AutoNation Inc. is opting to close its unprofitable aftermarket collision parts unit by the end of 2020, two years after launching it as a startup.
Growing the business unit's revenue stream was among former CEO Cheryl Miller's goals when she was named to lead the company in July 2019.
But the auto retail giant last week said it would shutter its collision parts arm, which includes 12 distribution centers, as part of a cost-cutting and efficiency move.
The division, launched in 2018 as part of AutoNation's larger brand extension strategy, sources and sells retail and wholesale collision parts, from bumpers to radiators, for more than 30 brands. Customers include retail consumers, dealerships and other collision centers.
Guggenheim Securities analyst Ali Faghri, in a note to investors last week, raised his forecast for AutoNation's 2021 earnings and his stock price target for the company after the announcement. Faghri called the exit from the collision parts business positive "as it helps focus capital allocation on better-return investments ... and will yield meaningful cost-savings benefits into" 2021. He mentioned AutoNation USA, the retailer's used-vehicle-only store network, as one of those better-return investments.
The collision parts unit represented less than 1 percent of AutoNation's $700.2 million parts-and-service gross profit in the first half of this year.
It isn't clear how many employees will be affected by the closure. AutoNation did not respond to questions from Automotive News.