On Monday, Holman Automotive said it has completed its acquisition of Kuni Automotive.
As they did when the transaction was first announced back in April, Holman officials said the terms of the deal will not be disclosed.
The Kuni Automotive dealerships located in Washington, Oregon, California, Colorado and Kansas that were acquired will now operate as “Kuni Automotive, a Holman Enterprise.” The deal doubles Holman Automotive’s retail business, which will now have:
—More than $3 billion in annual revenue
—40 dealership franchises and 19 brands at 34 locations
—Nearly 3,000 employees.
The company insisted this acquisition makes Holman Automotive one of the largest privately owned dealership networks in the nation. Holman’s existing dealerships are located in New Jersey, Florida and Pennsylvania.
In addition, officials pointed out the transaction will positively impact the Wayne D. Kuni and Joan E. Kuni Foundation, a charitable foundation that has supported cancer research and worked to enhance the lives of developmentally disabled adults since 2005.
As the majority stakeholder in Kuni Automotive, the Kuni Foundation will receive funding that will help to support its philanthropic work well into the future. The foundation expects to be able to broaden the scope and geography of its charitable outreach as well.
“This acquisition aligns with Holman’s strategy of investing in and growing our retail business outside of our existing platforms,” said Melinda “Mindy” Holman, chairman of the board of Holman. “But it is important to recognize that our two companies are a great cultural fit, which was a very important consideration to us as we went through this process.
“We look forward to sharing in the success we will enjoy together as we continue to define what it means to be a leader in the automotive industry, in our own communities and beyond,” Holman continued.
Former Kuni Automotive chief executive officer Greg Goodwin, who remains an integral part of the company, said he is excited for the Holman and Kuni employees who will benefit from the combination of the two dealership networks.
“Team members from both the Kuni and Holman sides of the deal will have the opportunity to explore new career opportunities within the larger organization and will learn a lot from one another, to the benefit of our customers,” Goodwin said.
Holman added that it plans to remain a privately owned company “as it continues to grow and flourish.”
Capital One recently announced that it provided a $12 million floor plan revolver to Fahrney Automotive Group in Selma, Calif. Capital One also provided a $10.4 million construction line of credit that will enable the group to house each of its three franchises in separate facilities.
“This is the first construction loan in California for our automotive dealer commercial services business,” said Michelle Carriere, senior vice president and manager of Capital One’s Commercial Dealer Services Group. “We have grown the national reach of our business in the past few years, and we’re also expanding our capabilities to serve the full range of financing needs for our clients.”
The group’s Toyota dealership — Toyota of Selma — will move from its current building to the new facility, which will be located adjacent to Highway 99 — the major conduit between Fresno and Los Angeles.
Fahrney Buick/GMC, which shares a building with Swanson-Fahrney Ford, will move to the old Toyota building and be renovated to General Motors’ brand standard.
The Fahrney Group is owned by Jerry and Don Fahrney and is celebrating its 60th anniversary this year.
“We pride ourselves on delivering quality financing that meets each customer’s unique needs,” said Linda Grissinger, vice president and regional sales manager for Capital One Commercial Bank. “Timing was a critical element for this deal and, from the outset, we worked closely with the Fahrney Group to ensure that we could successfully execute the transaction and enable them to move forward with their planned expansion.”
The new Toyota facility will be one of five locations in California with a jewel box, a two-story glass enclosure that dealerships use to showcase vehicles. It will serve as a landmark for the more than 68,000 people who will pass the new facility each day.
Jerry Fahrney added, “We’re a family business and we value relationships.
“Throughout the transaction, Capital One demonstrated a level of responsiveness that truly showed their dedication,” he went on to say. “At the same time, we appreciated the fact that they had the capacity to meet all of our financing needs in a single transaction.”
Capital One Bank’s Commercial Dealer Services Business can provide a wide array of banking and lending solutions to franchised dealerships, as well as provide dealerships with strong retail support through Capital One Auto Finance.
Capital One Commercial Bank leverages a relationship-based banking model that can deliver an array of products and services including loans and deposit accounts, treasury management services, merchant services, investment banking, international services and correspondent banking.
The largest automotive retailer in the U.S. just got a little bit larger.
AutoNation, Inc. announced Thursday that it will add four stores in the Westchester County, N.Y. area. The stores represent approximately $190 million in annual revenue, and will be fully acquired by the company in the third quarter of 2016, after completing the customary terms and conditions.
"These acquisitions will greatly enhance our brand mix, positioning us with outstanding premium luxury offerings in this new market,” Mike Jackson, AutoNation's chairman, chief executive officer and president, said in a news release. “We look forward to welcoming the BMW, Jaguar and Land Rover customers and 140 new associates in Westchester County to AutoNation."
