AutoNation Inc. says it will drop regional brand names on its dealerships and use the AutoNation moniker on most of its 221 stores coast to coast.
The transformation begins Friday when the nation's largest dealership group sheds the Maroone name from 22 stores in south Florida and unveils new AutoNation signage.
The company will then roll the initiative across the country, eliminating another 14 local market brands -- such as Power in Los Angeles and Champion in Texas -- by June.
The switch to one brand has been 13 years in the making, said CEO Mike Jackson, who is betting the move will win over customers and create significant but unspecified savings. But to pull the trigger, AutoNation first needed to lay the foundation in large part by improving its customer experience and upgrading its store facilities.
"Now, 13 years later, we have a unique product, we have the operational foundation to deliver on that day in and day out, our facilities are first class across the enterprise," Jackson said in an interview. "So now we're ready to name the baby with the brand name AutoNation."
Profits rise
AutoNation unveiled the initiative today as it announced an increase in profits for the fourth quarter.
Net income jumped 20 percent to $83.2 million in the October-December period. For the full year, profit rose 12 percent to $316.4 million.
Quarterly revenue increased 13 percent to $4.2 billion. Full-year revenue rose 13 percent to $15.7 billion. Gross profits were up in all major operating categories -- new vehicles, used vehicles, parts and service and finance and insurance -- for both the quarter and year.
AutoNation shares bounced higher on the news, rising 8.4 percent to close at $48.50 for the day.
Plan deferred
When Jackson arrived as CEO of AutoNation in late 1999, the young company was planning a national brand rollout, even making plans to show a commercial in the 2000 Super Bowl. Jackson scrapped the effort, saying the then-struggling retailer needed to get its house in order. He questioned the benefit of a national brand for auto dealerships.
Even now, Jackson says the new branding campaign is not national in scope. With stores in 15 of the 50 states, AutoNation doesn't have a national footprint and doesn't intend to build one, he said.
But after such efforts as investing $3.7 billion in dealership facilities in recent years and consolidating store accounting functions to a center in Dallas, executives were ready to look at the idea of a single brand again.
The catalyst for saying yes this time was a $50 million bet AutoNation is making during the next three years on digital efforts. The investment includes new dealership Web sites and a so-called digital storefront through which customers are envisioned to speed transaction time and better control their shopping experiences.
"When we looked at that bet and analyzed it, we came to the conclusion that the payoff on the bet would be exponentially stronger if we did it with one brand name rather than 15," Jackson said.
Ultimately, 160 of the company's 221 dealerships, representing all of the company's mass-market brand stores and 82 percent of its retail volume, will convert to the AutoNation name. The retailer's luxury-brand stores will not adopt the AutoNation brand. They will continue to use their current names reflecting vehicle brand and location. Those luxury stores haven't been using the regional brand names like Maroone, executives said.
Spreading the word
AutoNation is planning a roughly 10 percent boost in advertising spending during the next four months to tell customers about the change. The total incremental advertising spend is $18 million during the first half of 2013. The campaign will include television, radio, print, direct mail and online advertising, plus point-of-sale or store-level promotional materials.
Before AutoNation could follow through on its one-brand idea, automakers had to sign off. Many objected to the idea when AutoNation proposed a national brand in the late 1990s.
This time around, manufacturers of the mass-market brands in AutoNation's plan gave complete support to launching a unified brand, Jackson said.
"They set very high standards to get approval for that unification, and we have met and exceeded all those standards," he said. Jackson declined to give examples.
But AutoNation COO Michael Maroone said they were in three general categories: customer satisfaction, sales efficiency and facility image programs. In some cases, manufacturers sought higher standards than those already spelled out in the framework agreements between AutoNation and them.
Maroone joined AutoNation in 1997 when the company, then called Republic Industries, acquired his family's Maroone Automotive Group. AutoNation later extended the Maroone name to its other south Florida stores.
When the Maroone signs come down on Friday, it will mark the end of 58 years of the name on dealerships.
Toyota's OK
Bob Carter, senior vice president of automotive operations for Toyota Motor Sales U.S.A. Inc., gave his OK after meetings last summer. He said AutoNation generates a lot of new-vehicle sales at its 23 Toyota stores and does a great job of representing the brand.
It's a different relationship than the last time AutoNation pushed a unified brand strategy.
"There was caution in the industry at the time," Carter said in reference to AutoNation's plan in the late 1990s. "But quite frankly now that we have experience with each other, there's mutual trust on both sides."
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