The restructuring of the U.S. auto industry should include a new standard for inventory levels, the CEO of the top U.S. dealership group said today.
AutoNation Inc. CEO Mike Jackson said he thinks automakers should maintain a 30-day supply of inventory, half of the 60 days' worth recommended by analysts.
“It has been the mantra for 50 years,” Jackson said today in an address at Nova Southeastern University in Fort Lauderdale, Fla. “What other business accepts the same benchmark for 50, 60 years and says, ‘That's fine.'”
U.S. inventory levels began October at a 53-day supply, after rising to twice the recommended level early this year and then plunging to 30 days' worth at the end of August, after the cash-for-clunkers program had ended.
Jackson advocated more just-in-time delivery linked to demand, like the parts delivery automakers often insist on for their plants.
“As soon as you put the parts together in a vehicle, nobody cares if it sits there for 90 days. And how you can get those ideas together in the same head is beyond me,” he said.
Jackson joined General Motors Co. CEO Fritz Henderson in explaining the dealers' and automakers' restructuring to adjust to sales levels that plummeted to 27-year lows this year. The executives addressed students at the university's H. Wayne Huizenga School of Business and Entrepreneurship, named for AutoNation's founder.
Jackson said GM's announcement in advance of its 39-day bankruptcy that it didn't plan to renew about 1,380 of its dealerships' franchise agreements was the most risky political step the company took. GM is hoping to have 3,600 to 3,800 stores by next year, down from about 6,000.
“It had to be taken if they were really going to restructure,” Jackson said. “As painful as it was, they did an absolutely totally professional job deciding who could stay and who would go.”
AutoNation said six of its dealerships were part of GM's initial notifications about not renewing franchise agreements. Those six stores represent 0 percent of AutoNation's 2008 operating income, the company said at the time.
Jackson has said he would buy Ford or Chevrolet dealerships now that the industry has adjusted from a business model of pushing out more vehicles and selling them through incentives to one driven by demand.
At the Nova Southeastern event, Henderson said GM would be willing to approve AutoNation as a buyer for franchise rights.
AutoNation, of Fort Lauderdale, ranks No. 1 on Automotive News' list of the top 125 dealer groups in the United States. It has 207 locations and sold 255,843 new retail units in 2008.