Joining Carl Quintanilla and Becky Quick on the CNBC set in New York, Mike Jackson Chairman and CEO of AutoNation gave an extensive analysis and frank assessment of the new Chrysler reorganization plan to be undertaken by its new owner Fiat. This plan was unveiled to the U.S. auto industry yesterday.
Months ago, at Chrysler headquarters, Mr. Jackson met with Sergio Marshionne CEO of Fiat SpA and now head of Chrysler LLC, to discuss the future of the "new" Chrysler LLC, and to go over the plans that Fiat had developed for the struggling car company. This meeting was also to help AutoNation determine the "weight and balance" it would give the Fiat and Chrysler brands within the AutoNation Store dealer groups here in the United States.
Make Jackson and Mr. Marshionne talked extensively about the new product mixes and the new Chrysler business model, as well as the new U.S. auto industry model of "demand pull" and how it will affect the narional vehicle unit distribution model that is now coming to the forefront of the U.S. distribution system now that the "old style" production push model is dead.
Mr. Jackson is impressed with the plan as he saw it unfold yesterday and as it compared to the discussions he had with Mr. Marshionne several months ago and is convinced of Sergio Marshionne that "this is a remarkable man. If anybody can succeed in turning the Chrysler company around it will be Sergio."
Nevertheless the situation was and is still serious. Consequently, AutoNation was cautiously waiting to see the unveiling of this plan to determine if Fiat had included criteria AutoNation believed necessary to allow it to move forward with capital expansion plans; and to what extent the Fiat and Chrysler brands would be included in these plans. Yesterday, the Fiat SpA unveiled their plan for Chrysler LLC and Mike Jackson concluded that this plan, if executed properly, would succeed and positive results would be achieved.
Mike Jackson and AutoNation were using for the following criteria to evaluate the viability of the plan that was unveiled. They are as follows....
· A recognition of the seriousness of the situation ?
· Was Fiat willing to intervene dramatically and immediately with existing products and not wait years for new product development within the product chain ?
· Was Sergio Marshionne truly committed as well as Fiat as a whole ?
· Was the unveiled plan "realistic" and could it withstand some economic stresses going forward ?
After a careful review Mr. Jackson is convinced that this plan "will work" and that Chrysler LLC, under the Fiat umbrella, will survive as a viable car company and eventually flourish. " Their cash burn is over and their plan will work even if everything remains the same for now "...Mike Jackson went on to say. 'In September the company broke even; so, in my opinion they will make it with this plan just on the cost structure side alone. Ultimately they will need more revenue. But, the question that needed to be answered now was that; in the worst case scenerio; if any economic disruptions occur in the next year or two; will Chrysler survive? We believe now that it will.'
Mike Jackson’s opinion is that, if properly executed, the plan unveiled yesterday will allow Fiat and Chrysler to recreate the Chrysler and Dodge as profitable brands. This has been a significant development for AutoNation, as it had to determine whether to move forward to support the Fiat Dodge and Chrysler brands in its footprint within the United States. Now we can move forward positively. '
'The days of penny-pinching are over for Chrysler. The cash burn is over and they are now stabalized financially. Chrysler LLC has five billion in cash on hand with an additional two billion in a line of credit available to them. Nevertheless, AutoNation still views Chrysler as the riskiest situation we are currently facing. Consequently had committed to only about 3% of our portfolio to the Dodge and Chrysler brands in our existing stores. But now after what we heard yesterday, we will be increasing our positions in our existing stores and will be in an "acquisition mode" for future capital expansion as well ...Mike Jackson concluded we believe in this plan and are very supportive.
Fiat and Sergio Marshionne "know styling and brand marketing" and have been brilliant in their executions world wide. They clearly have a brand strategy for the existing Chrysler and Dodge lines. This plan will call for the splitting of Dodge between cars and trucks with the Ram being its own brand and Sergio is a master of brands. Mike Jackson goes on to say that Fiat will not walk away from Jeep. The U.S. consumer of the Jeep brand needs not to be concerned. Fiat clearly understands rugged the "body-on-frame" and solid axle advantages Jeep has in the industry.
