What changed in this filing

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Item 1. Business

2021-02-24 compared with 2020-02-13 · 233 added, 124 removed, 153 unchanged (70% of the section changed)

Group 1 Automotive, Inc., a Delaware corporation organized in 1995, is a leading operator in the automotive retail industry.

Unless the context requires otherwise, references to “we,” “us,” “our,” or “the Company” are intended to mean the business and operations of Group 1 Automotive, Inc.

and its subsidiaries.

As of December 31, 2019 , our retail network consisted of 119 dealerships in the U.S., 50 dealerships in the U.K.

and 17 dealerships in Brazil.

Our operations are primarily located in major metropolitan areas in 15 states in the U.S., 33 towns in the U.K., and three states in Brazil.

Group 1 Automotive, Inc.

is a leading operator in the automotive retail industry.

Through our dealerships, we sell new and used cars and light trucks;

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and sell vehicle parts.

The following charts present the total revenue and gross profit contribution from our U.S., U.K.

and Brazil operations by new vehicle, used vehicle, parts and service, and F&I for the year ended December 31, 2019:

As discussed in Note 19 “Segment Information” within our Notes to Consolidated Financial Statements, we have three regions, which comprise our reportable segments:

(1) U.S., (2) U.K., and (3) Brazil.

As of December 31, 2020, our retail network consisted of 117 dealerships in the U.S., 50 dealerships in the U.K.

and 17 dealerships in Brazil.

Our operations are primarily located in major metropolitan areas in 15 states in the U.S., 33 towns in the U.K.

and three states in Brazil.

The following chart presents the total revenues and gross profit contribution from our operations by new vehicle, used vehicle, parts and service and F&I for the year ended December 31, 2020:

As discussed in Note 19.

Segment Information within our Notes to Consolidated Financial Statements, we have three regions, which comprise our reportable segments:

the U.S., U.K.

and Brazil segments are led by the President, U.S.

and Brazilian Operations, and the U.K segment is led by a Managing Director, each reporting directly to our Chief Executive Officer, who is the Chief Operating Decision Maker.

and Brazilian Operations, and the U.K.

segment is led by an Operations Director, each reporting directly to our Chief Executive Officer, who is the CODM.

The President, U.S.

and Brazilian Operations, and the U.K Managing Director are responsible for the overall performance of their respective regions, as well as for overseeing field level management.

segment includes the activities of our corporate office.

and Brazilian Operations, and the U.K.

Operations Director are responsible for the overall performance of their respective regions, as well as for overseeing field level management.

Business Strategy

Our business strategy primarily focuses on the performance of our existing dealerships to achieve growth, capture market share, and maximize the investment return to our stockholders and also focuses on enhancing our dealership portfolio through strategic acquisitions and dispositions.

Our business strategy focuses on improving the performance of our existing dealerships and enhancing our dealership portfolio through strategic acquisitions and dispositions to achieve growth, capture market share and maximize the investment return to our stockholders.

We constantly evaluate opportunities to improve the overall profitability of our dealerships.

For 2020 , our priorities are:

We believe that as of December 31, 2020, we have sufficient financial resources to support additional acquisitions.

Further, we intend to continue to critically evaluate our return on invested capital in our current dealership portfolio for disposition opportunities.

For 2021, our priorities are growing our company through acquisitions, improving and growing sales penetration in our digital retailing platform, AcceleRide®, continuing to grow our parts and service gross profit through numerous initiatives, increasing our market share in the highly fragmented used vehicle business and continuing to leverage our SG&A as a percentage of gross profit.

Strategic Acquisitions and Dispositions

We will continue to focus on opportunities to enhance our current dealership portfolio through strategic acquisitions and improving or disposing of underperforming dealerships.

We believe that substantial opportunities for growth through acquisitions remain in our industry in the U.S., U.K.

Acquisitions capitalize on economies of scale and cost savings opportunities in our existing markets in areas such as used vehicle sourcing, advertising, purchasing, data processing and personnel utilization, thereby, increasing operating efficiency.

We seek to acquire large, profitable, well-established dealerships that represent growing brands in growth markets.

We evaluate all brands and geographies to expand our brand, product and service offerings in our existing markets or expand into growing geographic areas we currently do not serve.

Further, we intend to continue to critically evaluate our return on invested capital in our current dealership portfolio for disposition opportunities.

During 2020, our dispositions included two dealerships representing three franchises in the U.S.

We recorded a net pre-tax gain totaling $3.1 million related to these dispositions.

Refer to Note 3.

Acquisitions and Dispositions within our Notes to Consolidated Financial Statements for further discussion.

Digital Initiatives to Enhance the Customer Experience

Our digital initiatives focus on ensuring that we can do business with our customers where and when they want to do business.

Our online retail platform, AcceleRide®, which was deployed to all of our U.S.

dealerships in 2019, allows a customer to complete a vehicle transaction entirely online or start the sales process online and complete the transaction at one of our dealerships.

