Dealership chains braked acquisition plans last year but are stepping on the
gas again in 2001, according to industry magazine Ward’s Dealer Business.

Independent new car dealers are less likely to sell their stores in a good
year — such as 2000’s record-setting pace of 17.4 million vehicle sales.

Conversely, dealers are more prone to sell out in a softer economy – such
as in the U.S at present.

"It’s a hard decision for an entrepreneur to sell when times are at a
peak," Brian Kendrick, CEO of Asbury Auto Group of Stamford, Connecticut,
said.

"We think this [dip in the market] is a great opportunity to continue
consolidation."

AutoNation Inc., a publicly owned Fort Lauderdale, Florida, corporation that
owns 290 dealerships in 18 states and had revenues of $20.5 billion in 2000,
topped Ward’s annual Megadealer 100 listing of top dealership groups.

Runner-up was Sonic Automotive, based in Charlotte, North Carolina whose 116
dealerships in 13 states took in $6 billion last year.

The top 100 sold 5.1 million new and used cars and trucks for revenues of $101.5
billion in 2000, a 13 percent increase over 1999.

Dealerships owned increased by 129 to 1,725 in 2000.

Despite that eight percent increase, Ward’s notes that it was a far cry from
the top megadealers’ buying sprees of a few years ago.

AutoNation alone would purchase close to that many dealerships in a year when
it was aggressively building its network.

The threshold for entry onto the top 100 list keeps rising.

Last year’s 100th spot was held by a company with $235.6 million in revenues.

This year the final spot is occupied by the Southern Hospitality Automotive
Group of Chesapeake, Virginia, with revenues of $261.8 million in 2000.

Geographically, the bulk of the top 100 holdings are in fast-growing ‘sun
belt’ states such as California, Arizona, Texas, Georgia and Florida.

Megadealers are attracted to those states because of their expanding populations
and economies.

The top 100’s leaders, despite their size and scope, tend to take a hometown
approach to vehicle retailing.

"We’re all coming closer to the model that is right for large megadealers/consolidators
in this marketplace, which is to run it close, run it with operators at the
local level, to focus on the retailing aspects and to fine-tune our retail strategies,"
says Asbury Automotive’s Kendrick.

He adds, "There are very few synergies to be reaped from a national (consolidation)
strategy.

“Most of the synergies in our business exist with local level advertising.
We’ll continue to do that. We believe that is the right strategy. I think we’ve
seen everybody come full circle around to that."

AutoNation, when it was known as Republic Industries, was the pioneer of megadealers.
It started rapidly buying dealerships in the early 1990s.

In doing so, it met resistance from car manufacturers and criticism from the
National Automobile Dealers Association.

Manufacturers worried that AutoNation and similar companies would gain too
much clout, and start dictating terms to the vehicle makers.

There was even talk that AutoNation might ‘brand’ its own car line.

The NADA fretted that the megadealer’s appetite for dealerships threatened
the independents but those fears went unrealised, Ward’s claims.

"AutoNation eventually managed to convince the manufacturers that they
were in the business of selling cars, not running car companies," says
Steve Finlay, editor of Ward’s Dealer Business.

"NADA was appeased when their dealers, in large numbers, joined the association."

The Ward’s Megadealer 100 ranks the top dealer groups in the country according
to total revenue generated within the previous calendar year.


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