The Evolving Landscape of Automotive Retail Advertising and its Impact on the Newspaper Industry

1. The Evolving Landscape of Automotive Retail Advertising and its Impact on the Newspaper Industry National Print Partners NTMC Conference Earl J. Hesterberg, President & CEO Group 1 Automotive February 9, 2011

2. Group 1 Automotive Overview • Fortune 500 company • Fourth largest dealership group in the U.S. • Committed management team with more than 100 years of automotive retailing and OEM experience • Owned by independent shareholders with no large controlling owner • Well positioned for growth • Geographic and brand mix positioned for future market share • 3 U.S. Regions / 15 States • U.K. / England • 101 Dealerships / 137 Franchises • 32 Brands Note: New Vehicle Unit Sales for quarter ending 9/30/10; Dealership, Franchise and Brand counts as of October 26, 2010

3. Well-Balanced Brand Portfolio Brand Mix (New Vehicle Unit Sales) Brand Diversity (New Vehicle Unit Sales) 3rd Quarter 2010 Financial data is from continuing operations

4. Stable Business Mix 17% of Revenues Generate 66% of GrossProfit Parts & Service Gross Profit Covers 80% - 90% of Total Company Fixed Costs and Parts & Service Selling Expenses $1,462 $229 3rd Quarter 2010 Financial data is from continuing operations ($ in millions)

5. Consolidated Financial Results • See appendix for GAAP reconciliation. • Includes non-cash interest expense of $2.1 million incurred in 3Q10 and $1.1 million incurred in 3Q09. ($ in millions, except per share amounts)

6. SG&A as a % of Gross Profit ($ in millions) SG&A by Component Same Store Basis September Year-to-Date

7. Group 1 Advertising Expense 2010 $52.3M +$10M vs. 2009 $323 PNVR +$4 PNVR Total Ad Spend by Department % Total

8. The Automotive Retailing Climate • Traditional media has long been the preferred way to reach such a varied target audience—however, this is evolving • 77% of new-vehicle buyers are using the Internet during their shopping process • Approximately 95% of researchers find vehicle ratings and reviews most important when shopping online, followed by dealer reviews, enthusiast sites, blogs and online videos • Approximately 70% of automotive Internet users view consumer-generated content while shopping for a new vehicle

9. Automotive Retailing Climate Con’t • Changing purchasing behaviors in the last 10 years have nearly doubled the use of the Internet for consumers shopping for vehicles: • Consumers using the Internet to shop for new vehicles has increased from 40% to 77% and 26% to 61% for pre-owned. • Nearly 72% of Internet users use a search engine to find their local dealership • Group 1 has seen an emergence of new applications for media throughout our business segments and along the customer lifecycle continuum in recent years, and we fully expect this trend to continue

10. Reactions from the Publishing Field • “We’ve seen some of our best advertising customers migrate like geese heading south. Think about it. Much of our classified ads for jobs, homes and cars all have shifted to the Web. We’re scrambling to adapt.” - Jeff Cohen, Houston Chronicle Editor • “Rupert Murdoch, the Beaverbrook of our age, once described [print advertisements] as the [news] industry's rivers of gold—but, as he said last year, “Sometimes rivers dry up.” - The Economist • “Newspapers made $34.74 billion in print advertising in 2008, while they only accumulated $24.821 billion in 2009. The [newspapers] that embrace the online space faster and more effectively have the best chance for survival.” - Ben Parr, Mashable Co-Editor

11. A Business Case Study Remember when Blockbuster was the go-to destination for movie rentals? According to a September 2010 Newsweek article: • By [the late 1990s] the Internet was being viewed as a potential killer of the video industry. • Amazon had just entered the market, expanding from selling cheap books online to cheap DVDs, and a little company called Netflix rolled out a subscription service. • This was the beginning of the end for the traditional movie rental concept that was once so popular. "Imagine a Blockbuster night without Blockbuster, a time when no video store will ever slap you with a late fee or fine you for failing to rewind. Because in this world, there are no videos, only home computers." - Chicago Sun-Times, June 1999

12. Fall of & Rise of • Internet activity rises with online sales of DVD’s & creation of Netflix • Netflix implements flat rate subscription & allows multiple rentals • Blockbuster still owes a substantial amount of debt to former parent Viacom • Netflix goes public at over 5,500,000 shares. Reaches over 1 million subscribers • Blockbuster sustains more than $4 billion in losses since 2001 • In 2004 Blockbuster seeks control of its biggest rival, Hollywood Video, but fails when Movie Gallery buys it out in 2005 • Netflix introduces streaming videos expanding their reach • Netflix reaches over 14 million subscribers adhering to their model • With nearly $1 billion in debt, Blockbuster files for Ch. 11 1997 2000 2001 2002 2004 2008 2010

