AutoNation 2007 Annual Report Download - page 16

Table of Contents
We are subject to numerous legal and administrative proceedings, which, if the outcomes are adverse to us, could materially adversely
affect our business, results of operations, financial condition, cash flows, and prospects.
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, class actions, purported class actions, and actions brought by governmental authorities.
We do not believe that the ultimate resolution of these matters will have a material adverse effect on our business, results of operations, financial
condition, or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more
of these matters could have a material adverse effect on our business, results of operations, financial condition, cash flow, and prospects.
Our operations, including, without limitation, our sales of finance and insurance and vehicle protection products, are subject to
extensive governmental laws and regulations. If we are found to be in violation of, or subject to liabilities under, any of these laws or
regulations, or if new laws or regulations are enacted that adversely affect our operations, our business, operating results, and
prospects could suffer.
The automotive retailing industry, including our facilities and operations, is subject to a wide range of federal, state, and local laws and
regulations, such as those relating to motor vehicle sales, retail installment sales, leasing, sales of finance, insurance, and vehicle protection
products, licensing, consumer protection, consumer privacy, escheatment, money laundering, environmental, vehicle emissions and fuel
economy, health and safety, wage-hour, anti-discrimination, and other employment practices. Specifically with respect to motor vehicle sales,
retail installment sales, leasing, and the sale of finance, insurance, and vehicle protection products at our stores, we are subject to various laws
and regulations, the violation of which could subject us to consumer class action or other lawsuits or governmental investigations and adverse
publicity, in addition to administrative, civil, or criminal sanctions. The violation of other laws and regulations to which we are subject also 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, as well as significant fines and penalties. We currently devote
significant resources to comply with applicable federal, state, and local regulation of health, safety, environmental, zoning, and land use
regulations, and we may need to spend additional time, effort, and money to keep our operations and existing or acquired facilities in
compliance therewith. In addition, we may be subject to broad liabilities arising out of contamination at our currently and formerly owned or
operated facilities, at locations to which hazardous substances were transported from such facilities, and at such locations related to entities
formerly affiliated with us. Although for some such liabilities we believe we are entitled to indemnification from other entities, we cannot assure
you that such entities will view their obligations as we do, or will be able to satisfy them. Failure to comply with applicable laws and regulations
may have an adverse effect on our business, results of operations, financial condition, cash flows, and prospects.
Legislative or similar measures have recently been enacted or pursued in certain states in which we operate to limit the fees that dealerships
may earn in connection with arranging financing for vehicle purchasers, to require disclosure to consumers of the fees that stores earn to arrange
financing, and to enact other additional regulations with respect to various aspects of our business, including with respect to the sale of used
vehicles and finance and insurance products. Recent litigation against certain vehicle manufacturers’ captive finance subsidiaries alleging
discriminatory lending practices has resulted in settlements, and may result in future settlements, that could reduce the fees earned by our stores
in connection with the origination of consumer loans. The enactment of laws and regulations that materially impair or restrict our finance and
insurance or other operations could have a material adverse effect on our business, results of operations, financial condition, cash flows, and
prospects.
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