Mike Jackson Chairman and CEO of AutoNation the largest General Motors dealership in the United States appeared on CNBC to respond to questions as a result of the fallout over Richard Wagoner’s resignation as head of GM.
After meeting with Ron Bloom head of the domestic auto industry government task force Mr. Jackson indicated that Mr. Bloom realizes that this is an historic opportunity to address the lingering obstacles that have been plaguing the industry for many years such as burdensomely high fixed cost labor agreements, high debt levels and legacy costs.
‘Mr. Bloom is a first class individual and knows all the right questions to ask and clearly understands the issues for Chrysler and GM’ Mr. Jackson went on to say…” he is smart tough and fair-minded. The affected domestic auto companies will be in good hands and this is a moment that cannot be missed. ‘Generally, when the ‘government is “here to help”, most are fearful there will be more difficulty yet to come, but is this case, government support of Chrysler and GM is absolutely necessary to provide a guaranteed support mechanism for a final and comprehensive reorganization of the struggling domestic industry.
Though a government-sponsored bankruptcy has not been declared, Mr. Jackson strongly contends 'it is cannot be disregarded'; and though the companies were not forced into bankruptcy earlier regardless of the fact that the companies have made some headway in their reorganization, 'major issues still remain'.
Difficult decisions still lay ahead, and major changes are still in order for the industry.
Chrysler was given 30 days to find a buyer, and GM was denied another 16 billion dollars it had requested and has been told to completly reorganize within 60 dys or loose additional funds. The situation for the automakers is a moving target and has been deteriorating. With the intransigence of the unions and the bondholders the hard decisions must be made more quickly at this time.
Mr. Jackson went on to say that the industry has stabilized now at about 9 million units, and with the emergence of the TALF this month and GM and Chrysler’s reorganization finally being materially addressed the future, over time, should improve.
' Credit is still the key and is beginning to improve, but leasing programs still need to be revived. Floor plan financing is still difficult to acquire as well. ' Mike Jackson reiterated. 'However, there is no question there may be a risk of a downward spiral with an uncontrolled bankruptcy of General Motors and Chrysler, but if the government will provide material support and direction, this will provide the necessary stability that should allow the companies to come back with a new future.'
Click on video icons to view
CNBC
FOX Business
Mike Maroone President of AutoNation, the largest car dealership in the United States, announced on the Fox Business Network and Bloomberg Television, AutoNation's new car buyer “Payment Protection Plan” for new and used vehicles across all brands of cars and trucks available at its dealerships as a special service for the AutoNation customer.
In an effort to meet consumer needs and provide help and a sense of security for the future car or truck buyer, AutoNation will begin this pilot program at its Thirty-Three flagship South Florida dealerships. Any customer who currently is employed and who wishes or needs to purchase a vehicle any purchases it from an AutoNation dealership, AutoNation will guarantee monthly payments up to $500 per month up to six months if the customer subsequently looses his or her job…. at no additional cost to the customer.
'These are difficult times for the nation and particularly the U.S. auto industry' Mr. Maroone went on to say. 'The consumer has lost confidence with unemployment rate currently hovering around 8.1% and AutoNation is working hard to meet the needs of the consumer at this time by providing some security by implementing this “Payment Protection Plan”. This is the right program at the right time and will provide proper stimulus that should help the distressed customer and spur vehicle sales' ...Mike Maroone stated… “We are beginning this program immediately in South Florida, and if successful, it will be available at all AutoNation dealerships and to every AutoNation customer across the United States. This program will apply to leased vehicles as well and will attack the two key issues plaguing the U.S auto industry at this time; 'these are consumer confidence, and the availability of credit.'
As to the current state of the economy, Mr. Maroone stated that the announcements about the TALF and the announcement from Federal Reserve Chairman today were critical in helping stabilize the financial industry, and AutoNation is now quick to respond with this positive program which is aggressive and bold in order to break through to the beleaguered customer. Mr. Maroone indicated there is still a high supply of cars and trucks available and whatever AutoNation can do in establishing new vehicle purchase programs will be helpful.
As to the most recent economic events, Mr. Maroone went on to say that ‘Chairman Bernanke is doing well in announcing the TALF today and this will help in freeing up the frozen credit markets, but the customer right now may be slow to respond….This program should help in this regard.
Click on video icon to view....
Fox Business
Bloomberg Television
In a surprising turnabout, General Motors Corp. Chief Executive Officer Rick Wagoner said Tuesday that increasing the federal gasoline tax to guarantee a minimum price of $4 a gallon is an idea "worthy of consideration."
Few industries have been more vigorously opposed to hiking the gas tax than automakers. But GM, which is betting its future on high-priced, energy-efficient cars, has switched its historic view and is now open to the federal government setting a new, higher floor on fuel, which would act as an incentive for consumers to buy hybrid and electric cars.
"It's great that smart people are talking" about ideas to conserve energy, Mr. Wagoner told reporters Tuesday. He was referring to recent comments by Michael Jackson, the Chief Executive Officer and Chairman of AutoNation, who recommended a huge increase in the gas tax to encourage American consumers to buy fuel-efficient vehicles.
"Michael Jackson is a smart guy," and his idea deserves to be considered, Mr. Wagoner said at a briefing sponsored by the Christian Science Monitor.
When the price of gasoline jumped above $4 a gallon in July, AutoNation, the nations largest chain of new-car dealers, had a two-day supply of Honda Civic gasoline-electric hybrids. By the end of the year, when gas prices dipped significantly, AutoNation had a 148-day supply of hybrids.
