AutoNation CEO: Car sales recovery will continue
DETROIT (AP) — U.S. car buyers will continue to shake off bad economic news and political uncertainty, keeping auto sales a bright spot in the economy for the next several years, the CEO of the nation's largest auto dealership chain said Thursday.
AutoNation Inc. CEO Mike Jackson said people who held onto their cars through the Great Recession in 2008 and 2009 now have to make a choice between sinking thousands into repairing old vehicles or buying new ones. At the same time, automakers are rolling out strong new products with much higher gas mileage, and interest rates are low, making new cars attractive, Jackson said.
He made the comments in an interview with The Associated Press shortly after the company released its third-quarter earnings. AutoNation said Thursday that its third-quarter net income rose more than 15 percent as it benefited from the continued rebound in U.S. new-car sales.
Jackson said that while U.S. economic growth is "anemic" and there's uncertainty over the so-called "fiscal cliff" in Washington, car and truck buyers have been resilient. If Congress doesn't reach agreement to avoid the fiscal cliff, it could push the economy back into recession because deep spending cuts will go into effect. The Bush-era tax cuts also could expire at the end of the year.
"We've plowed through high gas prices. We're plowing through fears of a fiscal cliff," Jackson said. "The replacement need is genuine. It's going to drive the market forward for the next several years."
Jackson's Fort Lauderdale, Fla., company earned $81.6 million in the quarter ended Sept. 30, up from $70.7 million last year. The 261-dealership chain saw new-vehicle sales rise 21 percent from a year ago.
Auto dealership chains are making strong profits this year despite a sputtering economy, as new-vehicle sales continue to bounce back from the Great Recession. Sales so far this year are running at annual rate of 14.3 million, 1.5 million more than last year's sales of 12.8 million. Many analysts echo Jackson's view that people who kept their cars and trucks through the recession are now being forced to replace them. The average age of a U.S. vehicle is close to 11 years.
Jackson said buyers believe that a deeply polarized Congress will come up with an agreement to avoid the spending cuts and tax increases, keeping the auto sales recovery on track.
"So they're still out there buying. My view is they're right. Regardless of who wins the election, there will be some sort of grand bargain on the fiscal cliff. We won't go over it," Jackson said.
But he said stronger economic and job growth is needed before total U.S. auto sales can return to pre-recession levels of 16 million to 17 million vehicles per year.
AutoNation also posted strong revenue gains on used cars, as well as parts and service and finance and insurance.
On a per-share basis, AutoNation earned 66 cents per share in the recent quarter, up 38 percent from 48 cents per share last year. The outsized jump reflects a 16 percent drop in the number outstanding shares from the 2011 third quarter.
Revenue rose 12 percent to $3.9 billion.
The results matched Wall Street's expectations. Analysts, on average, expected earnings of 66 cents per share, on revenue of $3.9 billion, according to FactSet.
Despite the strong performance, AutoNation shares fell $2.02, or 4.2 percent, to $46.02 in morning trading. The shares started the day up 30 percent since the start of the year.
Sales from Detroit-based manufacturers were up 9 percent, sales from foreign-based automakers up 35 percent and premium luxury sales rising 11 percent.
New car and truck sales ran at an annual rate of 14.5 million for the quarter, and AutoNation expects the U.S. will end the year at that number. That's 13.3 percent higher than last year, which is a bonanza for new-car dealers.