Lithia Motors Inc. is launching a restructuring program that it says will save the dealership group $18 million per year, when combined with previously announced cuts. Lithia also is selling some stores and land to preserve cash.
The Oregon-based company said its going to cut 10 to 15 underperforming stores out of its 110 total stores. Lithia also plans to:
Trim personnel and restructure management duties within stores.
Consolidate regional offices and increase the proportion of smaller cars in its inventory.
Delay spending on its new L2 chain of stand-alone used-car stores.
Lithia planned to become a national chain with at least 350 dealerships by 2014. The company launched a stand-alone used-vehicle chain last year because the venture offered unfettered growth potential.
Growth is a religion with us, CEO Sid DeBoer told Automotive News in 2006.
The company lost money for the first time since going public in the fourth quarter of 2007. In the first quarter of this year, Lithia lost $1.9 million on $699.3 million in sales, compared with a profit of $7.2 million during the same quarter in 2007.
Lithia said it expects the restructuring plan to be complete within 90 days. In a statement, the dealership group said it will release more details on the plan when it announces second-quarter earnings July 29.
As the economic environment has worsened, we have taken a comprehensive look at our business and determined how it can be right-sized to achieve our profit margin and growth objectives for the long term, DeBoer said in a statement.
Lithia ranks No. 8 on the Automotive News list of the top 125 dealership groups in the United States, based on new-vehicle sales. Lithia sold 63,607 new vehicles in 2007.
The companys shares were down this morning, but rallied during the afternoon to close up 1.9 percent at $6.96 a share.