As for AutoNation… "we get the Fiat 500 next year as a Fiat and are excited about this." The car is "adorable" and it will be an excellent first addition to our inventory …If AutoNation adds Fiat’s Alfa Romeo brand, this will be icing on the cake. But what needs to be remembered is the complement Fiat brings to Chrysler with its current car platforms, its diesel technologies, as well as other high tech engineering advancements the company has made over the last decade.
However, let us not believe for a minute that Fiat does not know that they are staring into the abyss. But, they are young and know what they are doing, and a leader like Sergio Marshionne at the helm they will have a high probability of succeeding. Nevertheless, this is a "make or break" situation for Dodge and Chrysler. It will be in the execution of this plan that will determine the success of these companies in the future.... "This is the final charge up the hill." and AutoNation will be supportive of Fiats efforts.
As to the current economic landscape under which Fiat will have to advance this plan; we are glad to admit that the U.S. auto task force did an amazing job of restructuring of the U.S. auto industry. Mike Jackson goes on to say...The structural excesses that were taken out last year has provided the U.S. with a new business model built around the consumer rather than the car manufacturers building excess inventory just to fill production capacity. As a result, the industry would then have to liquidate excess units through incentive plans that would deteriorate brands and residual unit values. This model was self destructive and unsustainable. Now we have improved cost structures with improved profitability and industry viability.
.......Consequently we are excited about our future relationship with Fiat as well as a new shared comitment with the Chrysler and Dodge brands going forward.
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This morning Mike Jackson Chairman and Chief Executive Officer and Mike Maroone President and Chief Operating Officer of AutoNation, the largest auto retailer in the United States, appeared on CNBC as well as Fox Business News to announce a stunning 36 cents per share earnings for the company’s operations for the most recent quarter of 2009. Analysts were expecting 35 cents a share.
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"This quarter was decidedly solid; " Mike Jackson explained to Becky Quick and Joe Kernan of CNBC. Mike Maroone appearing on Fox Business explained that even though revenue was down 13% and industry sales were down 11% ...there was a 44% increase of year over year earnings per share at AutoNation and we are excedingly optimistic about the future for the U.S. auto industry and particularly AutoNation as well.
Mike Maroone to Fox Business News stated that 'certainly 7 cents of these earnings was due to the greatly successful Cash for Clunkers program but in addition to this program, AutoNation was able to reduce inventory and improve year over year earninings over and above the earnigs gained by the program.'....' Reducing inventories allowed AutoNation reduce interest carrying costs and this was additionally helpful to the bottom line'.... Mike Maroone concluded.
Additionaly when asked, Mr. Maroone did indicate the AutoNation has been reinbursed by the government for the "Cash for Clunker" program rebates.
Both men agreed that the operating efficiency improvements that the company managed to implement for the past two years has allowed it to position itself for profitable stabilization of its operations this year and going forward into the forseeable future. Now the "risk profile for AutoNation has changed as a result of improving economic conditions and AutoNations ability to "weather the storm" of this most recent and catastrophic economic setback for the nation. Now, two acquisitions have been announced, and inventories of new product models will be positioned at the Dealer Groups to take advantage of the expected sales improvements as the economy heals. Inventories have been reduced from a 60 day to a 40 day supply.
Mike Jackson and Mike Maroone believe that the changes made by the U.S auto industry for a better rationalization of the auto industry model in the United States has positioned the industry for a significant recovery and AutoNation will experience a large part of this.
Mike Jackson sees the company at a significant pivot point. The production push model is solidly behind us and going forward we should inprovements in sales volumes and margins as we move into a cyclical growth period for the industry over the next five or six years. Mr. Jackson goes on to say that six months ago we would never have thought about the expansions that we are considering now: For example the company is strongly considering a 65% increase in "cap-ex" spending for 2010 and possibly a share buyback. There should be about 11 million in unit sales next year as the "Sword of Damocles" has been removed from over the industry. Consumer credit is improving and leasing programs are reviving.... We are extremely optimistic about the future.
