Posts (page 2)

    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'.

 

Click on video icon to view

 

    

      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.

 

Click on video icon to view

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....."

______________________

 

     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.

 

Click on video icons to view

CNBC

.Bloomberg Television

Fox Business

 

CNN Money

Mike Jackson CNN 08-02-2009 B

       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. 

 

Click on video icon to view

AutoNation on Mad Money

 

    

       'Buy a new, more fuel efficient car, trade in a less fuel efficient vehicle with a miles per gallon rating of 18 miles per gallon or less, and the new car buyer will receive a tax credit of up to $4500 towards the purchase.'

       President Barack Obama has officially signed "Cash for Clunkers" into law as part of a larger defense spending bill. and the program puts the burden of deciding which vehicles qualify squarely on the shoulders of dealers. Vehicles being traded in must be less than 25 years old, and their replacement must get 4 mpg better if it’s a car, 2 mpg better if it’s an SUV. Again, dealers are responsible for having the older vehicles scrapped. The benifits of the program are two-fold in that the U.S. fleet will move to an improvement in fuel milage, and domestice production of vehicles will get the needed "boost" to jump start manufacturing.

     The program has been very sucessful in other countries when introduced, and has provided positive results of achieving the goals of increasing car sales of more fuel efficient models, while removing older less fuel efficient vehicles from the road in order to improve the country's overall vehicle fleet fuel efficiency and reduce fuel consumption on a national scale.

     ...... Also seen as a boon to the struggling auto industry, the new program is expected to spur U.S. auto production and sales going forward. Larger auto dealers may expect to see an increase new car sales of up to 20 vehicles per month per dealership or store according to some sources.

 

 

Click on video icon to view.

NBC Nightly News

 

 CBS  Miami

 

By: Mike Jackson - Chairman and CEO of AutoNation:  21-June 2009  Sun Sentinel

"Bankruptcy, restructuring, factory closings, dealership terminations, layoffs - and the likely demise of a once-heralded brand like Pontiac."

 "Those are the headlines about America's car companies today, and they don't make for pleasant reading. The sad truth is that these recent events are the inevitable culmination of years of short-sighted decisions by Detroit's car companies."

 "But there's a hidden truth. The American auto industry is heading for a bright future, thanks to the painful (and long overdue) restructuring steps that are being taken today. Because of these steps, even a modest recovery in our economy will bring a rebound in the auto industry that could be far faster and more robust than most people realize."

"The industry's structure and dynamics will be changed forever, and many of the distressed deals that consumers can get on cars today will go away, too. But cars will hold their value better, the car companies will be stronger, and the country and U.S. taxpayers will be better off as a result."

"None of this is conventional wisdom. But as someone who has spent his entire career in the car business, I'm convinced it will happen."

"So what can U.S. consumers expect? Three major changes - let's examine them".

 .....Incentives out, but vehicles will hold their value

"First, the days of Detroit propping up sales and keeping factories running with extreme incentives, heavily subsidized loans and, most recently, "employee financing" for everyone, whether they worked for a car company or not, are over."

 "This was good for car buyers, right? Sure, you might think so, because consumers sometimes got discounts of $6,000 to $7,000 or more on Detroit's cars."

 "But guess again. All these discounts had the unintended, but entirely predictable, effect of depressing the value of used cars of the same brand. A person who bought, say, a 2006 Chevrolet Impala at a discount price would see the trade-in value of that car depressed by the deeper discount that his neighbor got on the same model two months later."

 "U.S. car buyers are smart, and they figured this out long ago. That's why that new Toyota or Honda holds 50 percent of its resale value after three years, while a new Pontiac or Dodge retains only 33 percent of its value. While deep discounts made it cheaper to buy a Detroit car in recent years, the deeper depreciation usually made it more expensive to own one."

" Instead of spending so much money on discounts, Detroit would have been better off spending it to boost quality and develop new technology. Instead, the chronic cycle of excess production and ever-deeper discounts hurt GM, Ford and Chrysler just as much as it did their customers. It destroyed the images of such once-venerable marquees as Oldsmobile, Pontiac, Plymouth and other brands."

