AutoNation 2000 Annual Report Download - page 8

structure of automotive dealerships franchised by such manufacturers. The
agreements also set limits on the number of dealerships that we may acquire of
the particular manufacturer, nationally, regionally and in local markets, and
contain certain restrictions on our ability to name and brand our dealerships.
In addition, some of these framework agreements give the manufacturer or
distributor the right to acquire, at fair market value, the automotive
dealerships franchised by that manufacturer or distributor under specified
circumstances in the event of a change in control of our company, the
acquisition of 20% or more of the voting stock of our company by another
manufacturer or distributor or other extraordinary corporate transactions such
as a merger or sale of all of our assets.
We operate each of our new vehicle dealerships under a franchise agreement
with a vehicle manufacturer or distributor. The franchise agreements grant the
franchised automotive dealership a non-exclusive right to sell the
manufacturer's or distributor's brand of vehicles and offer related parts and
service within a specified market area. The franchise agreements also grant the
dealerships the right to use the manufacturer's or distributor's trademarks in
connection with dealership operations. The franchise agreements impose numerous
operational requirements and restrictions on the automotive dealerships
relating to inventory levels, working capital requirements, the sales process,
marketing and branding, showroom, service facilities and signage, personnel,
changes in management and monthly financial reporting, among other things. The
franchise agreements also provide for termination of the agreement by the
manufacturer or non-renewal for a variety of causes, subject to applicable
state franchise laws that limit a manufacturer's right to terminate a
franchise.
REGULATIONS
Automotive and Other Laws and Regulations
We operate in a highly regulated industry. A number of state and federal
laws and regulations affect our business. In every state in which we operate,
we must obtain various licenses in order to operate our businesses, including
dealer, sales, finance and insurance related licenses issued by state
regulatory authorities. Numerous laws and regulations govern our conduct of
business, including those relating to our sales, operating, financing,
advertising and employment practices. These laws and regulations include state
franchise laws and regulations and other extensive laws and regulations
applicable to new and used motor vehicle dealers, as well as a variety of other
laws and regulations. These laws also include federal and state wage-hour,
anti-discrimination and other employment practices laws.
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Our financing activities with customers are subject to federal
truth-in-lending, consumer leasing and equal credit opportunity regulations as
well as state and local motor vehicle finance laws, installment finance laws,
usury laws and other installment sales laws. Some states regulate finance fees
and charges that may be paid as a result of vehicle sales. Claims arising out
of actual or alleged violations of law may be asserted against us or our
dealerships by individuals or governmental entities, and may expose us to
significant damages or other penalties, including revocation or suspension of
our licenses to conduct dealership operations and fines.
Our operations are subject to the National Traffic and Motor Vehicle
Safety Act, Federal Motor Vehicle Safety Standards promulgated by the United
States Department of Transportation and various state motor vehicle regulatory
agencies. The imported automobiles we purchase are subject to United States
customs duties and, in the ordinary course of our business we may, from time to
time, be subject to claims for duties, penalties, liquidated damages or other