Group 1 adds regional execs to boost F&I

As other large auto retailers shrink field networks and eliminate middle management positions, Group 1 Automotive Inc. has added a layer of managers to its finance and insurance operations.

The Houston company hired regional F&I directors in each of its three regions in the United States and one in the United Kingdom, the company recently told analysts. The mission of the newly created job is to boost F&I gross profit for each vehicle retailed by training store-level F&I managers and designing pay plans to motivate them.

After four years of steady increases, Group 1 suffered a 9 percent decline in the F&I gross profit it made on a per-unit basis, to $982 in the first nine months of this year. Overall revenue from F&I fell nearly 20 percent in the third quarter from the year-earlier period to $37.5 million and dropped 33 percent in the first nine months of the year to $102.2 million.

Group 1 CEO Earl Hesterberg blames the federal cash-for-clunkers rebates for the drop because the rebates attracted a large share of cash buyers. He also says auto lenders continue to require hefty down payments before they'll fund vehicle purchases, a practice that trims the amount being financed.

Lenders are "still significantly more conservative than they would have been a year ago," Hesterberg says. "We just don't have enough room in the deal to sell some of the vehicle service contracts or things like that."

Hesterberg says large down payments are the "new reality," and he forecasts per-unit gross profit will dip to $925 to $950 in the fourth quarter.

Publicly held Group 1 reported revenues of $5.65 billion last year and ranked third on the Automotive News list of the top 125 dealership groups in the United States, with retail sales of 110,705 new vehicles in 2008.