 "All this reached crisis proportions last fall, after the bankruptcy of Lehman Brothers on Wall Street sparked a contraction of consumer credit that collapsed car sales. The current sales pace is below 10 million cars a year, down 40 percent from just a few years ago. We have hit the bottom, and the new vehicle market will recover, considering 13 million vehicles are scrapped each year and over a million new households are formed."

.....More choices for U.S. consumers

"Auto companies going forward will produce more choices for American consumers."

 "We will continue to have many choices, ranging from trucks to small cars, SUVs to Crossovers. But what will dominate our roads in the future depends on the price of gasoline. Americans crave roomy, big, comfortable vehicles, and the industry will need to ensure that consumers enjoy these comforts, even as fuel-economy standards rise."

 "So, expect the U.S. landscape to continue being dominated by the internal combustion engine. But our roads will see more hybrids, plug-in hybrids and, yes, electric vehicles. Let's take these one at a time."

"Hybrids - Examples are the Toyota Prius, Ford Fusion and Chevy Tahoe. Right now, hybrids sell about 2 percent of the new vehicles each year."

"Plug-in Hybrids - The next generation of hybrids. Plug-in hybrids are even less dependent on fossil fuels than hybrids because they do not depend on the gasoline-powered engine to recharge the battery. The battery is recharged through an electric outlet."

"Electric cars - You'll see more of these vehicles roll out in the next 24 months. One industry-leader will be the Chevrolet Volt. At first, they will be much more expensive. In the next five to 10 years, however, you'll see them reach mass market production status. Depending on where gasoline prices are, hybrid sales could become 10 percent of the market."

 "Ethanol is part of the solution, as up to a 10 percent blend into gasoline. Unfortunately, I see little hope for a true ethanol flex-fuel vehicle, as E85 is not available to consumers conveniently, or at an attractive price. Perversely, the government ethanol subsidies intended to help attract consumers to ethanol are paid to the "blender." Translation: Big Oil. Now that you just can't make up!"

"That said, one technology that gets lots of speculative, almost sci-fi attention is still far off. That is hydrogen. Hydrogen engines have a lot of practical issues to overcome. It is in the perpetual future - it's been 10 years away for many years, and in 10 years, it will still be 10 years away."

 "Consumers will need to weigh the cost of the new technologies with the price of gasoline. These innovations will cost up to $4,000 more per vehicle, so consumers need to do the math and decide whether it's an investment they want and can afford to make."

 "Still, AutoNation's showrooms going forward will have choices that 20 years ago we could not have imagined.  The future will be different for these companies, no doubt. But they're making the painful changes that have been needed for years - and that could make the American auto industry shine again. Today, we are all part of the reinvention of America's automobile industry."

.....Smaller, nimbler auto companies

 "The third major change is industrywide - the restructuring of the automotive industry will make U.S. companies smaller, but leaner, more flexible and profitable."

 "Virtually no car company is making money at this level of sales because of the enormous fixed costs of factories, engineering, sales organizations and other key operations. The companies that were the weakest going into this downturn are getting hit the hardest. Chrysler is out of bankruptcy proceedings, and General Motors has just begun the process. A restructured, retooled GM will compete at these historically lower levels. As the market comes back, GM will be ready to capitalize on these steps."

 "Despite all this, I'm optimistic about the industry's future, more so than I've been in years. Basically, it's because President Obama's automotive task force is forcing GM and Chrysler - in return for getting government assistance - to make the difficult decisions the companies themselves ducked. Those decisions include killing unprofitable brands, keeping only enough factories to fit realistic sales forecasts, consolidation of the dealer network, eliminating big chunks of debt and rewriting union contracts to reduce billions in retiree health care costs and eliminate burdensome work rules."

"One example: Chrysler has new rules requiring workers to put in 40 hours a week before collecting overtime pay. That should have been standard all the while, but things got out of hand."