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Mike Jackson on CNBC
Mike Maroone on Fox Business
In a coming together of US auto industry leaders for the advancement of higher education in U.S. "Business Management".....; Fritz Henderson CEO of General Motors and Mike Jackson Chairman and CEO of AutoNation joined the legendary entrepreneur and corporate leader - Mr. Wayne Huizenga - at the "Huizenga School of Business and Entrepreneurship" of Nova University located in South Florida to address the students and faculty in a "Town Hall" meeting..
"The Auto Industry - How we Got Here - Where we are Now - and Where are we Going".
"THE ROAD AHEAD"
Prior to their meeting with the assembly at the University, Fritz Henderson, Mr Jackson and Wayne Huizenga sat down with the journalistic staff of CNBC to be interviewed by their most seasoned journalists along with Mario Gabelli... famed Wall Street investor as to the progress that has been made in the U.S. economy as well as progress made in the strategic changes previously called for by industry leaders within the domestic auto industry and the changes expected in the global auto markets looking forward.
To begin, Fritz Henderson from General Motors believed we have "found the bottom" in the U.S economy recently and from the fourth quarter of this year into the year 2010, the auto industry should see the beginnings of acceptable but moderate growth. Responding to a question from Becky Quick :‘ asking if the industry scheduled milestones previously articulated by Washington, have yet to be completely accomplished. Mr. Henderson responded that the economic landscape and circumstances within the industry, as result of the "Cash for Clunkers program, had changed. For exanple, some General Motors plants brought back workers to meet the increased demand for fuel-efficient automobiles and slowed some lay-offs in other plants. GM is still confident that the plan to streamline all operations will continue.
On a different note, Mr. Henderson, in responding to a question about the sale of Saturn to the Penske Auto Group, said that GM was 'disappointed' in that the Saturn deal "fell through". GM did work hard in its commitment to being able to forge an agreement with Roger Penske but "in the long run it was the problem in that Roger’s long term 'source of product' fell through; and we couldn’t proceed on that basis" .....Now General Motors will and must move on. - Fritz Henderson concluded.
As to foreign markets, for example; General Motor's role as a supplier of cars and trucks within China....Mr. Henderson was quite optimistic.....'China is very important to the GM management in that 11 million units will be sold this year in the country. And just last month the equivalent SAR (annual unit sales rate for cars sold) in China was 16 million units..... The growth rate in China will be tremendous and GM expects to be a significant contributor to the vehicle sales within the country this year and well into the future.
On the other hand...when asked about Japan, Fritz Henderson saw little promise for any exposure by GM within that market as the Japanese domestic customer base and unit sales have been declining year over year for a long period of time. GM will not be in the Japanese market... Mr. Henderson concluded.
Mike Jackson addressed credit issues in that now, credit is much more available to the U.S. car and truck customer as compared to the beginning of the year; and most certainly from the last half of 2008 after the crash and bankruptcy of Lehman Bothers and the crash in global financial markets. Approval rates for car loans are improving, but higher interest rates and larger down payments are being required by the lender in order to secure a financed purchase for the car or truck customer. Next year, we should see total unit sales of 11.5 million units for all of 2010. These types of sales figures are still "depression level" figures. Mr. Jackson went on to say ....hopefully we will see return to just "recession" level annual vehicle sales figures by 2011 or 2012. After that, if all goes well, we will be back to more improved economic activity and more typical domestic vehicle sales figures of 13-14 million units per year.
Looking at the economic landscape right now, Mr. Huizenga believes we are at the "bottom" in the U.S. economy and we will be in this bottom of this economic pattern for a while. But ,we will be moving forward and conditions will improve moderately over time. As for South Florida in and of itself ; Wayne Huizenga sees South Florida as no more hard hit than the rest of the country save for the real-estate market which will take years to recover. But it will recover eventually in his opinion.
