<SEC-DOCUMENT>0001437749-15-004178.txt : 20150416
<SEC-HEADER>0001437749-15-004178.hdr.sgml : 20150416
<ACCEPTANCE-DATETIME>20150305162917
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0001437749-15-004178
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20150305

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			LITHIA MOTORS INC
		CENTRAL INDEX KEY:			0001023128
		STANDARD INDUSTRIAL CLASSIFICATION:	RETAIL-AUTO DEALERS & GASOLINE STATIONS [5500]
		IRS NUMBER:				930572810
		STATE OF INCORPORATION:			OR
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		150 NORTH BARTLETT STREET
		CITY:			MEDFORD
		STATE:			OR
		ZIP:			97501
		BUSINESS PHONE:		541-776-6401

	MAIL ADDRESS:	
		STREET 1:		150 NORTH BARTLETT STREET
		CITY:			MEDFORD
		STATE:			OR
		ZIP:			97501
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.htm
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<P id=PARA1 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">March 5, 2015</FONT></P>
<P id=PARA3 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA2 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><I><B>By EDGAR and Overnight Delivery </B></I></FONT></P>
<P id=PARA5 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA4 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Securities and Exchange Commission </FONT></P>
<P id=PARA6 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">100 F Street, N.E. </FONT></P>
<P id=PARA7 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Mail Stop 3561</FONT></P>
<P id=PARA8 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Washington, D.C. 20549-0404 </FONT></P>
<P id=PARA10 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA9 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Attention: Jennifer Thompson</FONT></P>
<P id=PARA11 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA12 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 18pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Re:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Lithia Motors, Inc.</B></FONT></P>
<P id=PARA13 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 18pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Form 10-K for the Fiscal Year Ended December 31, 2013</B></FONT></P>
<P id=PARA14 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 18pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Filed February 21, 2014</B></FONT></P>
<P id=PARA15 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 18pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>File No. 001-14733</B></FONT></P>
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<P id=PARA16 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Ladies and Gentlemen:</FONT></P>
<P id=PARA19 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA18 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 18pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Lithia Motors, Inc. (&#8220;Lithia&#8221;) submits this letter in response to comments from the staff (the &#8220;Staff&#8221;) of the Securities and Exchange Commission (the &#8220;Commission&#8221;) received by letter dated February 5, 2015, relating to the above referenced filing (the &#8220;Filing&#8221;). </FONT></P>
<P id=PARA21 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA20 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 18pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">In this letter, we have recited the Staff&#8217;s comments in italicized, bold type, and have followed each comment with Lithia&#8217;s response. </FONT></P>
<P id=PARA23 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA22 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><I><B><U>Notes to Consolidated Financial Statements, page F-8</U></B></I></FONT></P>
<P id=PARA24 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA25 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><I><B><U>(1)Summary of Significant Accounting Policies, page F-8</U></B></I></FONT></P>
<P id=PARA26 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA27 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><I><B><U>Segment Reporting, page F-14 </U></B></I></FONT></P>
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<TD style="WIDTH: 4%; VERTICAL-ALIGN: top" colSpan=2><I><B>1.</B></I></TD>
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<P id=PARA30 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><I><B>We have read your responses to comments 1-4 of our letter dated October 29, 2014 and considered the information you discussed on the January 21, 2015 conference call. Based on the information you presented, we note the following:</B></I></FONT></P>
<P id=PARA31 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 36pt; LINE-HEIGHT: 1.25; TEXT-INDENT: -18pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&#9679;</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><I><B>Each store is operated in an autonomous manner by a general manager who is responsible for meeting profit targets established by your CODM.</B></I></FONT></P>
<P id=PARA32 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 36pt; LINE-HEIGHT: 1.25; TEXT-INDENT: -18pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&#9679;</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><I><B>Your CODM regularly obtains and actively reviews store-level financial results</B></I></FONT></P>
<P id=PARA33 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 36pt; LINE-HEIGHT: 1.25; TEXT-INDENT: -18pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&#9679;</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><I><B>Your CODM participates in termination decisions of general managers at underperforming locations.</B></I></FONT></P>
<P id=PARA34 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 36pt; LINE-HEIGHT: 1.25; TEXT-INDENT: -18pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&#9679;</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><I><B>Your CODM actively participates in completing financial forecasts at the store level, reviews actual versus budgetary results at the store level, and visits individual stores to discuss and review store performance with store general managers.</B></I></FONT></P>
<P id=PARA35 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><I><B>&nbsp;</B></I></FONT></P>
