Item 1. Business
Item 1. Business
General
Group 1 Automotive, Inc. is a leading operator in the automotive retail industry. Through our omnichannel platform, we sell and/or lease new and used cars and light trucks; arrange related vehicle financing; sell service and insurance contracts; provide automotive maintenance and repair services; and sell vehicle parts retail and wholesale. We have operations in geographically diverse markets that extend across 17 states in the U.S. and 34 towns and cities in the U.K. As of December 31, 2023, our retail network consisted of 144 dealerships and 28 collision centers in the U.S. and 55 dealerships and 13 collision centers in the U.K.
Discontinued Operations
On November 12, 2021, we entered into a Share Purchase Agreement (the “Brazil Agreement”) with Original Holdings S.A. (“Buyer”) to dispose of our Brazilian operations. Pursuant to the terms and conditions set forth in the Brazil Agreement, Buyer agreed to acquire 100% of the issued and outstanding equity interests of our Brazilian operations (the “Brazil Disposal Group”) for approximately BRL 510 million in cash (the “Brazil Disposal”). On July 1, 2022, we completed the Brazil Disposal. The Brazil Disposal Group met the criteria to be reported as discontinued operations. Therefore, the related assets, liabilities and operating results of the Brazil Disposal Group are reported as discontinued operations (the “Brazil Discontinued Operations”) for all periods presented. Effective as of the fourth quarter of 2021, we have two reportable segments: the U.S. and the U.K. Refer to Note 20. Segment Information within our Notes to Consolidated Financial Statements within this Form 10-K, for further information on our reportable segments. Refer to Note 4. Discontinued Operations and Other Divestitures within the Notes to Consolidated Financial Statements within this Form 10-K, for additional information regarding business dispositions. Unless otherwise specified, disclosures in this Form 10-K reflect continuing operations only.
Dealership Operations
Our new vehicle revenues include new vehicle sales and lease transactions, completed at our dealerships or via our digital platform, AcceleRide®. We sell retail used vehicles directly to our customers at our dealerships and via AcceleRide® and wholesale our used vehicles at third party auctions. We sell replacement parts and provide both warranty and non-warranty maintenance and repair services at each of our franchised dealerships, as well as provide collision repair services at the 41 collision centers that we operate. We also sell parts to wholesale customers. Revenues from our F&I operations consist primarily of fees for arranging financing and selling vehicle service and insurance contracts in connection with the retail sale of a new or used vehicle. We offer a wide variety of third-party finance, vehicle service and insurance products in a convenient manner at competitive prices.
The following chart presents total revenues and gross profit contribution from our operations by new vehicles, used vehicles, parts and service and F&I for the year ended December 31, 2023 (“Current Year”):
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The following chart presents our diversity of new vehicle unit sales by manufacturer for the Current Year:
The following table shows our new vehicle unit sales geographic mix for the Current Year and our franchise count as of December 31, 2023:
New vehicle unit sales geographic mix (%) Franchises
Region Geographic Market
U.S. Texas 38.4 % 81
Massachusetts 9.0 % 22
Oklahoma 5.6 % 19
California 5.9 % 7
Georgia 3.6 % 9
New Mexico 2.9 % 8
Maine 1.8 % 6
New Jersey 2.2 % 8
New Hampshire 2.1 % 6
Florida 3.0 % 5
South Carolina 1.6 % 3
Louisiana 1.7 % 6
Kansas 1.2 % 3
New York 1.0 % 2
Alabama 0.4 % 1
Maryland 0.5 % 2
Mississippi 0.4 % 1
81.3 % 189
U.K. United Kingdom 18.7 % 78
100.0 % 267
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Business Strategy
Our business strategy is built on our commitment to maximize the return on investment for our stockholders sustainably. We intend to execute our business strategy, underpinned by the following four key components:
• Business growth through portfolio and operations optimization;
• Leading customer experience;
• Employer of choice; and
• OEM Partner of choice.
