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Thursday, 20 August 2020 21:16

AutoNation Continues Aggressive Approach to Streamline Business and Reduce Costs

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AutoNation, Inc., America's largest and most recognized automotive retailer, announced Aug. 19 the company continues its aggressive approach to streamline its business.

Over the last two years, AutoNation has implemented a restructuring plan that reduced costs annually and consolidated its region infrastructure from three to two regions.

 

In 2020, further reductions to headcount, advertising and discretionary spending were also made. AutoNation's adjusted SG&A as a percentage of gross profit, 68.2% in the second quarter of 2020, represented a 520 basis point improvement compared to the second quarter of 2018.

 

As part of the company's continued efforts to reduce costs and increase efficiencies, AutoNation will close its aftermarket collision parts business, referred to as AutoNation Collision Parts (ACP), by the end of 2020. The ACP business represented less than 1% of AutoNation's Parts and Service gross profit for the six months ended June 30, 2020.

 

The company will continue its solidly profitable PrecisionParts business, which includes the sale of branded maintenance and repair parts. AutoNation expects the SG&A savings related to the closing of the ACP business will be approximately 100 basis points as a percentage of gross profit, and now targets operating below 68% SG&A as a percentage of gross profit, beginning with the third quarter of 2020.

 

In connection with the closing, the company currently estimates it will incur charges in the second half of 2020 of approximately $52 million, of which approximately $12 million will be cash expenditures. The company also expects additional cash expenditures following the closing of approximately $9 million related to existing contractual obligations.


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