Mike Jackson, who leads AutoNation, was asked how will the auto industry "make headway" while unemployment levels within the U.S. still remain high….Mr. Jackson believed that the changes recently made within the industry will have a significant positive impact, but fully agreed with Mr. Huizenga in that the recovery will be slow. "But, forget depression levels" Mike Jackson goes on to say..."we would like to see just recession levels of sales right now…"
Mario Gabelli , weighed in on AutoNation’s ability to weather the global economic storm and congratulated Mike Jackson who indicated that though the company did go through a difficult set of circumstances, the changes in the new US domestic manufacturing model that GM has led for the past year will be significant for a recovery.
The ‘production push model is dead', Mr. Jackson concluded, and now the U.S. auto industry is on its way to enhanced viability, sustainability, and profitability. This will be good for the country and we have had our day of reckoning with the changes that were undertaken at Chrysler and General Motors this past year. The industry has had its revolution to a more rational manufacturing -distribution model; particularly with the fixed costs of labor reduced at the manufacturing level and with a reduced number of auto dealers within U.S. .......The industry is finally addressing past generational problems that have existed for years.
Fritz Henderson agreed in that GM has made many significant changes in the past year.... The company has aligned its capacity for a 10.5 million unit overall U.S. annual sales rate and the company has made tactical changes in its plants operations as to the flexibility of workers needed at any one time as well. "We have also reduced our legacy costs and the financial situation looks much improved for the company going forward."
The assembled leaders were all glad to be able to address the students and faculty at Nova University with the "lessons learned" within the auto industry over the past year; and to outline what may be in America's future.
Mr. Huizenga's dedication to the quality of the education within the Nova University Business School, which bears his name, was apparant and much appreciated by the students, faculty, as well as the South Florida community...Wayne Huizenga's ability to attract such masterful and high caliper business talent from around the United States has been a testament to his dedication in developing high quality strategic business management systems throughout the years of his leadership within the country.
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AutoNation Chairman & CEO Mike Jackson, Chief Financial Officer, Mike Short, Vice President of Shared Service Center, Maura Berney, and Senior Vice President, Public Policy & Communications, Marc Cannon, joined with our 275 members of the AutoNation Team to celebrate the success of processing over 13,000 Cash for Clunker vehicles with a total rebate due AutoNation of $54 million by the U.S. government
The recent work of the Shared Service Center (SSC) during Cash for Clunkers was a validation of AutoNation’s move to a common back office support group.....
Congratulations for a job well done ... AutoNation TEAM !
Mike Jackson Chairman and CEO of AutoNation the largest auto dealership in the United States spoke this morning on CNBC to give a better sense to the business community as to where the car industry is headed after the successful "Cash for Clunkers" program.
Now that it is ended Mr. Jackson indicated that the auto industry sold a total of about 700,000 "Clunker" vehicles in a four week period where the volume would normally have been 75,000 units sold. "Cash for Clunkers could be considered the most successful stimulus program of all time. Mr. Jackson goes on to say.... 'If you strip away the clunker deals in august, the sales rate is tracking at an annual rate 10.5 million upward trend line going into this month of September and inventories are now at an extremely tight level of about 2 million units within the country accross all dealers.
Mike Jackson also addressed the forward inventory build that is now necessary as a result of the success of the program and goes on to say that ... 'AutoNation has increased "forward" orders by 50%; this represents about 20,000 vehicle units. This increase in orders will continue in future months, and for the industry as a whole, this will probably represent about 500,000 – 1,000,000 units per month of vehicle orders to the manufacturers. So the domestic factories really will have a real shot in the arm as to increased production '
Becky Quick of CNBC asked Mr. Jackson specifically if the "Cash for Clunkers program has pulled forward sales from the future," and in his response Mike Jackson indicated that after reviewing the typical Cash for Clinker customer, he is convinced that the program in reality "Clawed Back" sales from a customer who would not normally have bought a vehicle had it not be for this specifically tailored program. These consumers really were non-buyers; typically very conservative, with no credit issues, and understood from the very beginning that this program also had the propose to the lift in the U.S fleet fuel efficiency.