Business Growth Through Portfolio and Operations Optimization
At Group 1, growing and improving our operations is fundamental to future success, driven by the following key activities:
• Mergers and Acquisitions
• Dispositions
• Operations optimization
In 2021 to 2023, the retail automotive industry experienced multiple merger and acquisition transactions. Despite this increase in merger and acquisition activity, the industry remains fragmented to a significant degree. We believe there will continue to be opportunity for consolidation within the industry. Consistent with our acquisition activity completed in 2021, 2022 and 2023, we intend to pursue opportunities in growth-positioned or economically stable markets, or that are economically accretive to our existing markets in 2024 and beyond, specifically focusing on brands, large dealership operations and/or dealership clusters that will provide attractive returns to our portfolio. Acquisitions completed within our existing markets allow us to better capitalize on economies of scale and provide for cost saving opportunities in key expense areas such as used vehicle sourcing, advertising, purchasing, data processing and personnel utilization. In addition to cost savings opportunities, scale enables us to make the EV, facility, compliance, real estate, and technology investments necessary to thrive in today’s retail automotive industry.
In addition to expanding our portfolio through acquisitions, from time to time, we make decisions to optimize our portfolio by disposing of certain assets or operations. In some instances, we dispose of underperforming dealerships which do not meet our return objectives. We may also dispose of certain dealerships in order to complete strategic acquisition opportunities. Specifically, we may dispose of a less significant dealership to allow us to acquire a more substantial dealership within the same or another geographic area based on the ownership limitations imposed in the various franchise agreements.
Refer to Note 3. Acquisitions and Note 4. Discontinued Operations and Other Divestitures within the Notes to Consolidated Financial Statements within this Form 10-K, for additional information regarding our acquisitions and dispositions.
Operations optimization includes leveraging our dealership’s full potential and local scale advantage to improve operational efficiency. This includes focusing on operational excellence at each dealership and other facilities, including, but not limited to, standardization of key common processes and taking advantage of shareable business resources. We believe our operations optimization efforts will provide a strategic advantage by structurally lowering our operating costs.
Leading Customer Experience
Our customers drive what we do each day, and we seek to provide them with an industry-leading customer experience, both physically in our stores and digitally. With our expansive portfolio of brands and service capabilities across significant geographical areas, we believe we can service the needs of each and every member of our customers’ families. To drive the leading customer experience we endeavor to:
• Adopt new technology
• Drive process improvement
• Improve the customer aftersales journey
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As new and innovative tools become available, we seek to quickly adopt those that provide a mutual benefit to our customers and Group 1. Our digital platform, AcceleRide®, allows customers to shop for and purchase and/or lease new and used vehicles, including a full selection of finance and insurance options; receive instant cash offers or trade-in of vehicles; and schedule service appointments at the customers’ convenience. A customer can step in and out of the buying process using AcceleRide®, while also working with a sales agent in one of our stores. The digital and in-store experiences do not have to be mutually exclusive. We continuously evaluate our processes to identify opportunities for automation, enabling us to facilitate our customers’ vehicle inventory selection on a more expedited basis, process parts inventory and F&I products transactions quicker and price cars more competitively for our customers using the latest and most accurate information available.
With a focus on the aftersales impact on the customer journey, we have and will continue to increase customer retention through more convenient service hours, training of our service advisors, selling service contracts with vehicle sales and customer relationship management software that allows us to provide targeted marketing to our customers.
Employer of Choice Within Automotive Industry
At Group 1, our employees are the cornerstone to our operations and business success. We seek to be the employer of choice within the automotive industry, by focusing on:
• Talent Management and Employee Engagement;
• Providing Training and Development;
• Promoting Employee Safety and Well-Being; and
• Market Competitive Compensation and Benefits.
To help our workforce feel heard and supported, we solicit employee feedback through multiple channels. We leverage our intracompany communication platform, the Meta-based Workplace app, to bring our teams together digitally and provide our leadership team the ability to engage in more frequent, direct communication with our employees. Our management team routinely visits our stores, meeting with and soliciting feedback from employees at all levels. The results of the annual engagement survey and employee discussions inform our overall human capital management methods and other growth strategies.