The customer also has the ability to apply for financing and review and select F&I products as part of the online process.

During 2020, AcceleRide® U.S.

total retail unit sales were 11,053, up more than 100% compared to 2019.

We began the roll out of AcceleRide® to our U.K.

dealerships in 2020 and expect to complete this in the second quarter of 2021.

In addition, our parts and service digital efforts focus on our online customer scheduling appointment system.

We have seen continued growth in the percentage of appointments scheduled online over the past few years as we have continued to enhance this tool.

We have also focused on improved interaction with our parts and service customers by offering preferred communication options via dealership apps, phone, text or email and online payment options.

We are capitalizing on technology advances in robotic process automation and artificial intelligence to improve our marketing, call center and back office efficiency.

These digital platforms were instrumental in allowing us to connect with and service our customers during the social distancing requirements as a result of the COVID-19 pandemic.

Parts and Service Growth

We remain focused on s ustained growth in our higher margin parts and service operations which continue to hinge on the retention and hiring of skilled service technicians and advisors.

In 2019, our U.S.

service operations implemented a four-day work week for service technicians and advisors which allowed us to expand our hours of operations during the week.

This change has resulted in increased service technician and advisor retention, thereby expanding our service capacity without investing additional capital in facilities.

Our online service appointment platform and centralized call centers have improved the customer experience.

We seek to increase the retention of our customers through more convenient service hours, training of our service advisors, selling service contracts with vehicles sales and customer relationship management software that allows us to provide targeted marketing to our customers.

The increasing complexity of vehicles, especially in the area of electronics and technological advancements, is making it increasingly difficult for independent repair shops to maintain the expertise and technology to work on these vehicles, and provides us the opportunity to increase our market share well into the future.

Used Vehicle Retail Growth

Gross profit from the sale of used vehicles depends primarily on a dealership’s ability to obtain a high-quality supply of used vehicles at reasonable prices.

Used vehicle gross profit depends primarily on a dealership’s ability to obtain a high-quality supply of used vehicles at reasonable prices.

Our new vehicle operations generally provide our used vehicle operations with a large supply of high-quality trade-ins and off-lease vehicles, which are our best source of used vehicle inventory.

In October 2020, we introduced “Sell A Ride” to our AcceleRide® platform to increase our ability to purchase used vehicle inventory directly from customers with a cash offer within 30 minutes during business hours, home pickup and payment available within one hour.

Our dealerships supplement their used vehicle inventory with purchases at auctions, including manufacturer-sponsored auctions available only to franchised dealers.

Our data driven pricing strategies ensure that our used vehicles are priced at market to generate more traffic to our websites.

We review our market pricing on a regular basis and work to limit discounting from our advertised prices.

In the first quarter of 2018 in the U.S., we launched a sales program called “Val-U-Line®,” a strategic used vehicle initiative that targets a growing customer niche and enables us to retail lower cost, higher mileage units that would otherwise have been sent to the auction.

Leveraging our scale, internal on-line buying center, internal auction capability and transportation infrastructure, the Val-U-Line® initiative has provided incremental retail volume and represented approximately 10% of our U.S.

retail used car business in 2019.

Parts and Service Growth

Sustained growth of our higher margin parts and service operations continues to hinge on the retention and hiring of service technicians and advisors.

Our newly implemented four-day work week has been rolled out in 75 U.S.

dealerships as of December 31, 2019, resulting in an increase to our same store service technician headcount of approximately 320 employees or approximately 13% since December 31, 2018.

The four-day work week has allowed us to extend our hours of operations, thereby expanding our service capacity without investing additional capital in buildings.

We seek to increase the retention of our customers through more convenient service hours, training of our service advisors, selling service contracts with vehicles sales and customer relationship software that allows us to provide target marketing to our customers.

The increasing complexity of vehicles, especially in the area of electrics and technological advancements, is making it difficult for independent repairs shops to retain the expertise and technology to work on these vehicles and provides us the opportunity to increase our market share.

Digital Initiatives to Enhance the Customer Experience

Our digital initiatives focus on ensuring that we can do business with our customers where and when they want to do business.

Our online new and used vehicle retail platform, “AcceleRide®”, was deployed to all of our U.S.

dealerships in 2019.

The platform allows a customer to complete a vehicle transaction entirely online or start the sales process online and complete the transaction at our dealerships.

Parts and service digital efforts focus on our online customer scheduling appointment system.

We have seen continued growth in the percentage of appointments scheduled online over the past few years as we have continued to enhance this tool, with approximately 26% of our U.S.

service appointments scheduled online in 2019.

Cost Management as We Continue to Grow Gross Profit

We review our market pricing on a constant basis and work to limit discounting from our advertised prices.

Cost Management

We continue our efforts to fully leverage our scale and cost structure.

As our business grows in 2020 and beyond, we intend to manage our costs carefully and to look for additional opportunities to improve our processes and disseminate best practices.

