Good morning ladies and gentlemen and thank you for standing by. Welcome to the Group 1 Automotives third quarter earnings conference call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation the conference will be opened for questions. (Operator Instructions) I would now like to turn the conference over to Pete DeLongchamps, Vice President of Manufacture Relations; please go ahead, sir.

Thank you [Makaela] and good morning everyone and welcome to the Group 1 Automotive 2008 third quarter conference call. Before we begin, I’d like to make some brief remarks about forward-looking statements and the use of non-GAAP financial measures. Except for historical information mentioned during the call, statements made by management of Group 1 are forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve both known and unknown risks and uncertainties, which may cause the company’s actual results in future periods to differ materially from forecasted results. Those risks include but are not limited to risks associated with pricing volume and the conditions of the market. Those and other risks are described the company’s filing with the SEC over the last 12 months. Copies of these filings are available from both the SEC and the company. In addition, certain non-GAAP financial measures as defined under the SEC rules may be discussed on this call. As required by applicable SEC rules, the company provides reconciliations of any such non-GAAP measures to the most directly comparable GAAP measures on its website. I’d now like to turn the call over to our president and CEO, Mr. Earl Hesterberg; Earl.

Thank you Pete and good morning everyone. In a moment, I’ll turn the call over to our CFO, John Rickel, who will provide Group 1’s detailed financial results. After he has finish, I will address guidance and then open up the call for questions. Before I turn the call over to John, let me begin by telling you what we observed during the quarter. The third quarter started off looking like a continuation of the second quarter, with the challenging but manageable overall selling environment; then came September. First, hurricane Gustav made its way towards the New Orleans area, leading to mass evacuations that resulted in more than a one week loss of business, including the typically busy Labor Day weekend. Then on September 13, hurricane Ike descended on the Houston metropolitan area. Evacuations began on the tenth, with most businesses in preparation for the storm. Even though our team was able to get all nine of the Houston area stores up and running by September 17 and the five Beaumont stores back in business a couple of a days later, the public was not out shopping for vehicles again until late in the month due to power outages, gasoline shortages and traffic issues. The Houston and Beaumont stores account for approximately 20% of Group 1’s revenues and an even larger percentage of our profits. We estimate that the two weeks worth of business we lost as a result of this storm’s effects negatively impacted our earnings by approximately $0.15 per diluted share for the quarter. I want to take this opportunity to thank our people for the outstanding job they did in getting us back in business so quickly. The level of dedication showed continues to demonstrate the quality of our most important asset, our employees. In addition, to…

Thank you Earl and good morning everyone. For the third quarter 2008, our net income from continuing operations was $9.4 million or $0.42 per diluted share excluding the impact of the asset impairment charges, lease terminations and bonds redemption gains recognize during the quarter. On a comparable basis net income from continuing operations decreased 57.3% from $22.1 million in the third quarter a year ago and earnings per diluted share were down 55.8% from $0.95 per diluted share. As we indicated in our press release on October 10 2008, results for this quarter were negatively impacted by hurricanes Gustav and Ike, which made landfall near New Orleans, Louisiana on September 1 and near Houston Texas on September 13, 2008 respectively. We estimate that the impact on the quarter of the business lost as a result of these storms was approximately $0.15 per diluted share outstanding. In addition, in reviewing the third quarter we identified triggering events indicating a potential impairment of our indefinite life intangible assets, in other words goodwill and franchise rates, which required us to perform an interim valuation of the book value of these assets compared to their estimated fair market value. In addition, impairment triggers were also identified relative to certain other assets, causing us to evaluate their caring values as well. As a result, we recognized a $30.2 million after-tax impairment charge during the third quarter of 2008, primarily related to a write-down of our domestic brand franchise evaluations as well as real estate associated with some domestic franchise terminations. We did not identify an impairment of our recorded goodwill. Including the impact of these non-cash impairments, we realized a $20.6 million net loss for the quarter or $0.91 per diluted share. Our third quarter consolidated revenues decline $191.4 million or 11.8% to $1.4 billion…

