Lithia Motors' streamlined operations produced a dramatic turnaround in the second quarter.

Lithia Motors' streamlined operations produced a dramatic turnaround in the second quarter.

The Medford auto-retailer Thursday reported a net profit of nearly $3.7 million in the second quarter, a major upswing from the $243.8 million loss reported in the second quarter of 2008.

The improved profit came despite faltering new car sales, which produced a 24.4 percent revenue decline — $402 million compared with $532 million for the corresponding period in 2008. Still, Lithia produced its best bottom line results since announcing major cutbacks in June 2008.

"This has been an unprecedented quarter in the automobile industry," Lithia Chairman and Chief Executive Officer Sid DeBoer said during Lithia's quarterly conference call with analysts and stockholders. "I wouldn't have believed it a year ago if you would have told me General Motors and Chrysler would have reorganized with the help of the government. Despite the (economic) headwinds, we've executed our plan."

He said customer demand continues for vehicles built by GM and Chrysler, which account for 47 percent of the company's new unit sales.

"Their reorganization is critical to our future and we understand the impact to ourselves," DeBoer said. "Sales have been stable at our GM and Chrysler locations."

As demand lagged, the company eliminated 20 dealerships and slashed $55 million in annual expenses during the past year. Lithia now operates 88 stores in 13 states, with plans to sell 11 more.

"We did not make significant progress on the sales of stores in the second quarter," said Brian DeBoer, Lithia's president and chief operations officer. "Now that General Motors and Chrysler have emerged from bankruptcy, we hope interest will rise."

Lithia previously reported it had a net gain when Chrysler closed 800 dealerships nationwide, but it lost three GM stores as part of the manufacturer's reduction of 1,100 dealerships. "Those GM stores lost money," Sid DeBoer said. "Many of our locations will see incremental increases due to surrounding dealers closing. Less competition will benefit all who survive."

DeBoer said he was pleased with improved gross margins and used vehicle retail sales throughout the year. He also anticipated the government's "cash for clunkers" program would lead to good third-quarter results.

"They ought to make it a $50 billion program," DeBoer said of the program that was budgeted at $1 billion. Congressional sources announced Thursday the program would be suspended because of fears the demand may overwhelm the budgeted amount. (See story, Page 1A).

For the first half of the year, Lithia sold 10,363 fewer cars than the corresponding period a year ago. However, the average selling price of a new car rose 3.6 percent to $29,927, an increase of $1,040.

For the six-month period ending June 30, total sales declined 27 percent to $769 million from $1.05 billion in the same period last year. Same-store new vehicle sales tumbled 37.8 percent, retail used vehicle sales decreased 4.4 percent and service, body and parts sales decreased 5.5 percent.

Reach reporter Greg Stiles at 776-4463 or e-mail business@mailtribune.com.