Top auto dealer `very optimistic' about Detroit

But AutoNation CEO Jackson derided overproduction in '04

June 04, 2005|By KNIGHT RIDDER/TRIBUNE

FORT LAUDERDALE, Fla. - As General Motors Corp. and Ford Motor Co.'s sales continue to fall, one might think the nation's biggest owner of GM and Ford dealerships would be anxiously plunking "For Sale" signs outside its Pontiac and Lincoln stores.

But that's not the case at AutoNation Inc., the nation's largest chain of auto dealerships.

"I'm very optimistic" about the Detroit automakers, Mike Jackson, Auto- Nation's chairman and chief executive officer, said yesterday in an interview at his Fort Lauderdale headquarters.

Despite the apparent troubles at GM and Ford, Jackson said, his company has no plans to sell off its heavy portfolio of domestic dealerships, and he doesn't have a counter-plan to buy up dealerships of Japanese or Korean autos to offset his often-criticized mix of brands either.

For the most part, Jackson likes what he has seen of GM and Ford's new models, and he said profits at AutoNation's big domestic dealerships in metro areas "are the equal of the Japanese stores - absolute equal."

AutoNation owns 352 franchises in 17 states, and nearly two-thirds of those sell traditional Detroit brands. It owns 90 GM, 69 Ford and 66 Chrysler Group dealerships. Its holdings include three Fox dealerships in the Baltimore area.

Jackson, though, challenges the conventional wisdom that views negatively retailers who sell more domestic vehicles.

He said his company is the most profitable publicly traded car dealership chain in the country by a long shot, despite its heavy reliance on domestic brands.

In fact, AutoNation is about twice as profitable as United Auto Group Inc., the nation's second-largest chain of auto dealerships, which is based in Bloomfield Hills, Mich., and is heavily invested in foreign brands.

With the profit margins on new cars under pressure nationwide, AutoNation works hard to achieve results like these. But the company's performance tells a story that seems important to hear in Detroit right now: Just because an automaker is struggling doesn't mean dealers are writhing along with it.

While GM posted a $1.1 billion loss in the first quarter, its dealers aren't doing badly.

"The vast majority of all GM dealers are ... profitable," Mark LaNeve, GM North America's vice president for vehicle sales, service and marketing, said at a recent media briefing.

As the nation's largest auto dealer, Jackson has a bully pulpit for being heard in the auto industry, and those who know him say he has earned it.

Starting as a mechanic in the 1970s, Jackson bought his own dealership with partners in 1979 and became the top marketing executive at Mercedes-Benz USA Inc. in 1990, a time when the luxury nameplate was struggling. In that role, he oversaw a renaissance for Mercedes that eventually earned him the top job at Mercedes in the United States. AutoNation recruited Jackson in 1999.

Art Spinella, president of CNW Marketing Research, an automotive research firm in Bandon, Ore., said Jackson is so important to Detroit automakers that they should be taking him to breakfast, lunch and dinner "until Jackson runs out of suggestions."

"Nobody wants to get on the bad side of AutoNation," he said.

The frank-speaking Jackson, whose company manages an inventory of about 80,000 new and 20,000 used vehicles on any given day, practically launched a PR campaign against automakers last year for building more vehicles than consumers wanted.

His criticism was particularly aimed at the domestic brands, which had more than 2 million vehicles sitting on dealer lots nationwide last fall.

Jackson complained to The Wall Street Journal, Automotive News and other publications that domestic automakers were causing inventory buildups at a time when interest rates were rising and cash-back rebates were losing their ability to draw in customers.

Politically, dealers are usually reluctant to criticize the manufacturers that supply the products they must sell. But Jackson said it was "an appropriate moment" for some tough talk.

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