Mr. Jackson goes on to say that 'now on the other hand the current problem we are facing now is that dealers across the nation are waiting to be reimbursed by the government for the rebates that were advanced to the customer. The car industry and particularly the auto dealers have provided three billion dollars to the program upon the promise that they will be repaid within 10 days and are now becoming a little nervous that this money will be reimbursed in a timely manner. Hopefully within the next 30-60 days the rebate money will be forthcoming. There is no question that U.S auto dealers will get the money owed to them by Department of Transportation. However, the government is fastidious in its operation and accounting operations of the program as inspectors are in the showrooms at this moment auditing the program paperwork of the dealers. AutoNation itself took careful strategic measures for the administration of its "Cash for Clunkers program paperwork, knows its paperwork is perfect, is owed 55 million dollars at the moment. We could use this money."' Mr. Jackson concludes.
Mr. Jackson addressed the future of car sales for the U.S. ....in response to a question from Steve Liesman - CNBC economist.
' As a baseline during the first quarter of 2009 the industry was selling at about a 9.2 million unit annual rate of sales. During the second quarter of 2009 we were selling just under 10 million units. If you strip out the Cash for Clunker’s Program to find the normal selling rate we see a 10 to 11 million unit selling rate nationally. Next year in 2010 I see a 11-12 million unit rate of car sales and production and then during the "out years" in 2011 and beyond, we should see a gradual recovery to a production and distribution annual rate of 15 to 16 million units.
Mr. Jackson also concludes that 'there will be price firming on future units sold as the industry cannot provide the incentives previously maintained to help boost sales, and because of the costs which will be incurred by the manufacturers to increase the required fuel efficiencies for the U.S. fleet.
So there is hope of a continued recovery of the U.S. auto industry and AutoNation is excedingly proud to be part of it...!
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Appearing today on Bloomberg Television, The Fox Business Network, Fox News and ABC News; Mike Maroone President and Chief Operating Officer of AutoNation – The nations largest car dealership – announced today that AutoNation is ending its participation in the most successful "Cash for Clunkers" program that was undertaken by the U.S. Department of Transportation in coordination with the nations auto dealers across the United States this past month.
AutoNation completed over ten thousand four hundred sales transactions as a result of the program, and has determined that it would be prudent to end the program at its dealerships this Friday evening to allow for time over the weekend to process the final paperwork. AutoNation is managing its processing for the "cash for clunkers program" at its quality control shared service center in Dallas Texas.
It will be helpful to have this paperwork completed by Monday evening, which is the time Washington has announced that they are ending their participation in the program after absorbing 1.9 Billion dollars in rebate requests from auto dealerships across the United States to date. Mike Maroone concluded.
' Yes we would love to see it extended', Mike Maroone explained, 'however as it has been an overwhelming success; more than anyone expected. Traffic to the AutoNation showrooms increased by about 30% and even non-cash for clunker traffic has increased. However, we do have a lot of paperwork to complete by Monday of next week, so it is time to declare victory over this portion of the national stimulus plan.'
'We are sure that this has been a "shot in the arm" for the auto industry, and the U.S auto manufactures were helped greatly by this. We also believe that now the US Department of Transportation will follow through as quickly as possible to send the appropriate rebate dollars to the auto dealers as necessary and have no doubt that they will follow through with this part of the program in a timely manner.
Mike Maroone explained, 'that AutoNation would continue to sell cars at extordinary prices with superb customer service; offering the great deals they always have, and we will look back on this program as the great success that it really was for our industry; as well as for the future of nation’s economy. We don't believe we have pulled too much business from the immediate future because sales statistics have shown us the "cash for clunker" customer was not the typical customer. They were predominatly conservative and hold on to a car much longer than average person. They were also smart in taking advantage of an extrodinary program during the short time it was available.