The four stores are: BMW Mt. Kisco, Land Rover Mt. Kisco, Jaguar Land Rover Larchmont/New Rochelle and White Plains Jaguar. The stores were acquired from The Premier Collection, expect White Plains Jaguar, which AutoNation purchased from DiSimone Imports.
The stores will be either renovated or relocated within the area. BMW Mt. Kisco will receive a renovation, while the Land Rover Mt Kisco store will be completely relocated and combined with Jaguar in an entirely new facility, which the news release states will be “state-of-the-art.”
The Larchmont/ New Rochelle Jaguar location will be renovated and expanded. AutoNation expects the newly constructed facilities to “generate approximately $100 million in additional revenue one fully operational.”
Larry H. Miller Dealerships just welcomed three new stores into the family.
LHM Dealerships on Tuesday announced the acquisition of three stores in Colorado, with the purchase of Cherry Creek Dodge in Denver, Fiat of Denver and Colorado Chrysler Jeep in Aurora. The dealership group owns 11 stores in Colorado after this move.
“We’ve been strategic in our approach to growth and in finding opportunities that are a win-win for the seller, employees and our company. Denver is a strong market for us and these brands are a great fit with our business model,” Dean Fitzpatrick, president of Larry H. Miller Dealerships, said in a news release. “With the acquisition of these dealerships, we are able to employ more Denver residents and deepen our connection and commitment to the community.”
LHM Dealerships, which operates 58 stores in seven states, said that it will retain all current employees of the newly acquired stores. This increases LHM's employee base in Colorado to more than 1,000.
Doug Moreland sold the three Denver area stores to LHM. Moreland, who sold seven Arizona locations to LHM in 2013, said he’s always been “appreciative of the way the LHM Dealerships group conducts business and takes care of its employees. … Their focus on customer service, community and giving back assures me that these stores and our customers will be in good hands.”
All three locations will be renamed to reflect their new ownership by Larry H. Miller Dealership group.
Asbury Automotive Group has opened a Q auto store in Holiday, Fla.
The latest used-car standalone store was announced Friday and is the second facility in the Tampa market. There is an existing Q auto store in Brandon, Fla.
Asbury also has a Q auto location in Fort Myers, Fla.
Casey Coffey, president of Q auto, said in a news release: “The Q is the key to our brand. The Q stands for three things that we know are very important to our customers: Quality, Quantity and Quickly. As we are demonstrating in our Brandon and Fort Myers stores, Q auto is changing our customers' buying experience by providing a completely transparent sales experience that the customer controls.”
Coffey added: “We have all the latest technology to allow customers to research easier than ever. We offer a large selection of reliable cars with no hassles and no pressure. Our customer experience is handled by one Q product specialist, from beginning to end.”
When the first Kerrigan Auto Retail Index was released at the end of March, the report said it was a bit premature to call the seven-year up-cycle in auto retail stocks over, but noted the handwriting was clearly on the wall.
“It is still too early to call the end of the cycle, but the public markets have clearly voted with their feet, driven by widespread concern about a slowing economy and concern about future profitability,” Kerrigan Advisors managing direct Ryan Kerrigan said in a news release when the inaugural report was released on March 31.
Well, a month-and-a-half later, public auto retailer valuations are really starting to feel the effects of gravity.
The KAR Index, which is a monthly index covering the seven publicly traded U.S. auto retailers, declined 9 percent in the last two weeks.
Specifically, the index had fallen to 452.29 when the market closed on Tuesday. Beyond the two-week change, the KAR Index is down 20 percent year-to-date and it’s off 36 percent from its peak on June 5, 2015, according to Kerrigan Advisors, which publishes the index.
The firm said three primary factors have driven the decline in May: high new-car inventory levels, compressed new-car gross margins and weak sales forecasts.
This follows what has been a topsy-turvy start to 2016.
“This is a continuation of a volatile first quarter,” Kerrigan Advisors managing director Erin Kerrigan said in a news release on the latest report. “After far outperforming the S&P 500 between 2009 and 2015 by over 700 percent, gravity is starting to set in.
“With sales growth slowing, auto retail will be a much more competitive industry going forward, likely resulting in lower earnings growth.”
Consider how the seven publics fared in Q1, for instance.
Even with revenues on the rise for most of these groups, five saw their net income decline, Kerrigan Advisors said — those being AutoNation, Lithia Motors, Group 1 Automotive, Asbury Automotive Group and CarMax.
The net income declines for AutoNation (down 14 percent) and Asbury (down 13.6 percent) were in the double-digit percentages.
