MEDFORD, Ore. -

Along with sharing their perspective on Chrysler’s stair-step incentive program, Lithia Motors’ top executives joined the parade of large publicly traded groups answering questions about their acquisition strategies.

In Lithia’s case, president and chief executive officer Bryan DeBoer said the company’s dealership footprint is going to have to grow in order to achieve its revenue and sales targets.

A year ago, Lithia purchased four stores and was granted two new dealerships, contributing estimated annualized revenues of $260 million.

“We continue to emphasize acquisitions as one of the long-term drivers of growth for Lithia,” DeBoer said. “We remain focused on increasing our store count through acquisitions in 2013, and believe that compelling opportunities currently exist in the marketplace.”

Lithia admitted that its store count could have grown by more than six if circumstances unfolded differently. At the close of 2012, the company boasted 87 stores with 23 of them being Chrysler operations.

“We thought there would be a little bit of a flurry at the end of last year,” DeBoer told analysts during a conference call on Wednesday. “It never really happened because prices seemed to be adjusted upward because they thought they could at that time because they thought there was going to be a frenzy to some extent.

“However, I will say this: After the start of the year, it’s probably the most active acquisition environment that we’ve seen since we’ve been public,” he continued. “A lot of the deals are priced again at higher numbers. Some of the sellers maybe even adjusted for the 5 percent or 8.8 percent increases that came through taxes. But we still believe because of the quantities, there’s probably an oversupply of deals. We’ll probably be able to buy them at our pretty stringent (return on equity) threshold. It just may take us a little longer than expected. It’s very active.”

After dissecting Lithia’s current balance sheet and past financial reports, one analyst wondered if Lithia might utilize $500 million or more to make acquisitions this year, a level the company usually doesn’t exceed. DeBeor responded by reiterating the company’s ROE mandates as well as the potential for buying stores east of the Mississippi River. Lithia’s primary footprint currently is in the West.

“That’s why we’re moving into the East because we don’t want to relax our ROE threshold to find the right acquisitions. More importantly, the Lithia model is all about small- to medium-sized markets. In luxury, we’ll go into metropolitan areas, but we want franchise exclusivity, which means we have to expand our wings,” DeBoer said.

“We don’t want to get acquisitions that get ahead of our people. We currently are growing people at a rapid enough rate,” he went on to say.

Should Lithia bolster its presence somewhere on the East Coast, DeBoer indicated the company would have to approach personnel issues prudently.

“If we find stores in the East that have good people and we’re able to relate with and integrate into our team, it makes it a lot easier to grow at a faster rate,” he said. “But we’re building the model that no matter what happens with the existing staff, our people can populate stores if necessary.”

Sid DeBoer, Lithia’s founder, executive chairman and chairman of the board of directors, praised the direction the company’s acquisition track is going.

“Bryan and the acquisition team are so focused on finding the right mix of people, the right mix of brands and that return on investment on an analytical basis way better than we used to be in terms of acquisitions,” Sid DeBoer said.

“We don’t want targets that have a deadline. I’m quite confident this team is going to perform on the acquisition side better than we ever did in the past,” he added.

Lithia’s Take on Chrysler’s Stair-Step Incentives

Later in Wednesday’s call, analysts wanted to know Lithia’s position on Chrysler’s stair-step sales incentive since nearly 25 percent of the dealer group’s store network moves that OEM’s metal.

Sid DeBoer replied by asking if the analysts heard comments from AutoNation’s Mike Jackson during the recent National Automobile Dealers Association Convention and Expo.

“(Jackson) said the problem is they work,” DeBoer recapped.

NADA took a hard stance last summer against stair-step incentives that sometimes reward dealers as much as $500 or more per unit if they sell more new vehicles above a predetermined objective. Former association chairman Bill Underinner said, “The fact is manufacturers can unfairly create real competitive disadvantages for some dealers and cause real customer confusion and dissatisfaction in the marketplace.”

Meanwhile, DeBoer is on the Chrysler National Dealer Council and said he is privy to what the automaker is planning to do regarding stair-step incentives.

“As a growing company that’s taking market share, we can benefit from stair-steps,” said DeBoer, who added that 93 percent of Lithia’s Chrysler dealerships hit the automaker’s targets in January.

“A guy that’s asleep and not doing well, he gets hurt by it,” DeBoer continued. “We want to be on the front of all of that. I’m not going to be a voice that says they’re great. But I think as a whole, Lithia benefits from stair-step programs.”

Bryan DeBoer took a similar position on the issue.

“They are aggressive numbers but it keeps us focused on volume, and I think it’s an important thing in retail that you are always trying to improve and living our value of continuous improvement,” Bryan DeBoer said.

“The numbers they gave us for the first quarter were pretty steep. They had to be better than the previous year and we were coming off a pretty strong year. Somehow we seem to be able to find customers and get some conquest sales from the other domestics and imports to be able to achieve them. We’re challenged by them,” he went on to say.

Nick Zulovich can be reached at nzulovich@autoremarketing.com. Continue the conversation with Auto Remarketing on both LinkedIn and Twitter.