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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