' No one expected the overwhelming success that the program was and we have seen non-clunker business increase also as result of the program. The industry-selling rate peaked at about 12 million units from a 9.8 million unit annual rate that we experienced earlier this year. Traffic in our stores was up significantly, and though there may be some drawback of volume in the near term, we expect the vehicle selling rate to remain somewhat higher than the unit annual rate we were experiencing earlier this year'.
'As for the mix of cars sold, approximate 65% of the new car transactions were for foreign cars though most are built right here in America, however the balance did come from models produced by the domestic manufacturers such as the Ford Escape and Ford Focus; and General Motors models '.
'Nevertheless the domestic manufacturers were helped greatly because of the program. General Motors, Ford and Chrysler have all increased production, and inventories have been reduced; so we go into the fall a leaner industry.' Mike Maroone explained.
However, more work needs to be done in providing more credit to the prime and standard markets and the reorganization of the domestic manufacturers continues as well....Progress is being made. Legacy contracts that have been so harmful to the future of the industry have, and are, being rewritten; and some obsolete plants have been closed...... All this will return the U.S. auto industry to a more efficient production-distribution platform,.
'At AutoNation we see a successful U.S. auto industry going forward with better days ahead...."We are looking forward rather than backward."'
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In an early morning interview on CNBC, Mike Jackson Chairman and CEO of AutoNation – the largest auto dealer in the United States - sat down with Becky Quick, Joe Kernan, and Carl Quintanilla of Squawk Box; as well a Phil Labeau, the CNBC auto specialist - to discuss the complaints from U.S. auto dealers about the delays in the payment of the rebates promised to them by the federal "Cash for Clunkers program.
The following issues were highlighted in that…
- From a quick survey by CNBC of about 12 car dealers across the United States, none have received their rebates.
- Four out of every five claims were being rejected for minor paperwork errors
- Many claim forms have been sent back to the dealers to be re-written.
The U.S. Department of Transportation has made a recent statement as a result of these complaints from the auto industry in that .....‘that they are now committing enormous resources and are working overtime to process the applications both quickly and responsibly, while getting rebates paid for complete and valid deals.'
However, the good news for the economy is, that as a result of the "Cash for Clunkers "program; General Motors has boosted car production by 60,000 vehicles and the program has also spurred significant production at the other U.S. manufacturers as well. The total dollar value of the program has been approximately 1.5 Billion dollars in transaction revenue for the industry as a result of 411,000 "Cash for Clunkers" transactions, as of 9-18-2009; indicating that this program has been a resounding success.
But fraud can easily take place and the government does have a responsibility to ensure that only the proper and valid amounts of rebates are returned to the dealers. Consequently the administration of such a vast nationwide program is tedious.
When asked for a dealer perspective of these issues; Mike Jackson responded in that these details are accurate, but he believes that the 'Department of Transportation will come through within in the next few weeks and will clear the paperwork log-jam that has developed .... 'however it will take time'. "The government is worried about fraud; and rightly so." Mr. Jackson concludes.
Auto Nation is currently owed about 45 million dollars in federal rebates as a result of sales within the "Cash for Clunkers" program to date , but the program is working on every level Mr. Jackson contends..... "Cash for Clunkers"has been so successful, and the response so overwhelming, that the resources for for the administration of the program have been strained.'
Mr. Jackson's view is that as of now..... "A drowning man has just been thrown a life preserver" ...and "we cannot now complain about the color of the preserver."…..
'This program is working on every level and has been an overwhelming success. But because of this success we are now seeing these difficulties. Mr. Jackson went on to say that 'in a few weeks the problems in the program will be resolved. The Department of Transportation was not prepared for the significant and rapid success of the program; but it is now adding rmore resources every day to fufill its comittments to the program.'
