Dealership group Asbury Automotive today reported fourth-quarter and full-year 2008 financial results. As could be expected, lower vehicle sales and reduced parts-and-service business pressured earnings, and despite a host of cost-cutting measures, the dealership group lost $365.4 million for the quarter and $338 million for the year.
Among other things, Asbury relocated its corporate headquarters to Duluth, Ga., from New York. It reduced staff by 25%, bought back $60 million of debt, lowered same-store operating expenses by 17%, and eliminated its regional management structure.
The company, which operates 87 stores, is at risk of tripping some debt covenants. So far, Asbury has received waivers from its lending partners. It had $116 million of borrowing capacity and $92 million in cash at yearend, and no major debt maturities until 2012.
One of the interesting comments made by management during the earnings call this morning, though, related to the availability of credit. Sure, consumer confidence is taking a toll on sales volume, but “credit is a bigger part,” said CEO Charles Oglesby.
“Before, almost anybody could walk into a dealership and walk out with zero money down or 130% loan-to-value,” he said. “Today, even the best credit can rarely walk out with 125% or 130% loan-to-value.”
Then he added: “There’s an adjustment period going on with the consumer to the new credit standards.”
I think one of the crucial considerations for lenders is this “adjustment period.” It seems that finance companies might do well with a united message to potential car buyers that financing is still available. Credit unions are doing it with the “Invest in America” campaign, but maybe some of the finance trade groups should band together to offer a similar message.
