• Goldman analyst cites U.S. exposure as retailer’s big risk
  • Steepest drop in three months outpaces broad stock sell-off

AutoNation Inc. sank the most in three months after a Goldman Sachs analyst said the Takata Corp. air-bag recall would have a bigger effect on the largest U.S. new-vehicle retailer than on most of its competitors.

The shares fell 5.4 percent to $47.63 at the close in New York, the steepest drop since March 8. The stock’s decline outpaced a 0.9 percent sell-off in the Standard & Poor’s 500 Index as waning consumer sentiment and a looming U.K vote spurred investor caution.

AutoNation’s dependence on the U.S. market makes it particularly susceptible to the scope of Takata’s recall, Goldman analyst Patrick Archambault wrote in a research note Friday. He estimated that by the end of the second quarter, the company may end up doubling the used inventory that it’s unable to sell because of the recall, reducing full-year earnings per share by 6 cents. Archambault rates the stock a sell.

AutoNation was the first public dealer to not sell any new or used vehicles with an open safety recall, according to his note. While the company broadened the policy to allow open-recall vehicles to be sold through its wholesale channel if the recall is disclosed, “we think this may not be an attractive thing to do in large quantities as we expect the pricing to be poor for these vehicles that are more difficult to retail,” Archambault wrote.

Goldman cited Sonic Automotive Inc. as the auto retailer affected most by the air-bag recall, because of its large position in used vehicles and “already high” inventory of recalled vehicles. Sonic fell 1.3 percent Friday after dropping as much as 4 percent.

The Takata recall now affects one out of every five cars on the road in the U.S., and has resulted in 13 known deaths worldwide. It may take at least three years for Takata and other manufacturers to make enough air bags to replace the company’s defective ones.

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