Welcome to the Group 1 Automotive, Incorporated fourth quarter 2008 earnings results call. Today’s conference is being recorded. Now I’d like to turn the conference over to Mr. Pete DeLongchamps, Vice President of Manufacture Relations. Please go ahead.

Welcome to Group 1 Automotive’s 2008 fourth quarter conference call. Before we begin, I’d like t make some brief remarks about forward-looking statements and the use of non-GAAP financial measures. Except for historical information mentioned during the conference call, statements made by the management of Group 1 Automotive 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 filings with the Securities and Exchange Commission 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.

After I cover what we observed during the fourth quarter, I’ll turn the call over to our CFO, John Rickel who will provide details on Group 1’s financial results, including the asset impairment charges reported for the quarter. Then I will address guidance and open up the call for questions. First, let me begin by telling you what we observed during the last three months of 2008. As we reported on our third quarter earnings call, we were hesitant to predict where our sales were headed in the fourth quarter. We knew things had gotten significantly worse starting with the Lehman Brothers bankruptcy in mid-September, but had hoped that similar to earlier financial blowups this would be a somewhat temporary reaction. By the end of October, we realized that the quarter was in a much steeper decline than we had anticipated. Seasonally adjusted selling rates for October, November and December were each down more than 35% for the industry on a whole. In looking back at history in prior recessions, we don’t believe anyone could have realistically predicted the rapid decline to the levels we saw in the fourth quarter. As the extent of the declines became clear, it led us to revisit the $35 million cost cutting measures we began implementing in October. In doing so we determined that we needed to cut costs more aggressively, and on January 14th we announced that we were putting additional measures in place. We will reduce our 2009 SG&A expenses by a total of $100 million from 2008 levels. These actions include pay reductions for everyone in our corporate office, as well as our regional vice presidents and our board of directors. We have defined plans in place to achieve these savings and are making good progress on implementing them. I’ll let…

For the fourth quarter of 2008, our net income from continuing operations was $1.8 million or $0.08 per diluted share after adjusting for non-cash asset impairment and gains on debt redemption realized during the quarter. On a comparable basis net income from continuing operations decreased $14.7 million from $16.5 million in the fourth quarter of 2007. Our fourth quarter 2008 results included the $67.2 million after tax asset impairment charge related to intangible franchise rights. During the fourth quarter, we performed our annual impairment test on our indefinite lived intangible assets, in other words goodwill and franchise rights. As a result, we recognize an impairment charge primarily attributable to one, the use of a higher discount rate reflecting increased risk premiums evident in the market for the last three to four months, and two, a further reduction in the projected industry selling rate reflecting the significant deterioration in the fourth quarter, which adversely impacted the forecasted operating results from many of our franchises, particularly in our western region. Also during the fourth quarter we recognized $20.9 million of after tax gains from the redemption of our long-term debt. Including these non-cash asset impairment charges and the gains from debt redemption, we recognized a loss of $44.5 million from continuing operations in the fourth quarter of 2008 or $1.96 per diluted share. Our fourth quarter consolidated revenues declined $366.4 million or 24.4% to $1.13 billion compared to the same period a year ago. Our new vehicle sales declined $283.4 million or 30.2%. In addition, our used vehicle retail and wholesale businesses declined $41.8 million and $30.7 million respectively. Our revenues from our finance and insurance business decreased $14.8 million reflecting the impact of lower new and used retail volumes. In the partial offset, our parts and service business increased $4.3 million…

On our third quarter earning calls, we said that we would review conditions to see if it would be feasible to reinstate earnings guidance. We’ve determined that it’s still not feasible to issue earnings guidance at this time given the continued uncertainty surrounding the overall economy, consumer lending and the automotive industry. However, we are planning our business on the following key assumptions for 2009. Industry seasonally adjusted annual sales rate of 10.5 to 10.8 million vehicles. SG&A expenses as a percent of gross profit as 80% to 83.5%, excluding any one-time items as lower sales revenues are expected to offset cost improvements. Tax rate of 38.5% estimated average diluted shares outstanding of 23.2 million, capital expenditures of $30 million or less. On the same store basis, new and used vehicle margins consistent with 2008 fourth quarter levels, parts and service revenue 1% to 3% lower, and finance and insurance gross profit at $1,000 to $1,025 per retail unit. That concludes our prepared remarks. In a moment we will open up the call to Q&A. Joining me on the call today are 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 will now turn the call over to the operator to begin the question and answer session.

(Operator Instructions) We’ll hear first from John Murphy – Bank of America-Merrill Lynch. John Murphy – BAS-ML: Just a question on the cost cutting and the cost saves. The $100 million is completely incremental in 2009 meaning the $20 million or so that was achieved in the fourth quarter this is incremental for that.