We believe that our management structure supports more rapid decision making and facilitates an efficient and effective roll-out of new processes.

A key to the execution of our business strategy is the leverage of what we believe to be one of our key strengths — the talent of our people.

As our business evolves, we will manage our costs c arefully and look for additional opportunities to improve our processes and disseminate best practices.

We believe that our management structure supports rapid decision making and facilitates an efficient and effective roll-out of new processes.

As part of the digital efforts discussed above, in 2020 we have improved our productivity for our sales and service departments, resulting in increases of 19% and 22% in technician and salesperson productivity rates, respectively, as compared to 2019.

See COVID-19 Pandemic section below for specific cost-cutting measures and productivity efficiencies undertaken in response to the COVID-19 pandemic.

Employee Training and Retention

A key to the execution of our business strategy is leveraging what we believe to be one of our key strengths — the talent of our people.

We are focused on the retention and training of our talented dealership employees.

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With our management structure and level of executive talent, we plan to continue empowering the operators of our dealerships to make appropriate decisions to grow their respective dealership operations and to control fixed and variable costs.

We believe this approach allows us to provide the best possible service to our customers, as well as attract and retain talented employees.

We will continue to focus on opportunities to enhance our current dealership portfolio through strategic acquisitions and improving or disposing of underperforming dealerships.

We believe that substantial opportunities for growth through acquisitions remain in our industry in the U.S., the U.K.

An absolute acquisition target has not been established for 2020 , but we expect to acquire dealerships that provide attractive returns on investment.

We believe that as of December 31, 2019 , we have sufficient financial resources to support additional acquisitions.

Further, we intend to continue to critically evaluate our return on invested capital in our current dealership portfolio for disposition opportunities.

We believe this approach allows us to provide the best possible service to our customers and attract and retain talented employees.

COVID-19 Pandemic

Since emerging in December 2019 , the COVID-19 pandemic has spread globally, including to all of our markets in the U.S., U.K.

and Brazil, significantly impacting our operating results starting in mid-March 2020.

There have been extraordinary and wide-ranging actions taken by international, federal, state and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 across the world, including social distancing requirements for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations.

Beginning in mid-March 2020, these measures significantly reduced the operating capacity of all of our dealerships in the U.S., U.K.

As the restrictions eased during the latter part of 2020, we continued to experience periodic disruptions from reduced capacity and departmental shutdowns as a result of COVID-19 outbreaks and quarantines impacting our employees.

Beginning in December 2020 and January 2021, vaccines deemed highly effective started rolling out to the general population in the U.S., U.K.

The rollout of the vaccine is expected to help control the spread of the virus.

However, the timeline and effectiveness of vaccinating the critical mass of the population in our markets is uncertain.

The primary COVID-19 pandemic impacts on our global business and our response to date include:

Virtually all of our U.S.

dealerships are located in markets that operated under some form of social distancing requirements in accordance with applicable state and local orders during most of March 2020 and April 2020.

As the market shutdowns began, March 2020 U.S.

sales fell sharply from February 2020, with new and used retail unit sales and service repair orders falling approximately 50% for the last two weeks of March 2020 and first two weeks of April 2020 compared to the same period in 2019.

In early May 2020, as social distancing requirements began to be partially lifted, our used vehicle business returned to near normal levels and our new vehicle sales pace started improving.

Our new vehicle sales pace improved during the third and fourth quarters, however the recovery of new vehicle unit sales was limited as a result of low inventory levels due to reduced OEM production rates.

Our used vehicle sales have also been limited due to inventory shortages as a result of fewer trade-ins.

Thus far, we have been able to nearly offset the volume declines with higher gross margins in new and used vehicles and higher F&I per retail unit.

Beginning in mid-April 2020, we saw recovery in our parts and service business as well and closed the fourth quarter of 2020 with parts and service revenues down 4.8% compared to the same period last year.

Our online selling platform AcceleRide® and our online service scheduling platforms continue to show increased utilization rates as we remain in a social distancing environment and such higher utilization rates are expected to continue after the pandemic.

vehicle sales levels were well above prior year in most of our brands through February 2020.

We closed all of our U.K.

dealerships from late March 2020 through May 18, 2020 for service, with the exception of emergency vehicle service repairs, and our vehicle showrooms did not reopen until June 1, 2020.

Operations in the U.K.

significantly improved in June 2020 and continued to improve throughout the third quarter and early fourth quarter of 2020.

As vehicle sales and service operations reopened, our revenues and margins in all departments increased versus prior year levels.

While new vehicle volumes have rebounded, our new vehicle inventory is still well below normal levels due to reduced OEM production rates.

On October 31, 2020, the U.K.

government announced a national lockdown of non-essential businesses, which included our dealership vehicle showrooms, beginning November 5, 2020 through December 2, 2020.

Regional lockdowns occurred in late December and on January 4, 2021, the U.K.

government announced another national lockdown of non-essential businesses beginning immediately, and are not expected to be lifted until April 2021 at the earliest.

