AutoNation, Inc. (NYSE:AN) Q3 2023 Earnings Call Transcript

So it really was, I think, just a logical description of something that we would want them to do and take a balanced approach to business is multifaceted.

Rajat Gupta: Maybe like just to finish up on the new GPUs. Were you able to, like do you see any benefit of the strike in the third, and do you expect any benefit from a slower inventory build in the fourth quarter to the GPUs? Or would you think like the strategy around like CFS and driving volume growth [indiscernible] continue to decline in those GPUs here in the fourth quarter?

Mike Manley: No, there will be no benefit, and I’ll put some color to that. When we saw GPUs rise across the industry, we saw them rise because all of the competitive cross-shop models were in short supply. So you have a situation where every brand was in short supply, and therefore, prices drove up. If we just have individual domestics in short supply but the cross shop brands consumers are looking at in addition to domestics or not, there’d be no reason — there’s no potential for those domestics in my view to get pricing as a result of the fact that they may have a few days less supply than the others, and that’s just in general. The pandemic was, as we’ve said, it was a one term reset to the entry and secondly, we said it was 65 day supply in domestics, and that’s nowhere near the fleet that we had before the pandemic but it’s certainly enough to take us through for the next few months.

Obviously, what we’re looking for as Tom mentioned in his speech is a mutual end of the strike as soon as possible. But as we said today, we’ve got 55 days, I think we’ll be okay.

Operator: Our next question today comes from Daniel Imbro from Stephens.

Daniel Imbro: Mike, maybe I’ll follow up sort of the new unit. I think you caught out strength in Port brands even as production increased. Can you talk about what you think is driving that, is it more affordable product, just a strong lineup, trying to understand why some of the brands are outperforming so well?

Mike Manley: So without diving into all of the inventory numbers, if I just think about the last few years, what we saw initially is we came into the pandemic with those import brands were holding up in terms of their inventory. And we saw a kind of delayed effect as their inventory levels got really low, and we were talking about three, four, five days of supply. So a lot of those customers for those branches just couldn’t find the [Technical Difficulty]. And as we’ve been able to see flow increase and improve, I think genuinely think it is just some pent-up demand that is being able to get unlocked as a result of that, we saw those brands rebound and rebound strongly. And I’m convinced that, that is what it was in those brands. And our turn rates are just phenomenal, as you can see, we’re still very low day supply but produced great volume in the quarter, I think.

Daniel Imbro: And then, Tom, maybe a strategy one for you. You guys, I think, put in a bid on a UK asset during the quarter, would have been a big international deal. Maybe you can discuss where dealership M&A fits. You obviously saw the buyback this quarter. But where a dealership M&A fits in your focus? And maybe is international becoming more of a focus for you guys as you think about the next lot of growth for AutoNation?