AutoNation CEO: Bullish on '12 but wary of fiscal cliff
Jackson warns politics could hurt 4th-quarter sales
 | Mike Jackson, AutoNation CEO: "This has the potential, with the combination of the fiscal cliff, of becoming an all-consuming event." |
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AutoNation Inc. CEO Mike Jackson generally is bullish on the rest of 2012.
But throw in a presidential election in November and the federal government's automatic spending cuts and expiration of Bush-era tax breaks on Jan. 1, and it could all go haywire.
"This has the potential, with the combination of the fiscal cliff, of becoming an all-consuming event," Jackson said in an interview last week. "So there's some risk around that."
Jackson remembers when business slowed in late 2000 as the disputed Bush-Gore presidential contest went to the U.S. Supreme Court.
And although political uncertainties again could threaten auto sales in the fourth quarter this year, Jackson is sticking with his forecast of U.S. new-vehicle sales in the mid-14-million-unit range for 2012.
Eventually, annual U.S. new-vehicle sales will return to more than 16 million, Jackson said, but he isn't predicting a specific year.
AutoNation last week reported second-quarter net income of $78.6 million, a 9 percent gain from the same period last year.
Though new-car margins slipped as supplies of Japanese-brand vehicles returned to normal levels, higher volume drove profit gains in AutoNation's new-vehicle, parts and service, and finance and insurance operations.
Although Japanese automakers have regained some share they lost in 2011 as they struggled with inventory shortages after the March 2011 earthquake and tsunami, the domestic-brand manufacturers, with their competitive new products, won't give it all back, Jackson said.
Going forward, Jackson expects the domestic-brand and Asian manufacturers to each control 44 to 45 points of share, with the European makers taking the rest.
That's roughly in line with the share breakdown through the first half of 2012.
The Detroit 3 had 45 percent, while the Asian manufacturers had nearly 46 percent, according to the Automotive News Data Center.
Stair-step incentive programs from the manufacturers continue to bedevil retailers and present consumers with a game of three-card monte to get the best price on a car purchase, Jackson said.
While stair-steps should end, the industry's overall level of incentive spending is under control, he said.
With production now aligned with demand, Jackson says manufacturers will avoid a price war.
The lessons learned during the industry collapse of 2008 and 2009 should be enough to keep manufacturers disciplined about their production and pricing.
"It was about as ugly as it gets," Jackson said. "Nobody wants to go back to that."
| Profit producer | ||
| New-car margins slid, but AutoNation's second-quarter profits jumped on volume gains. | ||
| % change | ||
| Net income | $78.6 million | 9% |
| Total revenue | $3.9 billion | 17% |
| Gross profit per new vehicle | $2,172 | –18% |
| Source: AutoNation Inc. | ||
You can reach Amy Wilson at awilson@crain.com.
