Speaking to a group of investors this month, Lithia Motors CFO Chris Holzshu offered a sunny summation of why it feels so right to be a car dealer. Even when the products are wrong, he said, the dealer comes out all right.
"We don't have the option to create the products we sell," Holzshu said at a Boston investment conference sponsored by Bank of America and Merrill Lynch. "We get the option of buying different franchises in the market that we are in, so we have to rely on the manufacturers to build products that are hot for consumers."
And when products miss the mark?
"When those products aren't hot for consumers, the good news about our business is that we don't really suffer on a gross profit," Holzshu told his audience. "The manufacturers incentivize us and customers to buy vehicles that aren't selling, so the vehicles that aren't the hot products at the time -- we are basically paid to move that metal.
"[Manufacturers] also ... do all the national advertising for the brand and they do brand support -- and one of the best things they do is put warranties on new vehicles, so if the vehicle breaks the customers are incentivized to come back into our dealerships and the manufacturer reimburses us for the cost of the warranty."