New-car sales growth is also expected to dampen, with many analysts now projecting just 2-percent growth in the SAAR, according to the report. New-vehicle inventory has also proven to be problematic, the KAR Index report notes.
It cites comments that Group 1 chief executive officer Earl Hesterberg made to Reuters: "We simply have too much. More of the manufacturers are pushing more inventory. They are making more than they really need.”
Excess inventory and weaker sales forecasts are “having an impact on the public's forecasts, contributing to declines in the share prices,” Kerrigan Advisors indicates.
Jeff Dyke, executive vice president of operations at Sonic, is cited in the report as stating: “We continued to see gross profit compression in new vehicles and expect this to continue until inventory supply corrects to more normalized levels.”
High levels of inventory, along with online sales channels and greater consumer awareness, have contributed to a decline in new-car margins for these groups, the report said.
The report does show one bright spot, however.
“Although the public's share prices are depressed, there is a silver lining: Auto retailers have been taking advantage of the dip by repurchasing stock, allowing them to decrease the number of shares outstanding and increase their EPS,” Kerrigan said.
Even before the National Highway Traffic Safety Administration expanded the Takata airbag inflator recall earlier this month, several of the large publicly traded dealer groups were encountering the rippling impact observers such as Kelley Blue Book described.
Leaders from AutoNation, Asbury Automotive Group and Sonic Automotive each touched on how they’re handling the challenges of stop-sales preventing prime pieces of their used inventories from being turned as well as agitated customers calling their service departments inquiring when replacement parts would be available to complete repairs.
“Our thought process is this: If there’s a safety issue on a stop-sale car, we’re not going to retail it or wholesale it,” Sonic president and chief executive officer Scott Smith said when the group hosted its first-quarter conference call.
“We’re not going to go to sleep at night with that on our minds,” Smith said before trying to recall reports of a teenage girl who died when her airbag unexpectedly deployed during a minor accident.
“That’s not going to happen with us,” Smith added.
AutoNation chairman, chief executive officer and president Mike Jackson reiterated the policy the company has taken on recalled vehicles. Last September, AutoNation rolled out a strategy not to sell, lease or wholesale any new or used vehicle that has an open safety recall. AutoNation has since modified its position by sending some recalled units to auction.
“We can’t ignore the mother of all recalls here. Takata is a very difficult situation in that you have a safety device that in minor crashes is causing serious injury if not death, and there are tens of millions of vehicles involved,” Jackson said.
“On Takata, we’re in the early innings,” he continued. “We will adapt as best we can to manage this situation. I would say as far as retailing any vehicle with an open recall, that’s out of the question. We have started to auction vehicles with very clear disclosure, with stickers on the car that make it absolutely clear what’s open as far as a recall.
“They have gone to wholesale auctions, and that will help us manage the overhang and is probably the missing piece of the puzzle to make this all work smoothly that we can stand on our brand principle,” he went on to say.
Asbury chief operating officer and executive vice president David Hult estimated that 10 percent of all the used vehicles in the group’s inventory are impacted by recalls. Hult was asked to project how that impacted the group’s sales results.
“I’m not sure how to quantify what we would have sold had we not had it, but it’s fair to say we did miss opportunities because of them,” Hult said.
The Asbury executive acknowledged the assistance the group has received from automakers such as Honda and Acura that have thousands of units involved in stop-sale actions.
“To touch on the inflators that are coming in, we have started to receive them in small quantities from Honda and Acura so far and not from any of the European brands,” Hult shared when Asbury conducted its call in late April. “We’re told later in this quarter we'll start to see more significant volume from both Honda and Acura with those inflators, so we think that'll pick up fairly quickly in the second quarter and it'll be a little bit slower roll for the Europeans.
“Mid- to late summer is our best guess, and they’re going to service the states with the hot and humid weather first,” he continued. “So potentially it could certainly go into fourth quarter or first quarter next year depending upon where the stores are located."
When the Takata recall expansion was announced, Kelley Blue Book analyst Mark Williams told Auto Remarketing about the “bind” dealers are likely to face for several months. Takata is required to make a series of safety defect decisions that will support vehicle manufacturer recall campaigns of an additional estimated 35 million to 40 million inflators, adding to the already 28.8 million inflators previously recalled.
“Dealerships are just going to need to be prepared to have angry customers and be very patient because this isn’t something that’s going to be solved overnight. In fact, it could be months, potentially even years to get all of it resolved,” Williams said.
Evidently dealer groups such as AutoNation are navigating the situation successfully.
