Automotive News Mobility Report

Lithia buys Baierl Auto Group, enters Pittsburgh market

UPDATED: 5/2/17 4:02 pm ET -- corrected

Editor's note: A previous version of this report stated the incorrect number of Baierl Auto Group's rooftops and brands. It has been corrected. 

Lithia Motors Inc. has bought Pittsburgh’s Baierl Auto Group in a deal that is estimated to provide Lithia with $500 million in additional annual revenue, the retailer said Monday.

Lithia, of Medford, Ore., bought six Baierl rooftops that sell Acura, Cadillac, Chevrolet, Ford, Honda, Kia, Subaru and Toyota vehicles. Two other, smaller Baierl stores are being spun off to their managers. Lithia did not previously have any dealerships in Pennsylvania.

“The combination of Baierl and Lithia continues our strategy of acquiring dominant franchises with entrepreneurial leadership,” said Lithia CEO Bryan DeBoer in a statement.

DeBoer said entering the Pittsburgh market increases Lithia’s involvement in “cutting-edge technology around autonomous transportation and allows us to proactively adapt and learn from the consumer behaviors and trends associated with it.”

Pittsburgh has become a hotbed of autonomous-vehicle research, although ride-hailing service Uber’s work in that area has brought criticism from city fathers.

Lithia’s expansion

Lithia, which owns 160 dealerships, has made other big buys in recent years. In 2014, it bought DCH Auto Group, giving Lithia its first dealerships in major metro markets on the East and West coasts. Last fall, it entered markets in New England with the purchase of the Carbone Auto Group.

DeBoer has said the purchases allow Lithia to share best practices and expand technology. During a first quarter earnings call, he told analysts that Lithia expects to achieve full “synergies” with Carbone in the next few months.

“We continue to increase the size and agility of our organization, strengthening our capital engine for growth,” said DeBoer in Monday’s statement. “Our strategy of acquiring businesses that have yet to realize their potential provides greenfield rates of return, while the stores we purchased over the past several years supply internal dry powder to deliver earnings growth independent from the new vehicle” sales rate.

Decentralized

Lithia is known for its decentralized management, which gives each store’s general manager wide autonomy to control operations, provided the store meets Lithia’s performance metrics. DeBoer said that that “people-powered culture allows us to purchase unrealized potential at extremely attractive prices with very low risk and outperform not only auto retail, but all retail.”

Lithia ended the first quarter with $450 million in potential liquidity, it said. At that time, DeBoer said, “The ability to flex our balance sheet coupled with our free cash flow provides capacity to continue acquisitions at a similar or accelerated cadence in 2017 and beyond.”

Lithia ranks No. 4 on Automotive News’ list of the top 150 dealership groups based in the U.S., with retail sales of 145,772 new vehicles in 2016.

You can reach Jamie LaReau at jlareau@crain.com -- Follow Jamie on Twitter: @jlareauan

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