Dealership group Group 1 Automotive Inc. today reported a fourth-quarter net loss of $44.5 million as it slashed expenses to keep up with deteriorating sales.
The results include a $67.2 million asset impairment charge reflecting a company decision to write down the market value of its dealerships and other assets. Excluding the write-down, Group 1 posted a gross operating profit of $20.6 million during the fourth quarter.
Revenue during the quarter fell to $1.1 billion, down 24.4 percent from the same quarter a year earlier.
For the full year, Group 1 said it posted a net loss of $31.5 million compared with a $67.9 million profit a year earlier. Revenues fell 9.7 percent to $5.7 billion.
Group 1 also said today it was suspending its quarterly dividend and forecast that U.S. light vehicle sales for 2009 would fall to between 10.5 million and 10.8 million vehicles, down from 13.2 million in 2008.
Group 1 shares were trading at $7.64 a share as of 1:13 p.m. EST, down 23 cents or 2.9 percent.
In a conference call with journalists, Group 1 CEO Earl Hesterberg said the companys board of directors are preparing for the worst. After Group 1 set a cost-cutting goal of $35 million last October and boosted that to $100 million for 2009 in mid-January, Hesterberg said the latest plan is to reduce expenses by $150 million from 2008 levels, with most cuts in place by the end of March.
Its necessary, he said in a conference call this morning, citing the industrys depressed level of new-car and used-car buying. The biggest problem with our stores is a lack of foot traffic.
Hesterberg listed several Group 1 initiatives beyond ending the dividend.
Cutting administrative overhead with pay cuts for headquarters and regional office staffs.
Boosting emphasis on higher-margin used-car and parts and service operations.
Adding collision-repair centers in several markets
Reducing and balancing inventory.
Buying fewer new vehicles from factories and more from other dealers when advantageous.
Closing or selling underperforming stores.
Diverting store and real estate acquisition capital to pay down debt.
We anticipate making no new acquisitions this year, Hesterberg said, noting Group 1s bought five stores in the first half of 2008.
Group 1 relied more on service and parts as new-car revenue fell 30.2 percent from the 2007 fourth quarter to $655.1 million in the most recent period. Used-car revenue declined 15.6 percent to $225.5 million. Service and parts revenue rose 2.5 percent to $178.6 million during the quarter.
The company said it shaved $20.5 million in selling, general and administrative costs during the quarter, a decline of 11.4 percent over the same quarter a year earlier.
More than half of Group 1's sales come from Texas and California.
Japanese automakers dominated fourth-quarter sales with only about 20 percent coming from Detroit 3 manufacturers.
Almost 36 percent of its new-car sales were Toyota or Lexus brand.
Honda Motor Co. and its Acura brand were No. 2 at 13 percent of sales, followed by Nissan Motor Co. at 11 percent.
BMW and Ford Motor Co. brands each accounted for 10 percent. Mercedes-Benz captured 7 percent, Chrysler brands 6 percent and General Motors 4 percent.
Group 1, of Houston, ranks No. 4 on the Automotive News list of the top 125 U.S. dealership groups with retail new-vehicle sales of 131,719 in 2007. In 2008, Hesterberg said Group 1s new-vehicle revenue fell 33.1 percent and used-vehicle revenue declined 19.6 percent.
Reuters and Philip Nussel contributed to this report