Glenn Chin: Okay. Very good. And then just going back to parts and service, was there any discernible impact from the UAW strike?
Daniel Clara: We — I would say it was not material. We had an impact. There was — it was challenging to keep up with the guest experience when we had the lack of availability of parts. But I would say no.
David Hult: But like our peers, we certainly had some impact with parts. But quite honestly, we had some impact with parts on OEMs that don’t have union issues. So it was just an odd end of the year from a parts standpoint, ebbing and flowing with when we’re receiving parts.
Glenn Chin: Okay. Very good. And then just lastly, on your leverage target. It sounds like you’re targeting below 2x by end of the year. But I mean, is that a revision to your longer-term target, which I think historically is in what, 2.5 to 3x?
Michael Welch: No. I mean the 2.5 to 3x is kind of when we get back to a normalized SAAR and normalized new vehicle margins. So that’s still not a revision from that. We want to work our way back down to 2x to be ready to do sizable acquisitions and share buybacks, but also this year, as I quoted in the script, if we see something from a share repurchase perspective or an acquisition, we wouldn’t be afraid to spend money on that. So if we don’t see those things, we’ll work our way back down to 2x, but if something comes up that makes sense from a capital allocation perspective, we’re not afraid to spend the money on those items this year.
Operator: Our next question is from Bret Jordan with Jefferies.
Bret Jordan: One, could you talk a bit about what you’re seeing on the battery electric vehicle side from an inventory and maybe GPU? And the follow-up question I’m going to ask is really on GPU by brand. You’ve talked about Spolantus and Nissan being kind of back to relatively high inventory levels. Are those GPUs looking like pre-pandemic levels? Or is the new base above the historic profitability?
David Hult: I’ll talk about the gross profit per vehicle, and Dan could hit the electric car stuff. It’s a great question, Bret. The brands that you mentioned, Nissan, Salantis and Infinity they had the biggest impact as far as going backwards in PVR. But all 3 of them are significantly above, say, 2019, still very — again, if you’re comparing it to ’19, extremely healthy, good gross profits, and they were good numbers overall, just compared to some of their peers in their spaces, meaning domestic, luxury and import, they weren’t as good.
Daniel Clara: Dan, I’ll try to give you — to answer all the questions you asked about EV, it’s a great question. So hopefully, I’ll give you the color that you want. If I miss something, please let me know. When you look at electric vehicle DSI, as a percentage of our total inventory, it’s about in the 5% range. And so just keep that in mind as I’m discussing the other numbers. Our electric vehicle day supply for Q4 was 91 days and about 54 days supply in the used car arena. We did see an increase from Q3 to Q4, specifically in the new car arena, we saw an increase of about 33%. So obviously, there’s no news out here, but the EV sales starting to slow down and inventory starting to build. So we’re managing that as best we can. Did I miss anything else you want to color on? .
Bret Jordan: Yes, if you could just sort of talk about, I guess, how you see the trajectory of GPUs on the battery side?
Daniel Clara: Yes. So the early adopters of EVs, I think that’s what we have been facing or serving at the dealership level. And now that, that phase is behind us, there’s a lot more, what’s the right word, a lot more aggressiveness from a pricing standpoint. So expect the GPUs to be lower than our ICUs and the ICE and when we’re working deals or work in leases, which most of these vehicles are being leased and that puts a little bit of pressure on the OEM or the lender institution from a residual factor, we’re having to get pretty aggressive in discount cars much more than we do traditional combustion engines.
Operator: Our next question is from David Whiston with Morningstar.
David Whiston: Can you talk a bit about what the franchise and goodwill impairments for the special item?
Michael Welch: Yes. So that’s mostly related to our Stellantis and Nissan stores. With interest rates going up, that kind of increases the WACC in our calculation we have to do for our annual impairment testing. But that’s primarily related to our Stellantis and Nissan stores in our company.
David Whiston: Okay. Looking at your debt profile, 2 questions on that. First, you’ve got a lot of bonds due 2028 to 2030. So if you’re not already at a point like this, you might be soon at the point where you can’t just keep piling debt into those 3-year time frames to do more deals in the future. So are your hands tied in big M&A? Or do you just want to issue bonds that mature after 2032?
Michael Welch: Yes. I mean, we think with our cash flow that we generate on an annual basis, that provides sufficient capital to go out and do M&A and share buybacks. So we’re looking more at those bonds in those years as a refinancing opportunity not to continue to add more debt onto those bonds. So we use our free cash flow to kind kind of do our activity. We do have some mortgages when we bought the Koons acquisitions. We did not mortgage that real estate. And so we do have the option to put all mortgages for that property. We typically mortgage the properties when we bought in this case, we did not mortgage it just to kind of keep the debt level at a lower level.
