Three of the nation’s largest auto retailers – Lithia Motors Inc., Sonic Automotive Inc., and Asbury Automotive Group Inc. – are bracing for new-vehicle shortages stemming from the earthquake in Japan by stocking up on used vehicles.

The retailers are aggressively buying customer trade-ins and plan to offset the impact of tight new-vehicle supplies by emphasizing used-vehicle operations, reported Automotive News.

The companies had double-digit growth in new- and used-vehicle sales year-over-year during the first quarter of 2011.

Sonic’s net earnings for the quarter were $15 million, more than triple the $4.2 million in profits posted a year earlier. Lithia earned $8.7 million in the first quarter, up sharply from $1.3 million a year earlier.

Asbury also said it expects “meaningful” supply disruptions as it posted quarterly earnings of $19.9 million compared with $7.4 million a year ago.

Sonic and Lithia said they expect new-vehicle shortages to begin in June and continue throughout 2011. Supplies of used vehicles – particularly late models – are expected to be tight.

Like their larger rival AutoNation Inc., Sonic and Lithia said a shortage of import vehicles could result in market share gains for Detroit automakers.

The tight supply of new models also could drive up prices – and profit margins – for some import models, the companies said.

Though used-vehicle values are rising, resulting in higher acquisition costs, the companies are also selling older, higher-mileage vehicles that cost much less as trade-ins.

These are vehicles that in the past the dealers would normally wholesale, sometimes at a loss.

“We are working to mitigate the situation through … expanding our used vehicle business, seeking higher margins on vehicle sales, and more actively managing inventory across stores,” Asbury COO Michael Kearney said.

Lithia told analysts in a conference call today that it raised its full-year earnings guidance to $1.42-$1.50 per share for 2011.

Even with supply disruptions and higher fuel prices “the economy is getting better,” Lithia CEO Sid DeBoer said.

Sonic said supply shortages already are influencing pricing on Lexus and Honda models.

Jeff Dyke, Sonic’s executive vice president, told analysts Tuesday that Lexus vehicles were retailing for about $1,000 more per unit on the West Coast than they were earlier in the year.

The company is also seeing wholesale prices jump $1,000 to $2,000 on used Honda and Lexus vehicles. Sonic expects Toyota prices to rise in the next couple of months as supplies dwindle, Dyke said.

The company is testing a new pricing strategy on new vehicles at Honda and Volkswagen stores. Dyke doesn’t expect the shortages to affect the pilot program.

It has adopted market-based pricing – narrowing the gap between asking and retail price – in 10 Honda and three Volkswagen stores. It will adopt the program at six remaining Honda stores in May.

“These stores are up 96 percent in volume and 47 percent in gross, combining finance and insurance and the gross profit we make on the vehicle,” Dyke said in an e-mail. “Our margins are right where we think they should be and the customer satisfaction scores are very good.”

Lithia said it plans to acquire more import franchises, but domestic-brand vehicles still dominate its product mix. Import vehicle shortages could help its traditional network of domestic stores in small markets.

“We have the opportunity to take market share” at domestic-brand stores, said Bryan DeBoer, Lithia’s president.

Though the company said used vehicles are in short supply, it has increased its sales of older vehicles with 80,000 miles and up.

While used-vehicle prices are rising, these “Value Auto” vehicles will help the company keep costs down, DeBoer said.

During the first quarter, unit sales of Value Auto vehicles nearly doubled to 2,200 units from 1,200 units in the first quarter of 2010.

The company also is beefing up its used-vehicle inventory by buying directly from consumers advertising their used vehicles for sale.

Lithia reported first-quarter net income of $8.7 million on revenue of $603 million, compared with profits of $1.3 million on revenues of $459.2 million a year ago.

Sonic posted first-quarter net profits of $15 million on revenue of $1.84 billion, compared with $4.2 million in net income and revenues of $1.54 billion during the year-ago period.

At Asbury, the top-selling brands in terms of sales at its stores are Japanese automakers Honda Motor Co , Nissan Motor and Toyota Motor Corp .

The group’s quarterly revenue rose 18 percent to $1 billion.

New vehicle sales rose 20 percent to $571.2 million while used vehicle sales rose 21 percent to $301.4 million.

Asbury, with earnings per share of 35 cents for continuing operations, met Wall Street expectations. Analysts on average had expected earnings of 35 cents a share on revenue of $1.1 billion, according to Thomson Reuters I/B/E/S.

Auto dealership chains are pursuing new stores and paying pre-recession multiples on acquisitions to expand their networks as the U.S. auto market recovers.

