AutoNation CEO Knows The Party Won't Last, But Doesn't Want To Hurry To The End

Aaron Cole
by Aaron Cole

The CEO of the largest car dealer in the U.S. told Reuters on Wednesday that automakers shouldn’t base incentives on volume, which could jeopardize cutting profits.

“We really have to watch the quality of volume,” AutoNation CEO Mike Jackson told Reuters. “We have to find the right balance between price and volume.”

Jackson said he doesn’t anticipate auto sales to waver far from 2015’s record year, but he does foresee “entering a new chapter” with weaker demand for cars.

Jackson specifically warned of a repeat post-2000 until 2005, when auto sales were essentially flat, but earnings deteriorated.

“You’ll hear a lot of happy talk from everybody else in the industry,” Jackson told CNBC. “(But) I’m saying we’re in a new chapter here.”

Jackson said that December’s 9-percent sales spike was an anomaly — we had one more weekend in December than normal — and that December 2015 was relatively flat compared with the year previous.

Bigger pressure to move metal means deeper discounts, he added. AutoNation shaved an additional $250-$300 off each car.

“I’m looking at significantly higher inventories; higher incentives from the manufacturers; and bigger discounts from us, the retailer,” he told CNBC.

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  • Buickman Buickman on Jan 06, 2016

    he's right. the incentives are so whacked it's unbelievable. unless you're on the front line, or extremely in touch like Mr Jackson, you have no idea how interfering and out of control the factory is.

    • See 4 previous
    • Danio3834 Danio3834 on Jan 06, 2016

      @Buickman "you wouldn’t believe the confusion! stair steps, private offers galore, vouchers, coupons…to dealers and customers." Yet a week or so ago there was a GM dealer on these very pages insisting that GM doesn't grease the dealers individually to move the metal...

  • Big Al from Oz Big Al from Oz on Jan 07, 2016

    This article is actually more significant than the number of "hits" it has received. I do believe the current sales rate of vehicles has peaked. The numbers moved in 2015 though high are not really outstanding considering the current numbers have eclipsed the 2001 numbers. What was the population of the US then? 288 million. Now there are 322 million, so the 2001 figure of 17.1 million vehicles sold should equate to around 19 million to equal the 2001 sales success. There also is a huge difference between now and then which has boosted car sales. Low interest rates, leasing has become more prominent, etc. When the sales start to dip, there will also be a huge influx of near new vehicles that have run out of lease hitting the market. This will force the value of used vehicles down along with the downward pressure of the manufacturers reducing prices to move as much metal as possible. I do foresee the next downturn as rather large. The next downturn will force the rationalisation that should of occurred during the GFC, that is the weaker companies will be forced to find new partners and more product sharing than we currently have. So, the survivors will be these manufacturers that have rationalised. This sort of reminds me of the Energy Crisis of the 70s. The most successful vehicle manufacturers back then actually produced global vehicles, ie, Japanese and Europeans. The US and it's Big 2 built many regional vehicles, unlike the Japanese and Europeans. (Ford and GM, as Chrysler really only had Valiant/Chrysler in Australia and Simca in France). This up and coming "cleanout" will allow the new Chinese auto industry some breathing space to improve it's vehicle export market. The Chinese will sell the cheapest EVs, appliance cars and CUVs and light commercials. I'm not saying they will invade, but their presence will be felt.

  • Frantz Frantz on Jan 07, 2016

    And different states with different advertising laws don't help either. I'm in south central PA where we advertise the destination as part of all online pricing. South of us in MD and VA they often don't, meaning all their cars are "cheaper". Heck, I'd drive an hour to save $1200 bucks. Then you get there and find it charged back and just assume all folks do the same and "you get better deals out of state" gets passed around at the water cooler. That's not to mention doc fee laws, interest rate mark up laws, prep fees. I don't blame dealers who do it, because they have to compete with the guy down the street, but it sucks for us in states that border states with a little less truth in advertising. $1000 pin strips (added to "original price" and then discounted in the sale price). And to be competitive online you almost have to add the rebates that only 20% of folks qualify for. Talk about setting up a negative situation when folks finally sit down to try and work out what you want to be a honest good deal and still fill your cars fuel, pay your bills, and go out once in a while -Ford Sales