Lithia Motors Sees Stock Prices Sink

Even in relatively good times Sid DeBoer expressed disappointment about what he considered to be Lithia Motors' under-valued stock.

Now, with the auto industry treading water, there are other kinds of worries for Lithia's chairman and chief executive officer: Lithia stock is selling for less than a tenth of what it did at its high-water mark of $35.75 in March 2006, making the company vulnerable to a hostile takeover.

While Lithia Motors battens down the hatches for potential take-over storms, it also was the indirect beneficiary of GMAC receiving $5 billion in federal government aid.

“It's good news for us,” DeBoer says in the Medford Mail Tribune newspaper. “It replenishes our ability to sell cars. Twenty percent of our sales are GM and we have a lot of Chevy stores.”

To protect its top executives, Lithia's board filed a change-of-control plan with the Securities and Exchange Commission, assuring top management would not walk away empty-handed if the company was rousted away by an outsider.

“The board insisted on doing this,” DeBoer tells the Mail Tribune. “We're such a bargain, trading at 30% of book value and no goodwill on the books any more. The board wanted management to focus on the now and not looking ahead or worrying about whether there's a takeover.” Goodwill is a premium beyond the actual value of a business. It's often related to the brand identity of the company being purchased or the established customer base of that business.

There are roughly 20 million shares of Lithia stock.