AutoNation’s (AN) Mike Jackson did the following interview yesterday on PBS
JEFF YASTINE: Earlier today, I spoke with Michael Jackson, CEO of AutoNation, the largest chain of auto dealerships in the country. I began by asking him how soon his business will feel the impact of the plan and when his customers will be able to get loans.
MICHAEL JACKSON, CEO, AUTONATION: As far as I`m concerned, the sooner the better, but it is going to be tough to predict exactly when it is going to happen. The banks have been saying no, looking for every excuse to say no, and they`re saying no to good costumers with good credit, with business that is very good for them. So clearly the banks are out of money to lend, and hopefully with the Treasury`s initiatives here, they can be back in business as soon as possible.
YASTINE: Now you`re the nation`s largest auto retailer, how bad is business, really?
JACKSON: Well, you know, it is a difficult economy to begin with. We`ve been struggling with it for the past two years, and we had the gasoline crisis in May, and by August, our business had stabilized from that. But then the credit squeeze turned into a credit crisis and a credit panic in the month of September, and it has impacted business by another 10 to 15 percent.
YASTINE: Do you think this bailout is enough boost consumer confidence, and restore trust in the financial system again?
JACKSON: It was — it is an absolute essential step on the journey back. Without it, there is no chance. But with this, I think that you`ll gradually rebuild trust and confidence, both with the banks and customers, and at least we can get the credit panic behind us. But we still, then, have to deal with the fundamentals of a weak economy, which are going to take more time to get through.
YASTINE: What are you telling your dealers at a time like this?
JACKSON: Just keep the visibility, and tell everybody it is not them, it is the environment. And we will get through this. We`re still solidly in the black and we`ll manage through this.
YASTINE: You know, one of the big Chevy dealers in the Southeast went under, went bankrupt last week. Will you be forced to close dealerships in a similar fashion, closing them in this environment?
JACKSON: Well, our business model is very different than what is happening — what happened to that Chevy dealer and some of our other competitors. They ran a business model of huge inventories with huge marketing budgets, high pressure tactics with razor thin margins. And that business model, with overcapacity and a dramatic decline in the business simply will not work.
YASTINE: You know, Mike, do you think we`re actually in a recession, and if so, the crystal ball question, of course, how long will it last?
JACKSON: I think the third quarter will show negative growth, and that`s even before the credit crisis and the credit panic really took off at the end of the quarter. So the economy is in serious trouble. What you cannot have, though, is a weak economy combined with a credit crisis/credit panic. You know, you have to go back to 1900 or 1930 to find similar circumstances. But when business is already weak and credit availability dries up, and by the way, the other shoe to drop will be that interest costs actually go up. If you look at the spread rates on LIBOR, because of the credit crisis, they`ve expanded by 200 basis points. So that`s a toxic combination that simply cannot exist for long or you do tremendous damage to the economy. Thank goodness Congress has acted and given the resources to Mr. Bernanke and Mr. Paulson, who are fighting this battle for our economy. And hopefully they take these new resources and apply them effectively to the market place and we can get things moving again as soon as possible.
YASTINE: Mike, thanks for your time on the program.
JACKSON: Thank you. My pleasure.
YASTINE: Our guest, Michael Jackson, CEO of AutoNation.
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Disclosure (“none” means no position):Long AN
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