Thanks, John. Now let me address our guidance. As I stated in our press release earlier this morning, we are suspending our 2008 full year guidance. It’s difficult enough during normal business conditions to provide valid earnings guidance. Given the unprecedented market volatility, rapidly changing consumer confidence and a shifting lending environment, it is impossible to predict near-term vehicle industry sales levels and therefore impossible to provide any meaningful estimates at this time. We will address 2009’s full year guidance when we announce our fourth quarter earnings in February. Before we begin the Q-and-A I wanted to say something about Randy Callison. A couple of weeks ago, we announced that Randy has decided to retire at the end of year so he can spend more time with his family. Randy has served as our Senior Vice President of Operations and Corporate Development since mid 2006. It was his service in corporate development that had the biggest impact on the company. He’s been involved in nearly every acquisition and disposition that Group 1 completed since 1996, before the company went public. He was also instrumental in seeing Group 1 through the structural reorganization I implemented after I joined the company in 2005 and for that, I’m very grateful. I as well as all the employees who worked with him over the years will miss him, but we all wish he and his family well. That concludes our prepared remarks. In a moment we’ll open the call up for Q-and-A. Joining me on the call today are Randy Callison, who is joining us for his last earnings call; John Rickel, our Senior Vice President and Chief Financial Officer; Pete DeLongchamps, our Vice President of Manufacture Relations and Public Affairs and Lance Parker our Vice President and Corporate Controller. I’ll now turn the call over to the operator to begin the question-and-answer session. Operator.

(Operator Instructions) Your first question comes from the line of John Murphy - Merrill Lynch.

John, you guys did some work on your coverage at the beginning of this year. We worked with the banks to get some more head room or your max leverage covenants and I was just wondering if we went into some tougher times next year which it looks like we are heading into, if there might be the need to rework some of your covenants, how that process worked earlier this year and if you think the banks will be willing to work you and how you would work through that process?

John, this is John Rickel. At present we really don’t anticipate needing to rework the covenant, so it’s kind of point one. We’ve looked at it under a variety of scenarios and are comfortable [inaudible] that we are performing. To your second point though, we do think that if situation would worsen materially or something unexpected would occur, the banks have shown a willingness to have those discussions, but recognize there’s a price involved which is why we are very focused right now on continuing to work on the business, deliver the results and really work on strengthening the balance sheet, because I really don’t want to have to go do that if we don’t have to and right now we don’t anticipate it.

And then on SG&A, we look at your program to a cut $35 million and that’s great. I was just wondering also as times get tougher and we think about SG&A, if you could just paint a little more color around what portion of SG&A is variable and what portion is fixed and as we go forward, if things get tougher, is it going to be more personnel and advertising cuts or there are other areas that you might be able to get into a little bit deeper in the cost curve?

John it’s Earl. I don’t want to imply that we believe that $35 million is enough at this moment. Personally I think that we’re going to need to go deeper than that. We’re trying to get a fix for the current sales travel rate, which until we have a month of data in October and then maybe into November, it’s hard to tell where the current true sales rate is in the industry, but I don’t think we’re sized properly yet. This is about our fifth round of cuts for some our dealerships, such as our like the California dealerships, whereas we’ve just started to cut in Houston and some of the other areas, but when we look at our personnel related, which is about 60% of total SG&A, probably around half of that is truly variable. You have benefit costs and you have to have a certain level of management and a certain level of pay that’s not completely variable in terms of relating to gross profit generated. Then with advertising, it’s highly flexible and very responsive, but there is a certain level of advertising we need to do to just maintain awareness and nowadays in particular, you have to have a constant web presence or electronic media presence, so that’s about the best I can answer that question at the movement.

