Top 'Megadealers' Slow Their Dealership Buying Pace

    SOUTHFIELD, Mich., May 16 Car dealership chains slowed
their acquisition activity last year, but are poised to step it up in 2001,
according to Ward's Dealer Business, an industry magazine.

    Independent new-car dealers, according to Ward's, are less likely to sell
their stores in a good year -- such as 2000's record-setting pace of 17.4
million vehicle sales.

    Conversely, dealers are more prone to sell out in a softer economy -- like
the one the U.S. currently is experiencing.

    "It's a hard decision for an entrepreneur to sell when times are at a
peak," Brian Kendrick, CEO of Asbury Auto Group of Stamford, CT, tells Ward's.
"We think this (dip in the market) is a great opportunity to continue
consolidation."

    Privately owned Asbury, with 84 dealerships in 10 states, and revenues of
$4.8 billion, ranked No. 4 on the 2001 Ward's Megadealer 100, the 14th annual
listing of the top dealership groups and so-called "consolidators" --
companies with dealership holdings around the country.

    The No. 1 ranked dealership is AutoNation Inc., a publicly owned Fort
Lauderdale, FL, corporation that owns 290 dealerships in 18 states and had
revenues of $20.5 billion in 2000.

    The No. 2 spot is held by Sonic Automotive, based in Charlotte, NC.  Its
116 dealerships in 13 states took in revenues of $6 billion last year.

    The Ward's Megadealer 100 collectively sold 5.1 million new and used cars
and trucks, and tallied revenues of $101.5 billion in 2000, a 13% increase
over 1999.

    Their dealership ranks increased by 129 -- from 1,596 in 1999 to 1,725 in
2000.

    Despite that 8% increase, Ward's notes that it's a far cry from the top
megadealers' buying sprees of a few years ago.

    AutoNation alone would purchase close to that many dealerships in a year,
when it was aggressively building its network.

    The threshold for entry onto the Ward's Megadealer 100 keeps rising.  Last
year's last spot was held by a company with $235.6 million in revenues.  This
year's No. 100 spot is occupied by The Southern Hospitality Automotive Group
of Chesapeake, VA, with revenues of $261.8 million in 2000.

    Geographically, the bulk of the Ward's Megadealer 100 holdings are in
fast-growing Sun Belt states such as California, Arizona, Texas, Georgia and
Florida.  Megadealers are attracted to those states because of their expanding
populations and economies.

    The Ward's Megadealer 100's upper echelon, despite their size and scope,
tend to take a hometown approach to automotive retailing.

    "We're all coming closer to the model that is the right model for large
megadealers/consolidators in this marketplace, which is to run it close, run
it with operators at the local level, to focus on the retailing aspects and to
fine-tune our retail strategies," says Mr. Kendrick of Asbury Automotive.

    He adds, "There are very few synergies to be reaped from a national
(consolidation) strategy.  Most of the synergies in our business exist with
local level advertising.  We'll continue to do that.  We believe that is the
right strategy.  I think we've seen everybody come full circle around to
that."

    AutoNation, back when it was known as Republic Industries, was the pioneer
of megadealers.  It started rapidly buying dealerships in the early 1990s.
In doing so, it met resistance from auto manufacturers and criticism from the
National Automobile Dealers Association.

    Manufacturers worried that AutoNation and similar companies would gain too
much clout, and start dictating terms to the automakers.  There was even talk
that AutoNation might "brand" its own car line.  The NADA fretted that
AutoNation's appetite for dealerships threatened the independents.

    Those fears went unrealized.

    "AutoNation eventually managed to convince the manufacturers that they
were in the business of selling cars, not running auto companies," says Steve
Finlay, editor of Ward's Dealer Business.  "NADA was appeased when AutoNation
dealers, in large numbers, joined the association."

    The Ward's Megadealer 100 ranks the top dealer groups in the country
according to total revenue generated within the previous calendar year.  The
total revenue includes new- and used-vehicle revenues as well as revenues for
fleet sales, wholesale and auction sales, finance and insurance, service
department, body shop, parts and accessories.