New U.S. auto sales upturn is sustainable

New U.S. auto sales upturn is sustainable

AutoNations Mike Jackson tells WANADA

WANADA Annual Luncheon attendees last week got a solid dose of good news from keynoter Mike Jackson, CEO of AutoNation, who said auto sales should continue to increase over the next several years as things like credit become more accessible and affordable for large numbers of buyers who need to replace vehicles they have held onto for too long.

Jackson noted that a million new households are being formed each year in the U.S., which means an additional 1.5 million in new vehicle sales, atop the annual replacement rate of 14 million units, is in the offing. The average age of the vehicle fleet has increased to 11 years and those cars and trucks have to be replaced, he told the packed house at the Mayflower Hotel in downtown Washington.

Sixteen million new vehicle sales per year is a very sustainable number, he said, adding that sales would be better still if people on Capitol Hill would just focus on finding a way forward for America.

Jackson said America would benefit from Europes current economic turmoil, as banks would be more likely to invest here, particularly in the auto market where defaults have been few, if at all. History has shown that people will pay for their car before their house or their credit cards, he noted.

Jackson, a 30 plus year veteran in the automobile business, said he has never been more optimistic about U.S. auto sales, noting that the bankruptcy reorganizations of Chrysler and General Motors, while not perfect by any means, had allowed the companies to have much lower breakeven points, given the flexibility they had to be profitable at almost any sales rate.

Looking ahead in service and parts, Jackson opined that business would likely reach a low point in 2012, as increased vehicle quality and the dearth of new vehicle sales over the past few years impacted the system. By 2016, America should be back to normal, he said, noting that the same would be true for used vehicle operations.

If there were any clouds on the horizon, Jackson pointed to the new fuel economy regulations that he believes will likely test the auto industry more than anything else, particularly at the retail level. Its going to be a real challenge come 2016 trying to convince people to buy high mpg cars they dont necessarily want, he said, sort of like trying to sell someone broccoli to go with their coffee when they really want a donut.

In a lively question and answer session, Jackson expressed concerns about online competitors to dealers as well as a spirited defense of dealer franchise rights.

A burgeoning market reality, which Jackson said keeps him up at night, are larger, better organized vehicle buying services which are becoming a formidable presence online.

Reflecting on his experience as both an OEM CEO and franchised dealer, Jackson said he hoped manufacturers would get more realistic about facility requirements, an issue that is coming to the forefront as industry sales improve. When they are telling me the color of toilet paper to use, theyre out of control, he said. Build a facility that fits your community, put a manufacturer sign out front, and that should be it, period!

Jackson said he remembers his days as a dealer in the Washington area fondly, recollecting that the Washington market likely had the most resourceful and successful auto dealers anywhere. Competition was always tough in this town, but it was classy competition, and I owe each of you my gratitude for all that I learned when I operated here, he said.