The lockdown impacts our new and used vehicle sales as our showrooms are required to close, but has a lesser impact on our service operations as they are allowed to remain open.

Effective March 20, 2020, all of our dealerships were required to close.

Despite restrictions being lifted and businesses reopening in Brazil during the second quarter, the recovery has been limited as the effects of the COVID-19 pandemic and significant inventory shortages are still impacting operations.

We do not expect inventory to return to normal levels until late 2021.

Cost-Cutting Actions

We have taken quick and decisive actions to reduce costs and preserve liquidity in all regions, with approximately 8,000 employees furloughed or terminated in early April 2020.

As sales have improved in the U.S.

and U.K., we have been able to return to work some of the furloughed employees to a point where our U.S.

headcounts are approximat ely 75% of our pre-COVID levels.

In addition, other measures were implemented to significantly reduce costs in all three regions including reductions of as much as 50% in management compensation, 100% of Board of Directors’ cash compensation, over 33% reduction in advertising expense and cuts across all other cost categories.

Additionally, as announced in April 2020, we suspended our dividend and canceled our share repurchase program, as well as implemented capital expenditure deferrals.

By the end of the third quarter as market conditions improved, we restored many of these cost reductions.

On October 6, 2020, we announced a $200 million share repurchase program and on November 18, 2020, we declared a dividend of $0.30, which was paid on December 15, 2020.

As discussed in Item 7.

Liquidity and Capital Resources, we have sufficient liquidity currently and do not anticipate any material liquidity constraints or issues with our ability to remain in compliance with debt covenants.

The demand outlook remains uncertain and the long-term impact of the COVID-19 pandemic is difficult to predict, especially with the recently announced additional lockdown in the U.K.

and rising COVID-19 cases in some of our markets.

However, we expect our used vehicle and service operations to return to near pre-pandemic levels in 2021.

Reduced new vehicle inventory levels in the U.S., U.K.

and Brazil will likely persist throughout the first half of 2021, which will limit the recovery in new vehicle unit sales.

However, we expect to continue the trend set in the third and fourth quarters of 2020 by offsetting some of the decline in volume with gross margin improvement.

We are prepared to adjust our cost structure further to adapt to market conditions.

While some of the cost reductions taken in the first and second quarters were reinstated in the third and fourth quarters as market conditions improved, we expect to be more cost efficient going forward as compared to pre-pandemic levels.

Any potential impact of the COVID-19 pandemic will depend on future developments and new information that may emerge regarding the severity and duration of the pandemic, timing and effectiveness of the vaccines and the actions taken by authorities to contain it or address its impact, all of which are beyond our control.

Dealership Operations

Our operations are located in geographically diverse markets that extend domestically across 15 states aggregated into one U.S.

region, and internationally in the U.K.

and Brazil, representing our three reportable segments:

See Note 19 “Segment Information” within our Notes to Consolidated Financial Statements for further financial information on our reportable segments.

Our operations are located in geographically diverse markets that extend domestically across 15 states in the U.S., and internationally across 33 towns in the U.K.

and three states in Brazil.

The three regions in which we operate represent our three reportable segments:

the U.S., U.K.

Refer to Note 19.

Segment Information within our Notes to Consolidated Financial Statements for further financial information on our reportable segments.

For a discussion of the risks associated with our operations in the U.S., U.K.

and Brazil, please see Part I “Item 1A.

and Brazil, please see Item 1A.

Risk Factors.

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and sell vehicle parts.

Our new vehicle revenue includes new vehicle sales and new vehicle lease transactions, sold at our dealerships or via our internet sites.

We sell retail used vehicles directly to our customers at our dealerships or via our internet sites and wholesale used vehicles at auctions.

Our new vehicle revenues includes new vehicle sales and new vehicle lease transactions, sold at our dealerships or via our internet sites.

We sell retail used vehicles directly to our customers at our dealerships or via our internet sites and wholesale used vehicles at third party auctions.

We sell replacement parts and provide both warranty and non-warranty (i.e., customer-pay) maintenance and repair services at each of our franchised dealerships, as well as provide collision repair services at the 49 collision centers that we operate.

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To increase transparency to our customers, we offer all of our products on menus that display pricing and other information, allowing customers to choose the products that suit their needs.

The following chart sets forth the regions and geographic markets in which we operate and the percentage of new vehicle retail units sold in each region for the year ended December 31, 2019 :

(1) Other includes LA 3%, NH 2% NJ 2% SC 2%, MS 2%, KS 2%, AL 1%, MD 1% and NM 1%.

The following chart presents our diversity of new vehicle unit sales by manufacturer for the year ended December 31, 2020:

The following table shows our franchises and new vehicle revenues by manufacturer as of December 31, 2019 (in millions):

New Vehicle Revenues

Volkswagen/Audi/Porsche/SEAT/SKODA

Chevrolet/GMC/Buick/Cadillac

Mercedes-Benz/Smart/Sprinter

Chrysler/Dodge/Jeep/RAM

Jaguar/Land Rover

Hyundai/Kia/Genesis

Acquisition and Divestiture Program

We pursue an acquisition and divestiture program focused on delivering an attractive return on investment.