We routinely create and offer department or job-specific training and professional development opportunities to meet employees’ needs. In addition to providing career growth pathways for employees, annually our Board of Directors reviews management’s succession planning for key positions throughout the organization. We believe that embracing DEI (“Diversity, Equity, and Inclusion”) allows us to attract and develop high-performing employees, which leads to a more engaged workforce and lower turnover.
We maintain policies and procedures to mitigate personnel health and safety risks and to help prevent accidents. Partnering with health and safety expert, KPA, we take measures to ensure our working environments are safe and all employees receive department-specific training on how to avoid injury, report potential hazards and respond to emergencies. In 2023, we hired a Health and Safety Manager for our U.S. operations, to lead our health and safety initiatives.
We recognize the importance of providing support for our employees’ physical, mental and financial wellness. Our market competitive pay and benefits packages include paid family leave, flexible work schedules and a comprehensive health and wellness program. We offer medical, dental and vision insurance plans for employees and dependents, 401(k) matching and an employee stock purchase plan. In select locations, Group 1 also offers commuter benefits that save employees commuting costs through subsidized public transportation and parking fees. We continue to modify our benefits to maintain competitiveness and to better suit the needs of our diverse employees.
OEM Partner of Choice
We regard our OEMs as strategic partners and rely on them to deliver high-quality products and services for our customers. Key to the success of our business is the determination to be great partners to our OEMs. We work closely with our OEMs and regularly communicate with them regarding material sourcing, marketing, recalls, safety and other factors that influence our business relationship and the customer experience.
Competition
The automotive retail industry is highly competitive across all our service lines. Consumers have a number of choices when deciding where and how to (i) purchase and/or lease a new or used vehicle as well as select related vehicle financing and insurance products; (ii) purchase related parts and accessories; and (iii) procure vehicle maintenance and repair services. We believe the principal competitive factors in the automotive retailing industry are location, service, price, selection, online capabilities, established customer relationships, and reputation.
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New Vehicles Sales
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. Our principal new vehicle dealer competitors also have franchise agreements with the various vehicle manufacturers and, as such, generally have access to new vehicles on the same terms as we do. We do not have any cost advantage in purchasing new vehicles from vehicle manufacturers, and our current franchise agreements do not grant us the exclusive right to sell a manufacturer’s product within a given geographic area. Several companies are currently manufacturing EVs for sale primarily through the internet, under a direct-to-consumer model, without using the traditional dealer-network or are considering such a strategy, including some of our OEM partners. Certain of our vehicle manufacturers in the U.K. recently transitioned or have announced plans to explore an agency model for selling new vehicles. Under an agency model, our franchised dealerships receive a fee for facilitating the sale of a new vehicle to a customer but no longer record the vehicle sales price as revenue, record vehicles in inventory or incur floorplan interest expense, as has been historical practice. The agency model, if adopted by other manufacturers, would reduce revenues.
Used Vehicle Sales
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.
Parts and Service
We believe the principal competitive factors in the parts and service business are the quality of customer service, timeliness of 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. Our dealerships also compete with other automobile dealers, franchised and independent service center chains and independent repair shops for non-warranty repair and maintenance business. In addition, our dealerships sell replacement and aftermarket parts both locally and nationally in competition with franchised and independent retail and wholesale parts outlets. A number of regional or national chains offer selected parts and services at prices that may be lower than ours. Our collision centers compete with other large, multi-location companies, as well as local, independent, collision service operations.
F&I
We believe the principal competitive factors in the F&I business are convenience, interest rates, product availability and affordability, product knowledge, flexibility in contract length and ease of consumer understanding. We face competition in arranging financing for our customers’ vehicle purchases from a broad range of unaffiliated third-party financial institutions. Many financial institutions now offer their own menu of F&I products, providing an alternative to our product offering, which may reduce our profits from the sale of these products through reduced penetration.
Manufacturers’ Relationships and Agreements
Each of our U.S. dealerships operates under one or more franchise agreements with vehicle manufacturers or authorized distributors. The franchise agreements grant the franchised automobile dealership a non-exclusive right to sell the manufacturer’s or distributor’s brand of vehicles and offer related parts and service within a specified market area. These franchise agreements also grant franchised dealerships the right to use the manufacturer’s or distributor’s trademarks in connection with their operations, and impose numerous operational requirements and restrictions relating to, among other things, inventory levels, working capital levels, the sales process, sales performance requirements, customer satisfaction standards, marketing and branding, facility standards and signage, personnel, changes in management, change in control and monthly financial reporting.
