Asbury Automotive Group is being affected by stop-sales related to the ongoing Takata airbag recall to the point that some company stores are running out of available space to park them.
The company on Tuesday reported a 4 percent dip in used vehicle retail revenue during the second quarter, with unit sales down 5 percent on a same-store basis.
However, “With better used vehicle management, we were able to improve our gross profit per unit by $114 to $1,769, our highest level in a year,” David Hult, executive vice president and chief operating officer, said during a conference call in which company executives discussed quarterly earnings.
According to Hult, stop-sales tied up 10 percent or roughly $16 million of Asbury’s inventory in the second quarter. That’s up from $14 million in the first quarter.
About a third of the automotive group’s more than 80 stores are affected by stop-sales. At some stores, as much as 40 percent of inventory is impacted.
“We’ve been told by our partners that they’re going to take care of the customers first, inventory second,” Hult said. “We are being compensated.”
As far as how the OEMs are making up for vehicle depreciation, that varies, he said.
“Every OEM is different. On some of them, there will be no economic impact. On others, there will be probably some loss that we’re going to suffer by the time we get these lots cleared.”
How fast the lots get cleared, of course, depends on how fast the replacement airbags arrive. Recent estimates indicate that only a fraction of the 70 million or so recalled vehicles in the U.S. have been repaired.
“They’re (the airbags) coming in on a very light flow, but not what we expected by this point. And what we’ve heard most recently is we shouldn’t expect to see them in any kind of volume until later in the third quarter, potentially early fourth quarter,” Hult said.
Craig Monaghan, president and chief executive officer, chimed in on a scenario in which “40 percent of your inventory is on stop-sale, and we’re running out of space.
“In some cases, we’re looking for nearby lots to park these vehicles,” he said. “It has become very disruptive. But they are vehicles that, when we get the airbags, that we think are going to be very marketable. So we are holding on to them for the most part, and we’re just going to ride this thing out.”