<P id=PARA36 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><I><B>Given the above factors, each store appears to meet the definition of an operating segment in accordance with ASC 280-10-50-1. As a result, please provide us with an analysis that illustrates how your stores should be aggregated into reportable segments under ASC 280-10-50-11 through 50-14. In determining the appropriate aggregation level(s), please tell us how you have considered each factor based on differences based on geography, manufacturer and type of brand (domestic, luxury and imported), as relevant.</B></I></FONT></P>
<P id=PARA37 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA38 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">In light of our discussions with Staff, as well as their comments and views, we have reconsidered the identification of our operating segments, our reporting units and our reportable segments. Beginning with our Annual Report on Form 10-K for the year ended December 31, 2014, we have presented&nbsp;reportable segment information in the notes to the financial statements for our Domestic, Import and Luxury dealerships. As a result, we also have provided commentary in the Business section of Item 1 and in Management&#8217;s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 that corresponds to reportable segments of Domestic, Import and Luxury.</FONT></P></TD></TR></TABLE>
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<P id=PARA136 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Securities and Exchange Commission </FONT></P>
<P id=PARA137 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">March 5, 2015 </FONT></P>
<P id=PARA138 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Page &nbsp;2</FONT></P>
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<TD style="WIDTH: 96%; VERTICAL-ALIGN: top" colSpan=5><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">We have concluded that each of our individual stores is an operating segment consistent with the definition in ASC 280-10-50-1 as each store location engages in business activities from which it earns revenues and incurs expenses (recognizing that shared benefits and costs are not allocated to the store location&#8217;s discrete financial results), its operating results are regularly reviewed by our Chief Operating Decision Maker (CODM) to make decisions about the allocation of resources and to assess performance and discrete financial information is available for each location.</FONT>
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<P id=PARA41 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA42 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Based on this conclusion, we performed our annual goodwill impairment test at the operating segment level for both 2013 and 2014 and determined that no impairment was indicated.</FONT></P>
<P id=PARA43 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA44 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">We believe that some level of aggregation pertaining to the operating segments (our current 130 individual store locations) is consistent with the objectives of Topic 280.&nbsp;Disclosing each operating segment as a separate reportable segment would not provide decision-useful information to users of the financial statements as it would be overly detailed and not add significantly to an investor&#8217;s understanding of Lithia.</FONT></P>
<P id=PARA45 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA46 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Consideration was given to the potential aggregation criteria that would be consistent with the objectives of Topic 280. Historically, we have provided geographic mix information and brand mix information to our investors through our press release, investor presentation and earnings release calls. Additionally, in the past few years we have focused on increasing diversification through geographic footprint and brand mix in our acquisition strategy. We also noted within the public auto retail peer group, a geographic or brand classification aggregation basis is utilized. As such, we further evaluated the aggregation criteria and economic similarities related to a geographic or brand classification aggregation basis.</FONT></P>
<P id=PARA47 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA48 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">In addition to being economically similar, aggregated operating segments must be similar with respect to all of the following aggregation criteria. We evaluated each of the criteria as it applied to both geographic and brand aggregation basis:</FONT></P>
<P id=PARA49 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA50 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 54pt; LINE-HEIGHT: 1.25; TEXT-INDENT: -36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The nature of the products and services.</FONT></P>
<P id=PARA51 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 54pt; LINE-HEIGHT: 1.25; TEXT-INDENT: -36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The nature of the production processes.</FONT></P>
<P id=PARA52 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 54pt; LINE-HEIGHT: 1.25; TEXT-INDENT: -36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The type or class of customer for their products and services.</FONT></P>
<P id=PARA53 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 54pt; LINE-HEIGHT: 1.25; TEXT-INDENT: -36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">4)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The methods used to distribute their products or provide their services</FONT></P>
<P id=PARA54 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 54pt; LINE-HEIGHT: 1.25; TEXT-INDENT: -36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The nature of the regulatory environment, for example, banking, insurance, or public utilities.</FONT></P>