And Randy on your last conference call not to let you get away I heard an analyst ask you a tough question. You’ve seen the acquisition environment for quite sometime now. I was just wondering what you think it looks like right now. Currently a lot of companies are sort of cash draft to your capital draft and they are not able to make advantages acquisitions in an environment like this. Are there advantages acquisitions or cheap acquisitions to be made out there and it’s just a tough time because there’s not a lot of capital available or are we just looking at a lot of Dodge’s out there that are up for sale in the dealership network?

Thanks John, this is Randy. There are some reasonably priced domestics which isn’t what we’re looking to add to our portfolio. There is still a gap between what sellers want for input and highline and what buyers are willing to pay. That’s probably going to come down at some point in ’09. I think this is the right time for the publics to be kind of quite on acquisitions and wait for that gap to strengthen.

Okay, so you think prices still need to come down quite a bit and to more realistic levels?

I do. On the desirable franchises the important highlight, demands are reasonable right now and someone wanted to go that direction.

And then just one last question as far as the demand weakness that you guys are seeing in your dealerships, there’s a big debate on how much of it is because of credit tightness and how much it is just really fundamental weakness and it’s a very tough thing to parse out. In your opinion of what you’re seeing in your dealerships, how much is just because of fundamental weakness in the economy and the fact that unemployment is rising, consumer confidence is falling of a cliff and how much of it is actually because consumers can’t get credit to buy the vehicles?

John, this is Earl. The vast majority of the issue is customer traffic from the overall lack of confidence and the economic disruptions. We chatted here among our group, and we kind of see it is being about 80% of traffic issue and 20% a lending issue. That’s not scientific, but that is our feel based on our field input.

Your next question comes from Rick Nelson - Stevens Company. Rick Nelson – Stevens Company: I wanted to follow-up on the expense cuts that you have in place, the $35 million. How much of that do you see coming here in the fourth quarter and how will that sort of layout over the next 12 months?

Rick, this is John Rickel. We started implementing most of the plan. Now obviously you don’t get it all at the start of the quarter, but we think by the end of this year, those cuts should basically be in place. So you get a portion of it this quarter and then you should get the annualized effect next year. Rick Nelson – Stevens Company: Okay. The service and parts strike, I know you talked about capacity additions driving that but is there any operational changes that are going on that are also driving that good number?

Rick, this is Earl. I think that a lot of what we are realizing is the focus we put on this over the last year or two, but also the benefit of moving our brand mix toward these import and luxury brands which have the growing units and operation and so there’s a lot of things on the good side a ledger in the parts and service business these days, in the units operation, that wave from the brands like Toyota and BMW and Honda, that have grown, CPO business, certified pre-owned which types people back to us, complexity of vehicles, selling 35%, 35% extended service contracts, there’s a lot of good things on the positive side of the parts and service ledger. Now, I wouldn’t say there aren’t a couple things on the negative side. Clearly people been driving less miles and there’s some cost pressure, not everyone is going do accept every repair presented to them in the service drive these days, so there’s a little economic pressure in the parts and service business two, but it seems to me that the factors on the positive side of the ledger outweigh those negative factors at least at the moment, at least based on what we’ve seen today.

A big difference is regional. I know you have lot of exposure in Texas

We’re really not seeing a big differential across the country. Rick Nelson – Stevens Company: And the asset impairments, have you identified the dealerships that those are related to?

Internally we have, Rick. This is John Rickel. They primarily impairments of the domestic franchise value. Rick Nelson – Stevens Company: And one final question John; on the covenants, the two ratios, I guess one is interested in is the leverage ratio and the fixed charge coverage; do you have those numbers through the third quarter?

Yes, we do. Give me just a second; total leverage 4.07, at the end of the third quarter and fixed charge coverage ratio 1.37. Those are also, Rick, posted on the website as part of our Investor Presentation; they are in the road show.

