Lithia puts brakes on used-car stores

Lithia CEO Sid DeBoer: Expansion of used-vehicle stores will resume when the nationís economy improves.
Lithia Motors Inc. is putting its chain of used-vehicle stores on hold as the public dealership group cuts costs.

Lithia launched the L2 Auto chain in August 2007. At the time, CEO Sid DeBoer called L2 a state-of-the-art sales network that would allow used-vehicle buyers to complete most of their transactions online. He said the concept had unlimited growth potential.

But in June, Lithia closed its L2 store in Loveland, Colo., merging its operations with those of Lithia's new-vehicle dealerships in the market. In Cedar Rapids, Iowa, Lithia added a Kia franchise to its L2 store — a move that company executives said was aimed at boosting profits with service and parts sales.

L2 stores in Lubbock and Amarillo, Texas, remain open and are "doing well," DeBoer told industry analysts in a recent earnings call. Lithia also operates an L2 store in Boise, Idaho.

Reached last week by Automotive News, DeBoer declined to comment further on L2.

After launching L2 as a stand-alone retail network, Lithia this year brought L2 under its corporate umbrella.

L2 offers fixed prices on all products and services. Its used vehicles pass a 160-point inspection and carry a 60-day warranty. The stores have a three-day return policy on vehicle purchases.

Lithia invested in future retail sites for new-vehicle dealerships and L2 stores, DeBoer said, but has put those properties up for sale. Buy-sell agreements are pending on some locations.

Lithia will resume plans to expand L2 when the national economy improves, DeBoer said. But he conceded he expects the industry's slump to last through next year.

Said DeBoer: "We are right-sizing this company to a new operating environment."

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