Acquisition Strategy

We seek to acquire large, profitable, well-established dealerships and franchises that are leaders in their markets to:

enhance brand and geographic diversity with a primary focus on import and luxury brands;

expand our brand, product, and service offerings in our existing markets;

expand into geographic areas we currently do not serve;

capitalize on economies of scale and cost savings opportunities in our existing markets in areas such as used vehicle sourcing, advertising, purchasing, data processing, personnel utilization, and the cost of floorplan financing, thereby, increasing operating efficiency.

Recent Acquisitions

In 2019 , we acquired four dealerships representing six franchises in the U.S.

and four dealerships representing five franchises in the U.K.

Aggregate consideration paid for these dealerships, which were accounted for as business combinations, totaled $143.2 million .

We also opened one dealership representing one franchise in the U.S.

and two dealerships representing three franchises in the U.K.

See Note 3 “Acquisitions and Dispositions” within our Notes to Consolidated Financial Statements for additional details.

Divestiture Strategy

We continually review the investments in our dealership portfolio for disposition opportunities based upon a number of criteria including:

the rate of return on our capital investment over a period of time;

location of the dealership in relation to existing markets and our ability to leverage our cost structure;

potential future capital investment requirements;

existing real estate obligations, coupled with our ability to exit those obligations or identify an alternate use for real estate.

Recent Dispositions

During 2019 , our dispositions included four dealerships representing seven franchises and two terminated franchises in the U.S., three dealerships representing four terminated franchises in the U.K.

and one dealership representing one franchise in Brazil.

We recorded a net pre-tax gain totaling $5.0 million related to these dispositions.

See Note 3 “Acquisitions and Dispositions” within our Notes to Consolidated Financial Statements for additional details.

The following table shows our new vehicle unit sales geographic mix for the year ended December 31, 2020 and our franchise count as of December 31, 2020:

New vehicle unit sales geographic mix (%) Franchises

Region Geographic Market

United States Texas 37.8 74

Oklahoma 7.5 20

California 4.9 5

Georgia 4.7 9

Massachusetts 4.6 5

Florida 2.7 4

Louisiana 2.2 5

New Hampshire 1.9 3

New Jersey 1.9 4

South Carolina 1.8 3

New Mexico 1.3 9

Mississippi 1.0 2

Alabama 0.7 2

Maryland 0.5 2

International United Kingdom 21.2 67

Brazil 3.9 22

We operate in a highly competitive industry.

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Consumers also have options for the purchase of related parts and accessories, as well as the maintenance and repair of vehicles.

In the U.S., according to the National Automobile Dealers Association, there were approximately 16,750 franchised automobile dealerships as of January 2019 , which was down from approximately 16,800 as of January 2018 .

In the U.K., according to the National Franchised Dealers Association, there were approximately 4,190 franchised dealerships based on a survey conducted as of July 2019, which was down from approximately 4,240 as of the survey conducted in 2018.

In Brazil, according to the Brazilian Automotive Industry Yearbook, there were approximately 4,020 franchised automobile dealerships as of January 2019, which was down from approximately 4,290 as of January 2018.

New and Used Vehicles

We believe the principal competitive factors in the automotive retailing business are location, suitability of the facility, on-site management, the acceptance of a franchise to the market in which it is located, concentration of same franchises in the surrounding markets, service, price, and selection.

We believe the principal competitive factors in the automotive retailing business are location, service, price, selection, online capabilities and established customer relationships.

In the new vehicle market, our dealerships compete with other franchised dealerships in their market areas, as well as auto brokers, leasing companies and internet companies that provide referrals to, or broker vehicle sales with, other dealerships or customers.

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We do not have any cost advantage in purchasing new vehicles from vehicle manufacturers, and our franchise agreements do not grant us the exclusive right to sell a manufacturer’s product within a given geographic area.

In the used vehicle market, our dealerships compete both in their local market and nationally, including over the internet, with other franchised dealers, large multi-location used vehicle retailers, local independent used vehicle dealers, automobile rental agencies, and private parties for the supply and resale of used vehicles.

In the used vehicle market, our dealerships compete both in their local market and nationally with other franchised dealers, large multi-location used vehicle retailers, local independent used vehicle dealers, automobile rental agencies and private parties for the supply and resale of used vehicles.

The internet has also become a significant part of the advertising and sales process in our industry.

Customers are using the internet as part of the sales process to compare pricing for cars and related F&I services, which may increase competition and reduce gross profit margins for new and used cars and profits for related F&I services.

Some retailers offer vehicles for sale over websites without the benefit of having a dealership franchise, although they must currently source their vehicles from a franchised dealer.

Several companies are currently manufacturing electric vehicles for sale primarily through the internet without using the traditional dealer-network.