No. It would include that, John. It expanded the original $35 million target, of which that 20 million was in response to some of the actions that we took to $100 million. So the $20 is inclusive within the $100.

John, this is John Rickel. Think about it this way. The reason we set up the target this way is because of the incremental nature of the reductions that we are identifying. The easiest way is it's a $100 million reduction off of the full year 2008 levels. John Murphy – BAS-ML: And then if we look at this $65 million is coming from personnel. I mean is that a structural reduction or is that kind of cost that will creep back in overtime as sales hopefully at some point maybe this year start to recover?

It’s both. Some of that is variable in nature and is volume sensitive. I couldn’t tell you what the percentages are exactly, but I would guess at least around half is volume related. John Murphy – BAS-ML: Okay. And then as you work through the process of cleaning out some of the weaker dealerships through disposition, you mentioned there might be some cost associated with that. I mean what kind of payback period are you looking at on those kinds of dispositions?

John, this is John Rickel when we’ve been able to do those in the past couple of years the paybacks are actually reasonably quick, I’d say on average probably two years maybe even a little less. John Murphy – BAS-ML: On the collision repair shops, three new shops opened. When were they opened, were they opened late in the quarter, when did they start impacting results?

They were dramatically expanded shops actually. For example, we took individual Toyota and Lexus, two small shops and made them into a large one here in Houston. That became active in September, so really fourth quarter was the first real impact of that. We had a very small shop on Long Island with BMW and we made it a much larger shop. That was also probably fourth quarter in terms of first full quarter of impact. I would say most of the impact was fourth quarter.

The third one was earlier in the year, it was basically because this is a fourth quarter to fourth quarter comparison, the other came on earlier in the year. John Murphy – BAS-ML: And do you foresee any other opportunities in other regions or locations to make those kinds of expansions?

Yes, we’re doing it on a very measured basis because of our desire to keep CapEx minimized. We have one in New Orleans that should open any day or certainly within a couple of weeks that would be dramatically expanded from our Ford dealership there. Then we’re looking to keep one or two projects at a time under way. Body shops aren’t real expensive to do, but again we’re trying to minimize CapEx, but we think collision repair is a good return on investment for us and will expand it in the future. John Murphy – BAS-ML: Lastly, there seems to be a little bit of a loosening in a more congenial approach is being taken by auto makers towards the larger group, [inaudible], I was just wondering, Earl and John both, given your past experience, do you feel that there is a shift in the approach here and that the tide might be shifting to an even greater partnership approach by the automakers?

I’m not sure that we have reached congenial yet, but I do think that you are making a valid point that, as we see the financial pressures going forward, that the value we bring to the party in the automotive retail distribution network with capital and expertise and some strength, is starting to and will be more valued by the manufacturers. Let me see if Pete has any comments. He deals with the manufacturers everyday as part of his job.

I would say that over the last six months, the discussions we’ve had with manufacturers surrounding capital expenditures has become much more transparent seamless and I’m pleased with the discussions we’ve had with all of our manufacturers surrounding capital expenditures.

You next question is from Scott Stember – Sidoti & Company Scott Stember – Sidoti & Company: Could you maybe talk about on the used side of it, you said that you’ve seen a lit bit of a firming up or traffic so far this year, could we maybe talk about that and pricing and how that could possibly help maybe reduce some of the wholesale losses.

Scott, this is Earl. The phenomenon is fairly straight forward. In the fourth quarter there were some, I would say, atypical or above average wholesale losses that reflected the shift back to trucks because gas prices dropped, whenever it is they dropped its September, October, November and that seems to be behind us now. But the new paradigm is with new vehicle sales being so reduced, 35% say in the industry, that we’re not getting as many trade-ins to fuel our used vehicle operation, but we do have good customer demand. In the reduced market there is certainly more used vehicle impact than there is new. You can see the used vehicle sales have probably dropped half of what new vehicle sales have. But there are more people at the auction now buying vehicles and the prices very quickly get the book value, which wouldn’t normally be a problem, but now with the restrictive lending practices, you buy too many vehicles at auction at above book prices, you’ll back and you’ll see the banks won’t lend above book on them. So that’s more the new constraint we have that will keep inventories pretty lean. So now the issues are more acquiring merchandise and lending practices. But the relative activity in the used vehicle market is pretty good right now for the overall economic levels. So there are some opportunities for us in the used vehicle market. But the margins are still likely to be under pressure just because we will have to acquire more vehicles outside of our normal trade-in process. I wouldn’t forecast the wholesale losses being from any market shift, but we have to be very careful about how we manage externally sourced used vehicles in this environment. Scott Stember – Sidoti & Company: California can you talk about any progress there before the recent cost cuts you’ve been doing a lot of things over there. Can you talk about the profitability issues over there?