Your next question comes from Scott Stember - Sidoti & Company. Scott Stember - Sidoti & Company: Thanks all for qualifying the traffic versus lending issues, but on the side of lending issues, obviously this has gotten a lot of press lately, could you quantify that maybe just a ballpark percentage of deals that are actually getting killed because of increased cash down or just people just not meeting the finance requirements?

That’s more difficult Scott for me. I mean we’ve seen some turndowns. In this kind of market, when there is less traffic, some of the traffic out there is very poor quality traffic. They seem to stay in the market regardless of economic conditions. I would have to believe that flat turndowns are still 10% or below the market, but I have no scientific data on that. Scott Stember - Sidoti & Company: Okay and John you mentioned the breakup of parts and service comps, what was the warranty work versus the customer pay?

Yes, that the warranty work was up 3% and customer pay was down less than 1% on same-store basis. Scott Stember - Sidoti & Company: And what was the collision?

Collision was up 3.9%. Scott Stember - Sidoti & Company: Okay and just generally speaking, looking at 2009, I know you guys are not giving guidance yet, but with the level of cost cuts you’re talking about, obviously you guys are planning to be quite profitable in 2009 I imagine, right?

That’s our goal. You’ve received some kind of guidance with those questions, but we’re here Scott, we’re here; that’s what we get up everyday for, is to stay solidly profitable. We really need to get some trend line data on where the industry is traveling. I’ve read the analyst reports for where they believe October is going to come in but I’m really interested to give that data next week. Scott Stember - Sidoti & Company: I only bring it up just given that unfortunately there’s a common belief that dealers won’t make money at all next year, so I just wanted to throw that out there.

That possibility certainly still exists that retailers can be profitable in this type of environment. Scott Stember - Sidoti & Company: And just last, I mean obviously, it sounds like your capital structure’s in tact, the dividend is safe, right?

Well, this is John Rickel. That’s something for the Board to address.

Your next question comes from Matthew Fassler - Goldman Sachs.

A few questions here; first of all, can you quantify the revenues associated with the divested sales, the divestitures rather?

Yes, this is John Rickel. That, it was about $18 million on a trailing 12 month basis.

Only $18 million of revenues?

Correct.

Okay. Just a couple other questions as we begin on some of the issues for the quarter. You touch about Ike, the increase of the hurricane impact and the aggregate increase in the SG&A to gross profit ratio by about 200 basis points. Was that primarily because of the loss of sales in gross profit dollars or is that SG&A dollars as well that increased because of your efforts to deal with the storms?

Matt, this is Earl. It was lot of sales, but by the same token during that period our large volume dealerships remained staffed up, so we head our normal expense load at the large Houston and Beaumont dealerships without the sales coming in for at least two weeks. So it ends up getting you from both sides of the equation.

But, not allowed at extraneous expenses above the beyond…

No, not extraneous. Not significant extraneous expenses.

This is John Rickel. We get have some minor things, generators we has to rent, fuel for those sort of things, the primary impact was the fact that we had the expenses and we paid our people even though the stores were shutdown. So it’s more the lack of revenue than any extra incremental expenses.

Great, if you look at the lower floor plan rates that you discussed overall, including your swaps, can you just remind us what the swaps looked like a year ago and what the effective floor plan rate was? I should say, not the effective floor plan rate, I mean with the gross floor plan rate, with regard to the impact of swaps.

Yes, this is John Rickel, give me just a second now.

I can ask Randy while you dig that up? As you talk about the multiples that buyers are looking to pay and sellers are looking for etc., I guess there’s a point in time when the multiples were probably below where the publics were trading. I would imagine that the private market such as it exists as now, [Inaudible] above where the publics are trading on the EBITDA basis?

I think that’s absolutely correct.

And are you seeing any transactions happening or are those prices simply prices on paper, but there’s no liquid market at this point?

Matt yes, I’m seeing very little transactions. There are some deals for sale, but someone who’s had great memories for good numbers. So, they want the highest price paid, that kind of last deal multiple. So, those deals are out there on the market, but I’m not seeing any transaction.

