(Update share price, paragraph 9)
By Bernie Woodall
DETROIT, Feb 11 (Reuters) - Group 1 Automotive Inc Chief Executive Officer Earl Hesterberg said on Thursday the auto dealer group will cut orders for new vehicles as it looks to trim excess inventory.
The excess inventory was most acute for luxury cars from BMW and Daimler AG’s Mercedes-Benz in the oil patch of Texas and Oklahoma, Hesterberg told Reuters in an interview after the company issued fourth-quarter earnings.
“We have to order a few less vehicles until we get it lined up,” he said. He did not specify how much the company expects to cut orders.
He said it generally takes three to six months to overcome excess inventory, but that timeframe may lengthen because January and February are slow auto sales months. Hesterberg said he has spoken the luxury automakers about realigning shipments so fewer cars are sent to areas hit by low energy prices.
Hesterberg said other auto dealers have joined him in telling all automakers to ship more SUVs and pickup trucks and fewer passenger cars.
Group 1 Chief Financial Officer John Rickel said in a separate interview that there were 88 days of supply of BMW models on Group 1’s U.S. lots as of the end of the fourth quarter, compared with 58 days a year earlier. Mercedes-Benz supply was 61 days versus 49 days a year earlier.
Rickel said a key factor is that the two luxury brands have fewer of the SUVs that are in high demand in the U.S. market as car demand slides. He also said the strength of the U.S. dollar has led the two luxury automakers to divert shipments to the United States from China, swelling inventory.
Two weeks ago, AutoNation Inc Chief Executive Mike Jackson also said low oil prices were pressuring sales in Texas, and that the company would cut its new vehicle orders.
Group 1 on Thursday reported fourth-quarter adjusted net income of $1.51 per share, missing Wall Street expectations of $1.80 per share as compiled by Thomson Reuters I/B/E/S. Shares for the No. 3 U.S. auto dealer group were down 3.4 percent at $52.11 by Thursday afternoon. Shares have slid 30.6 percent since the start of this year.
Hesterberg said the company’s lower share prices decrease the chance of dealer acquisitions but also opens the door for more share repurchases. On Thursday, Group 1 said its board increased its share repurchase authorization to $150 million from $78.2 million. (Reporting by Bernie Woodall; Editing by David Gregorio)