AutoNation 2015 Annual Report Download - page 9

Table of Contents
Some of our stores are parties to proceedings under the Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA, typically
in connection with materials that were sent to former recycling, treatment, and/or disposal facilities owned and operated by independent businesses. The
remediation or clean-up of facilities where the release of a regulated hazardous substance occurred is required under CERCLA and other laws.
We have a proactive strategy related to environmental, health, and safety laws and regulations, which includes contracting with third-party vendors to
inspect our facilities routinely in an effort to ensure compliance. We incur significant costs to comply with applicable environmental, health, and safety laws
and regulations in the ordinary course of our business. We do not anticipate, however, that the costs of such compliance will have a material adverse effect on
our business, results of operations, cash flows, or financial condition, although such outcome is possible given the nature of our operations and the extensive
environmental, health, and safety regulatory framework. We do not have any material known environmental commitments or contingencies.

We operate in a highly competitive industry. We believe that the principal competitive factors in the automotive retail business are location, service,
price, selection, and online and mobile offerings. Each of our markets includes a large number of well-capitalized competitors that have extensive automotive
retail managerial experience and strong retail locations and facilities. According to industry sources, as of December 31, 2015, there were approximately
16,400 franchised automotive dealerships, which sell both new and used vehicles, in the United States. In addition, we estimate that there were approximately
twice as many independent used vehicle dealers in the United States. We face competition from (i) several public companies that operate numerous
automotive retail stores on a regional or national basis, including franchised dealers that sell new and used vehicles as well as non-franchised dealers that sell
only used vehicles, (ii) private companies that operate automotive retail stores in our markets, and (iii) online and mobile sales platforms. We compete with
dealers that sell the same vehicle brands that we sell, as well as dealers and certain manufacturers that sell other vehicle brands that we do not represent in a
particular market. Our new vehicle store competitors have franchise agreements with the various vehicle manufacturers and, as such, generally have access to
new vehicles on the same terms as we have. We also compete with other dealers for qualified employees, particularly for general managers and sales and
service personnel.
In general, the vehicle manufacturers have designated marketing and sales areas within which only one franchised dealer of a given vehicle brand may
operate. Under most of our framework agreements with the vehicle manufacturers, our ability to acquire multiple dealers of a given vehicle brand within a
particular market is limited. We are also restricted by various state franchise laws from relocating our stores or establishing new stores of a particular vehicle
brand within any area that is served by another dealer of the same vehicle brand, and we generally need the manufacturer to approve the relocation or grant a
new franchise in order to relocate or establish a store. However, to the extent that a market has multiple dealers of a particular vehicle brand, as most of our
key markets do with respect to most vehicle brands we sell, we face significant intra-brand competition.
We also compete with independent automobile service shops and service center chains. We believe that the principal competitive factors in the parts and
service business are price, location, expertise with the particular vehicle lines, and customer service. We also compete with a broad range of financial
institutions in our finance and insurance business. We believe that the principal competitive factors in the finance and insurance business are product
selection, convenience, price, contract terms, and the ability to finance vehicle protection and aftermarket products.

Our business exposes us to the risk of liabilities arising out of our operations. For example, liabilities may arise out of claims of employees, customers, or
other third parties for personal injury or property damage occurring in the course of our operations. We could also be subject to fines and civil and criminal
penalties in connection with alleged violations of federal and state laws or regulatory requirements.
The automotive retail business is also subject to substantial risk of property loss due to the significant concentration of property values at store locations.
In our case in particular, our operations are concentrated in states and regions in which natural disasters and severe weather events (such as hail storms,
hurricanes, earthquakes, fires, tornadoes, snow storms, and landslides) may subject us to substantial risk of property loss and operational disruption. Under
self-insurance
7