Also another question about the changing environment and this one is probably for Earl. You’re F&I per vehicle retails was still up in the third quarter, some of the financing issues that you’re discussing I would think would weigh on F&I a little bit. Is it your expectations that you can continue to grow that line or would you think that it would start to finally see some pressure given tighter financing?

It’s Earl. I don’t see a lot of upside per unit from where we are. I believe there is a little bit, but we are starting to perform at a very high level there, so I believe your assessment is accurate.

And John, any cleanup on that last question?

Yes, this is John Rickel, back to your question on the swaps. If you go back to kind of the same period a year ago, the kind of the weighted average interest rate would have been around about 6.7%, thereabouts.

And this quarter?

This quarter, the average rate including the swaps was about 5.25.

What, if you were to ignore swaps and just apples-to-apples which you have been versus last year?

Would have been about 3. 9.

And did that change a lot over the course of the quarter and how does that look if you could into the first part of Q4?

I mean, it’s based on LIBOR. So as you saw in LIBOR was striking all over the place during third quarter. We have seen LIBOR obviously begin to come off in the last few weeks. So, really that kind of depends on what you think is going to happen with LIBOR.

And we should use three month LIBOR for that exercise.

One month LIBOR.

Your next question comes from Richard Kwas – Wachovia. Richard Kwas – Wachovia: John, on customer pay margin, is there much you can do to try to improve the margin in the business right now?

This is Earl, Rich. No, I think there’s not a lot we can do and some of that floats based on individual customer pay brands mix from quarter-to-quarter, but we’ll probably want to do even more aggressive promoting, I would think through this type of environment. So I think that, I’d sacrifice a half point or point of margin to keep business in the shops these days. Richard Kwas – Wachovia: Okay and then in terms of regional trends here, with oil declining how much impact do you expect that to have in the Texas market over the next several months?

This is Earl, again. Tm me the biggest factor is it could help a little bit on the launch of these new full-sized trucks that Ford and Dodge are offering. There’s some real brands loyal people in Texas and Oklahoma and people who need a truck for their vocation or life-style and that I guess is a little better chance to get some earlier adaptors into those new trucks. I don’t think it’s any type of panacea, but it is certainly better than what it was looking like 45 or 60 days ago. Richard Kwas – Wachovia: Okay and then in terms of the acquisitions divestitures John, Earl. I know you are not giving guidance for February, but should we think about that in terms of the acquisition market not doing much next year that will be relatively neutral or maybe a net divestiture, either you’ll be a net divestiture next year?

Well based on where we sit right now, that would be my opinion, but we all know it’s a dynamic market, but as we sit here now, I would think it would have to be a good opportunities, just an overwhelming opportunity for us to acquire something in the near-term. Richard Kwas – Wachovia: And then on the mortgage debt front, John do you have any restrictions with your covenants on moving towards more ownership? Do you feel any of your covenants are going to restrict your ability to covenants are going to restrict your ability to convert to more real estate taking out more mortgage debt?

I mean it’s the covenants that we’ve been talking about. Certainly the total leverage ratio and to some degree the fixed charge ratio will govern what we can do as well as kind of the overall capacity of the mortgage facility, we kind of balance all three of those things. Richard Kwas – Wachovia: So you may not be as aggressive here in this environment as you have been in a little last few quarters?

I think that’s a fair assumption. Richard Kwas – Wachovia: And finally a housekeeping question, what was your lease expense for the quarter?

I have to dig that out. I can send it to you separately Rich.

Your next question comes from Matt Nemer - Thomas Weisel Partners.

My first question is if we could just go back to the credit availability topic, what are you seeing in terms of credit availability by brand? We’ve obviously seen some pretty interesting advertising out of Toyota and GM on credit availability. I’m just wondering if you can give us some color on that.

