AutoNation Inc. is closing its aftermarket collision parts business by the end of the year in a continued cost-cutting effort by the auto retail giant.
The nation’s largest new-vehicle retailer said Wednesday it expects to incur about $52 million in charges in the second half of the year, including $12 million in cash, related to closing AutoNation Collision Parts. The tally is comprised of about $28 million for writing down inventory, about $8 million in contract terminations and $16 million in other costs such as depreciation, severance and closing fees, according to a regulatory filing.
Following the closing, AutoNation expects to incur another $9 million in cash expenses related to contract obligations.
AutoNation CEO Mike Jackson indicated last month on the company’s second-quarter earnings call that the AutoNation Collision Parts business was struggling and called it “an area of concern.”
“The whole collision business was very challenged during the second quarter with the dramatic reductions in the amount of miles driven,” he said. “And that business wasn’t profitable even before the marketplace got much more difficult.”
The unit represented less than 1 percent of the retailer’s parts and service gross profit in the first half of 2020.
AutoNation has cut about 3,500 positions this year amid cost-cutting moves fueled by the coronavirus pandemic.
The company said it will continue its profitable AutoNation Precision Parts business, which includes branded maintenance and repair parts.
The aftermarket collision parts business was among the pillars of the company’s efforts to extend the AutoNation brand into new products and services. Other key elements of the strategy include branded finance and insurance products, accessories, collision centers, auto auctions and used-vehicle only AutoNation USA stores.
The company on Wednesday also named a president for its AutoNation USA stores, which it plans to expand. Steve Kwak, AutoNation’s western region president, also will serve as president of the used-vehicle unit that he has overseen for the past two years.
AutoNation said last month it plans to add 20 or more AutoNation USA stores over the next three years, up from five stores today.
“We see an opportunity to take a larger share of the used-vehicle market and benefit from the increased interest in vehicle ownership by our customers,” Jackson said in a statement. “AutoNation’s strong brand, first-class digital capabilities, and one price pricing strategy, combined with lower acquisition cost and stable used-vehicle retail pricing make AutoNation USA stores an attractive opportunity.”
AutoNation Inc., of Fort Lauderdale, Fla., ranks No. 1 on Automotive News‘ list of the top 150 dealership groups based in the U.S., retailing 282,602 new vehicles in 2019.
