AutoNation SOS call goes to 'dealer guy' Jackson

FORT LAUDERDALE, FL - The AutoNation ship was heading for an iceberg when the first $20 billion megadealer turned to its new skipper Mike Jackson to help avoid disaster.

In fact, the situation was Titanic-like in the eyes of the company's founder and chairman, the visionary billionaire H. Wayne Huizenga. Mr. Huizenga's four-year-old collection of 290 of the highest-volume dealers was bringing in $20.1 billion in the all-time-high industry year, but AutoNation, Inc., profits were lagging and the stock price was plunging. Which, in turn, meant dealers who sold to the then-Republic Industries for stock in 1997 and 1998 were taking a personal bath while their stores were joining in the industry-wide boom.

A rescue specialist was desperately needed, preferably a "dealer guy" with experience in auto retail cycles and in tune with the exploding world of selling new and used vehicles electronically.

"I had led Mercedes-Benz of North America out of a slump in the 1990-91 period," recalls onetime dealer Michael J. Jackson, "and when Mr. Huizenga offered me this job last summer, the timing and opportunity seemed to be right, even though the problems at AutoNation were staggering. It was a challenge - and I like challenges."

Under orders and with incentives to turn AutoNation around swiftly, the new skipper axed one of Mr. Huizenga's fondest creations - the money-losing used-vehicle superstore operation - and laid off 2,000 employees.

That move confirmed Wall Street analysts' belief that publicly owned corporations could not successfully run dealerships, even though established principals had been left in place at nearly all of the stores purchased by Mr. Huizenga and his co-founder and former co-CEO, Steven R. Berrard.

Interviewed in his spacious 30th floor office atop the AutoNation headquarters building, Mr. Jackson is deploying a comeback strategy with a blend of new and old initiatives, designed to raise AutoNation net profits from $288.7 million in 1999 to $425 million this year, or from 66 cents a share to 90 cents a share.

The programs, which Mr. Jackson and his group executives, former South Florida dealers Michael E. Maroone and Stephen Moore, are advancing to gain this goal include:

* Building metro-market platforms like the Denver-based pioneer John Elway group established in 1998 and the new AutoWay collection in the Tampa Bay area. Next prospective platform sites are Dallas and southeast Florida.

* Rolling out AutoNation.direct. com web site sales offices in all 290 dealerships as soon as possible, with links to auto data portals giant Edmunds.com, CarPoint.com and major factory sites. The Internet generated $1 billion in AutoNation vehicle sales last year and Mr. Jackson's goal is $1 1/2 billion for 2000. AutoNation's Compass software, showing the network's 100,000-unit vehicle inventory, is a prime web feature.

* Adding major dealer groups as AutoNation.direct.com licensees, the first of which include Don Flow based in Winston-Salem, NC; Herb Chambers in Boston; John Bergstrom in Neenah, WI, and Walzer in Minneapolis/St. Paul. These licensees will be in metro markets lacking AutoNation-owned stores.

* Constantly refining the network to focus on major brands and metro markets. Courtesy Ford was added to the 17-store Elway pilot in Denver, while a Lincoln Mercury outlet in Aurora, CO, was sold off. A GM dealership was sold in Midland, TX.

* Choosing "preferred providers" for F&I, such as Bank One Credit Co. for leasing.

Kim Hackett, former partner of Louisville, KY, megadealer Sam Swope in an Orlando group sold to AutoNation, took over the AutoNation stores co-owned with Ford in Rochester, NY, in February.

Two former group vice presidents whose groups were sold to AutoNation in its buying-binge days, Cleveland's Jerry Mullinax and Denver's Marshall Chesrown, have left the company. Mr. Jackson says no new dealerships will be acquired until 2001 as the focus on cost-saving strategies escalates.

"Later this spring," Mr. Jackson, 51, tells Ward's Dealer Business, "AutoNation will spin off its vehicle rental division so that we will be strictly centered on auto retailing. We're looking at a softer market in 2000, due to rising gas prices and interest rates, but our goal for 500,000 new-vehicle sales still stands because of our high hopes for establishing ourselves as the lowest-cost provider and the preferred place for Internet shoppers to go.

"Our 18-dealer Elway platform web site in Denver gets 1 1/2 million visits a month," he says. "Multiply that across the nation and our 400 franchises should prove quite successful as leaders in their markets."

That outcome would gladden the former Bethesda, MD Mercedes-Benz, Acura-Saab dealer personally, as well. Mr. Jackson is being paid a salary of $1 million this year, with a $1 million bonus riding on a profits turnaround and 1,000,000 stock options awarded at AutoNation's recent lows of $7-$8.

The stock sold at nearly $45 after its initial public offering in 1997, followed by the dismaying downhill ride for dealers who sold to AN then, but it's an enticing reward goal now for Mr. Jackson if he brings elation to AutoNation.

MIAMI - AutoNation's intensified Internet sales operation already is more than doubling the closing ratios of leads and visits produced by portals like CarPoint, says Randall L. Rahe, the mega-network's vice president of e-commerce operations.

Working on a seven-day basis, like other Florida dealers, the two-man Internet sales team at AN's Miami Honda closed 20 new- and used-vehicle visits in February out of about 180 inquiries, says Internet sales manager Carlos M. Rubio.

Internal CarPoint surveys report an average of 5% closings by Internet hits, says Mr. Rahe, "so we're ahead of the curve and planning to increase our rations all across AutoNation."

Working with pagers out of a dedicated Internet sales office in the 75,000-sq.-ft. Miami Honda dealership, Mr. Rubio and his assistant, Randy Revan, expect to boost their monthly closing total to 30 a month out of the dealership's average monthly volume of 450-320 new and 120 used.

"Night or day," says Mr. Rubio, who emigrated from Cuba in 1995, "Randy and I respond to all hits in 30 minutes. The fun part is pitching Honda over inquiries about Toyota or Nissan, in Spanish or English, to shoppers as far away as St. Croix or Panama City, FL, up north."

Internet sales are a big factor in the AutoNation turnaround orchestrated by new President and CEO Michael J. Jackson. Leading producer of Internet sales among AN dealers on a per-volume basis is Downers Grove Dodge, outside Chicago, with a 30% average for closings attributed to e-commerce.