Megadealer Takes In the Auto Show and Gives His Take on the Industry

As car lover Michael Jackson walks the floor of the North American International Auto Show he is 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.”

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.

General Motors Corp. agrees. In an attempt to escape a vicious and volatile incentive cycle and instead turn the focus back on the competitiveness of its new vehicles, GM announced a new pricing structure a day after Jackson's comments.

Prices for all Chevrolet, Buick, GMC vehicles and most of the Pontiac lineup will have a new price that is, on average, $1,300 lower, but in some cases is much more.

The new pricing model affects nearly 80% of GM's total volume.

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

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

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 wows 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.

The one knock against the best-selling Toyota 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,” he says.

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

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

Auto makers can profit from small cars now because of manufacturing advances, he says. “Price must be right, or it will not sell. The question is, ‘Can you make the car at the right price point?’”

Jackson's 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 55 AMG, with 480 hp.

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 “bigger, bolder and bursting with innovation.”

The new launches indicate the importance of the luxury market. Jackson says it will become one of the fastest growing.

He thinks dealers should take note of the elegant designs of the auto-show exhibits and apply 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.”