AutoNation 2000 Annual Report Download - page 14

experienced a rapid slowdown in new vehicle sales in late 2000. Industry
experts
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have predicted a decrease in new vehicle sales in the United States during 2001
of up to ten percent or more as compared to sales during 2000. Similarly, we
expect that our new vehicle sales, the single largest component of our
aggregate revenue, will significantly decrease during 2001. In addition,
although we generate diversified revenue and profit streams from the sale of
used vehicles, financial services, vehicle service, parts and collision repair
services, which we do not expect to be adversely impacted in a general economic
downturn as dramatically as new vehicle sales, we cannot assure you that our
business will not be materially adversely affected as a result of an industry
or general economic downturn.
We Are Substantially Dependent on Vehicle Manufacturers. The success of
our dealerships is dependent on vehicle manufacturers in several key respects.
First, we rely exclusively on the various vehicle manufacturers for our new
vehicle inventory. Additionally, manufacturers generally support their
dealerships by providing direct financial assistance in various areas,
including, among others, advertising assistance and favorable inventory
financing. Beyond funds paid directly to their dealerships, the manufacturers
also have established various incentive programs designed to spur consumer
demand for their vehicles. From time to time, manufacturers modify and
discontinue these dealer assistance and consumer incentive programs, which
could have a significant adverse effect on our consolidated results of
operations and cash flows. Any event that may have a material adverse effect on
the financial condition, management, marketing, production and distribution
capabilities of the vehicle manufacturers with whom we hold franchises, such as
general economic downturns or recessions, increases in interest rates, labor
strikes, supply shortages, adverse publicity or product defects, may have a
material adverse effect on our business, results of operations, financial
condition, cash flows and prospects.
We Are Subject to Operating Restrictions Imposed by Vehicle Manufacturers.
The franchise agreements to which our dealerships are subject and the framework
agreements that we have with many major vehicle manufacturers impose
significant restrictions on our ability to operate our dealerships. These
agreements provide the manufacturers with considerable influence over the
operations of our dealerships, including the level at which we capitalize our
dealerships, the condition of our dealership facilities, our performance
standards with respect to sales volume and customer satisfaction, our selection
of dealership management, naming and marketing of our dealerships and the
operations of our e-commerce sites, and other factors. They also grant the
manufacturer the right to terminate our franchise for a variety of causes,
subject to state laws.
We Are Subject to Extensive Governmental Regulation. The automotive retail
industry is subject to a wide range of federal, state and local laws and
regulations, such as local licensing requirements, retail financing and
consumer protection laws and regulations and federal and state environmental,
health and safety, wage-hour, anti-discrimination and other employment
practices laws and regulations. The violation of these laws and regulations can
result in administrative, civil or criminal sanctions against us, which may
include a cease and desist order against the subject operations or even
revocation or suspension of our license to operate the subject business. We
describe certain pending license revocation proceedings with respect to one of
our dealerships in California under the "Legal Proceedings" heading on page 15
of this Form 10-K. In addition, as the on-line automotive business expands,
there may be new laws and regulations adopted, or increased regulatory scrutiny
and enforcement of existing laws and regulations, that could have a material
adverse effect on our e-commerce business. We may need to spend considerable