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Lithia Motors aims for $150 million in annual savings through targeted layoffs and cost reductions

The company emphasized that these layoffs are "very targeted".

Lithia Motors is set to achieve an annual savings of $150 million through strategic layoffs and other employee cost reductions this quarter, as confirmed by Jardon Jaramillo, senior director of finance for Portland General Electric. Despite the company’s ongoing efforts to streamline its new U.K. network, these cost-saving measures primarily focus on U.S. positions.

Jaramillo emphasized that these layoffs are “very targeted” rather than a blanket reduction across all Lithia positions. He clarified that they are not announcing a mass layoff. Instead, the $150 million in personnel cost savings is part of Lithia’s broader goal to cut $250 million in selling, general, and administrative expenses annually. Additional savings will come from reducing inventory, floor plans, and carrying costs, as well as cutting expenditures with third-party service providers.

Leadership changes will also be part of the layoffs, but will not affect senior vice president or C-suite executive ranks. “These are changes at the store level,” Jaramillo explained, citing actions against “underperforming general managers” as examples.

Lithia has implemented cost-saving measures as part of a 60-day plan that began in May. These measures are expected to significantly impact the company’s results by the third quarter.

The $150 million in personnel savings represents approximately 6% of Lithia’s annual staff expenses based on first-quarter employee costs. In the second quarter, Lithia cut six members from a 13-person internal communications team.

Jaramillo explained that the layoffs at Lithia’s online vehicle shopping platform Driveway last year were part of the transition from building to maintaining the site. He mentioned that the company is presently in a period of sustaining the platform, and they have reduced Driveway’s cash burn rate by about 50% year over year in the first quarter primarily through reduced personnel and marketing expenditures.

Furthermore, the company is redirecting its efforts towards improving the adoption of Driveway across its stores. Analysts from J.P. Morgan noted that Lithia is making necessary personnel and leadership changes to advance this strategy, addressing the lack of initiative from store general managers and sales managers that previously led to limited platform uptake.

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