Remember my interview with AutoNation CEO mike Jackson? His words today seem prophetic..
Here was the exchange:
Todd Sullivan: The Kiplinger Report estimates that about 1,200 dealerships across the US are going to close this year, mostly domestic brands, do you see that as an accurate assessment or do you see more than the 1,200?
Mike Jackson: I think it could well be more as we’ve hit a tipping point on sustainability. It’s not just going to be small ones, its going to be big ones also. The retail distribution system was never rationalized and the domestic share moved from 70% to 50%, if you look at the number of dealerships that came out that period of time was very minor vs what was done in the manufacturing side and the white collar side. With any decline in industry value with that overcapacity situation, you’ve hit an inflection point that is going to lead to a rapid decline in the number of dealerships out there, particularly domestic.
The situation was sustained with a bond of loyalty that went just beyond just economics with a resilient business model. But that bond has been broken and the business model cannot handle these types of declines with that type of overcapacity. I think its hit an inflection point and you’re going to see massive amounts of automotive real estate be converted over to other business uses. Families that have been in the business 40, 50, 60, and 70 years are going to say “this is it and I’ve had enough, I’m getting out”.
Full Interview
Today this news:
Bill Heard Enterprises, the country’s top Chevrolet dealer group, is closing the doors at all of its 13 dealerships at the end of business today, according to a person with knowledge of the situation.
Bill Heard Enterprises, of Columbus, Ga., ranks No. 13 on the Automotive News list of the top 125 U.S. dealership groups, with 2007 group revenue of $2.13 billion.
AutoNation is going to pick up market share “through attrition” as Jackson said in the interview. As the things Jackson said in the interview begin to come to fruition, one has to also look at what he said about his own company.
“Significant postponed demand” were the three words that stick with me. Cars are still aging and still need to be replaced. When the current credit condition ends, and it will, Jackson and AutoNation will be in the pre-eminent position to caputre that “postponed demand”.
Got to give it to the guy, he really called this one…
Disclosure (“none” means no position):Long AN
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