Parts and Service

We believe the principal competitive factors in the parts and service business are the quality of customer service, the use of factory-approved replacement parts, familiarity with a manufacturer’s brands and models, accessibility and convenience for potential customers, access to and use of technology required for certain repairs and services (e.g., software patches, diagnostic equipment, etc.), location, price, the availability and competence of technicians, and the availability of training programs to enhance such expertise.

We believe the principal competitive factors in the parts and service business are the quality of customer service, the use of factory-approved replacement parts, familiarity with a manufacturer’s brands and models, location, price, the availability and competence of technicians, and the availability of training programs to enhance such expertise.

In the parts and service market, our dealerships compete with other franchised dealers to perform warranty maintenance and repairs, conduct manufacturer recall services and sell factory replacement parts.

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If dealer laws are repealed in the states in which we operate in the U.S., manufacturers may be able to terminate our franchises without providing advance notice, an opportunity to cure or showing of good cause.

Without the protection of dealer laws, it also may be more difficult for our dealers to renew their franchise agreements upon expiration.

Without the protection of dealer laws, it also may be more difficult for us to renew our franchise agreements upon expiration.

Further, U.S.

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In addition, our U.K.

dealerships are subject to EU and U.K.

antitrust rules prohibiting certain restrictions on the sale of new vehicles and spare parts and on the provision of repairs and maintenance across the EU.

For example, authorized dealers are generally able to, subject to manufacturer facility requirements, relocate or add additional facilities throughout the EU, offer multiple brands in the same facility, allow the operation of service facilities independent of new car sales facilities and ease restrictions on cross supplies (including on transfers of dealerships) between existing authorized dealers within the EU.

dealerships are subject to U.K.

antitrust rules prohibiting certain restrictions on the sale of new vehicles and spare parts and on the provision of repairs and maintenance.

For example, as a matter of 2020 EU law, authorized dealers are generally able to, subject to manufacturer facility requirements, relocate or add additional facilities throughout the EU, offer multiple brands in the same facility, allow the operation of service facilities independent of new car sales facilities and ease restrictions on cross supplies (including on transfers of dealerships) between existing authorized dealers within the EU.

However, certain restrictions on dealerships may be permissible, provided the conditions set out in the relevant EU Block Exemption Regulations are met.

On June 23, 2016, the British citizens voted on a referendum in favor of Brexit.

formally exited the EU on January 31, 2020, but the exact terms of resulting trade agreements are still being negotiated.

The impact of these negotiations on the laws protecting dealership franchises is not yet known.

formally exited the EU on January 31, 2020 and the EU and the U.K.

reached an agreement in principle as set out in the EU-U.K.

Agreement, which became provisionally applicable on January 1, 2021.

Agreement commits the parties to maintaining antitrust/competition law based on the common principles underlying the respective competition frameworks, and envisages cooperation and coordination between the U.K.

and EU competition authorities.

Similarly, as of January 1, 2021, the relevant EU Block Exemption Regulations remain in effect under domestic U.K.

law, as amended in accordance with the U.K.

competition framework, but may be further amended, revoked or extended by subsequent U.K.

The sale of vehicles in Brazil is regulated by federal law, commonly referred to in Brazil as the Ferrari Law.

Such law sets forth the terms and conditions of distribution agreements executed among manufacturers and dealerships, specifically with regard to the distribution of cars, trucks, motorbikes and similar vehicles.

Such law sets forth the terms and conditions of distribution agreements executed among manufacturers and dealerships, specifically with regards to the distribution of cars, trucks, motorbikes and similar vehicles.

In addition, the Ferrari Law establishes the geographical area of a dealership and termination of distribution agreements and their consequences, among other things.

Any contractual provision that conflicts with the Ferrari Law is considered void in Brazil.

The distribution agreements contemplate the commercialization of vehicles and components fabricated by the manufacturer, the rendering of technical assistance relating to such products and the usage by the dealerships of the manufacturers’ brand.

According to the Ferrari Law, distribution agreements may be executed for either a determined or an undetermined term.

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Additionally, in every jurisdiction in which we operate, we must obtain various permits and licenses in order to conduct our businesses.

Refer to “Item 1A.

Risk Factors” for further discussion of automotive and other laws and regulations affecting our business.

On January 29, 2020, President Trump signed into law the United States-Mexico-Canada Agreement (USMCA).

The USMCA updates, modernizes and rebalances the prior existing North America Free Trade Agreement (NAFTA) to meet certain anticipated challenges of the 21st century economy for the region and is intended to ensure that American workers, farmers, ranchers and businesses share in the benefits of the agreement.

On January 29, 2020, President Donald Trump signed into law the United States-Mexico-Canada Agreement (“USMCA”).

The USMCA updates, modernizes and rebalances the prior existing North America Free Trade Agreement to meet certain anticipated challenges of the 21st century economy for the region and is intended to ensure that American workers, farmers, ranchers and businesses share in the benefits of the agreement.

