For the first time in his long auto retail career, AutoNation Inc. CEO Mike Jackson says he is feeling no pressure to order vehicles from the factories.
The "production push" system of building and selling new vehicles is "definitely dead," Jackson told analysts last week as AutoNation discussed its third-quarter financial results. Jackson was responding to an analyst's concern that the industry might return to the bloated inventory levels of the past as the economy gradually recovers.
The federal cash-for-clunkers rebates helped shave AutoNation's inventory to a 47-day supply on Sept. 30, down from a 60-day supply a year earlier.
Jackson said AutoNation should be able to maintain healthy inventory levels because the recession and tight credit permanently altered the manufacturers' focus.
"There has been a transformational experience for every manufacturer," Jackson said.
"They're all about profitability, sustainability and viability. There is no pressure to buy more than we need -- and it's the real deal. I don't think it's a temporary situation and they're going to screw it up."
He thinks manufacturers will continue to keep production in line with demand to maintain healthy inventory levels.
"What we had in the past is unsustainable," Jackson said.
He expects a change in manufacturers' policies on sales incentives. Jackson said incentives likely will be smaller and more strategic.
"You're not going to see the massive incentives day in and day out," he said.
Other dealers agree with Jackson's assessment on vehicle inventory.
"With production reductions by most manufacturers, many dealers cannot get enough vehicles," said Michael Baker, executive vice president of the Baker Automotive Group in San Diego, which has seven dealerships.
Sid DeBoer, CEO of Lithia Motors Inc., said that since General Motors and Chrysler reorganized they want to move to a demand-driven model. Fiat, which owns Chrysler, maintains a lean 18-day supply of new vehicles, DeBoer said.
"It's a whole different view of running a company," he said.
Scott Smith, president of Sonic Automotive Inc., said both manufacturers and dealers are working at operating profitably with dramatically lower sales.
He said: "Everyone gets that we are all operating in a much smaller new-vehicle market than in the past."