Nevertheless, 'They are correctly worried about fraud and we must understand that the requirements of the program need to be met appropriately. The Department of Transportation is being absolutely perfectionist in its administration of the program as it is distributing taxpayers money for the rebates. The rule book for "Cash for Clunkers" is 136 pages long, indicating how complicated the program is to administer. However, though there are some logistical hiccups at the moment; Mr. Jackson believes that the Government will get it right, and the money will finally begin flowing to the dealers.'
Mr. Jackson went on to say that, 'It is important to note the commitment of the auto industry in the fact that the U.S. auto dealers have advanced the money for the rebates of the program to their customers, and are now waiting to be reimbursed.' But this is a commitment that we have made in the best interest of the country.'
Doug Kass of Seabreez Partners Management Inc. - and famed market investor, asked Mr. Jackson " ...if the "cash for clunkers" program is pulling sales from the future; particularly from the spring of 2010, and consequently there will be a significant drop in car sales at the end of 2009.
Mike Jackson explained, that his observation is that there is no question that the program has spurred a" incremental" increase of auto sales to customers that would not normally have bought a new car. 'These conservative car buyers have come into the dealers to trade in a 10 year of domestic car as a result of the program. These customers have maintained good credit histories and are easy to finance if necessary.
'Beyond this, the Cash for Clunkers program has stimulated "dovetail" sales from the customer who was qualified for the program only marginally, but purchased a new car regardless. And though program has lifted sales to higher levels of about 12.5 million units per year, it is not unreasonable to expect that current sales rate will eventually subside to a more sustainable but yet higher level than the 9 .5 million unit sales rate that resulted from the collapse of Lehman Brothers last year'.
' It is now safe to come back into the market. The worst is over.... Mr. Jackson contends. The program is now driving traffic beyond itself, and this is exactly what a stimulus program is supposed to do.' 'Additionally, the U.S. is achieving a full 10mpg improvement in fuel economy "on paper" for each sale, as a result of the program. But actually the mileage improvement could be as high as 15 miles per gallon which would be exceptional.
.....To conclude, Mr. Jackson believes that 'the "Cash for Clunkers" program is currently experiencing some logistical problems. However, it is undeniable that this program has been a resounding success on every level'.
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Appearing on local NBC in South Florida, Mike Maroone - President and Chief Operating Officer of AutoNation, - the largest auto dealer in the United States, addressed questions about the current state of U.S. vehicle production, design, and engineering quality. He also speaks about the most recent structural changes occurring in the U.S. auto industry, and how they will affect strategic planning for companies in the future.
Mr. Maroone is convinced that the manufacturing quality of the American auto industry is "back on track" and he explains that the newest Ford and GM models are of the highest quality, which is on par with any other cars or trucks built in the world. Mike Maroone went on to state that, in his opinion, the choice of Frederick A. (Fritz) Henderson as the new CEO of General Motors was an excellent choice. ...and that [Fritz] he has done a good job in steering the company through its most recent crisis. 'GM is now a very healthy company and is poised to compete on the world stage.' ....The car manufacturer additionally has fantastic products in the pipeline such as the new Camero and Equinox.'
Looking at Ford, 'they have fantastic pipeline of products as well,' Mike Maroone continued, ‘and their product cycle is very fast and efficient from… " the artist's conception" …"to the road"…. with a high level of engineering and manufacturing quality' .... 'Ford has done a wonderful job with the Ford Fusion, the Edge, and the Escape models…These products are fantastic.'
Ford also has an advantage over GM and Chrysler because of not having to accept government money to maintain operations. Though they did have a significant debt burden to address, they have done a good job in restructuring this debt and Alan Mulally, who did not come from the auto industry, has made all the right moves to improve the future of the company both financially and strategically.‘
Mike Maroone believes... "A lot of credit needs to be given to the Governemental Auto Task Force and the Obama administration for the progress that has been made recently within the domestic auto industry. "Without the efforts of the administration, and all involved, GM and Chrysler would be gone".
