AutoNation 2006 Annual Report Download - page 6

Table of Contents
operations, including our finance and insurance sales operations, in accordance with applicable laws and regulations and our
policies and ethical standards. As part of our training program, we conduct specialized training for certain of our store employees
in areas such as finance and insurance, fixed operations and sales. We also require all of our employees, from our senior
management to our technicians, to participate in our Business Ethics Program, which includes web-based interactive training
programs, live training workshops, written manuals and videos on specific topics. We also launched the AutoNation General
Manager University in 2006 to prepare our future general manager prospects to become well-rounded successful leaders of our
stores. We expect our comprehensive training program to improve our productivity by ensuring that all of our employees
consistently execute our business strategy and manage our daily operations in accordance with our common processes and
policies, applicable laws and regulations and our high standards of business ethics.
Build Powerful Local-Market Brands
In many of our key markets where we have significant presence, we are marketing our stores under a local retail brand. We continue
to position these local retail brands to communicate to customers the key features that we believe differentiate our stores in our branded
markets from our competitors, such as the large inventory available for customers, our extended evening and weekend service hours and
the competitive pricing we offer for widely available services. We believe that by having our stores within each local market speak with
one voice to the automobile-buying public, we can achieve marketing and advertising cost savings and efficiencies that generally are not
available to many of our local competitors. We also believe that we can create strong retail brand awareness in our markets.
We have fifteen local brands in our key markets, including “Maroone” in South Florida; “GO” in Denver, Colorado; “AutoWay” in
Tampa, Florida; “Bankston” in Dallas, Texas; “Courtesy” in Orlando, Florida; “Desert” in Las Vegas, Nevada; “Team” in Atlanta,
Georgia; “Mike Shad” in Jacksonville, Florida; “Dobbs” in Memphis, Tennessee; “Fox” in Baltimore, Maryland; “Mullinax” in
Cleveland, Ohio; “Appleway” in Spokane, Washington; “Champion” in South Texas; “Power” in Southern California and Arizona; and
“AutoWest” in Northern California. The stores we operate under local retail brands as of December 31, 2006 accounted for approximately
62% of our total revenue during fiscal 2006.
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Each of our stores acquires new vehicles for retail sale either directly from the applicable automotive manufacturer or distributor or
through dealer trades with other stores of the same franchise. Accordingly, we depend in large part on the automotive manufacturers and
distributors to provide us with high-quality vehicles that consumers desire and to supply us with such vehicles at suitable quantities and
prices and at the right times. Our operations, particularly our sales of new vehicles, are impacted by the sales incentive programs
conducted by the automotive manufacturers to spur consumer demand for their vehicles. These sales incentive programs are often not
announced in advance and therefore can be difficult to plan for when ordering inventory. We generally acquire used vehicles from
customer trade-ins, at the termination of leases and, to a lesser extent, auctions and other sources. We generally recondition used vehicles
acquired for retail sale at our stores’ service facilities and capitalize costs related thereto as used vehicle inventory. Used vehicles that we
do not sell at our stores generally are sold at wholesale through auctions.
We provide a wide variety of financial products and services to our customers in a convenient manner and at competitive prices. We
arrange for our customers to finance vehicles through installment loans or leases with third-party lenders, including the vehicle
manufacturers’ and distributors’ captive finance subsidiaries, in exchange for a commission payable to us by the third-party lender.
Commissions that we receive from these third-party lenders may be subject to chargeback, in full or in part, if loans that we arrange are
defaulted on or prepaid or upon other specified circumstances. However, our exposure to loss in connection with arranging third-party
financing generally is limited to the commissions that we receive. We do not directly finance our customers’ vehicle leases or purchases.
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