AutoNation Inc., Penske Automotive Group Inc. and Group 1 Automotive Inc. are paying 3 to 5 times earnings before interest and taxes for acquisitions after failing stores were sold during the recession for book value or scrappage prices, said four dealership brokers interviewed by Bloomberg. U.S. new-vehicle sales, which fell to a 27-year low of 10.4 million in 2009, are forecast to rise to 12.9 million this year, reported Bloomberg.

“The economic environment bodes well for dealer M&A activity,” said Gary Silberg, who leads KPMG LLP’s U.S. automotive practice and is based in Chicago. “It’s so hard to do a deal when you don’t know what sales are going to drop to. Now you have stability, and you have growth.”

New-vehicle sales per U.S. dealership this year may rise to levels reached before the recession, auto-dealership consultant Urban Science said last month. Sales per dealer may reach those levels with 3.2 million fewer industry deliveries than in 2007 because manufacturers led by General Motors Co. and Chrysler Group LLC closed locations as part of their bankruptcies in 2009, the Detroit-based firm said.

AutoNation, the largest U.S. auto retailer, this month acquired a Toyota Motor Corp. namesake brand store in Fort Myers, Florida, with annual sales of about $135 million.

AutoNation, based in Fort Lauderdale, Florida, will open six dealerships in 2011 that were awarded by manufacturers and spend $500 million in the three years through 2012 on renovating existing stores, Chief Operating Officer Michael Maroone said.

“We’re clearly in the recovery,” Maroone said in a telephone interview. “It was very difficult to value stores in the downward spiral of the cycle. There’s more confidence that we can look at a store and know what it could do for us.”

The number of U.S. auto dealerships fell 4.4 percent last year to 17,659, Urban Science said. The normal rate of closings was between 1 percent and 2 percent before 2009, when 8 percent of dealerships closed amid GM and Chrysler’s bankruptcies.

AutoNation had 206 U.S. dealerships as of Dec. 31, down from 283 in 2003, according to regulatory filings. Asbury Automotive Group Inc., the Duluth, Georgia-based retailer, has cut 13 stores since 2003, while Group 1 has eliminated 10 stores since 2006.

“The current environment has the advantage of a relatively settled landscape,” said Paul Taylor, chief economist at the National Automobile Dealers Association in McLean, Virginia. “They know which other brands and how many same-brand competitors are going to be in the larger geographic area of a dealership they might think about acquiring. That’s helpful.”

Asbury is better positioned to purchase stores after selling its Nalley Motor Trucks business this month, Chief Executive Officer Craig Monaghan said in an interview. Asbury in December bought a Greenville, South Carolina, store with annual revenue of $125 million.

“We’ve traded assets that aren’t a core strategic competence for a group of stores that are attractive franchises in our market,” Monaghan said.

Group 1 this month acquired a Volkswagen AG namesake brand dealership in Irving, Texas, that may generate $25 million in annual sales.

“Our first and best use of our capital is to grow the company through acquisitions,” said Peter DeLongchamps, vice president of manufacturer relations at Houston-based Group 1. “The opportunities to acquire are clearly better this year than in the last two years.”

Group 1 is pursuing stores selling GM’s Chevrolet and Ford Motor’s namesake brands for the first time since 2005, CEO Earl Hesterberg said in November.

Detroit-based GM’s Buick and GMC are in higher demand, said Bob Morris, a broker for auto dealership sales and acquisitions at Granville, Ohio-based Tim Lamb Group LLC.

Buyers will pay more than 10 times pretax earnings for Mercedes, Bayerische Motoren Werke AG, Toyota or Honda Motor Co. stores in major markets, he said.

“When we get a property like that, it’s like taking a piece of fresh meat and throwing it in a tank of piranhas,” Morris said. D.T. Murphy & Co. in Glen Ridge, New Jersey; Nancy Phillips Associates in Exeter, New Hampshire; and Gordon Page & Associates in Tampa, Florida, also provided estimates for the average multiples dealers are paying for acquisitions.

Pressure on dealers from manufacturers including Ford and Daimler AG for more capital investments in their stores may lead to opportunities for more acquisitions at Penske Automotive Group Inc., CEO Roger Penske said on a Feb. 16 conference call.

Daimler’s Mercedes-Benz drew about $1.4 billion in dealer investments to update U.S. stores as part of a program that began in 2008 and will be completed this year. Ford has asked Lincoln luxury-brand store owners to make renovations of as much as $2 million per showroom, dealers said in October.

