HOUSTON - Group 1 Automotive Inc. reported that its September sales and third quarter profits were significantly reduced by Hurricane Gustav and Hurricane Ike. September sales were also impacted by lower overall dealership traffic and tightening consumer credit.

The combination of these factors has reduced third-quarter profits below management's expectations. Third-quarter earnings are currently projected to be in the range of $0.39 to $0.44 per diluted share.

Hurricane Gustav made landfall on Sept. 1 causing dealership operations in New Orleans to experience a significant loss of customer traffic for one week over the typically busy Labor Day weekend. Store traffic was impacted as customers evacuated the New Orleans area for several days and from the subsequent loss of discretionary income spent during the evacuation.

Hurricane Ike made landfall on Sept. 13 resulting in substantial losses in September in the Houston-Metro market. Evacuations began on Sept. 10, with most businesses shutting down on Sept. 12, as preparations were made for Hurricane Ike's arrival. Group 1's Houston-area dealerships were all reopened by Sept. 17, with the Beaumont dealerships opening shortly thereafter. Considerable power outages throughout the area lasted for more than two weeks. Customer traffic was down drastically during those two weeks as citizens were living without power and dealing with gas shortages, downed trees and heavy traffic caused by the outage of thousands of stoplights.

"The Houston and Beaumont, Texas, markets account for more than 20 percent of Group 1's revenues and an even higher percentage of our profits, so the loss of two weeks' sales seriously impacted third-quarter results," said Earl J. Hesterberg, Group 1's president and chief executive officer. "Although results are still preliminary, we estimate that the hurricane impacts on the Houston, Beaumont and New Orleans markets have depressed third-quarter results by approximately $0.15 per diluted share. It has taken some time for demand to recover from the aftermath of the hurricane, but sales are beginning to normalize.”

Group 1 also reported that September sales and third-quarter profits were noticeably impacted due to customer traffic declining, as Americans have been focused on news of the financial crisis and the recent dramatic decline in the availability of retail automotive credit.

"It has gotten notably more difficult to finance new and used vehicle transactions, as we are experiencing higher rejection rates, higher interest rates and greater down-payment requirements to purchase a vehicle," said Hesterberg. "Down-payment requirements have increased as lenders have significantly reduced their loan-to-value ratios."

Group 1 noted that it is reviewing how these impacts may affect its full-year guidance. The company will address guidance when it announces its third-quarter earnings results on Oct. 28.