"Ford, the one Detroit car company that isn't getting government aid, is taking most of these same steps on its own, without being forced by Washington. For example, Ford has sold off Jaguar and Land Rover, two luxury brands that have lost money for years. Good for Ford. GM should have done the same with the money losers, but didn't. Ford is well-positioned to lead."

"The benefit of eliminating huge swatches of nonproductive costs will be enormous. General Motors and Ford will survive as independent companies. Ford likely will emerge larger than GM (for the first time in 80 years). But GM will still have between 15 percent and 20 percent of U.S. car and truck sales, and a profitable and smaller General Motors is better for everyone than a bigger but weaker company."

 "As for Chrysler, the proposed new partnership with Fiat represents the company's best chance to come through the current crisis. Dealers will be stronger, too, because there will be fewer of them, each selling more cars than they do now."

 "The bottom line here is that with leaner cost structures and modest rebound in car sales, these companies could be producing healthy profits far faster than most people expect."

 "Nobody likes the fact that the federal government will own most of GM and a big chunk of Chrysler (with the UAW also holding large portions), but that was unavoidable. The government was the only party willing to provide the money to keep these companies going through the current restructuring process. I believe President Obama's statements that he doesn't want to run the car companies, and the government will seek to sell its share within a few years."

 "Mr. Obama's intentions are noble here, but it's almost impossible to get Americans into small cars when gas is cheap. The better route would be to raise gas taxes and offset the impact on Americans with income-tax cuts and gas vouchers. We need a revenue-neutral gas tax to change America's buying habits. A small subset of car buyers will be motivated to buy hybrids because of "feel-good" environmentalism, but most people respond to fundamental economics. That's the potential flaw in the president's new plan."

"All this is good for America. This country has been a great force for good in the world because of its unique economic and industrial might, of which the auto industry is a vital part. Yes, the American auto industry includes the Japanese, German and Korean automakers that build cars in America. But the engineering expertise that is vital to our nation's economic prowess has a large and vital base inside General Motors, Ford, and Chrysler."

 

       In an extensive discussion on CNBC the morning General Motors, the beleaguered auto giant of the U.S. domestic auto industry, announced its government led “bankruptcy” filing in U.S. district court,  in a "special report" on CNBC, CNN Money, and The Nightly business Report on PBS, Mike Jackson Chairman and CEO of AutoNation, the largest dealer of GM cars in the United States, reiterated his conviction that this major reorganization of the domestic auto industry, though painful, will yield a more viable and competitive U.S. auto manufacturing base from which to build for the future.

 __________________

 

     'But the work is not over to repair the damage done by the economic “Pearl Harbor” experienced by  the financial industry melt-down on September 15^th 2008 as a result of the banruptcy of Lehman Brothers.  Mr. Jackson went on to say that we still need a re-normalization of the credit markets. Though the markets have improved somewhat, they have yet to be completely healed.'

 

    ' AutoNation is currently able to find credit for Prime customers only 59% of the time, when in the past, these customers would have been approved  95% of the time. The banks are still reluctant to extend credit to the auto or truck customer even with good credit. Without this credit, it will be a difficult time for whole industry. "We are not advocating lose credit ...says Mike Jackson, but seeking a more re-normalization of the credit markets.'

 

     'The difficulty is that the U.S. consumer is still finding it hard to find available credit Mr. Jackson contends.  Even though the domestic automakers themselves are going through difficult times, even Toyota Motors lost 7 billion dollars in the first quarter of this year  because of the low unit sales rate the industry has been experiencing for the past two quarters.' "This was more of a loss than General Motors experienced during the same period. So it is quite clear that these are unprecedented times for all auto manufacturers worldwide.'

 

      'However, for the Government’s plan to work in the future, vehicle sales volumes must recover,  Mike Jackson goes on to say.. 'Currently the consumer is scarred and the fuel economy requirements just initiated in congress will make cars more expensive to purchase. So the pressure is on for the financial markets to heal and credit to flow more normally.  If we see this,  the U.S. auto industry should begin to see a unit sales growth turnaround to a little over 10 million units a year with a more long term target of 14 million units per year.'