“A lot of these owners are thinking now is the time to get out,” Michael Kearney, Asbury’s chief operating officer, said in a telephone interview. “The number of deals reaching ‘conversation mode’ has increased.”

The board of directors of Asbury Automotive Group Inc. announced Feb. 10 its succession plan in anticipation of the retirement of President and CEO Charles R. Oglesby on July 31, 2011. Senior Vice President and CFO Craig T. Monaghan has assumed the role of president and CEO, and Senior Vice President and COO Michael Kearney has been promoted to executive vice president. Oglesby has assumed responsibilities as the chairman of Asbury’s board of directors until he retires at the end of July.

“Asbury is fortunate to have an executive on deck with Craig’s credentials. He has worked closely with Charles over the years in designing and implementing the strategy that has guided Asbury through the recent financial crisis and positioned the company for continued success,” commented Asbury Director Michael Durham on behalf of the board. “Elevating Craig to his new post is the logical progression considering his impact on and knowledge of Asbury. Craig has extensive executive experience within the automotive retail industry including his seven years as the CFO of AutoNation Inc., and his three years as the SVP and CFO of Asbury.”

Monaghan started his career as an engineer at a General Motors assembly plant and later worked in GM’s New York Treasurer’s Office.

“I could not be more thrilled or honored with the trust and confidence that the board of Asbury has placed in me as the new president and CEO,” stated Monaghan. “I am excited about the opportunity to continue working with Asbury’s 7,000 employees in reinforcing the company’s position as one of the most admired automotive retailers in the U.S. Furthermore, I am appreciative of the mentoring and friendship with Charles over the years. He has provided the spark that ignited the company’s profound transformation, creating the Asbury you see today.”

Charles Oglesby turns 65 this year and has been open about his interest to retire and pursue family and personal goals.

“Charles has had a tremendous impact on Asbury as a company as well as on the lives of Asbury’s employees,” said Durham. “We offer our heartfelt thanks for his service to Asbury and commend his 40-plus years of demonstrated success in the automotive retail industry. It is his vision that inspired the changes driving the company’s improved performance.”

“I have had a phenomenal ride over the last nine years at Asbury,” reflected Oglesby. “Coming out of my first retirement to join the Asbury family is one of the best decisions that I have ever made. I look forward to re-retiring and fulfilling some of the personal goals that I put on hold in 2002. I have no doubt that Asbury is in great hands as Craig is well known among the automotive and investor communities. We have been working in tandem to develop and implement our transition plan. Craig and Michael will continue to make Asbury a stronger company.”

Commenting on Kearney’s promotion, Durham stated, “Michael has more than 30 years of automotive retail experience during which he has cultivated numerous deep relationships with our manufacturing partners. He has a proven track record at Asbury and possesses close working relationships with Asbury’s store-level general managers. He will be working in close coordination with Craig in leading the company.”

In light of Oglesby’s retirement plans, Kearney stated, “I am excited for Charles personally, but I will miss him professionally. I look forward to working closely with Craig as we lead Asbury going forward. Craig and I have witnessed Charles’ leadership first-hand and we have learned from him.”

In addition, Asbury announced that in conjunction with Oglesby’s assumption of the chairman role, the board has established a lead independent director position and has elected Thomas DeLoach, a current Asbury director and former Mobil Corporation executive, to serve in that capacity.

“I look forward to this opportunity to serve the board in a leadership role during this important transition. We are a better company because of Mike Durham’s leadership as the prior non-executive board chair. I look forward to his continuing service on Asbury’s board of directors,” said DeLoach.

A search is currently being conducted for Monaghan’s replacement as CFO. In addition, the Asbury’s board continues to develop a succession plan for its chairman role that will be vacated following Oglesby’s retirement.

DAYTON – The Reynolds and Reynolds Company has extended its relationship with Asbury Automotive Group Inc. as the Website provider for its 84 retail automotive stores in the United States. Under the new agreement, Reynolds Web Solutions will continue to provide its latest Web technology platform and dedicated Web support team to Asbury’s dealerships, F&I and Showroom reported.

“We’ve had the privilege of providing websites to Asbury dealerships for some 10 years now,” said Ron Lamb, president of Reynolds and Reynolds. “We take an enormous amount of pride in the results we can deliver to their dealerships through our Web platform and technology. We look forward to building on a very positive working relationship with Asbury as we continue to make a measurable difference for every Asbury dealership through their presence on the Web.”