Most of our dealerships’ franchise agreements continue indefinitely and those with definite terms are renewed or superseded by a new agreement. Each of our franchise agreements may be terminated or not renewed by the manufacturer for a variety of reasons, including unapproved changes of ownership or management and performance deficiencies in such areas as sales volume, sales effectiveness and customer satisfaction. In most cases, manufacturers have renewed the franchises upon expiration so long as the dealership is in compliance with the terms of the agreement. We diligently work with our manufacturers to address any performance issues.
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Our dealership service departments perform vehicle repairs and service for customers under manufacturer warranties. We are reimbursed for those repairs and service by the manufacturer. Some manufacturers offer rebates to new vehicle customers, which we are required, under specific program rules, to adequately document, support and collect. In addition, some manufacturers provide us with incentives to order and/or sell certain models and/or volumes of inventory over designated periods of time. Under the terms of our dealership franchise agreements, the respective manufacturers are able to perform warranty, incentive and rebate audits and charge us back for unsupported or non-qualifying warranty repairs, rebates or incentives.
In addition to the individual dealership franchise agreements discussed above, we have entered into framework agreements in the U.S. with most major vehicle manufacturers and distributors. These agreements impose a number of restrictions on our operations, including our ability to make acquisitions and obtain financing, and on our management. These agreements also contain change of control provisions related to the ownership of our common stock. For a discussion of these restrictions and the risks related to our relationships with vehicle manufacturers, please refer to Item 1A. Risk Factors.
Governmental Regulations
Automotive and Other Laws and Regulations
We operate in a highly regulated industry. A number of laws and regulations applicable to automotive companies affect our business and conduct, including, but not limited to our sales, operations, financing, insurance, advertising and employment practices. These laws and regulations include state franchise laws and regulations, consumer protection laws and other extensive laws and regulations applicable to new and used motor vehicle dealers. Additionally, in every jurisdiction in which we operate, we must obtain various permits and licenses in order to conduct our business.
In general, the U.S. jurisdictions in which we operate have automotive dealership franchise laws, which generally provide that it is unlawful for a manufacturer or distributor to terminate or not renew a franchise unless “good cause” exists. As a result, it generally is difficult, outside of bankruptcy, for a manufacturer or distributor to terminate, or not renew, a franchise under these laws, which were designed to protect dealers.
The U.K. generally does not have automotive dealership franchise laws and, as a result, our U.K. dealerships operate without these types of specific protections. However, similar protections may be available as a matter of general U.K. contractual law. In addition, our U.K. 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 instance, authorized dealers are generally able to, subject to manufacturer facility requirements, relocate or add additional facilities, 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, under the EU Motor Vehicle Block Exemption Regulation, which was retained in U.K. law following U.K.’s exit from the EU on January 31, 2020, certain restrictions on dealerships are permissible in franchise agreements provided certain conditions are met. In October 2022, the Competition and Markets Authority of the U.K. published recommendations to introduce an updated U.K. equivalent broadly similar to the EU Motor Vehicle Block Exemption Regulations. The U.K. Motor Vehicle Block Exemption Regulation is applicable until May 31, 2029.
Data Privacy
We are subject to numerous laws and regulations designed to protect the 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 U.K.’s General Data Protection Regulation (“U.K. GDPR”) and, the California Consumer Privacy Act, as amended and enhanced effective January 1, 2023 by the California Privacy Rights Act (as so amended, the “CCPA”), and the Federal Trade Commission (“FTC”) Safeguards Rule. 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 organization violates the U.K. GDPR, the organization can be fined up to 4% of annual global turnover or 20 million euros, whichever is greater. The CCPA 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 and permits a private right of action for certain violations of laws. The FTC Safeguards Rule contains procedural, technical and personnel requirements that financial institutions, including dealers, must satisfy to meet their information security obligations.