“Our decision not to retail vehicles with open recall has resonated very well for the brand with customers,” Jackson said. “Even though it makes life (for dealership personnel) more complicated, truly the company is not putting them in a position of selling vehicles to consumers that have things like an exploding Takata airbag.”
Sheehy Auto Stores' 19th annual Sheehy 7000 sales event to benefit the American Heart Association will start Friday and run to July 5.
"We are proud to once again partner with the American Heart Association through fundraising efforts and events to make a difference in the communities we service,” Vince Sheehy, president, said in a news release. “Heart disease has touched many of us in one way or another, and this charity does much to educate, raise awareness and help save lives.”
Sheehy dealerships throughout Washington, D.C., Richmond, Va. and Baltimore will lead various initiatives in support of the Sheehy 7000 including giveaways, blood pressure screenings and CPR training.
Last year’s Sheehy 6000 community campaign raised $200,000 for the AHA. Throughout the company’s 50-year history, Sheehy has raised more than $40 million for community and nonprofit organizations.
"Sheehy Auto Stores is a valued and generous partner," said Michelle Nostheide, vice president of marketing for the AHA. "In addition to the Sheehy 7000, the company has actively supported our National Walking Day event through sponsorship and participation among employees."
The family-owned Sheehy Auto Stores began as a single Ford store in 1966 and has grown to more than $1 billion in sales.
Joe Lamphier, vice president of sales and marketing for Crown Automotive Group, said he will be participating in Cut for a Cure to benefit the National Pediatric Cancer Foundation.
Cut for a Cure is the National Pediatric Cancer Foundation’s annual campaign to raise money and awareness for pediatric cancer. Individuals who participate in the campaign set a fundraising goal to encourage their friends and family to donate money, and at the end of the campaign, shave their heads in honor of children who struggle with cancer.
Lamphier plans to shave his head on June 15 and has set a fundraising goal of $10,000, which he hopes to reach by that date. He has dedicated his efforts through Cut for the Cure to honor two individuals he knows who battled pediatric cancer: Dana Bertoch-Levin and Remi Stortch, and their families.
“I’ve supported the National Pediatric Cancer Foundation for many years, serving on the board of directors since about 2001 and serving as its president from 2006 to 2007,” said Lamphier, who is the VP for the 23-store group that has dealerships in Florida, Ohio and Tennessee.
“It’s a cause that’s near and dear to my heart, and I’m honored to be able to have this opportunity to participate in a way that can directly impact the lives of the children and families that the foundation works with each day,” he continued.
Pediatric cancer is the No. 1 cause of death by disease in children, and according to the foundation. Officials said 43 children per day or 15,780 children will be diagnosed with cancer this year.
All the money raised through Lamphier’s Cut for the Cure fundraising campaign will benefit the National Pediatric Cancer Foundation and its research initiative, the Sunshine Project.
To contribute to Lamphier’s fundraising goal, visit this website.
All Crown dealerships earn Environment & Safety Elite status
In other news, Crown Automotive Group also recently announced that all 23 of its dealerships across three states have achieved the prestigious distinction of Environment & Safety Elite.
This program was created by the Clean Auto Alliance, a nonprofit organization that comprises automotive businesses, manufacturers, government agencies and dealerships and aims to address environmental, safety and transportation best practices.
The organization said the Environment & Safety Elite distinction recognizes dealers that meet or exceed best practices spanning six environmental and safety categories, including DOT and supplemental programs, emergency response, environmental, hazard communication, loss control and safety systems.
In order to be considered for this honor, officials said the Clean Auto Alliance takes into consideration a dealership's efforts to stay in compliance with regulations from OSHA, the EPA and the DOT.
“We’re incredibly proud of this achievement, and of the hard work we’ve done to make sure all our dealerships reach the high standards set by this program,” said Tim Reid, facilities manager for Crown Automotive Group. “At Crown, we have a commitment to sustainable business practices, and we will continue to strive to exceed the benchmarks set by the Clean Auto Alliance across all our dealerships.”
All of the group’s dealerships earned this status, which is granted for one year to facilities that meet all the requirements.
Group 1 Automotive increased its U.S. used-vehicle sales by more than 6 percent in the first quarter, retailing close to 27,000 units.
Specifically, it sold 26,831 used retail units, up 6.7 percent year-over-year.
Used retail revenue in the U.S. was up 9.1 percent at $558.76 million.
Gross margin percentage on used retail sales was 7.8 percent, compared to 7.9 percent in Q1 of 2015.
Used retail gross profit was up 7.2 percent at $43.46 million.
Gross profit per used unit retailed was $1,620, up 0.4 percent year-over-year.
When including international results, Group 1 retailed 32,791 used vehicles in Q1, a 9.4-percent increase.
