Group 1 Automotive

So Duke of Bourbon had that early season campaign where he was excellent.

He was beaten last time out in the Eastern Light Classic at Group 1 level, but there was always the ability was obvious.

The speed was incredible, but he just wasn't the furnished product yet.

Hearing that he's made all of the necessary improvements, physical and hopefully mental as well, because he was certainly one who was just a little quirky last time in nothing silly, but probably wasn't helping himself with just being a little steady early.

I mean, I think I'm in the exact same boat as you, where if they do it correctly, this could be fantastic.

However, I've worked in a Group 1 dealer before, and it was not the best experience from a tech perspective.

So I have my concerns there.

However, looking at this, I think you're 100% right with the more technician bays you have, the more you can increase that service department.

And they end up coming back.

So, you know, I don't know if it's, you'll have some similar stuff, you know, rumblings in the beginning, but who knows? I mean, they're great.

I mean, how many stores do they have now? Group 1

is 200

And this is where I want to connect this to...

The last episode, where we talked about dealership collision operations, specifically we talked about Group 1 Automotive.

Because while everybody spends a lot of time talking about MSOs and independent shops, dealer collision centers can give us another data point, and Group 1 is openly telling investors that collision is under pressure.

In its filings, Group 1 says its parts and service businesses grew in customer pay and warranty work, but that growth was partially offset by the declining collision revenue.

And management has been even more direct.

Group 1 said it has been closing collision centers where the returns do not meet its requirements and repurposing some collision space into traditional mechanical service capacity.

Let's think about that for a second.

They've got a really nice building.

well she was coming up she was coming off a group one win out in germany at what point did the kentucky downs race really kind of come on your guys's radar as a race that you were trying to target

Well, the first aim for this mare was to try and win Group 1 race in Europe because up to then she'd been second four times.

And as a six-year-old, you're probably feeling like you're running out of time.

But as soon as she got that maiden Group 1 win, we felt then we could probably think a little bit more out of the box and the pressure was off.

And as soon as she won in Germany, Adrian Bowman from the IRB was on to say, look, you should consider this.

And it was probably one of those races that was in the back of our minds anyway.

But until we got that Group 1 victory on the board, we probably felt like we had a certain program to try and get the Group 1 victory.

And once that came, we were probably able to deviate a bit and chase some other targets.

And we have 40 chief human resource officers as of now.

from the world's top companies, whether it's PwC or Novartis or Lego or Amway, all these big companies that are in there, Group One Automotive, big, big global companies.

Kindrel recently joined us.

They have, I think, 70,000 employees.

So I thought that was a very interesting insight and a really great way to think about it.

They've been making investments in AI for years.

I think they were one of the earlier partners with one of the leading AI companies.

They built their big data lake where they kind of put all their information together starting in 2018.

Although, I wonder now, Dad, if everyone will be okay with it now that the car dealership groups are starting to lose money.

Sonic Automotive and Group One, for example, losing 23% of their profit year over year.

What do you take, uh, what do you take away from this?

Well, they're not losing money.

Yes.

They're not making as much money as they did.

Now, for Sonic and Group One to, to have the profits down 23%, that's, that's pretty damn significant.

Uh, when you look at Penske and Lithia at five and 6%, you go, "Okay." But, but the real key is the next line where it says operating margin.

So it definitely sounds like it's going to be a trend to watch for dealerships.

So as you said, Group 1 and Lithia are both praising the results, but some of their biggest rivals are sitting this one out.

What's the hesitation there?

Yeah, you know, it was interesting.

The two that talked to us, AutoNation just said they were happy with their current F&I model.

And Sonic actually brought it up on the call itself.

Their president, Jeff Dyke, said they'd let Group 1 lead the charge.

And his line was, we do such a good job in F&I that they don't need a wobble, was how he put it in there.

If

we look at Group 1's

financials, their average profit on every new car in Group 1, which is one of the biggest automotive groups in the country, was $2,380 on the front end and about $2,800 on the back end.

That was their average profit per car dealer, making over $4,000 per deal.

Dealerships, on average, are not losing money around the house on a car.