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Environmental and Occupational Health and Safety Laws and Regulations
Our business activities in the U.S. and the U.K. 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 laws, regulations and controls may impose numerous obligations on 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 incurring 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, analogous state statutes and their implementing regulations. 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 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.
Properties that we now or have in the past owned or leased in the U.S. are subject to the federal Comprehensive Environmental Response, Compensation and Liability Act and similar state statutes. These statutes can impose strict and joint and several liability for cleanup costs on those that are considered to have contributed to the release of a hazardous substance, including for historic spills that occurred prior to our ownership of our properties even if we did not know of, or did not cause the release of such hazardous substances. We also are subject to the Clean Water Act, analogous state statutes, and their implementing regulations which, among other things, prohibit discharges of pollutants into regulated waters without permits, require containment of potential discharges of oil or hazardous substances, and require preparation of spill contingency plans. Air emissions from some of our operations, such as vehicle painting, may be subject to the federal Clean Air Act and analogous laws. Laws and regulations protecting the environment are complex and 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. Certain health and safety standards promulgated by the Occupational Safety and Health Administration of the U.S. Department of Labor and related state agencies also apply to our operations.
The threat of climate change continues to attract considerable attention in the U.S., U.K. and elsewhere globally. As a result, numerous proposals have been made and could continue to be made at the international, national, regional and state levels of government, in locations affecting our business, 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. The U.K. is similarly committed to the Paris Agreement, and the U.K. announced that it plans to ban sales of new gasoline and diesel-powered vehicles after 2035. Similar planned bans have been announced in California, New Mexico, Massachusetts and New York. Additional regulation of GHG emissions from the vehicles could increase the cost of the vehicles sold to us. Government bans or restrictions on certain vehicle types could impact the mix of vehicles that we offer for sale. Consumer concerns regarding climate change could also alter consumer preferences and adversely affect our ability to market and sell vehicles. These developments could increase our costs of operation as well as reduce our volume of business.
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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. These agencies have finalized more stringent standards for both heavy-duty and light-duty vehicles and for increased fuel economy for vehicles in upcoming model years. 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, including updated standards for cars, vans and heavy-duty trucks for upcoming model years. 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 EVs in anticipation of such regulations. These developments could also significantly increase our costs of operation as well as reduce our volume of business. For additional information, see Item 1A. Risk Factors within this Form 10-K.
The EPA proposes higher emissions standards each year and beginning with model year 2027, there is expected to be new battery durability requirements and changes to certain existing air emissions credit programs. These regulations could increase or accelerate the adoption of certain emissions reducing technologies, and further market penetration for hybrid, plug-in and battery-electric vehicles. For example, should the proposed regulations be enacted, the EPA projects that at least 60% of new light-duty passenger vehicles sold in the U.S. would be battery-electric by 2030. The EPA also estimates that the regulations, if finalized, would increase costs for auto manufacturers and reduce consumer repair costs for covered vehicles. The EPA projects the regulations to become final during 2024.
Insurance and Bonding
Our operations expose us to the risk of various liabilities, including:
• claims by employees, customers or other third parties for personal injury or property damage;
• weather events, such as hail, flood, tornadoes and hurricanes; and
• potential fines and civil and criminal penalties resulting from alleged violations of federal and state laws, regulatory requirements and other local laws in the jurisdictions in which we operate.
The automotive retailing business is also subject to substantial risk of real and personal property loss as a result of significant concentration of real and personal property values at dealership locations. Under self-insurance programs, we retain various levels of risk associated with aggregate loss limits and per claim deductibles. In certain cases, we insure costs in excess of our retained risk under various contracts with third-party insurance carriers. Although we believe our insurance coverage is adequate, we cannot be assured that we will not be exposed to uninsured losses that could have a material adverse effect on our business, results of operations and financial condition. We are also subject to potential premium cost fluctuations and changes in loss retention limits with the annual renewal of these programs.
For further discussion, refer to Item 1A. Risk Factors, within this Form 10-K.
