As Michael Jackson, a lover of cars, walks the floor of the North American International Auto Show he is visibly impressed with many of this year's offerings.

But the president and CEO of AutoNation Inc., the world's largest dealer group, has other things demanding his attention in addition to the bevy of vehicles on display.

Jackson has made no secret the last year that he favors a more realistic pricing model when auto makers bring new vehicles to the market.

“There is a huge gap between the manufacturer suggested retail price (MSRP) and the price people actually pay for the vehicle,” Jackson says. “And that is not where you want to be.”

Mike Jackson

Jackson admits the transition from today's heavy incentive pricing to a value-pricing system will be difficult. “But you have to find a way to put integrity back into the system,” he says. How would he do it? “I'd just cut prices,” Jackson says.

Apparently, General Motors Corp. agrees. The auto maker reportedly will announce at the show this week that it is reducing prices on several vehicles by as much as $1,000 in an attempt to create a more realistic pricing model for customers.

Jackson, though, believes tactical rebates will not go away, but “it's just a matter of finding the right balance,” he says. When asked if value pricing would hurt dealership profitability, Jackson dismisses the notion quickly.

“We practically already give the cars away now,” he says. “Remember, we only make 7% on the new-car sale.”

For Jackson, honest pricing is not the only component affecting auto makers and dealers. Another critical business aspect is design, and Jackson's enthusiasm is evident as he migrates from exhibit to exhibit.

“Bolder and distinctive design is the place you want to be,” Jackson says. “If you're just plain vanilla, you're going to be second on everybody's list, and that's not going to get you the sale.”

Jackson stops to admire the Dodge Challenger, a curvy, yet muscular retro pony car concept that wowed the show.

“This is a 'no-holds barred' car,” he says of his show favorite thus far. “There is no turning back now, Dodge has to build it.”

Jackson also is impressed by Chevrolet's latest rendition of the Camaro, rumored to return to the streets in 2009.

“If the Challenger and Camaro don't get you're heart started, you shouldn't be here,” he says. “I think both cars will end up getting produced and, as a result, it will be a more exciting marketplace.”

Of course, Toyota Motor Corp.'s Camry, the best-selling car in America, may be the one exception to the rule.

The one knock against Camry has been its vanilla design. But, says Jackson, Camry has built up such a loyal following through the years, auto makers that have lost that sedan business and now want it back will have to do it through design.

“Either Toyota has to screw up the Camry, and that isn't going to happen,” says Jackson, as he points at the new silver '07 Camry on display, and what may be Toyota's boldest design yet for America's favorite vehicle, “or you've got to be better than the Camry. And the only chance is through design. If you just match the Camry, those customers are not going to come back to you.”

Jackson believes one of the themes of this year's auto show is that something interesting is happening in every segment.

“Just look at the sub-compact space,” says Jackson.

Four auto makers are displaying new models for the segment: Honda North America Inc. unveiled the Fit, slated for showrooms this April; Ford Motor Co. showed off the Reflex concept; Nissan North America displayed the Versa; while Toyota showed the Yaris.

(See related story: Honda Seeks Perfect Fit)

(See related story: Ford Looks For Small-Car Sales)

“They certainly did not just start working on these vehicles this year as a response to higher gas prices,” Jackson says. “They have been developing these for sometime.”

Auto makers can be profitable in the small-car segment now because of recent advancements in manufacturing processes, Jackson says. “Price must be right, or it just will not sell,” he points out. “The question is, 'Can you make the car at the right price point?'”

Jackson first love, though, is the luxury segment. “After all, that is where I came from,” he says, referring to his earlier days as a Mercedes dealer and then head of Mercedes-Benz North America.

He currently drives a Mercedes CLS 55AMG, with 480 hp and makes no apology for an affinity for driving fast.

Jackson stops by the new Mercedes S-Class and talks about what he calls the “battle of the super luxury sedans.”

“It is unusual that we have two of the premier luxury sedans launch in the same year,” he says, referring to the S-Class and the new Lexus LS 460. “Both are bigger, bolder and more masculine. And they are bursting with innovation.”

The new launches indicate the importance of the luxury market, Jackson says, adding it will be one of the fastest-growing segments in the next five to 10 years.

As a result, AutoNation, which historically has been heavily weighted toward the domestic brands, now is becoming more luxury-minded. Nearly 28% of the group's profit currently comes from the premier luxury segment.

Along with the bolder design and innovative content that can be found across all segments at this year's show, Jackson, whose company spends $120 million annually on updating its stores, thinks dealers should take note of the luxurious and elegant designs of the exhibits and implement the same philosophy in their dealerships.

“Design is playing an ever more important role in American culture,” he says. “We have to realize our customers are interacting in a world much larger than our little automotive world. And they are bringing those expectations of premium luxury through the door of the dealership.”

cbanks@primediabusiness.com