FORT LAUDERDALE, Fla. -- Earlier this year, AutoNation CEO Mike Jackson put on hold his ambitious plans for acquisitions and renovations as he waited for the industry to stabilize and the price of dealerships to drop.
Now, with 13 million in annual U.S. light-vehicle sales in sight, Jackson is hitting the gas.
By the end of the first quarter, AutoNation plans to renovate or expand 24 stores -- nine renovations will cost more than $5 million each -- and open 11 new stores from the ground up, including seven Fiat stores. The company is taking advantage of dramatically lower dealership and real estate costs. Acquisitions are happening.
"We have a number of handshakes out there," Jackson told Automotive News last week. "We are very optimistic" about buying stores.
The big difference is store pricing. A year ago, Jackson told Automotive News that AutoNation was looking for acquisitions in 2010 above its $150 million in announced capital expenditures.
But pricing "only became realistic" in the past few months, Jackson said. He said the gap has narrowed between a seller's hopes for a price and what a buyer will pay.
Jackson wants to fulfill his commitment to have at least one of every brand in each of AutoNation's 25 major markets.
"You will start to see deals announced, not just by us but others, too," Jackson said. "We are very eager to talk because pricing is fair."
Others are also on the prowl. Public and private groups, including some new players, are getting ready to do deals.
Mark Johnson, president of MD Johnson Inc., a dealership buy-sell advisory firm in Seattle, said his company has "several $20 million-plus transactions under way."
"Once you factor in what a store should be making today and divide that by the asking price, there are some great buys to be made," Johnson wrote in an e-mail.
"It is in the smaller-market stores where financing is harder to obtain that we see little acquisition competition."
In its most recent quarter, AutoNation reported a $120.9 million operating profit, up 2.5 percent from the third quarter of 2009. Third-quarter revenues increased 13 percent to $3.3 billion.
AutoNation is devoting $130 million of its $150 million in capital expenditures over the next 18 months to showroom improvements. Executives have said the retailer is committed to increasing its budget for capital expenditures in 2011.
Dramatically lower facility costs are making AutoNation's renovations and new stores a bargain by 2008 standards, company executives said.
Jeff Shupert, vice president of real estate services, said prices for dealerships have dropped 20 percent from 2008, and construction costs have plummeted 30 percent.
In 2008, AutoNation budgeted $11.4 million to renovate and expand by 6,000 square feet an Audi store in Westmont, Ill. The recently completed job came in at just $8 million.
On the construction of a new Audi store in Peoria, Ill., AutoNation's cost was $4.8 million, compared with the budgeted cost of $8.4 million in 2008.
"We are seeing real savings in the construction side," Shupert said. "That part of the business has allowed us to expand our existing dealerships substantially."
AutoNation will complete the process of improving most of its 209 stores, especially its lowest-rated -- or "C" level -- stores.
The company is finishing 12 Mercedes renovations and is in the middle of a multiyear Toyota expansion in 15 of its 18 Toyota stores.
AutoNation also recently completed a round of extensive renovations on most of its luxury dealerships and now will focus on Detroit 3 stores.
"Our goal is to upgrade all of our 'C' stores," said AutoNation COO Michael Maroone. "The goal is to have all 'A' stores."