We actually have improved our profitability in California strictly because we’ve now completed two years of ongoing cost cutting. The California market is still very weak, but I would have to say that at least the last few months, on a revenue basis, it’s been relatively flat. We thought we found the bottom there about three times before, so I wouldn’t want to predict the bottom, but we started to make some progress in California just because we’ve been relentless in our cost cutting. So our California business, as it contributes to our company, has been a bit better in the last four months. Scott Stember – Sidoti & Company: John, just going back to the comments you’ve made about any maturing debts this year, you talked about the Ford silo that you renegotiated in December. Is there anything come through at all in 2009 that we need to be aware of?

There would be some minor amounts on the mortgage facility, Scott. It’s probably in the order of $10 to $15 million. This is kind of the normal quarterly amortization on that. But that would be the only repayment at all in the year. Scott Stember – Sidoti & Company: John, just one last question, would you happen to have what the free cash flow figure was for 2008?

Not handy, I will have to get back to you with that.

Your next question comes from Rick Nelson – Stevens Company Rick Nelson – Stevens Company: I want to ask about regional strength and weakness as a follow-up on the question about California. How is [inaudible] market performing relative to the chain in the Northeast and any other color you might provide would be helpful?

Rick, this is Earl. The Houston market in particular, as well as most of Texas, is still relatively better than the rest of the country, but it had been weakening, particularly on the new vehicle sales side. I expect that has to do with the energy business and being under pressure now for three or four months with particularly low oil prices, and they’ve started to have reduction in force at some energy related companies. We can see some of the new vehicle business decline here in the last certainly in the last quarter of the year being more significant than the previous two years, but it’s still better than other places. Boston is holding up in our New England area probably better than average, but it too has been weakening. The new significant weakness for us is in New York and New Jersey, as you might expect, because of the financial centers there. And beyond that I don’t think there is any change in terms of relative strength or weakness regionally. Rick Nelson – Stevens Company: How about from a brand standpoint, we’re starting to hear about Honda potentially getting softer.

Quite frankly, the sales weakness of all the brands in the fourth quarter was pretty much uniform, whether it was luxury, whether it was Honda, Toyota. I can no longer tell you that there’s any brand that’s appreciably better than any other in the last few months. Everyone’s general order of magnitude, some may only be down 20% or 25% a month, but relatively speaking, it’s bad across all brands and all regions right now on the new vehicle side. Rick Nelson – Stevens Company: Another question on discounts, how much revenue is in discontinued ops and what sort of brands are there and is there a market for these dealerships?

The only thing we had in discontinued ops was what we’ve reported in the third quarter, which related to Albuquerque disposition we made, we’ve put nothing else in discontinued ops.

Your next question comes from Matt Nemer – Thomas Weisel Partners. Matt Nemer – Thomas Weisel Partners: My first question back to John’s question earlier on SG&A the cost cuts, is there a way to sort of look at how much of that $100 million bucket would you get assuming flat gross profit dollars year-to-year? I’m trying to understand how much of that is coming from variable and how much is fixed.

Matt, this is John. We’ve tried to dimension that. A rough estimate is there’s probably about $75 million-ish of the reduction is basically related to actions that we’re taking. There’s $25 million-ish that comes from the drop off, if you will, in gross profit. Matt Nemer – Thomas Weisel Partners: Then the second question, if we’re seeing a mix shift from new vehicles to nearly new, and it sounds like that may be happening in the market given the strength in CPO and the relative strength in used. What sort of an impact does it have on your model in general terms? How much dollar profit per unit do you make on a new, including F&I versus a nearly new including F&I? And just generally, do you think a one-year-old CPO can deliver a similar profit level to a new, or perhaps it’s even higher because you’ve got the baked in extended warranty.

Well, obviously if we looked at the entire revenue stream, including the warranty, I think it would be higher. What’s different right now in the used vehicle business, typically our F&I on used would be stronger than it has recently been just because of these lending practice shifts in the last three or four months. John’s trying to find some data here.

The used data that we have doesn’t really split out CPO. CPO on a front-end basis tends to be maybe a little less than an average used, but you pick up basically the service stream that goes with it. The actual kind of front-end dollars are not far off, Matt, they’re reasonably close. What I don’t have handy is the F&I split and drilled into the difference on CPO, I definitely don’t have that at hand. But the front-end numbers are not far off. Matt Nemer – Thomas Weisel Partners: But off the top of your head a shift from new to nearly new, if there’s trade down in the market, and that’s kind of what’s happening here, doesn’t necessarily have a significant impact on the profitability of the overall business.