'Also the "Cash for Clunkers" program has been a resounding success, and this will continue to provide a stimulus for domestic auto sales and production. .....'There was a catastrophic lull in sales because of financial devastation experienced last year and the bankruptcies of General Motors and Chrysler earlier this year....Mr. Maroone continued; ..... 'as a result of the programs recently put in place, the "purchase consideration" by our potential customers seems to be returning slowly to our dealerships.' The "Cash for Clunkers" program has catalyzed the market environment markedly and 'the selling environment for the dealers has stabilized" hopefully conditions will continue to improve.'
..... Because of the significant improvements from the financial turmoil that befell the U.S. financial markets last year, and AutoNation's ability to weather this most recent downturn, the company has begun to ramp up its orders for new cars and trucks .....AutoNation is also "on the acquisition hunt".
The conditions for opportunity are beginning to outweigh the recent "risk environment" for the company, Mike Maroone concludes, ....consequently, AutoNation will be moving forward.
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NBC South Florida
" AutoNation, Inc. (NYSE: AN), America's largest automotive retailer, today reported 2009-second quarter net income from continuing operations of $55 million or $0.31 per share, compared to year-ago net income from continuing operations of $56 million or $0.31 per share beating analysts expectation by $0.05....."
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Mike Jackson Chairman and CEO of AutoNation, appearing on CNBC with Joe Kernnen, Becky Quick, and Mario Gabelli "famed stock analyst", indicated that the accelerated productivity and cost savings measures AutoNation agressively pursued over the past year led to the positive earnings over the past two quarters for the company.
Mario Gabelli indicated that the mark of" good management" is how they perform during difficult times, and he went on to say that the shrinking of the auto industry distribution base will favor the AutoNation model for vehicle distribution in the United States.
The "Cash for Clunkers" program has been an overwhelming success across the country and Mr. Jackson indicated that, to his surprise, the credit quality of those taking advantage of this federal program to remove older 'gas guzzling cars from the nation's roads have a group average credit score above 700; indicating that the more conservative - upscale customer is taking advantage of the program. This bodes well for the future of "Cash for Clunkers" and its viability in jump-starting car sales and improving the U.S. fleet average mileage lowering the United States dependency on foreign oil imports.
Mr. Jackson also appeared on Bloomberg Television as well as CNN Money; and Mike Maroone - President and Chief Operating Officer of AutoNation - joined Fox Business to review the most recent quarter earnings results for the company and additionally answered questions from the business community as to the sustainability of the "Cash for Clunkers" program and the positive results it is having for the auto industry and the Unitrd States as well.
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Jim Cramer , on CNBC's Mad Money - admitted that he 'missed' the accelerated stock advance of the auto dealers due to the arrival of the "Cash for Clunkers" program which has been so successful for spurring auto sales in the United States to date. The program was so successful that the first traunch of one billion dollars from the federal government allotted for the sales credit to purchase old gas guzzling cars, is close to being depleted. Instead of giving a long term buy rating, Cramer said sell AutoNation stock for now; but Cramer believed that auto dealer stocks would rebound after a pullback.
AutoNation does not see a short term trade here, but rather a significant long term improvement in the fundamentals of the industry over the next five to ten years.
This should be an "accumulate" at least; as the dynamics of the old auto industry structure in the United States rapidly change for the better. Future efficiencies in production and sales distribution will bode well for the survivors of the industry of this most recent contraction. We must remember that "Mad Money", produced by CNBC, is tailored for the "position" trader who is quick to capture profits.
Additionally, we see AutoNation as being an extremely well managed company as they have not only weathered the most recent downturn in the U.S. economy, but have managed through the crisis to show a profit for the last two quarters. Clearly Mr. Cramer did not have the next day release of AutoNation's earnings for the most recent quarter at hand when forming his opinion of AutoNation stock.
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AutoNation on Mad Money