 

     'Specifically, as to the GM bankruptcy, Mike Jackson believes that the plan that  has been submitted with the bankruptcy filing that was undertaken this morning is strongly viable.... though painful for all parties.  The unions have made deep concessions and now have become partial owners. The dealers are going through an extremely painful period, and the secured credititors (i.e. the bond holders) have agreed to major immediate losses for future gains in new stock warrants.'

 

      However,  'Even with a total of 10 million units of annual unit sales in the U.S.; GM should see a break-even period with the new proposed future model that will emerge from the current reorganization plan.  ‘This is an historic time, and the total reorganization of the U.S. auto industry is underway’ Mr. Jackson concludes. 'There would be no future for the industry without this.  With a government-sponsored bankruptcy, and with government guaranteeing the warranties of Chrysler and GM, a precipitous catastrophic chapter 7 bankruptcy of either company is off the table, and we are now experiencing an increase in customer traffic in our Chrysler dealerships.'

 

     Mike Jackson is confident that, in the end "this will work"…. and..." there has never been a better time to buy a car or truck."  'Inventories have dropped from 4 million units to 2 million units, and we have moved from the decades of over production to a more viable and sustainable U.S. auto industry model with a new G.M. and Chrysler emerging from this crisis.

 

Click on video icons to view

 

CNBC Squawk Box

"CNBC Reports"

CNN Money

Nightly Business Report

 

     This week Chrysler Corporation sent out letters of franchise termination to 789 Chrysler dealerships in a painful move to downsize and streamline its dealer network. This number represents almost 25% of the company’s dealerships throughout the United States.

 

     Mike Jackson Chairman and CEO of AutoNation, the largest car dealership in the United States, indicated that, though painful, the necessary steps are finally being taken to allow the domestic Auto Industry to become more efficient and competitive with the foreign transplants.

 

     Appearing on ABC “World News” and CNBC, Mr. Jackson, who has been in the forefront in calling for exactly the changes that are currently occuring in the U.S. auto industry, views this period as the “Worst of Times” and the “Best of Times”.   It is the "worst of times" because of the pain the industry will have to bear during this transition period to more efficient operations, as well as the pain that will come as a result of many dislocations of facilities and families.

 

     However looking back, it also will be viewed as the “Best of Times” for the United States as a whole in that the industry will have made a major generational change to a more efficient model of operations necessary for the 21^st century.. As a result of these changes the economics of the industry will be positive going forward... Mike Jackson contends.

 

     On CNBC Mr. Jackson continued to highlight the major reorganizational milestones that have been met by the parties to the Chrysler bankruptcy filing, and those that have yet to be completed. This is a painful process, Mr. Jackson goes on to say,  but we are witnessing the re-invention of the U.S. auto industry in America.  This is a major step in the right direction.    

 

• There will be ‘fewer stores’ with higher “throughput” of vehicle sales.  This is a win for the consumer because prices for cars and trucks can actually go down because of lowered fixed costs.
• The Unions have finally accepted equity in exchange for forward commitments for Health Care and other forward funding and are making concessions and now the unions have a significant vested interest in the success of the companies .
• The shutting down of the factories for the next two month to eliminate the manufacture of unwanted inventory, stemming the bleeding of unnecessary costs.
• And finally, the streamlining of the dealer network; though extremely difficult, is absolutely necessary

 

     In response to a question from Jack Welch former Chairman and  CEO of General Electric,  Mr. Jackson felt that if the bondholders had not come to the table in a sprit of concession, both Chrysler and General Motors would have been forced into a "precipitous" Chapter 7 liquidation that would have sent shockwaves around the world.

 

     Now as a result of all the stakeholders coming together to sacrifice for the long term health of the U.S. auto industry going forward, both auto producers, General Motors and Chrysler, have a chance of emerging from this crisis with a more efficient model of vehicle production and distribution throughout the United States and the rest of the world.

