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Lithia buys up two more dealerships

Bad times in the auto industry have made this a good time for Lithia Motors Inc. to buy more dealerships.

Lithia added two dealerships to its holdings Monday and indicated its newest growth spurt is just beginning.

The Medford company paid cash for Seattle BMW and Ted Tufty Dodge in Sioux Falls, S.D., stores with estimated 2001 sales of $50 million and $35 million, respectively.

The company anticipates expanding rapidly in the coming nine months, taking advantage of depressed prices.

The dealerships are the sixth and the seventh acquired by Lithia this year and bring the company's count to 61 with 119 franchises in eight states.

"As expected, the number of stores available for acquisition is increasing, and we will continue to execute our aggressive growth plan in the coming quarters," said Lithia chairman and chief executive officer Sid DeBoer. "The Dodge store will fit in well with the Chevrolet and Subaru stores we already have in the Sioux Falls market. The Seattle BMW store represents our first major import luxury acquisition, as we have been waiting for prices of these kinds of stores to reach reasonable levels."

Although Lithia owns BMW stores in Bakersfield, Calif., Spokane, Wash., and Medford, the Seattle entry is a boon.

Even in economically turbulent times, the 14-year-old dealership on the other end of Pike Street from the famous market is on pace to better past marks for dollar volume and units sold. In 1999, Seattle BMW, the market's 18th-largest auto dealer then owned by Steve Norman, sold 581 new cars and 221 used.

"Believe me, there are plenty of people buying BMWs in Seattle," said Jeff DeBoer, Lithia's chief financial officer and vice president. "People of that profile don't change their buying habits during a slowdown."

The purchase prices weren't disclosed because the acquisitions weren't proportionately large enough by Securities and Exchange Commission standards to be made public. Lithia had $1.66 billion in total revenue in 2000, while the combined sales of the BMW and Dodge dealerships was $85 million.

Lithia generated $20 million in cash flow through the first six months of the year, said DeBoer. Coupled with a $130 million line of credit from Ford Credit, the company has ample resources for its shopping spree.

Jeff DeBoer said it takes about six months to close a deal and that several more are in the pipeline.

"This is the time when you take your share and grow your business," the younger DeBoer said. "We've been waiting and we're going to aggressively grow.

"The average dealer is over 60 years old. If you don't have a second generation to take over and you want to retire, you sell the business.

"There's uncertainty in the economy, and in that kind of environment you have to work harder. I'm not sure that's what a lot of them want to do. In the next two or three years, we're going to double or triple our business."

Lithia stock rose 21 cents a share Monday on the New York Stock Exchange, closing at $13.25.

On Sept. 19, Lithia reported it was confident that it would achieve its projected third-quarter earnings of 42 to 43 cents per share and that it would earn $1.30-$1.33 per share for 2001 and then between $1.50 and $1.56 per share in 2002 - a 15 to 20 percent earnings growth.

Sid DeBoer said July and August were good months, and despite the Sept. 11 terrorist attacks, September was relatively strong.

The company reports its third-quarter earnings on Oct. 23.

Reach reporter Greg Stiles at 776-4463 or e-mail