SecProbe.io

CORRESP
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corresp

July 25, 2005

Michael Moran, Esq.

Branch Chief

Securities and Exchange Commission

Washington, D.C. 20549

    Re:

    UnitedAuto Group, Inc.

File No. 1-12297

Form 10-K for the year ended December 31, 2004

Dear Mr. Moran:

Following is a response to each of the comments raised in your July 5, 2005 letter to James
Davidson, Chief Financial Officer of United Auto Group, Inc. (the “Company”). For ease of review we
have reproduced your original comments.

    1.

    We note your response to comment four of our letter dated May 20, 2005. Explain to us
how you are determining and measuring the fair values of the warrants each reporting
period. Please be detailed in your response. Furthermore, explain to us where you are
recording the fair value of the warrants in your consolidated balance sheets. Based on
your results of operations discussion, it appears you are recognizing the value of these
warrants as a finance and insurance activity. Please explain your reasoning for income
statement classification in revenue as opposed to other income. We may have further
comment.

    The Company measures the fair value of the warrants earned in each reporting period at each
reporting date as if the warrants vested on that date. As such, the fair value of the
warrants is determined each reporting period based on the market value of the underlying
Sirius Satellite Radio common stock to be issued upon the exercise of the warrants. The
fair value of all warrants earned and recognized in the Company’s balance sheet is based
upon the closing price of Sirius’s common stock as quoted on NASDAQ on the balance sheet
date or the most recent trading day preceding the balance sheet date. The Company has
determined that this method should yield a value that is consistent with the estimate of a
valuation model such as Black-Scholes due to the immediate vesting provisions of the
warrants and the Company’s intent to convert and liquidate the securities on the first
available date. We have further considered our ability to liquidate our position and have
concluded that the average trading volume of Sirius’s common stock is sufficient such that
we can liquidate our position at market value on the first available date. The fair value
of the warrants is recorded in other current assets in the Company’s balance sheet.

    The Company has recorded the recognition of the value of the warrants as finance and
insurance revenues because the warrants represent value for services provided in connection
with the installation, sale and promotion of an aftermarket automotive product.

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    2.

    We note your response to comment 12 of our letter date May 20, 2005. Quantify for us the
amount of the restatement. In this regard, we assume the goodwill restatement was
immaterial and there were no impairment issues. If this is not the case, please explain.
Finally, explain how you account for cumulative translation adjustment upon classification
of foreign dealerships as held for sale.

    The restatement of the January 1, 2004 balance in footnote 1 on page F-14 was $3.9 million of the
originally reported $993.3 million of goodwill,
which represents the value of the goodwill ascribed to the businesses treated as
discontinued operations. The Company did not incur any impairment losses relating to this
goodwill. The cumulative translation adjustment related to foreign assets classified as
held for sale is reported as a component of accumulated other comprehensive income (loss) in
the Company’s balance sheet. Upon the sale of foreign assets, cumulative translation
adjustment relating to the net assets being sold will be removed from accumulated other
comprehensive income (loss) and reported as part of the gain or loss on sale in accordance
with paragraph 14 of SFAS No. 52. As of December 31, 2004, the Company had not disposed of
any significant foreign assets.

    3.

    Please expand your response to comment 13 of our letter dated May 20, 2005. In this
regard, tell us the nature of your representation on the boards of directors including the
total number of board members and the number of representatives for your company on the
boards for each investment. Also, tell us the nature and extent of your participation in
management and policy-making decisions. Further, you state that the balance of ownership
in all cases is with an individual or closely held group that exercises significant
influence or control. Clarify how those parties representation on the boards of directors
and participation in management and policy-making decisions is distinct from yours such
that you do not have controlling financial interests in these entities.

    Following is a summary of the board representation at each of the investments we account for
using the equity method:

    No. of

    No. of

    UAG

    Board

    UAG Board

    Voting

    Members

    Members

    Interest

    Munich,
Germany *

    2

    1

    50.00
    %

Frankfurt,
Germany *

    3

    1

    50.00
    %

    Mexico

    4

    1

    48.70
    %

    Mexico

    4

    1

    45.00
    %

    Tulsa
*

    2

    1

    50.00
    %

    *

    As to each entity, the Company and the partner each have the right to appoint
one board representative and the additional representative is to be appointed jointly.
As to Munich and Tulsa, the mutually appointed directorship was vacant at December 31,
2004.

