The View From The Dealer Floor

September 23, 2009

Major automakers don’t sell cars to American consumers; they sell to dealers. And the biggest U.S. dealership chain by a wide margin is Fort Lauderdale, Florida-based AutoNation, which sold over 440,000 new and used vehicles last year.

So when AutoNation CEO Mike Jackson talks, auto executives listen — or so you would think.

In an interview with Reuters2ndautonationmikejacksonsep20082, Jackson said Detroit automakers had largely ignored his warnings over the past decade that the U.S. industry was headed for a crisis.

“I think I was usually able to reach an intellectual agreement on where the industry was headed. Where we disagreed was how much time we had to get there. On that, even I was wrong. Time was up,” Jackson said.
Jackson thinks GM and Chrysler can be fixed. But he also thinks Washington should let either or both fail if their current turnaround effort backed by $60 billion in taxpayer funds falters.
Here are excerpts from the interview and Jackson’s view of where GM, Chrysler, Ford and their rivals stand now in the marketplace:

Q: Are GM and Chrysler capable of change?

A:I think they had a near-death experience. When you really get down to the point where we either get this done or we won’t exist anymore, then it happens. …My sense is that absolutely Sergio (Marchionne) is providing leadership at Chrysler and (Fritz) Henderson at GM. It’s under way, and it’s going to happen.
Q: You’re looking to buy Ford and GM dealerships. Why is that?

A: We always bet on the biggest, broadest brands. Now we’ll take a look if the pricing and the opportunities are right. We love Chevy and we love Ford. Those are the brands that will succeed in the future. Those are the brands that are going to get the majority of the product and marketing dollars from those companies. They’re also the broadest brands. You can sell everything from Chevy from a Corvette to an Aveo. It’s unbelievable how well accepted and how approachable those brands are for the American consumer.

Q: Are you withholding judgment on Chrysler?
A: I think Chrysler has the biggest challenge of any of the companies that are out there. It’s been through the biggest turmoil for the longest time. It’s product pipeline is the most disrupted so let’s wait and see. But with Ford you can see that they’re clearly gaining momentum. The product development at GM was not nearly as disrupted as what happened at Chrysler, so they’re in good shape. Chrysler has the most difficulty, so we’ll take a wait-and-see there. Plus they don’t have an anchor volume brand like a Chevy or a Ford. They have a great brand in Jeep. There’s always a place for Jeep in the world. They have a good brand in Dodge but it can’t compare to a Chevy or a Ford. Then you have Chrysler, which is probably a head-scratcher of a brand. It’s a more complicated situation over there.
Q: Is the government’s role finished in supporting the U.S. auto sector?

A: The catastrophic economic crisis that hit its peak with the bankruptcy of Lehman Brothers, and I say this as a Republican,  was so massive and catastrophic, the only entity that had the size and scale and skill to step in and save the day was the U.S. government. It needed to do everything or we were looking at the next Great Depression and industries like automotive would have been swept away. So, they did it. You can criticize this and you can criticize that but they saved the day. Now they have to gradually unwind it and you need to look at the lessons learned so that we never again face a systemic collapse of the American economy and free enterprise. We were on the brink of that.


Q: But the government’s direct role is finished now?
A: I think so. Here’s my view: The economy is going to gradually improve and if one of  these companies — GM or Chrysler — falters, they’re going to let it go. At 10 million (unit sales) facing the Great Depression, we couldn’t handle one of these companies going down and the domino effect it would have on the entire industry. But if two years from now one of these companies is faltering and the economy has recovered and sales rates are up to 12 or 13 million, then they should face the consequences of that.
Q: Popular opinion would seem to agree with that.
A: Well, I agree from a business point of view. I think Chrysler and GM understand that. They know that this is their one shot and I think that’s understood by the boards and it’s understood by management. That’s why I’m so optimistic that change is going to happen.

(Writing and Reporting by Kevin Krolicki, Detroit Bureau Chief. Reuters photos by Rebecca Cook.)

One comment so far | RSS Comments RSS

Come on.

Gone are the days of planned obsolescence where you traded out before the cost of maintenance hit you. Not that long ago warranties for 3y/30k miles were replaced with 10/100. The paint doesn’t even chip anymore.

The secondary warranty market just exacerbates the ever increasing spread between when an auto is replaced for new.

People got used to 2 year leases but the days of $79 a month (1997) are over. Not that long ago a BWM was $400 a month, now it’s a Corolla and a 48 month lease -not that you can get approved for credit on either.

Face it, the market has changed and it’s due to more than a economic downturn.

Posted by Mark M | Report as abusive

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