I don’t believe it does. We also need to remember that the CPO volume that company’s do, like ours, tends to be heavily shifted to luxury brand. The best CPO programs in the market tend to be the luxury brands. Now Toyota’s got a great one also, we do a lot of Toyota. But you don’t do nearly as much CPO business, typically, in the volume brands as you would with Lexus, BMW, Mercedes they all have very powerful plans, and they’re obviously higher dollar cars. Matt Nemer – Thomas Weisel Partners: Next question is I know you’re not giving net income guidance for ’09, but can you give us a sense for what sort of a working capital benefit we could see in ’09 based on your industry volume guidance. I’m just trying to get a sense for how much you’ll be able to take out of working capital in a down environment this year.

Matt, this is John. We obviously made good progress there in 2008. It’s an area that we’re very focused on. I don’t have kind of a dollar millions that I can give you but we certainly think there’s further opportunities there. Matt Nemer – Thomas Weisel Partners: Then lastly, in terms of uses of cash for free cash flow in ’09 it seems like it’s essentially debt pay down and you took out some coverts this quarter. What’s the thinking behind the converts versus paying down other lines or taking out other debt just given that it's a little bit longer term paper even with the put than some of your other maturities?

Matt, this is John. We look at all the elements of the balance sheet and we’re trying to manage among them. We bought 8.25s. We bought converts, and we look at the mortgage debt. It’s just basically where do we get kind of the best bang for the buck and what’s available to pay down.

Your next question comes from David Lim – Wachovia. David Lim – Wachovia: Just a question on the $100 million, if the SAR happens to dip below your forecasted guided levels, what kind of additional opportunity is there?

Well, we have to be a little careful with SAR because I know a lot of people reacted to the sub $10 million SAR last month, and in reality retail actually went up in January from December. It’s the retail portion of the SAR that impacts retailers like ourselves, so for the last four months we’ve seen very consistent, albeit very low, retail levels. But if retail did drop another million, then we have to find more cost. There’s always more cost there. We would at some point get to a situation where we will be getting dangerously close to bone, but I’ve never worked anywhere where I couldn’t find more cost when I had to. If we have to find more, we’re going to go find more I will assure you of that. David Lim – Wachovia: Now I know that there was no guidance on acquisition or are you really looking to acquire more dealerships in ’09, but given some of the depressed valuations out there, namely southern California, would that line of thinking change possibly in the second half if things did turn around?

I don’t see that happening at this time, David. You’re right, there are some distressed sellers of dealerships out there and they’re going to tend to be in places like California. We’re now two years into the economic downturn. But even at reduced levels acquisitions of dealerships in California, because they tend to be big import dealerships and/or have big real estate associated with them, just tend to take an awful lot of money. And it would be unlikely that things would improve enough to make that magnitude of an acquisition in this calendar year. I guess you never say never, but I think it’s unlikely.

Your next question comes from Joe Amaturo – Buckingham Research. Joe Amaturo – Buckingham Research: Just one quick one, are there any limitations on how much public debt you can buy back?

Joe, this is John Rickel. No. There’s really not. Joe Amaturo – Buckingham Research: Then I guess one other one, could you just give us the performance of like internal service imports during the quarter.

Internal work was definitely down. The way we account for that is we strip the revenue out so it’s not really easy to give it to you in revenue terms, but down probably 10% to 15%.

Your next question comes from [Charles Sutter] – Keybanc Capital Markets. [Charles Sutter] – Keybanc Capital Markets: My question has to do with real estate. If I heard right you have $57 million available under your real estate line. Excluding places like Texas, I think the peaks and valleys definitely haven’t been affected. Do you see an opportunity to continue to buy real estate on franchises you own?

Charles, this is John Rickel. I basically tried to address that in the earlier comments. You’re right that is the available capacity, but right now, because we’re trying to reduce leverage, not really intending to pickup any more real estate this year at present. [Charles Sutter] – Keybanc Capital Markets: To wrap up with that, do you see some value impairments on the properties you currently own?

No. Not beyond what we took in the third quarter.

Mr. Hesterberg, with no further questions I’ll turn the call back to you for any closing or additional remarks.

Thank you for joining us today. We’re looking forward to updating you on our 2009 first quarter earnings call in April. Thank you and have a nice day.

Again, that does conclude today’s conference. Thank you all for your participation and have a great day.