Matt this is Earl. Toyota financial services continue to be well-funded and reasonably aggressive in the markets certainly compared to others. That said, all lenders including TFS, have tightened up some of the requirements. Loan-to-values are not what they were a year ago or six months ago, which means down payment requirements were higher and this is one of the real factors across the board, because you end up with the people who can’t roll as much negative equity from a trading into a deal. People are required to come up with more down payments and those are the types of things that are killing more deals than just out right rejections. That was the point Pete DeLong wanted me to make on the previous question, which I missed, and we’re seeing that across the board, but Toyota is out there, as you know well represented and they are well funded, but there are a lot of manufacturers who are not for example financing used vehicles that are not of their brand. You’ve read obviously about G-Max 700, beacon score requirement on new vehicles and so when we get into the domestics, it gets even tougher I think and independent banks have pulled back and so a lot of times that is manifesting itself in this stipulations as they require on the deal, which just either drives up down payments or monthly payments and makes it harder to sell.

Any major change with BMW financial or Daimler, the luxury brands?

No, that’s the biggest issue, particularly with BMW, they are trying to shift away from leasing. Their incentives are much more attractive now to traditional retail financing than leasing. So the luxury world is switching more as it being rates and lesser attractive lease payments, that’s my take.

And then my second question was on service and parts, you mentioned that customer pay was down a little bit less than 1% on the same-store basis. Can you give us anymore insight into what you’re seeing on the field in terms of either a change during the end of the quarter and then specifically is it people neglecting to do very expensive repair work and so your labor is down, but your parts are still high? Can you give us some more color there?

This is Randy. Don’t forget the hurricane impact, because that had a huge impact on our customer paid business, but also people are more frugal with the money they are spending. So some of the higher margin maintenance business, they are declining this time around. That puts pressures on our margins, but they’ll be back and we’ll get to do that maintenance at another time. As far as the trend is over the quarter, I think other than the hurricane impact, it is about the same.

Okay and then turning to John’s comments on CapEx; you mentioned that ‘09 would be down significantly versus ‘08 and I guess, I’m wondering if you can get us little bit more color than that on the construction line. Is that a line that can potentially go to zero or close to zero, given where your stock is and your bonds? It seems like there would need to be a very high hurdle to complete a project verse buying in one of those other two parts your capital structure.

You’re right, Matthew, there is a much higher hurdle we need to look at now when we do these projects, but there are some projects from manufacturers and those are the ones we tends to be continuing at the moment, where there’s money involved in terms of reimbursement from the manufacturer and we have to calculate that in these financial evaluations. Nissan, General Motors; they actually pay a significant part of some of these facility actions. So that gives us over some of these hurdles, but that said there’ll be a dramatic need for us to decrease CapEx next year and I assume rough orders of magnitude will be somewhat around half.

And the manufacturer’s been relatively understanding of the reduction in some of these projects or I guess the delay in some of the projects?

It’s hard for me not to laugh when you ask that question Matt. I would say perhaps some, somewhat better than others. Some are better than others, Matt.

And then my last question is just back to the topic on capital allocation. I guess you’re restricted payments basket is down to just a couple of million dollars. Does it make sense given where your stock is to potentially change the dividends and kind of refocus on stock buy back or does it make more sense to potentially try to pay down as much of the quarter notes as you can so you can relieve some of the RP basket pressure. What are you thinking about the best capital allocation hear?

Matt, this John Rickel. As kind of as I said in my stated or in my prepared remarks, our number one in priority for cash is to continue to pay down debt and strengthen the balance sheet.

Thank you and at this time, I’d like to turn the call back over to Earl Hesterberg for any closing remarks.

Thanks all of you for joining us today. We’re looking forward to updating you on our fourth quarter earnings call in February. Thanks and have a nice day.

Ladies and gentlemen this concludes the Group 1 Automotive third quarter earnings conference call. If you would like to listen to a replay of today’s conference please dial 303-590-3000 or 800452236 with an access code of 11120953#. Thank you for your participation. You may now disconnect.