13. Group 1’s Advertising Mix 2008/09 2010 • Newspaper - 17% - Newspaper – 10% • Radio – 30% - Radio – 35% • TV – 20% - TV – 25% • Outdoors – 5% - Outdoors – 5%   • Yellow pages  - 3% • Internet – 10% - Internet – 15% • Direct mail - 15% - Direct mail - 10% - Newspaper advertising increased due to lower costs resulting from the recession - With media costs now on the rise, 2011 ad spend is trending toward radio, internet & direct mail - Newspaper spend expected to continue shift toward internet

14. Comments from Group 1 Operating Management Regarding Newspaper Advertising • “We have been out of the newspaper for at least a couple of years in Boston” - Boston Market Director • “Long Island uses print. They feel it works well because of all the people taking the train into the city.” - NY/NJ Market Director • “Reduced readership has reduced ROI except in the Gulfport market where cost is low. The paper has many pictures and little print – maybe that is why it works so well.” - Gulf Coast Market Director • “Circulation numbers are packed, thus over-stating readership.” - Western Region, VP

15. Comments from Group 1 Operating Management Regarding Newspaper Advertising • “Newspaper is used for pre-owned display ads in classifieds. Customers then go to our website for details and can then see our total inventory.” - Gulf Coast Market Director • “Value is better when we get web links on the newspaper web version – link takes you to our website. The Sacramento Bee does a good job with this.” - Western Region, VP • “In Houston, we have used the Chronicle for pre-owned using liners which still gets a decent ROI for some stores, but not most stores. Newspaper just doesn’t work like it once did .” - Houston Market Director

16. Add Social Media to the Equation • The emergence of social media (Facebook, Twitter, etc.) has created a grass-roots approach to marketing • Group 1 recently launched a Twitter feed • Currently, 70% of Group 1’s dealerships utilize Facebook, • opportunity to leverage positive reviews and engage directly with customers Why spend money on print advertising when more and more customers are online?

18. Online Directories • Retailers benefiting from peer reviews/online recommendations “I bought my Nissan Maxima [to Sterling McCall] a few years ago and had the best car buying experience a girl could ask for. Since that time, I have taken my car here for all services, up to and including oil changes. The service advisors are great. I have nothing but good things to say about this dealership. If I were to buy another Nissan, I would go back here in a heartbeat!” • These recommendations are more influential than print • Online reviews and directories have never been more influential on the automotive retailing industry

19. Consumer Internet Usage – Car Shopping

20. Other Forms of Internet Usage • According to CNW Marketing Research, of those who used the Internet primarily to make their car purchasing decisions, they also use the Internet for the following activities:

21. Internet Displacement of Traditional Media • The internet has displaced over a dozen different types of media which used to be primary means of information on vehicles.

22. Influx of Advertising & Slow Download Times

23. Boston.com Cars

24. LATimes.com Cars

25. AdvantageCars.com

26. Our Online Marketing Approach • 6.1 million customers and prospects in our database • 1.4 million clean email addresses • More than 163,000 new and used vehicles sold in 2010 • 1.98 million repair orders generated in our service departments • 1.19 million parts tickets • 425,000 customer selling opportunities last year (sales ups in the CRM systems)

27. Our Online Marketing Mix New and Pre-owned Sales • Building the Database • Capture relevant customer data to better understand their needs, values & expectations • Reach: Attracting consumer attention and offering value • Highly targeted email marketing • Banner ads • Search Engine Optimization • Search Engine Marketing, pay-per-click • More than 75% of customers visit the web site prior to entering the dealership • Approximately 90% of internet users use search engines to find a new car

28. Email Address Capture Rate

29. New Car E-Mail Promotion f

30. TotalsPercentages Emails Sent 20,808 Emails Delivered 18,103 87% Showroom Visits 104 4% Vehicles Delivered 44 2% Campaign Results

31. What the Future Holds for us • Most dealings with customers will be driven online, however… • More than 50% of online consumers surveyed are less likely to buy a car online because of the inability to: • test drive • review full car/pricing information • interact with a person • negotiate trade-in of old vehicle • apply for financing • Customers will continue to control more of their own sales and service experience, resulting in greater consumer convenience and improving Group 1’s targeting efficiency • Migration of marketing and advertising budgets to online venues • Tighter integration of new, viral and social media throughout the customer lifecycle • Continued innovation in online marketing campaigns and metrics

32. What the Future Holds for you • What does the newspaper community need to do to maintain relationships with automotive retailers? • There is still an active consumer base that looks to newspapers as a source of information • Drive advertising focus to online venues for more direct and targeted consumer interaction • Leverage your online assets to drive advertising innovation online • Offer competitive pricing (when pricing dipped during the recession the retail automotive industry increased newspaper ad spend)

33. Thank you www.group1auto.com