Reynolds Web Solutions is focused on developing car dealer websites, Web technologies, and digital marketing tools for car dealers and OEMs, enabling them to reach more consumers on the Web and gain the best business results from their digital presence.

“When dealerships hear the name Reynolds and Reynolds, we want them to think of one word: Results. That’s our focus with Asbury. We deliver results for their dealerships through our Web platform and technologies,” Lamb said.

By selling its heavy-truck business and buying a five-franchise dealership group in Greenville, S.C., Asbury Automotive Group Inc. says it is committing to the light-vehicle business completely.

Asbury, the No. 6 auto retailer in the United States, announced today the acquisition of the Greenville Automotive Group, which sells Lexus, Toyota, Jaguar, Porsche and Volvo at three stores. The transaction takes Asbury’s store count from 81 to 84. The purchase is estimated to add about $125 million in annual revenues to the company. Asbury posted $3.7 billion in revenue in 2009.

Even as it bolsters its light-vehicle retailing footprint, Asbury said it has agreed to sell its Nalley Motor Trucks unit to Rush Enterprises Inc., the nation’s largest commercial vehicle retailer. The Nalley truck unit produces about $220 million in annual revenues from three dealerships and a collision center in the Atlanta area.

It is profitable so far this year, but struggled in 2009, Asbury CFO Craig Monaghan said. The Rush purchase is expected to close during the first quarter and is subject to manufacturer approvals.

Today’s moves underscore Asbury’s strategic focus going forward, CEO Charles Oglesby told Automotive News.

“We do this well,” Oglesby said of the light-vehicle business. “The truck business appears to be a little more cyclical. But we felt that this puts us in our core business.”

Terms of the deals were not disclosed.

Well run stores

With the dealership purchase, Asbury expands its business in Greenville, where it already operates Crown Nissan. Company executives will add the Crown name to the new dealerships. The stores, sold to Asbury by owner Terry Wall, were well run, said Asbury COO Michael Kearney. But he expects to improve results by adopting Asbury’s corporate F&I training and used-car initiatives.

Including its October purchase of Mercedes-Benz of St. Charles, Mo., the move brings Asbury’s 2010 acquisition tally to four stores with estimated annual revenue of $145 million.

Asbury will continue to seek acquisition opportunities, though no other deals are on tap for this year.

“This is a big acquisition for us,” Monaghan said. “It’s a very attractive acquisition, but it’s also one that we’ll need a little time to absorb.”

Asbury executives expect the acquisition and divestiture announced today to result in a $2 million increase in annual pre-tax income from continuing operations beginning in 2011.

Higher used-vehicle sales are helping boost revenue in two other key departments at Asbury Automotive Group Inc.

“Our focus on increasing used-vehicle sales also increases opportunities for (finance and insurance) and parts and service,” Asbury CEO Charles Oglesby said Tuesday after the public retailer reported third-quarter net income of $12.5 million, a 69 percent gain.

Revenue rose 9 percent to $1.1 billion, helped by a 19 percent gain in used vehicles, a 6 percent hike in new vehicles, 2 percent in parts and service and 21 percent in F&I. The spike in used vehicle sales gives the service department more reconditioning work to prep the units for sale and gives F&I more customers for its products.

“When you have north of 20 percent increase in volumes quarter after quarter, we know that it is impactful on parts and service,” Asbury COO Michael Kearney said in an interview. “As far as the impact on F&I, I’m not convinced that selling more used cars is impactful on the per-vehicle-retailed (amount). It is on the total gross dollars, of course.”

Asbury’s retail revenues for used light vehicles rose 23 percent on a same-store basis during the third quarter.

A year ago, the dealer group earned $7.4 million on revenue of $1 billion.

For the first nine months, Asbury posted net income of $32.7 million, up from $13.2 million during the same period last year. The company reported revenue of $3.12 billion during the period, up from $2.76 billion during the same nine months of 2009.

Car shoppers have remained cautious and are waiting longer to buy vehicles amid a sluggish economic recovery and stricter lending standards, Kearney said.

“We’re seeing a lot of ‘need buyers,’ people who have older vehicles that they’ve decided they don’t want to maintain anymore,” Kearney said. “We’re also seeing higher mileage vehicles in the shops.”

In an interview with Reuters, CEO Charles Oglesby projected that industry-wide sales would rise between 7 percent and 8 percent in 2011 from 2010 levels.

Retail sales — or sales excluding cars sold to high-volume fleet operators like rental car companies — could be around 9.5 million for 2010, he added. In 2011, retail sales could be around 10.5 million or above, he said.