"I have fuel-efficient vehicles parked at my dealerships as far as the eye can see," Mr. Jackson was quoted as saying in the Wall Street Journal on Tuesday. "I can't give them away."
Gas priced at $4 a gallon would be "a good start," Mr. Jackson said. The chairman and CEO of General Motors did not disagree.
The average price for a gallon of regular gasoline was $1.91 on Tuesday, according to the Energy Information Administration. To reach $4 a gallon, the federal gas tax would have to increase from 18.4 cents a gallon today to more than $2 per gallon.
A GM spokesman acknowledged that the automaker is thinking about the price of gasoline as an incentive to buy hybrids. "Everybody talks about $4 a gallon because, until gas prices hit $4, nobody saw any shift in consumer behavior," said Greg Martin, GM's Washington, D.C., spokesman. "Only then did people put fuel efficiency front and center."
The Energy Independence and Security Act of 2007 mandated an "aggressive increase in mileage standards," Mr. Martin said. As a result, GM is building fuel efficiency into its entire fleet. However, a lot of factors that raise fuel efficiency "are not particularly sexy," he said, adding that it would take $4-a-gallon gas for the market to shift consumer behavior.
GM has been struggling to stave off bankruptcy. It has laid off thousands of workers and borrowed $13.4 billion from the U.S. Treasury's Troubled Asset Relief Program to maintain operations. To qualify for another $16.6 billion in aid, which the automaker requested last month, GM must prove to a government task force by March 31 that it can be viable over the long term.
Mr. Wagoner downplayed the idea of a GM bankruptcy filing. Debtor-in-possession financing, which GM would need to fund operations while in bankruptcy, would be "potentially huge" and only the government could provide it, he said.
Even the "fast, prepackaged" version of bankruptcy would "bring significant risk," he said. If it couldn't be completed in 30 to 60 days, "a long period of bankruptcy could bring about an end to the company," Mr. Wagoner said, citing research showing that consumers would hesitate to buy cars from a bankrupt company.
People who casually talk about bankruptcy have never been bankrupt, said Mr. Wagoner, whose company lost $38.7 billion in 2007 and $30.9 billion in 2008.
To achieve long-term viability, GM is negotiating with its stakeholders, including the United Auto Workers, its dealers and its bondholders. "Everybody's got skin in the game," he said.
Mr. Wagoner declined to describe negotiations with bondholders, who reportedly have been balking at government demands that they take a 67 percent haircut. He did observe that GM's bonds are trading at about 15 cents on the dollar.
GM's stock, which closed at $2.41 Tuesday, has lost 94 percent of its value from its October 2007 peak of $42.84 per share.
David M Dickson
In interviews on CNBC and Fox Business...Mike Jackson Chairman and CEO of AutoNation gave guidance on the positive moves Ford Motor Company is making to improve the company’s operational efficiency and financial balance sheet. He also address General Motors and Chrysler as to the current 'state of affairs' within the respective companies.
Upon meeting with Alan Mulally Chief Executive Officer of Ford, Mr. Jackson had high praise for the way Mr. Mulally has “stepped into the industry” and has begun significant positive changes within the company. Ford has been consolidating brands; restructuring loans, made significant progress with the unions, and has embarked on a disciplined approach to the manufacturing and inventory side of the business, Mr. Jackson explained.
Mike Jackson believes that Ford has “charted its own course” and gives Mr. Mulally much of the credit for the positive and healthy moves Ford has been making recently......As to General Motors, in an interview with Fox Business reporter Liz Clayborn, Mr. Jackson believed it was no surprise that GM placed an “ongoing concern” statement within its 10k statement recently released. 'Clearly General Motors will need more support. as for Chrysler, Mr. Jackson contended that, though the company has formed an alliance with Fiat there will still be obsticles ahead in lowering costs and expanding to world wide footprint, but it is viewed as a positive turn that Chrysler and Fiat wouldsign a joint venture deal as Fiat does have "excellent 'small car platform'" engineering and a european reach in marketing.
Mike Jackson was asked about the 'Wall Street Journal' conference and the difficulty for the U.S. auto industry in “Going Green”…. At this moment, the current administration is pushing Detroit to manufacture “green” cars and Mr. Jackson indicated that there is a major disconnect between Washington and the consumers change in behavior to preference larger vehicles because of the drop in fuel prices. At this time only 5% of car customers are committed to “green vehicles” and will pay the price for fuel efficiency and 95% of consumers care about green but will not buy "green" for a higher price.
Mr. Jackson went on to explain that ‘the car industry switched to fuel efficiency last summer and the sales lots are brimming with fuel-efficient vehicles that the car customer will not buy; Currently, the U.S. auto industry is operating at depression levels and the only salvation to the current situation will be the much talked about TALF that was scheduled to be launched during the month of February. There are a lot of reasons that the auto industry is at depression levels and you have to go back to the Second World War to find such a low level of car sales within the U.S….The TALF will help but is late and we should have had this six months ago. Now that loans that have been written since October of 2007 will be able to be securitized within TALF, this should help the large auto financing companies within the industry and will help to get consumer credit flowing again. Additionally, ongoing healthy companies may make use of the TALF securitization program and there should be Billions of dollars in auto consumer loans may be funded.
As a closing note...Mr. Jackson indicated that ‘much damage has been done to the consumer’s confidence because of the withdrawal of consumer credit for six months, and we have a long way to go to restore this confidence.
Click on video icon to view
CNBC
Fox Business
