Dealership Valuation Risks
April 7th, 2009 by Brian Alwine | Tags: 10-K, Annual Reports, Dealerships, Disclaimers, Risk | Posted in Dealerships |Does Asbury Automotive know something we don’t? ABG‘s 10-K report for 2008 noted:
“If conditions surface during the second or third quarters that weaken automotive sales, such as severe weather in the geographic areas in which our dealerships operate, war, high fuel costs, depressed economic conditions or similar adverse conditions, our revenues for the year will be disproportionately adversely affected.” [emphasis added]
Should we assume that if war breaks out in the 1st or 4th quarter, it wouldn’t hurt their business?
On a more serious note, appraisers should be aware of the additional risk associated with dealership valuations in the current environment. Every week, it seems Automotive News has a story of a dealership in foreclosure, shutting down, facing lawsuits, losing financing and inventory, or accused of fraud. Desperate times are leading to some desperate actions by dealers!
Following are just a few of the recent headlines (autonews.com subscription required for most of these):
- Foreclosed: Nissan stores near HQ: Bank sues owner, says he defaulted on $50 million in loans
- Bad sign for Saturn: Megadealer will shut down 4 of his 6 stores
- Ken Zangara lands in a legal stew: New Mexico says high-profile dealer misused funds
- His empire in ruins, Hecker is under siege by lawyers, lender
- No floorplan: Top Suzuki dealer loses all his cars
- Dealership fraud: Phony credit info: Employees falsified forms and took appliances as trade-ins