    In each of these ventures, the Company’s participation at the board level is to exercise
joint decision making authority as it relates to policy making decisions and significant
corporate events (e.g., acquisitions, asset sales, capital structure, etc...). The Company
does not have the unilateral ability to approve significant events or policy making
decisions; these activities may only be undertaken with the mutual consent of our partners.
Moreover, the joint venture partner manages the day to day operation of the business at each
of the German and Mexican dealerships. In Tulsa, the President and CFO are appointed by
mutual consent. Each of these partners is an experienced automotive retail operator that is
familiar with local laws, regulations and the general retail environment. Further, other
than in Mexico where the operations were open points awarded by the manufacturer, we
acquired our ownership interest in the joint venture from our partner. As a result, the
Company does not have a controlling financial interest in these entities as contemplated in ARB No. 51, and has
therefore concluded that the equity method is appropriate based upon APB No. 18, as amended.

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    4.

    We note your response to comment 16 of our letter dated May 20, 2005. Explain if these
acquisitions were taxable or nontaxable transactions. Quantify for us the amount of tax
deductible goodwill. Also, please explain to us if any recorded tax goodwill exceeds the
recorded amount of goodwill for financial reporting purposes. If applicable, please
provide to us the calculations prescribed under paragraphs 262 and 263 of SFAS No. 109.
Supplement your response with examples that led to the recording of the deferred tax
liabilities associated with your deductible goodwill.

    Over time, the Company has completed a number of taxable and non-taxable acquisitions. The
amount of tax deductible goodwill arising in connection with taxable transactions as of
December 31, 2004 was $624.4 million. In each taxable transaction, the goodwill recorded
for financial reporting purposes equaled or exceeded the goodwill recorded for tax purposes.
The only deferred tax liabilities associated with our deductible goodwill relate to
temporary differences arising in connection with the amortization of goodwill on our tax
returns that is in excess of the amortization recorded for financial reporting purposes. As
a result, we have not prepared the calculations prescribed under paragraphs 262 and 263 of
SFAS No. 109.

    5.

    We note your response to comment 24 of our letter dated May 20, 2005. Provide to us
your analysis with respect to your operating segments. In this regard, we noted that you
sell new and used cars, you have significant international operations, you have a service
and parts operation, and you have a finance and insurance operation. If possible, please
supplement your response by providing us with examples of internal reports that your
management uses to assess the performance of your business such as budgets, flash reports
and internal financial statements. See paragraph 10 of SFAS No. 131. We may have further
comment.

    The Company manages its dealerships, which it considers to be components of an operating
segment, as a single business. Each department within the dealerships, including vehicle
sales, finance and insurance product sales and service and parts, is run as an integral
element of the whole. Further, the Company’s chief decision maker, which the Company has
determined to be its Chief Executive Officer, does not review the individual departments of
the dealerships when assessing the performance of the business or when making decisions
about the allocation of resources, as required for such department to be considered an
operating segment in accordance with paragraph 10 of SFAS No. 131. The Company confirms that
it does not prepare or provide its chief decision maker with separate discrete consolidated
financial information by department. In addition, the Company notes that it does not manage
its business by individual department, and that it allocates resources to benefit the
Company as a whole. This is supported by the fact that the Company does not have individual
managers that are responsible for the consolidated results of the various departments. As a
result, the departments of the dealerships do not meet the criteria for consideration as
operating segments as contemplated in paragraph 10 of SFAS No. 131.

    The Company believes it has appropriately disclosed the information relating to its
international operations required pursuant to SFAS No. 131 in footnote 15 on page F-28 of
the Company’s 2004 financial statements.

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    6.

    Prospectively, present separately the costs and expenses applicable to each category of
revenues you present on your consolidated statements of income. See Item 5-03 of
Regulation S-X.

    The Company will present separately the cost of sales applicable to each category of
revenues on the consolidated statements of income.

Sincerely,

    /s/ James R. Davidson

    Executive Vice President — Finance

Cc: Robert Kurnick

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