdings, the top consolidators listed on the New York Stock Exchange found their F&I income increases ranging from 30% to 150% over 1998.

But, in a trend reflecting more concentration on the contribution of F&I departments to bottom-line profits, F&I shares of gross revenues advanced across the board, as well.

Four of the publicly-owned consolidators broke new ground in F&I achievements during 1999.

Top megadealer AutoNation's record $478 million in F&I revenues soared 150% from 1998.

UnitedAuto Group cracked the 4% threshold on F&I's share of total revenues, the first publicly owned mega ever to do so.

Sonic Automotive's boost in F&I income from 1998 to 1999, amounting to 143.2%, kept in step with its fifth place among megas in total annual revenues.

Lithia Motors averaged $884 per vehicle sold for F&I receipts, which it contended approached a peak for any dealer group, public or private.

Group 1 Automotive reports averaging $740 to $750 a vehicle on F&I products and services last year, compared to $547 when it was formed in 1996. Group 1 says it would have done better except for the rises in interest rates that hurt some dealers' F&I performance in the fourth quarter.

At United Auto Group, whose 1998 F&I penetration matched Lithia's at 3.6% of gross revenues, 1999 F&I income of $165.7 million jumped 30% and gave the consolidator a 4.1% penetration total.

Always an F&I-oriented consolidator, UAG refocused on internal operations after last summer's reorganization under a new chairman and CEO, Roger Penske.

He says, "We showed solid growth throughout our 63 stores in the year and the fourth quarter, passing the 4% F&I penetration target. F&I also gave us profit margins in 1999 ranging from 56% to 60%, also meeting or passing our goals."

For 2000, Mr. Penske forecasts a total-revenue "run rate" of 8% to 10% above last year's gross income of $4 billion, an all-time high for the third largest publicly owned consolidator on the Ward's Dealer Business Megadealers' 100 list.

Increases in F&I earnings also accompanied penetration rises for other major publicly owned megadealerships such as AutoNation, Inc., Sonic Automotive and Group 1 Automotive.

Top-ranked AutoNation, with 290 dealerships and $20 billion in gross revenues in 1999, boosted its F&I share from 1.3% to 2.4%.

Though many of its individual dealerships surpassed that penetration percentage, the Fort Lauderdale, FL-based corporation was beset by a money-losing used-vehicle superstore division which Michael Jackson virtually scrapped last year when he became AutoNation's president and CEO.

Mr. Jackson plans to revitalize F&I operations on the in-house Compass Internet Web site, which will link all AutoNation dealerships and F&I providers for customer convenience in ordering vehicles, applying for loans and leases and buying insurance and extended warranties.

Sonic raised its F&I penetration from 2.2% to 2.5% as its revenues climbed to $82.7 million on gross receipts of $3.35 billion. The Charlotte, NC-headquartered consolidator is projecting a "run rate" of close to $6 billion this year because of its late-1999 acquisition of the 29-store FirstAmerica group in California and Nevada. That move is estimated to more than double its F&I yield.

Jeff DeBoer, Lithia's finance vice president, reports from the 41-store's Medford, OR, headquarters that it brought in $46.4 million in F&I business last year, up 80.6% from 1998. The F&I share of 3.7% edged up from 3.6% in 1998, still higher than any NYSE group except UAG.

"We're shooting for $900 in F&I income per vehicle sales this year," Mr. DeBoer declares. "We arranged 73% of our F&I business last year, which is a number we'd like to raise even higher. Our stores all have at least three F&I managers to maximize sales and we're looking also at reaching the 4%-of-revenue group in 2000."

Lithia's gross income in 1999 of $1.2 billion topped $714 million the year before by 74%.

Group 1 Automotive, headquartered in Houston, raised its F&I receipts by 59% to $78.7 million for a 3.2% penetration finish.

Its F&I portion, however, trailed rival Sonic's by exactly $4 million for the year after surpassing its North Carolina rival by $49.5 million to $34.0 million in 1998, due to Sonic's steeper climb in dealership acquisitions.

Group 1's chairman, president and CEO, B.B. Hollingsworth, Jr., expects, with more dealership acquisitions, to add $600 million in revenues this year to 1999's $2.5 billion in gross revenues.

Group 1 already has completed six acquisitions in February, including the Boston-based Ira Automotive Group, with $290 million in revenues per year, and the New Orleans Bohn dealerships with $180 million.

"We're heavily focuses on F&I and fixed-cost absorption improvements," says Mr. Hollingsworth. "Group 1 averaged 70.3% fixed-cost absorption in the fourth quarter, which was about tops in our sector."

In 1998, Group 1 had a 2.9% F&I share of total revenues.

Sonic in March purchased the three-store Riverside Dealership Group in Tulsa, OK, plus three dealerships owned by Blount Strange in Montgomery, AL.

That's Sonic's first acquisitions of 2000 after adding 73 points in 1999. The new acquisitions, says Sonic Chairman and CEO O. Bruton Smith, add approximately $425 million in revenues to Sonic's annualized "run rate."

UAG added two dealerships early this year as the rapid pace of consolidator acquisitions slowed markedly from that of 1997-99. Mercedes-Benz of San Diego, located in Kearny Mesa, CA, and Long Ford, Jacksonville, TN, near Little Rock, AR, were purchased for undisclosed sums.

Mr. Penske says those two stores will add about $130 million in annual revenues to UAG income. Long Ford has been renamed Landers Ford North.