Tag Archive | "earnings"

GM Financial Triples Share of GM Leases

SAN FRANCISCO AND FORTWORTH, Texas — Ally’s reaction to General Motors internalizing its leasing program came up at the end of GM Financial’s fourth quarter 2014 earnings call. Daniel Berce, the captive’s president and CEO, said the decision shouldn’t have surprised executives with GM’s former captive finance arm.

“That’s about increasing customer loyalty,” Berce said of GM’s decision. “Lease is a very important product from a loyalty standpoint, and having that customer data and relationship in-house and within control of the GM umbrella was extremely important. Taking that profitability in-house was another factor to consider.

“I don’t think bringing it in-house should be a surprise if you look at our ramp of penetration through 2014,” he added, noting that the firm started out the year with about a 15% share in GM leases. It finished 2014 with just less than a 50% share of the OEM’s lease business.

GM Financial doubled its lease origination volume from a year ago to $7 billion. For the December quarter alone, lease origination volume totaled $2.1 billion.

GM’s decision to end its leasing relationship with Ally Financial and U.S. Bank was announced shortly after the end of last quarter, with GM Financial officially becoming the OEM’s exclusive subvented lease provider for Buick-GMC on Feb. 3.

“Cadillac will follow closely after that [in March], then Chevy,” Kyle Birch, executive vice president and COO of North America, to F&I and Showroom at last month’s 2015 National Automobile Dealers Association (NADA) Convention & Expo in San Francisco. “By mid-year, we’ll have full lease exclusivity with all GM brands.”

Birch noted that GM Financial spent a lot of time and investment last year bringing its systems online in anticipation of the November 2014 rollout of its prime APR product. The company also rolled out last May a floorplan financing product; Berce noting during the company’s investor call that he has “pretty modest aspirations” for the product in terms of market share.

“We don’t have any plans at this point to supplant other providers,” he said.

But developing score cards and adding auto decisioning systems for its prime business weren’t the only infrastructure investments the company made last year. Under the direction of Will Stacy, senior vice president of digital and technology services, GM Financial is also working on systems that will drive a better connection between customers, GM and the OEM’s dealers.

“We’re trying to build integration tools with GM so you can apply for credit in an easier way through their sites and through their dealer’s sites,” Stacy told F&I and Showroom at the NADA’s annual convention. “So the idea would be, we’d offer an application or widget that goes on dealership sites so you can apply for a GM Financial loan through one of those 4,200 websites that GM and Cobalt host for their dealers, as well as a beefed up the customer experience for current and future customers with native applications on iPhones, Androids and customer portals.”

The goal, Birch added, is to create touchpoints that will allow customers to interact with the captive finance company however they want, whether through its chat features on the captive’s website, self-service portals or mobile connectivity. “We want to make sure when we have a customer on the books that we’re touching them at the right time to drive them back to the dealers,” Birch explained.

The investments made in the company’s infrastructure were partly responsible for the decrease in pre-tax earnings in the December quarter, which fell from $225 million in the year-ago quarter to $120 million, Birch noted. The company’s acquisition of Ally Financial’s international operations was another factor.

Full-year earnings for the captive were $537 million, down from $556 million in 2013. For the December quarter, the company posted earnings of $59 million, down from $121 million in the year-ago quarter.

Full-year consumer loan and lease originations totaled $21.4 billion, $6 billion for the December quarter alone. Prime originations for GM vehicles totaled $493 million for the year. Outstanding balances of consumer finance receivables totaled $25.7 billion for the year.

The company also added 81 dealers to its commercial lending business, bringing the captive’s total dealer count to 487.

Birch also noted stable credit metrics, with consumer finance receivables 31 to 60 days delinquent accounting for 4.2% of the captive’s portfolio as of Dec. 31, 2014. Accounts more than 60 days delinquent were 1.7%.

Annualized net losses were 2.2% of average consumer finance receivables for the December quarter, up from $2.1% one year ago. For the year, consumer net losses were 1.9%.

GM Financial also reported having total available liquidity of $9.3 billion as of Dec. 31, 2014. That total consisted of $3 billion of unrestricted cash, $4.8 billion of borrowing capacity on unpledged eligible assets, and $0.5 billion of borrowing capacity on unsecured lines of credit and $1 billion of borrowing capacity on a junior subordinate revolving credit facility from GM.

“2014 was a good year for our company,” Birch said at the NADA convention. “Every quarter we had improvement in volume and credit losses. The biggest thing for us in 2014 is we spent a lot of time and investment on bringing all of our systems together, understanding that we were going to get in the prime business from an APR perspective.”

Asked if the company would venture into F&I products for GM, Birch said, “We’re not doing that right now. The products out there right now are GM-based and -backed. We helped in some of the rollout of those products. Now that’s being handled internally by GM. We would expect at some point in our future, and I can’t tell you when, but there’s a natural evolution for those types of products to come back to the finance company.”

