AutoNation's idea for used cars just didn't work
It was like taking candy from a baby. Americans were sick and tired of unresponsive, uncaring used-car dealers. Bring in some big-time, highly capitalized consolidators. They would show the stodgy, slow, in-bred, outmoded auto industry how to do things right and make a lot of money doing it.
Billionaire H. Wayne Huizenga and his team made two serious mistakes. They underestimated the difficulty of retailing automobiles, and they underestimated the traditional American car dealer, who was more resilient, competitive and flexible than many outsiders thought.
The proof came last week when AutoNation CEO Mike Jackson closed 23 AutoNation used-car superstores and folded the rest into new-car franchises.
The retail auto business is never dull. There are always new ideas and approaches. AutoNation was one of them.
It was spawned in 1995 as an answer to CarMax, the creation of appliance giant Circuit City Stores Inc.
AutoNation made a great splash, but it didn't sink the traditional purveyors of used vehicles. In 1997, AutoNation jumped into the new-car market and found its true home.
By the end of 1997, AutoNation had 111 new-car dealerships with 151 franchises. It was selling 300,000 new vehicles a year, and total revenue was $7 billion.
It didn't stop there. At the end of 1999 the figures were 290 dealerships, 395 franchises, 655,000 unit sales and revenue of $21 billion. It was the biggest dealership group in the United States.
AutoNation is publicly held, and it used its stock to finance dealership acquisitions. Its stock closed at $6.63 per share Aug. 4, down from its all-time high of $42.75 in January 1997, just before the dealership acquisitions began. Former owners of AutoNation outlets, especially those who sold early, may question the wisdom of their decision.
AutoNation is huge; it is successful now that it has shed its used-car albatross and is shaking up the world of auto retailing.
And that's what it set out to do.