 

 

Click on video icons to view

ABC Nightly News

 

 

CNBC

     Appearing on CNBC to answer questions on the effect of a possible bankruptcy filing by Chrysler Corporation on the overall auto industry, Mike Jackson Chairman and CEO of AutoNation felt that a government led bankruptcy would be a viable option and possibly the last option left for turning around the U.S. domestic auto industry to allow for a more competitive and streamlined manufacturing and distribution process.

     Chrysler currently, because of the intractableness of the debt holders to accept the deal most recently offered in the company’s reorganization plan, is likely to file for bankruptcy in a Manhattan court, after talks with debt holders collapsed. An announcement on the auto sector is expected from the White House. The talks for a restructuring of Chrysler had had the full support of the company's key stakeholders, including the UAW and the largest creditors, but the rest of creditors did not agree.

     Mike Jackson looks upon the situation as a positive though, concluding ‘to take bankruptcy off the table will only lead to more delays in the necessary restructuring of the American auto industry. A government led bankruptcy, protecting the American consumer in guaranteeing warranties on vehicle sales, for Chrysler Corporation, and possibly General Motors, would be the most viable option for true reorganization of the companies, if “stake holders” will not agree to necessary concessions,'

 

Click on video icon to view

 

 

     An extremely pleased Mike Jackson Chairman and CEO of AutoNation, appeared on "CNBC", "Business News Live Canada", "CNN Money" and Bloomberg Television to provide an overview of the company’s most recent quarter of outstanding earnings improvement, an almost doubling of earnings from the last quarter of 2008, for the largest auto dealership in the United States.

 

     In his discussion with Becky Quick on CNBC Squawk Box, Mr. Jackson attributed the improvement in operating earnings to productivity improvements, an overall company efficiency drive that was undertaken early in 2008 which was accelerated later in the year on September 15^th, as well as a "substantial" corporate debt reduction.

 

     It was a “brutal first quarter” for the car industry with only about a 9.5 million unit sell rate for the U.S. auto industry Mr. Jackson went on to say, ‘AutoNation reduced its structural costs by $400 million dollars year over year; of which $200 million was in the form of variable comp. The company also paid down significant debt by $1.25 billion dollars which allowed the company to sequentially improve earnings from last year to date by 11 cents a share to 23 cents a share in quarterly earnings.’

 

     ‘There was an improved environment in used car sales', Mike Jackson went on to say, 'the volatility in the market has somewhat "settled down", and gross profits have improved.'  Mr. Jackson believes we have seen the bottom of the market in this most recent completed quarter, and now the economic climate for car sales should  gradually improve over the course of the rest of this year.

 

     Mr. Jackson was also pleased to see a  "thawing" of the commercial credit markets; 'TALF has started with almost 7 billion dollars of available capital - with more to come.  In the last 6 months of 2008 only 5 billion of auto credit was securitized. We expect more auto “stimulus steps” to come, such as the pending “clunker bill” which will provide a tax credit for scrapped used vehicles. The Federal Government Auto Task Force understands that the viability of the industry depends on increasing new car sales and with the restructuring of Chrysler and GM, the U.S. should see an improvement. “We do take President Obama at his word in that General Motors “will survive” in one form or another Mr. Jackson concluded.

 

     As for Chrysler, it is a bit more difficult to see if the future bodes well for its survival. Chrysler holds very valuable assets in the Jeep brand and its other vehicle platforms, but if for whatever reason Chrysler does not survive this tumultuous time, AutoNation will only be moderately affected as Chrysler car and truck sales make up only 4 percent of the company’s total revenue and profits.

 

     As for the rest of the year, Mr. Jackson is quite positive. "Currently the U.S. is scrapping almost 13 million vehicles per year, and forming 1 million households."  'Consequently the currently low rate of new car units being sold at 9.5 million units per year will not be able to supply future demand of 14 million units. Currently inventories are dropping and with General Motors shutting down their production plants for the summer this will only accelerate the reduction in the oversupply of vehicles within the nation. Overall there will be a re-rationalization of the United States auto industry from the car dealerships to the manufactures, which will be positive for the country.'

 

Click on video icons to view     

 

 CNBC

 

Business News Live Canada

 

CNN Money

 

Bloomberg Television