<P id=PARA55 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 18pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA56 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">In order to assess whether aggregation of operating segments is appropriate,&nbsp;we first considered whether the dealerships have similar long-term economic characteristics. We evaluated the average gross margins on a company wide basis by dealership and noted a range of 10% to 23.7%, with an average of 15.3% and median of 15.1%.&nbsp;The vast majority of the stores are within 5 basis points of the average gross margin. Additionally, we looked at other classifications (i.e geography, manufacturer, and class) to see if there were other reasonable economic similarities and all seemed to mirror the company as a whole and other individual dealerships. </FONT></P>
<P id=PARA57 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA58 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">As we were unable to see any widely different gross margins across geography, manufacturer, or class, we determined to further evaluate the aggregation criteria for each of the areas noted in ASC 280-10-50 paragraph 11.</FONT></P>
<P id=PARA59 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA60 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">In addition to the analysis over average gross margin, we believe all five aggregation criteria are similar when evaluating a geographic aggregation basis, and that four of the five aggregation criteria are similar when evaluating across a brand aggregation basis. Based on our analysis, class of customer is dissimilar when evaluating across brands, as discussed further below.</FONT></P></TD></TR></TABLE>
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<P id=PARA136 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Securities and Exchange Commission </FONT></P>
<P id=PARA137 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">March 5, 2015 </FONT></P>
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<P id=PARA30 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">When analyzing store performance and the customer demographics within each individual store, we find that there are economic differences within subsets of the operating segments. For example, the customer experience around a Luxury store visit expectation when compared to a volume Import brand is different. Our Luxury stores focus on high-income customers (as evidenced by average selling prices approaching $50,000), compared to the Import stores where the average price is approximately 50% of the average selling price of a Luxury vehicle. We believe that the customers for Luxury brands, Import brands and Domestic brands have differing demographic profiles although they still contain a mix of customers as evidenced by the overlapping high and low average selling prices of the three categories. </FONT></P></TD></TR></TABLE>&nbsp;
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<P id=PARA143 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt">Avg. Sale Price (11-14)</P></TD>
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<P id=PARA144 style="MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center; MARGIN-TOP: 0pt">&nbsp;Domestic</P></TD>
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<P id=PARA145 style="MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center; MARGIN-TOP: 0pt">&nbsp;Import</P></TD>
<TD style="BORDER-TOP: #000000 1px solid; BORDER-RIGHT: #000000 1px solid; WIDTH: 25%; BORDER-BOTTOM: #000000 1px solid">
<P id=PARA146 style="MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center; MARGIN-TOP: 0pt">&nbsp;Luxury</P></TD></TR>
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<P id=PARA147 style="MARGIN-BOTTOM: 0px; MARGIN-TOP: 0px">High</P></TD>
<TD style="WIDTH: 25%; BORDER-BOTTOM: #000000 1px solid">
<P id=PARA148 style="MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center; MARGIN-TOP: 0pt">&nbsp;$51,661</P></TD>
<TD style="BORDER-RIGHT: #000000 1px solid; WIDTH: 25%; BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid">
<P id=PARA149 style="MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center; MARGIN-TOP: 0pt">&nbsp;$33,531</P></TD>
<TD style="BORDER-RIGHT: #000000 1px solid; WIDTH: 25%; BORDER-BOTTOM: #000000 1px solid">
<P id=PARA150 style="MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center; MARGIN-TOP: 0pt">&nbsp;$94,323</P></TD></TR>
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<P id=PARA151 style="MARGIN-BOTTOM: 0px; MARGIN-TOP: 0px">Average</P></TD>
<TD style="WIDTH: 25%; BORDER-BOTTOM: #000000 1px solid">
<P id=PARA152 style="MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center; MARGIN-TOP: 0pt">&nbsp;$35,404</P></TD>
<TD style="BORDER-RIGHT: #000000 1px solid; WIDTH: 25%; BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid">
<P id=PARA153 style="MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center; MARGIN-TOP: 0pt">&nbsp;$26,304</P></TD>
<TD style="BORDER-RIGHT: #000000 1px solid; WIDTH: 25%; BORDER-BOTTOM: #000000 1px solid">
<P id=PARA154 style="MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center; MARGIN-TOP: 0pt">&nbsp;$54,362</P></TD></TR>
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<P id=PARA155 style="MARGIN-BOTTOM: 0px; MARGIN-TOP: 0px">Low</P></TD>
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<P id=PARA156 style="MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center; MARGIN-TOP: 0pt">&nbsp;$22,680</P></TD>
<TD style="BORDER-RIGHT: #000000 1px solid; WIDTH: 25%; BORDER-BOTTOM: #000000 1px solid; BORDER-LEFT: #000000 1px solid">
<P id=PARA157 style="MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center; MARGIN-TOP: 0pt">&nbsp;$18,793</P></TD>
<TD style="BORDER-RIGHT: #000000 1px solid; WIDTH: 25%; BORDER-BOTTOM: #000000 1px solid">
<P id=PARA158 style="MARGIN-BOTTOM: 0pt; TEXT-ALIGN: center; MARGIN-TOP: 0pt">&nbsp;$38,171</P></TD></TR></TABLE>
<P id=PARA142 style="MARGIN: 0pt; LINE-HEIGHT: 1.25">&nbsp;</P>
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<P id=PARA85 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Note: The average selling price for Luxury at the low end excludes Mini ($30,190), Sprinter ($43,856) and SmartCar ($16,975) due to their niche focus and limited volumes.</FONT></P>
<P id=PARA86 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA87 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Further, these customers respond differently to different economic stimuli and at different times. For example, Luxury buyers may be motivated to act by changes to bonus depreciation rules for tax purposes or the distribution of bonuses from an employer. Further, they may not be as sensitive to changes in interest rates (high proportion of leased vehicles) or gas prices (higher discretionary income).</FONT></P>
