One on One with Mike Jackson, CEO of AutoNation
Tuesday, June 02, 2009
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SUSIE GHARIB: Joining us now to talk more about the outlook for auto sales and the GM and Chrysler bankruptcies is Michael Jackson, CEO of AutoNation. It's the nation's largest car dealership. Mr. Jackson, good to see you again.
MICHAEL JACKSON, CHAIRMAN & CEO, AUTONATION: Good evening, Susie.
GHARIB: So what are you hearing from people who are coming into your showrooms? Are they looking to buy or just looking?
JACKSON: Sales for the industry have been running about 35 to 40 percent down. Traffic is only down 20 percent, so we have more demand than we have credit to be able to finance the customers. This is a condition that's existed since September of last year with the bankruptcy of Lehman Brothers when there was a dramatic withdrawal of credit from the marketplace. So that's the number one issue.
GHARIB: And what about the mindset of buyers? Are they looking now to buy a green vehicle, a hybrid, a fuel efficient car or do they still want big American cars?
JACKSON: Well, if you had asked me last July I would say they're looking for green and they're looking for fuel efficiency. So the industry switched over dramatically to producing fuel efficient vehicles. But lo and behold, gasoline went down to $2 a gallon and now people could care less about fuel efficiency and the great migration back to larger, faster vehicles is underway once again.
GHARIB: Even though gasoline prices are creeping back up?
JACKSON: They're still only $2.50 a gallon. I would say at $3 a gallon you get a lot of talking about the price of gas, but not much change in behavior. You really need $4 a gallon like we had last summer to really get the consumer really to make the tradeoff and pay for the technology that involves fuel efficiency.
GHARIB: Let me ask you a little bit about the GM bankruptcy. So if I go into one of your dealerships today and I want to buy a Gm vehicle, could I get a really good deal because GM is in bankruptcy?
JACKSON: I think there are really good deals now because business is so slow and these companies are all trying to bring down their inventory. If I look at the production schedule going forward, inventories are going to be reduced from a peek of 4.2 million units down to two million units. The incentives that exist today are not sustainable. Every manufacture is losing money at these incentive levels, meaning by the fall when they've reduced inventory they will move back to more rational inventory. So the answer of your question is, yes, in my opinion you're not going to get a price ever than you are right now.
GHARIB: Chrysler is supposed to be coming out of bankruptcy later this week. Is there demand for Chrysler cars or is there a stigma about buying a car, a vehicle from a company that's in bankruptcy?
JACKSON: When it was uncertain whether Chrysler was going to stay in business or go out of business in the fourth quarter and into the first quarter, it definitely was an overhang over Chrysler. As soon as the government said about a month ago when it went into bankruptcy that it had the full backing of the U.S. government and no one less than President Obama coming out and saying Chrysler will go on, that immediately removed the cloud that was over Chrysler and we were able to tell customers, unequivocally Chrysler is not going out of business. That helped business for Chrysler in May. Traffic actually went up for Chrysler after the bankruptcy than before.
GHARIB: So let's say six months, a year from now, as you look at the landscape for car sales, who are going to be the winners and who are going to be the survivors? Is it going to be Ford and Toyota, GM, Chrysler? How's it all going to play out?
JACKSON: In total I've never been more optimistic about the state of the industry because what is occurring right now is not just a bridge loan to resume business as usual. We're looking at the complete reinvention of the American automobile business and all the sacred cows that no one would slay in the past are all being slain today. So it will be a more rationale, sustainable profitable business.
GHARIB: You didn't answer my question though. Is it going to be Ford and Toyota on top or what?
JACKSON: I think Toyota will be the largest car manufacture in the world and I think there's a very good chance Ford will be the largest U.S. manufacturer. A lot of benefit is accruing to Ford by the fact that they stayed out of bankruptcy, have exciting new products coming in a pipeline and seem to have been ahead of the curve over the past two years on Mr. Malawi's leadership.
GHARIB: In a word or two, is GM going to make or not?
JACKSON: GM will absolutely make it and people are going to be amazed at how successful GM is in the future. It will be a brand new company.
GHARIB: All right. We're going to have to leave it there. Mr. Jackson, thank you so much for coming on the program.
JACKSON: Thank you.
GHARIB: My guest tonight, Mike Jackson, CEO of AutoNation.