It is intended to promote fairer and more balanced trade and keep North America one of the most competitive regions in the world.

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jobs in the automotive sector.

Additionally, it is expected that the USMCA will encourage automakers and suppliers to locate future production of new energy and autonomous vehicles in the U.S.

Additionally, it is expected that the USMCA will encourage automakers and suppliers to locate future production of new electric and autonomous vehicles in the U.S.

We are subject to numerous laws and regulations designed to protect information of clients, customers, employees and other third parties that we collect and maintain.

Some of the more significant regulations that we are required to comply with include the EU’s General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act (“CCPA”) and the General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or “LGPD”) in Brazil.

These regulations provide for various data protection requirements related to protection of customer’s personally identifiable information, notice requirements related to data breaches and obligations to inform a consumer, at or before collection, of the purpose and intended use of the collection, and to delete a consumer’s personal information upon request.

If an EU or non-EU organization violates the GDPR, the organization can be fined up to 4% of annual global turnover or 20 million euros, whichever is greater.

In addition, our dealerships in California are required to comply with the CCPA, which became effective in January 2020.

The CCPA also allows the California Attorney General to bring actions against non-compliant businesses with fines of $2,500 per violation or, if intentional, up to $7,500 per violation.

Further, the LGPD in Brazil, which became effective in August 2020, includes fines for violations of up to 2% of an organization’s revenue in Brazil, for the prior fiscal year, excluding taxes, with the total fine not to exceed 50 million reals (approximately $9.3 million USD).

Environmental and Occupational Health and Safety Laws and Regulations

Our business activities in the U.S., U.K.

and Brazil are subject to stringent federal, regional, state and local laws, regulations and other controls governing specific health and safety criteria to address worker protection, the release of materials into the environment or otherwise relating to environmental protection.

Our operations involve the use, handling and storage of materials such as motor oil and filters, transmission fluids, antifreeze, refrigerants, paints, thinners, batteries, cleaning products, lubricants, degreasing agents, tires and fuel.

We contract for recycling and/or disposal of used fluids, filters and other waste materials generated by our operations.

These business activities are subject to stringent federal, regional, state and local laws, regulations and other controls governing specific health and safety criteria to address worker protection, the release of materials into the environment or otherwise relating to environmental protection.

Additionally, vehicle manufacturers in the U.S.

are subject to numerous regulations including those adopted by the U.S.

EPA and the National Highway Traffic Safety Administration (“NHTSA”) that establish GHG emissions and corporate average fuel economy (“CAFE”) standards.

These laws, regulations and controls may impose numerous obligations upon our operations including the acquisition of permits to conduct regulated activities, the imposition of restrictions on where or how to manage or dispose of used products and wastes, the incurrence of capital expenditures to limit or prevent releases of such material, and the imposition of substantial liabilities for pollution resulting from our operations or attributable to former operations.

For example, in the U.S., most of our dealerships utilize storage tanks that are subject to testing, containment, upgrading and removal regulations under the federal Resource Conservation and Recovery Act.

Comparable regulations have been or may be enacted in the U.K.

Failure to comply with these laws, regulations and permits may result in the assessment of sanctions, including administrative, civil and criminal penalties, the imposition of investigatory remedial and corrective action obligations or increase of capital expenditures, restrictions, delays and cancellations in permitting or in the performance or expansion of projects and the issuance of injunctions limiting or preventing some or all of our operations in affected areas.

Additionally, certain of these environmental laws may result in imposition of joint and several strict liability, which could cause us to become liable as a result of our conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, prior operators or other third parties.

For instance, an accidental release from one of our storage tanks could subject us to substantial liabilities arising from environmental cleanup and restoration costs, claims made by neighboring landowners and other third parties for personal injury and property damage and fines or penalties for related violations of environmental laws or regulations.

Moreover, laws and regulations protecting the environment generally become more stringent over time, which may result in increased costs for future environmental compliance and remediation.

Comparable laws and regulations have been enacted in the U.K.

Refer to “Item 1A.

Risk Factors” for further discussion of environmental and occupational health and safety laws and regulations affecting our business.

The threat of climate change continues to attract considerable attention in the U.S.

and in foreign countries and, as a result, numerous proposals have been made and could continue to be made at the international, national, regional and state levels of government to monitor and limit existing emissions of greenhouse gas (“GHG”) as well as to restrict or eliminate such future emissions.

Gas and diesel-powered automobiles are one source of GHG emissions and in the recent past, the U.S.

Environmental Protection Agency (“EPA”), together with the National Highway Traffic Safety Administration (“NHTSA”), implemented GHG emissions limits on vehicles manufactured for operation in the U.S.

On January 20, 2021, President Joe Biden issued an executive order recommitting the United States to participation in the Paris Agreement, which is a United Nations-sponsored, non-binding agreement for nations to limit their GHG emissions through individually-determined reduction goals every five years after 2020.

and Brazil are similarly committed to the Paris Agreement, with the U.K.

announcing in late 2020 that it plans to ban sales of new gasoline and diesel-powered vehicles after 2030.

