AutoNation 2000 Annual Report Download - page 15

time, effort and money to keep our existing or acquired facilities in
compliance with applicable federal, state and local regulation of health,
safety, environment, zoning and land use.
We Are Subject to Numerous Legal and Administrative Proceedings. We are
involved, and will continue to be involved, in numerous legal proceedings
arising out of the conduct of our business, including litigation with
customers, employment related lawsuits and actions brought by governmental
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authorities. We have several class action lawsuits pending against us. A
significant judgment against us or the imposition of a significant fine could
have a material adverse effect on our business, financial condition, results of
operations, cash flows and prospects. We cannot assure you with respect to the
outcome of these administrative and legal proceedings and the effect such
outcomes may have on us. We describe certain significant pending litigation
matters under the heading "Legal Proceedings" below.
We May Be Required to Perform Under Certain Credit Enhancements and
Guarantees with respect to ANC Rental Corporation. In connection with the
spin-off of ANC Rental Corporation, we agreed to provide certain guarantees and
credit enhancements with respect to certain indebtedness and certain property
and vehicle lease obligations. ANC Rental recently reported a net loss for the
fourth quarter of 2000 of $44.0 million, resulting in an aggregate net loss for
2000 of $2.0 million. To the extent that ANC Rental is not able to meet its
obligations, we are likely to be called on to perform under the guarantees and
credit enhancements we provided, which could have a material adverse effect on
our business, financial condition, cash flows and prospects.
We Face Significant Competition in the Automotive Retail Industry. We
operate in a highly competitive environment. Our competition includes publicly
and privately-owned dealerships, some of which operate large groups, and any of
which may sell the same or similar makes of new and used vehicles in our
markets at competitive prices. Other competitors include franchised automotive
dealerships selling other brands of vehicles, private market buyers and sellers
of used vehicles, used vehicle dealers, service center chains, independent
service and repair shops and publicly and privately-owned finance companies,
including those of vehicle manufacturers, and, as we describe below, on-line
automotive retailers and lead-referral companies. Our franchise agreements
generally do not give us the exclusive right to sell a manufacturer's product
within a given geographic area, although state franchise laws do provide
certain protections. These and other competitive pressures could materially
adversely affect our business, financial condition, results of operations, cash
flows and prospects.
We also face competition in the rapidly evolving automotive retail
e-commerce business. A number of e-commerce companies and traditional
companies, including the vehicle manufacturers and other franchised dealership
groups, have established automotive-related websites over the past few years
and compete with us in two areas of our e-commerce business: (1) sales of
vehicles to retail customers via the Internet sales channel and (2) generation
and sales to other automobile dealers of customer referrals or "leads" obtained
via the Internet. Additionally, we believe that, as customers use the Internet
and gain increased access to information on prices for vehicles and related
finance and insurance products, margins for new and used vehicle sales and
related finance and insurance products may decrease, whether sales are made via
the Internet or through traditional channels. The success of our e-commerce
business will depend on our ability to develop a strategy that appeals to
Internet automobile buyers, to obtain high visibility on the Internet, whether
through our own websites or through strategic partnerships and alliances with
other e-commerce companies, and to develop and maintain a cost structure that