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Auto Sales May Reach Highest Mark In Two Years As Retail Franchises Close

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On: Thu, Jul 22, 2010 at 9:40AM | By: Sherry Christiansen

Auto Sales May Reach Highest Mark In Two Years As Retail Franchises Close

After closing thousands of small dealerships in the U.S. auto retailers project that they may post the highest profits in nearly two years.

Auto Nation Inc, the largest dealer group, may post $3.06 billion in second-quarter sales when it reports earnings, which would be the highest revenue since the third quarter of 2008. Penske Automotive Group Inc. and Sonic Automotive Inc., the second- and third-largest retailers, may post the highest sales in two years July 29th according to approximations by financial analysts.

When General Motors and Chrysler closed 2,800 dealerships last year as part of a restructure program after bankruptcy, the two automotive giants announced that the goal was to be able to sell more vehicles at the surviving retail locations.
Many people have condemned the auto franchise closings stating they added to the already high unemployment rate, but dealer groups report otherwise, that the stores were financially failing anyhow and by closing them, more profit was allowed for the surviving stores.

“We’re seeing the remaining stores do significantly better,” Greg Young, Sonics’ vice president of finance, stated. “In markets where other Cadillac or Chevy dealers closed, our Cadillac or Chevy stores are doing much better.” Better translates to $1.7 billion estimated in second-quarter sales.

Penske Automotive Group is estimated to post $2.61 billion in second-quarter sales, the highest quarterly revenue in almost two years.
CEO Roger Penske reports that the Penske Company specializes in offering imports and luxury brands. “We still believe there are too many domestic brand dealerships across the United States right now,” Tony Pordon, spokesman stated in an e-mail. “There needs to be a further culling.”

AutoNation, based in Ft. Lauderdale, Florida gets about one-third of its revenue from U.S. brands. The company, led by Chief Executive Officer Mike Jackson, lost a total of eight GM and Chrysler stores in the restructurings.The company's retail sales are higher than before the financial crisis in 2008 at $4.56 billion, which is 49% higher than the second quarter in 2007.

Although profits are up overall for many automakers, the bad news is that customer demand is still at the lowest since as far back as 1967 at only 3.7%. In June U.S. auto sales slowed to 11.1 million annually from 11.6 million in May. Last year, consumers purchased 10.4 million cars and light trucks, the fewest in 27 years. In 2006, about 16.5 million vehicles were sold according to the Bloomberg News.

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