Vehicle manufacturers in the U.S.

are also subject to regulations by the EPA and the NHTSA that establish corporate average fuel economy (“CAFE”) standards applicable to light-duty vehicles.

California and other states have indicated they would pursue more stringent CAFE and GHG standards than required by current EPA and NHTSA standards.

Comparable laws and regulations have been enacted in the U.K.

Our OEMs require lead time to prepare new vehicle models and more stringent regulations could result in increased costs and time constraints, or result in our OEMs deciding to increase production targets of electric vehicles in anticipation of such regulations.

These developments could also significantly increase our costs of operation as well as reduce our volume of business.

Insurance and Bonding

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Risk Factors.

We conduct employee surveys and believe our relationship with our employees is favorable.

Human Capital

The key to our success is the talent of our people.

Our core values — Integrity, Transparency, Professionalism, Teamwork and Respect — define our culture and help us attract and retain talented employees.

Our employee surveys indicate we have established the correct core values and our relationship with our employees is favorable.

As of December 31, 2020, we had 12,337 employees (full-time, part-time and temporary), of which 8,710 were employed in the U.S., 2,901 in the U.K.

and 726 in Brazil.

Included in the total were 724 furloughed employee s, of which 253 were in the U.S.

and 471 in the U.K.

In Brazil, all employees are represented by a local union.

Because of our dependence on vehicle manufacturers, we may be affected by labor strikes, work slowdowns and walkouts at vehicle manufacturing facilities and/or their suppliers.

Additionally, labor strikes, work slowdowns and walkouts at businesses participating in the distribution of manufacturers’ products may also affect us.

For further discussion, refer to “Item 1A.

Risk Factors.”

Training and Recognition

We offer a variety of approximately 200 training courses to employees based on job categories.

The majority of our training is offered through our online training platform.

In addition to job specific courses, we also offer leadership training and diversity training.

Employees have opportunities for various certification levels based on training completed and tenure.

The certification levels include an employee rewards program.

Employee Productivity

Employee productivity is measured in different ways, depending on the job category.

For example, salesperson productivity is based on vehicles sold per salesperson while technician productivity is measured as gross profit per technician.

For the twelve months ended December 31, 2020, our salesperson productivity increased 22% and our technician productivity increased 19% as compared to the same period in 2019.

Diversity, Equity and Inclusion (“DEI”)

We have a DEI council that is chaired by our President, U.S.

and Brazilian Operations.

The council’s mission is to foster a diverse and inclusive culture where employees of all backgrounds are respected, valued and developed.

We will enhance employee engagement in the areas of diversity, equity and inclusion by offering innovative training, recruitment and career path development where a sense of belonging is apparent throughout the organization.

The council has four primary areas of focus:

Workforce, Workplace, Community Involvement and Women’s Initiative.

The council consists of a diverse group of employees providing representation across the organization.

Each area has an employee chairperson as well as an executive sponsor.

In 2020, we implemented an ongoing diversity and inclusion training program led by a well-known diversity expert which was developed specifically for us.

Thus far, approximately 175 senior leaders received live, interactive training and approximately 7,300 employees received web-based training through the program.

Employee Engagement

Employees are offered opportunities to enroll in quarterly wellness programs that are fully funded by us and also include the opportunity for family members to participate.

In addition, our medical plans include opportunities for lower monthly premiums for employees who receive an annual physical.

Executive management participates in quarterly employee videos where the results of each quarter are shared with employees.

Various other employee recognition programs are celebrated in our dealerships.

Our operating results are generally subject to seasonal variations, as well as changes in the economic environment.

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Other factors unrelated to seasonality, such as changes in economic conditions, manufacturer incentive programs, supply issues, seasonal weather events and/or changes in currency exchange rates may exaggerate seasonal or cause counter-seasonal fluctuations in our revenues and operating income.

For further discussion, please refer to “Item 1A.

Risk Factors.”

Internet Website and Availability of Public Filings

Our internet address is www.group1auto.com .

We make the following information available free of charge on our internet website:

We make the following information available free of charge on our website:

• Annual Report on Form 10-K;

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• Our Corporate Governance Guidelines;

The charters for our Audit, Compensation, Finance/Risk Management and Nominating/Governance Committees;

• The charters for our Audit, Compensation and Human Resources, Finance/Risk Management and Governance & Corporate Responsibility Committees;

• Our Code of Conduct for Directors, Officers and Employees (“Code of Conduct”);

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We make our filings with the SEC available on our website as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC.

The SEC also maintains an internet website at http://sec.gov that contains reports, proxy and information statements, and other information regarding our company that we file and furnish electronically with the SEC.

The SEC also maintains a website at http://sec.gov that contains reports, proxy and information statements, and other information regarding our company that we file and furnish electronically with the SEC.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business