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AutoNation boss cites strengths despite $1.4-billion loss

By James Thorner, Times staff writer
In print: Friday, November 7, 2008

AutoWay Chevrolet of Clearwater salesmen wait for potential customers during a June sale. Dealers have been hit hard this year by the sluggish economy and credit crunch. Even more successful retailers, such as the AutoNation chain, are seeing losses.
	[JOSEPH GARNETT JR. | Times]

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For auto dealers, the economy this year has been a road strewn with boulders. The ride has been so wrenching that AutoNation, historically among the most successful car retailers in the country, recorded a $1.4-billion third-quarter loss Thursday. Though the loss wasn't in actual cash but reflected depreciation of stock and assets, it's a tough time for the chain of 238 stores based in Fort Lauderdale. Its share price settled at $5.77 Thursday, about a third of what it was six months ago. We spoke with company president Mike Maroone about the fate of AutoNation and its 14 locations in the bay area, most operating under the AutoWay brand. Some excerpts:

The industry keeps talking about consolidation and store closings, up to 700 this year. What are your plans for closing Tampa area dealerships?

There is none at this point. From time to time we'll close dealerships nationally, but it's not a key point of our strategy. We've increasingly bought import and luxury stores and divested of domestic stores.

I think you'll see right-sizing of our organization to meet the need of today's business. We have 22,000 full-time employees. Thus far this year we've taken it down about 2,000. I think it's something we'll look on as ongoing.

How sound is the company's future? Any truth to rumors that AutoNation could fail?

It couldn't be further from the truth. We make a healthy profit. We generate a tremendous amount of cash. That rumor is absolutely false.

How will current lower gas prices upset plans to hawk fuel-efficient cars?

I think it's a short-term aberration. Most people would say the price of oil was too high. Now there's an overcorrection on the low side. Most people realize it's a finite resource. I don't think gas will be $2 long term.

How much faith do you place in plug-in electric cars like the soon-to-arrive Chevrolet Volt?

It's premature. We haven't seen all the pricing on the Volt. But we're really excited about these types of cars, be they diesels, hybrids or plugs-ins. There's absolutely a market for them.

About a third of potential auto buyers can't get loans. When will the credit crunch ease so that financing can proceed?

Anyone who thinks he can project that is fooling himself. It's about breaking that credit logjam, and no one knows when that will happen. Consumer confidence is shaken. It's driven by financial panic. We can get sub-prime people financed — maybe not as many as before. I think people in the prime lending basket will still be able to buy cars with no money down.

Was this quarter's loss the worst in your company's 17-year history?

We've never had a loss of this magnitude — nor has anyone else in the business.