AutoNation 2001 Annual Report Download - page 7

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district-specific pricing guidelines, (2) continuing to maintain an
optimal mix of retail finance sources for our customers' vehicle
purchases and (3) standardizing the compensation guidelines for all
of our finance and insurance associates.
BUILD POWERFUL LOCAL-MARKET BRANDS
In each of our key markets where we have significant market share, we are
aligning our dealerships under a single market-specific retail brand. We believe
that by having our dealerships 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 a superior retail brand
awareness in our markets. Since our inaugural launch of the "John Elway" brand
across our Denver dealerships in December 1998, we have launched six other local
retail brands in our key markets, including "Maroone" in South Florida,
"AutoWay" in Tampa, Florida, "Courtesy" in Orlando, Florida, "Desert" in Las
Vegas, Nevada, "Team" in Atlanta, Georgia and "Mike Shad" in Jacksonville,
Florida. We expect to launch additional local retail brands in several key
markets during 2002.
OPERATIONS
As of December 31, 2001, we owned and operated 368 new vehicle franchises
from 278 dealerships located in major metropolitan markets in 17 states,
predominantly in the Sunbelt region of the United States. Our dealerships, which
we believe include some of the most recognizable and well-known dealerships in
our key markets, sell 35 different brands of new vehicles. The core brands of
vehicles that we sell, representing
4
approximately 95% of the new vehicles that we sold in 2001, are manufactured by
Ford, General Motors, DaimlerChrysler, Toyota, Nissan, Honda and BMW. Our
management structure is focused on our local markets, where day-to-day
decision-makers can be more responsive to the needs of local customers. We have
established nine districts to manage our automotive retailing business. The
number of dealerships within each of our districts varies.
Our dealerships offer a diversified range of automotive products and
services beyond new vehicles, such as used vehicles, vehicle maintenance and
repair services, vehicle parts, extended service contracts, insurance products
and other aftermarket products, and we arrange financing for vehicle purchases
through third-party finance sources. Additionally, we operate collision repair
centers in most of our key markets. For a discussion of how we intend to
leverage our strengths to improve our operations, you should read the "Business
Strategy" section of this document.
Each of our dealerships acquires new vehicles for retail sale directly from
the applicable automotive manufacturer or distributor. 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 locations, quantities and prices. 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. We
generally acquire used vehicles from customer trade-ins, at the termination of
leases and, to a lesser extent, auctions and other sources. We recondition used
vehicles acquired for retail sale at our dealerships' service facilities and
capitalize costs related thereto as used vehicle inventory. Used vehicles that
we do not sell at our dealerships generally are sold at wholesale through
auctions.
We provide a wide variety of financial products and services to our
customers. We offer to 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,