Human Capital
People make up the foundation of everything we do at the Company. Our core values — Integrity, Transparency, Professionalism, Teamwork and Respect — define our culture and help us attract and retain talented employees. As of December 31, 2023, we ha d 16,011 e mployees (full-time, part-time and temporary), of which 12,493 w ere employed in the U.S. a nd 3,518 in the U.K.
Employee Engagement
We engage in activities aimed at listening to our employees and addressing their concerns. In turn, our employees deliver superior service to our customers, and ultimately achieve exceptional results for our investors. We solicit employee feedback through multiple channels such as employee surveys and town halls. Our annual employee survey provides our management team with valuable insight into employees’ perception of workplace culture and progress on our corporate mission. The results inform our overall human capital management methods and other growth strategies.
In 2022, we launched the Meta-based Workplace app, an all-in-one communication platform that keeps our employees across the U.S. and U.K. up to date on the latest company news and brings our teams together digitally. The platform offers our executive team the ability to engage in direct and more frequent, real-time communication with our employees. The features of the platform include targeted announcement capabilities, company documents like policies, guidelines and benefits plans, and quick access to employee and department directories. We believe that working together is critical to prepare for coming opportunities and changes affecting us internally and externally.
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Training and Development
We routinely create and offer department or job-specific training and professional development opportunities to meet employees’ needs. In addition to job specific courses, we also offer leadership training. Employees have opportunities for various certification levels based on training completed and tenure. We have also developed a management training program and a technician training program to attract talent to the automotive industry. In addition to providing career growth pathways for employees, annually our Board of Directors reviews management’s succession planning for key positions throughout the organization.
DEI
We maintain a DEI council that is chaired by our Chief Diversity Officer. The council’s mission is to foster a diverse and inclusive culture where employees of all backgrounds are respected, valued and developed. We enhance employee engagement in DEI by offering training, recruitment and career path development where a sense of belonging is apparent throughout the organization. The council has four primary areas of focus: Talent Acquisition, Talent Development, Community Building and Women in the Workplace. 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 addition, employees participate in various diversity and inclusion training programs which were specifically developed for the Company.
Environmental, Social and Governance (“ESG”)
We are committed towards a more sustainable future by working to improve various aspects of our business in the ESG areas most relevant to us, our stakeholders and our industry. Beginning in 2021 we performed a thorough review of our business operations pertaining to: hiring practices, equal pay, promotional practices, health and safety, health insurance, community impact and environmental impact. Building off this analysis, we performed a second assessment in 2022. This effort included a detailed desktop study reviewing key material topics relevant to the automotive industry, an analysis of survey responses from our internal and external stakeholders, and interviews with executive leaders across our business and our Board members. With oversight from our Board of Directors, management annually reviews the Company’s ESG priorities and designates resources for their management and disclosure.
Environmental
Our commitment to sustainability centers on seeking to reduce waste and our collective environmental impact. We look for opportunities to reduce our energy consumption, eliminate waste and accommodate the growing EV market and continue to invest in numerous initiatives to improve our carbon and broader environmental footprint. These opportunities include technological solutions such as: climate control thermostats and LED lighting to improve energy efficiency, solar panels to increase our use of renewable energy and updated waste management systems to improve handling of chemicals and other byproducts from our dealerships’ operations. To prevent any adverse impact on the environment and to protect local water supplies, all of our U.S. service centers utilize oil water separators to properly manage wastewater. In addition, all U.S. dealerships that feature car wash services have processes in place to maximize water recycling between uses. At all U.S. and U.K. locations, we manage recycling of waste materials. We also recycle IT hardware, tires, oil, paint and damaged automotive parts.
The widespread adoption of EVs has accelerated in recent years. We are certified in EV service and repair. We have equipped our facilities with EV charging equipment, specialized lifts, EV-specific shop equipment and battery storage to sufficiently cater to the emerging EV market.
Social
We maintain a human capital strategy that supports a talented, diverse and inclusive workforce with equal opportunity. The Company offers programs for training and career advancement, strong benefits, incentives, and health, safety and wellness initiatives as described above within Human Capital . In addition, the Company has a history of philanthropy and volunteerism. We actively contribute to our local communities in different and meaningful ways. Our efforts include employee volunteering, donations to local causes, support to educational programs and hosting community gatherings at our dealerships. In 2023, the role of Corporate Communication and Community Engagement Manager was created to align our efforts across the Company. Our focus is centered around helping children, fostering education and addressing the needs of first responders and the homeless.