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Harley-Davidson Profit Slips, but Shipments In Line With Expectations

Harley-Davidson Inc. posted lower earnings and revenue during the third quarter as motorcycle shipments declined as expected, reported The Wall Street Journal.

The company’s earnings topped analysts’ expectations, however, while the top line fell short.

The motorcycle maker has sought to reach beyond its traditional, middle-aged target audience with smaller bikes geared toward younger customers. While demand has been somewhat stable—dealers sold 3.4% more new motorcycles in the most recent period—shipments have slipped as of late.

In the most recent quarter, Harley said it shipped 50,670 motorcycles to dealers and distributors, an decrease of 6.2% from a year earlier, in line with the company’s expectation as it had planned to scale back.

Harley in July had cut its shipment forecast for the year to 270,000 to 275,000 bikes from its previous call of 279,000 to 284,000. Earlier this year, the company also recalled several thousand motorcycles due to an ignition switch problem that could cause the vehicles to stall during operation.

For the period ended Sept. 28, Harley posted earnings of $150.1 million, or 69 cents a share, down from $162.7 million, or 73 cents a share, a year earlier.

Revenue decreased 4.2% to $1.13 billion.

Analysts had projected 59 cents a share in earnings and $1.14 billion in revenue, according to Thomson Reuters.

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AutoNation Discusses CFPB, Digital Push

FORD LAUDERDALE, Fla. — In a quarter in which it posted record second-quarter earnings per share (EPS) from continuing operations, AutoNation’s F&I operations realized an 11.5% increase in revenue from a year ago and a $9 million, or 5%, increase in total gross profit.

Average gross profit per vehicle retailed for the nation’s largest auto group rose $23, or 2%, from a year ago to $1,398. For the first six months of 2014, PVR rose $45, or 3.3%, from a year ago to $1,395. The group achieved this during a quarter in which it installed in nine stores the National Automobile Dealers Association (NADA)’s Fair Credit Compliance Program in response to the Consumer Financial Protection Bureau (CFPB)’s scrutiny of rate markups.

“It’s been successfully implemented without much disruption and no impact on results,” Mike Jackson, Chairman and CEO, said of the NADA’s program, which calls on dealers to document variations in rate markups on retail finance contracts. “We will now take it to additional stores on a gradual basis.”

Jackson added that he believes banks, dealers and the CFPB will eventually come to some sort of agreement regarding how finances sources compensate dealers in the indirect financing channel.

“And that will unfold over the course of the year, but my expectation will be some sort of agreement and some sort of common ground,” said Jackson, who also responded to a question about reports that the CFPB is turning its attention to F&I product sales.

“We have seen zero real activity in that area,” he said. “All the focus is on the reserve amount.”

In the second quarter, AutoNation posted second quarter net income from continuing operations of $101 million, or a second-quarter record of $0.83 per share, compared to $90 million, or $0.73 per share, in the year-ago period.

The dealer group also reported revenue of $4.8 billion, up from $4.4 billion in the year-ago quarter. That 8% increase was driven by stronger performance in new vehicles, parts and service, and finance and insurance.

Total gross profit for variable operations on a same-store basis was $3,279 per vehicle, a $67, or 2%, increase. Same-store new-vehicle revenue increased $200 million, or 8%, from a year ago to $2.7 billion on the sale of 79,000 units, a 6% increase. The dealer group also posted new-vehicle gross profit of $159 million, up 10 million, or 7%, from a year ago. New-vehicle gross profit per vehicle retailed was $2,008.

Retail revenue for used-vehicle sale was $976 million, an increase of $23 million, or 2%, on 52,000 used vehicles retailed, which was flat with a year ago. Revenue per used vehicle retailed increased $527, or 3%, to $18,836. Retail used-vehicle gross profit was $87 million, up $4 million, or 5%, from a year ago, while gross profit per used-vehicle retailed was $1,687, an increase of $91 per vehicle, or 6%.

Parts and service recorded a posted record revenue and gross profit, with revenue increasing $41 million to $696 million. Total gross profit grew 6%, or $17 million, to $297 million.

Jackson also provided an update on the company’s digital retailing drive, saying the group is ahead of expectations in terms of acceptance of the brand and the amount of traffic being generated by the group’s digital sites. He also announced the group is moving into the next phase of its digital push.

“So we’ve decided to accelerate the new phase, which is increasing our marketing around the brand AutoNation to drive even more customers to our digital sites and, of course, a big investment in the capabilities of the site itself, which the next step would be that the site goes transactional at the end of the year …,” Jackson said, noting that customers will be able to select a vehicle, get a committed price and submit a deposit without ever entering one of the group’s stores.

