Company: GPI
Filing Date: 2025-02-14
Form Type: 10-K
Source: 0001031203-25-000013
Chunk: 65

Company: GROUP 1 AUTOMOTIVE INC
Filing Date: 2025-02-14
Form: 10-K
Item: Item 1A
Chunk 65
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 production remains at current reduced levels or in some cases continues to decline, diminishing our ability to meet the immediate needs of our customers, the production shortage could have a material adverse impact on our financial and operating results.

Additionally, President Donald Trump issued a series of executive orders since taking office in January 2025, including executive orders regarding tariffs. Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Events, for additional information regarding these executive orders. Many manufacturers of vehicles, parts and supplies are dependent on imported products and raw materials in their production. Any significant increase in existing tariffs on such goods and raw materials, or implementation of new tariffs, could increase production costs for OEM’s that would then be passed on to consumers, potentially leading to higher vehicle prices and reduced demand, which in turn could adversely affect our profits on the vehicles we sell. Additionally, the tariffs and other market developments could potentially cause our current OEM’s to lose market share to emerging EV-only OEM’s. Market share losses could not only impair our sales and profits but lead to potential impairments.

If we are unable to enter into new franchise agreements with manufacturers in connection with dealership acquisitions or maintain or renew our existing franchise agreements on favorable terms, our operations may be significantly impaired.

We are dependent on our relationships with manufacturers, which exercise a great degree of influence over our operations through the franchise and similar agreements. These agreements may be terminated or not renewed by the manufacturer for a variety of reasons, including network consolidation plans, any unapproved changes of ownership or management, sales and customer satisfaction performance deficiencies and other material breaches of the franchise agreements. For example, in the U.K., the Volkswagen Group has disclosed a five-year plan to reduce the number of partners in its dealer network. That plan may require us to dispose of, or close, up to thirteen of our Volkswagen and up to three Audi dealerships. Correspondingly, the plan may require us to purchase dealerships adjacent to our territories. In the U.S., manufacturers may also have a right of first refusal if we seek to sell dealerships. We also cannot guarantee that the terms of any renewals will be as favorable to us as our current agreements. Although we are generally protected in the U.S. by automotive dealership franchise laws requiring “good cause” be shown for such termination, if such an instance occurs, we cannot guarantee that the termination of the franchise will not be successful. 

A manufacturer may also limit the number of its dealerships that we may own overall or in a particular geographic