Governance
Our Board of Directors has four standing committees to assist in fulfilling its responsibilities: the Audit Committee, the Compensation and Human Resources Committee, the Governance and Corporate Responsibility Committee and the Finance/Risk Management Committee.
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Our Governance & Corporate Responsibility Committee advises the Board on appropriate corporate governance guidelines and has direct oversight of our ESG policies and practices. Other Board committees also play a role in ESG: our Finance/Risk Management Committee oversees our Enterprise Risk Management processes and cybersecurity matters, our Compensation & Human Resources Committee oversees human capital management and health and safety matters and our Audit Committee oversees financial reporting, legal and regulatory compliance risks. Additionally, our management team and cross-functional subject matter experts are responsible for the implementation of our ESG strategy, initiatives and communications.
To improve business performance, better serve our customers and communities and enhance our competitive advantage, Group 1 is focused on hiring and developing a talented, diverse workforce. This starts with our Board. As Group 1 continues to evolve, so do the perspectives, skills and experiences the Board seeks in its director nominees. We believe the composition of our Board is critical to our success. As such, one-third of our directors are women, all of whom serve as committee chairs.
Much of our Board of Directors’ oversight work is delegated to various committees, which meet regularly and report back to the full Board. All committees have significant roles in carrying out the risk oversight function. Each committee is comprised entirely of independent directors (except the Finance/Risk Management Committee) and oversees risks associated with its respective area of responsibility.
At the corporate level, we established a Safety and Risk Steering Committee, which reviews the effectiveness of the Company’s risk management system, including a review of policies and profiles of financial and non-financial risks.
We track and identify new and emerging risks, and to the extent they affect or could potentially affect our business, we develop action plans with assigned sponsors to address and mitigate that risk. We use an internal process to help identify if we have enough controls in place to properly manage each risk.
Seasonality
Our operating results are generally subject to seasonal variations, as well as changes in the economic environment. In the U.S., we generally experience higher volumes of vehicle sales and service in the second and third calendar quarters of each year. In addition, in some regions of the U.S., vehicle purchases decline during the winter months due to inclement weather. In the U.K., the first and third quarters tend to be stronger, driven by the vehicle license plate change months of March and September. Other factors unrelated to seasonality, such as changes in economic conditions, manufacturer incentive programs, supply issues, seasonal weather events and/or changes in foreign currency exchange rates may exaggerate seasonal or cause counter-seasonal fluctuations in our revenues and operating income.
A shortage of new vehicle supply in 2022 and much of 2023, led by a global semiconductor and other parts shortage, as well as high inflation and high interest rates led to a deviation from historical seasonal variations. As a result, historical seasonal variation patterns may not be an appropriate indicator of current and future trends in seasonal variations.
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 website:
• Annual Report on Form 10-K;
• Quarterly Reports on Form 10-Q;
• Current Reports on Form 8-K;
• Amendments to the reports filed or furnished electronically with the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act;
• Our Corporate Governance Guidelines;
• The charters for our Audit, Compensation & Human Resources, Finance/Risk Management and Governance & Corporate Responsibility Committees;
• Our Code of Conduct for Directors, Officers and Employees (“Code of Conduct”);
• Our Code of Ethics for our Chief Executive Officer, Chief Financial Officer and Controller (“Code of Ethics”); and
• Our Sustainability Report.
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Within the time period required by the SEC and the NYSE, as applicable, we will post on our website any modifications to the Code of Conduct and Code of Ethics and any waivers applicable to senior officers as defined in the Code of Conduct or Code of Ethics, as applicable, as required by the Sarbanes-Oxley Act of 2002. 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 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.
References to the Company’s website in this Form 10-K are provided as a convenience and do not constitute, and should not be deemed, an incorporation by reference of the information contained on, or available through, the website, and such information should not be considered part of this Form 10-K.