Jackson said digital sites will be expanded next year to allow the group to appraise and purchase customer trade-ins. They will also be able to provide customers with quotes on financing. “This is our strategic vision, if you will, that we believe today’s customer and future customers want one experience, not an online experience and an in-store experience, but one seamless experience where they can interact and transact both digitally and in the store,” he said, noting that the AutoNation will invest an additional $100 million over the next two years to solidify the brands, increase site traffic and add transaction capabilities to its digital sites.

Jackson, however, stopped short of providing a timetable on how things will play out. “So it’s certainly not the end of the story over the next two years,” he said. “There will be more chapters, but we’re in a very ambitious and exciting phase. I call it an investment phase.”

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CarMax Soars as Earnings, Revenues Top Analyst Estimates

CarMax Inc., the biggest U.S. auto dealer by market valuation, soared the most in five years after its fiscal first-quarter earnings and revenue topped analyst estimates as increased customer traffic boosted vehicle sales, reported Bloomberg.

Shares of CarMax jumped more than 16 percent to $52.75 at the close in New York, the biggest gain since June 19, 2009. CarMax had declined 3.7 percent this year through yesterday.

Net income for the three months ended May 31 rose 16 percent to $169.7 million, or 76 cents a share, the Richmond, Virginia-based company said in a statement. Analysts had estimated 67 cents, on average. Revenue advanced 13 percent to $3.75 billion, compared with a $3.59 billion projection from analysts.

Demand for autos has risen with an improving job market, more housing starts and low interest rates. That drove the annualized pace for new light-vehicles sales, adjusted for seasonal trends, to 16.8 million last month, the fastest rate since February 2007, according to Autodata Corp. CarMax said comparable-store sales rose 3.4 percent, with used-vehicle revenues advancing 13 percent and new-model revenue jumping 33 percent. CarMax operates 136 used-car superstores in 68 markets.

CarMax’s financing unit saw income rise 8.7 percent to $94.6 million during the period, as the company continues testing a subprime loan program. Some $20.5 million, or 0.8 percent of retail unit sales, were originated through that program during the period, according to the statement.

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Chrysler Posts Best Oct. Sales in Five Years

Auburn Hills, Mich. – Chrysler Group LLC reported U.S. sales of 126,185 units, a 10 percent increase compared with sales in October 2011 (114,512 units), and the group’s best October sales since 2007. The Chrysler, Dodge, Ram Truck and FIAT brands each posted year-over-year sales gains in October compared with the same month a year ago. The FIAT brand’s 89 percent increase was the largest sales gain of any Chrysler Group brand for the month. October marked Chrysler Group’s 31st-consecutive month of year-over-year sales gains.

“In spite of Hurricane Sandy, Chrysler Group posted its best October sales since 2007 and we achieved our 31st-consecutive month of year-over-year sales growth,” said Reid Bigland, President and CEO – Dodge Brand, and Head of U.S. Sales. “Last month we also further demonstrated our disciplined approach to sales growth by posting a Q3 2012 operating profit of $706 million, an increase of 46 percent over Q3 2011.”

Chrysler Group’s minivans each posted double-digit percentage sales increases in October. The Dodge Grand Caravan’s 49 percent sales gain represented the largest percentage increase of any Dodge brand model while sales of the Chrysler Town & Country minivan were up 31 percent in October. The Ram 1500 pickup truck, Dodge Charger muscle car and Chrysler 300 flagship sedan all had sizeable sales gains during the month.

Chrysler Group finished the month with an 83-days supply of inventory (404,122 units). U.S. industry sales figures for October are projected at an estimated 14.7 million units Seasonally Adjusted Annual Rate (SAAR).

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Asbury’s Third-Quarter Profit Jumps 68 Percent

DULUTH, Ga. — Balanced contributions from all business areas drove 68 percent increase in third-quarter profit for Asbury Automotive Group. The operation also reported a revenue increase of 14 percent from a year ago. The dealer group earned $20.7 million in the third quarter, up from $12.3 million in the year-ago period. Net income for the first nine months of 2012 was $59.4 million, up from $46.4 million a year ago.

“Our stores continue to generate phenomenal results,” said Michael Kearney, Asbury’s executive vice president and COO. “Record operating profits were driven by a balanced contribution from all business areas recording higher revenues and gross profits. These results reflect the impressive benefits from our focus on best processes enabled by technology and executed by motivated employees.”

Total revenue increased from $1.05 billion a year ago to $1.2 billion. A major drive of that was the 22 percent increase in new-vehicle retail revenue, which climbed to $674.7 million during the quarter. Used vehicle retail revenue rose 5 percent to $335.6 million. Finance and insurance revenues also climbed during the quarter, rising 22 percent from a year ago to $44.1 million. The group’s profit per vehicle sold climbed 6 percent from $1,169 a year ago to $1,242. Revenue from parts and services also edged up, rising about 1 percent to $143.5 million.

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