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<P id=PARA89 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Domestic customers in our markets tend to be more dependent on their vehicles for lifestyle or employment reasons. Pickup trucks, vehicles with the ability to tow and off road capability are typically more important within these stores. As a result, the vehicles tend to be more expensive, have a higher monthly payment burden, and introduce sensitivity to economic trends based on customer employment base (e.g. agriculture, construction, forestry) and fuel prices. During periods of rising fuel costs, exposure to domestic stores is negative as their product offerings tend to be less fuel efficient.</FONT></P>
<P id=PARA90 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA91 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Import customers typically are looking for more basic transportation due to no specific requirement of capabilities within their vehicle. As these customers tend to be more &#8216;commuter&#8217; based, the exposure to import brands in a rising fuel cost environment is favorable. Also, there is a more robust offering of hybrid and alternative fuel vehicles than within domestic stores. As such, this factor may continue to increase in importance given macroeconomic developments with the emergence of competitors like Tesla Motors.</FONT></P>
<P id=PARA92 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA93 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">We believe the most appropriate aggregation of the operating segments would be Domestic, Import and Luxury. Based on the analysis of the aggregation criteria, there are qualitative factors that indicate the type or class of customers varies based on a brand aggregation</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">.</FONT></P>
<P id=PARA94 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA95 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">We have applied the aggregation criteria to our operating segments pursuant to ASC 280-10-50-11 through 50-14 and concluded that our reportable segments are Domestic, Import and Luxury. We believe these groupings are consistent with the objectives and basic principles of ASC 280, that the groupings represent operations that have similar economic characteristics, and the groupings are similar in each of the other identified criteria. Further, the presentation of these reportable segments will also satisfy the quantitative tests in ASC 280-10-50-12 through 14. Based on this conclusion, Lithia presented Domestic, Import and Luxury segments in its Annual Report on Form 10-K for the year ended December 31, 2014.</FONT></P></TD></TR></TABLE>
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<P id=PARA136 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Securities and Exchange Commission </FONT></P>
<P id=PARA137 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">March 5, 2015 </FONT></P>
<P id=PARA138 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Page&nbsp;&nbsp;4</FONT>
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<P id=PARA101 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 27pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 18pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Lithia believes the responses provided above address the staff&#39;s comments, and further acknowledges that: </FONT></P>
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<P id=PARA112 style="MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left; MARGIN-TOP: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Staff comments or changes to disclosure in response to comments do not foreclose the Commission from taking any action with respect to the Filing; and</FONT></P></TD></TR></TABLE>
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<P id=PARA117 style="MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left; MARGIN-TOP: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Lithia may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.</FONT></P></TD></TR></TABLE>
<P id=PARA119 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA118 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 27pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 18pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Please direct your questions or comments to me at (541) 618-5748. </FONT></P>
<P id=PARA120 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 58.3%; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA121 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 58.3%; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Very truly yours,</FONT></P>
<P id=PARA122 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 58.3%; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA123 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 58.3%; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Lithia Motors, Inc.</FONT></P>
<P id=PARA124 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 58.3%; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
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<P id=PARA126 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 58.3%; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">/s/ John F. North III</FONT></P>
<P id=PARA127 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 58.3%; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">John F. North III</FONT></P>
<P id=PARA128 style="TEXT-ALIGN: left; MARGIN: 0pt 0pt 0pt 58.3%; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Vice President, Finance and Chief Accounting Officer (Principal Accounting Officer)</FONT></P>
<P id=PARA129 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA130 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">cc:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;Bryan B. DeBoer, President and Chief Executive Officer</FONT></P>
<P id=PARA131 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Chris S. Holzshu, Senior Vice President and Chief Financial Officer</FONT></P>
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