AutoNation to Rename Most Dealerships to Build on Profit
AutoNation Inc. (AN), the largest U.S. retailer of new cars and trucks, plans to rename its mass market brand franchises in the first half of this year after posting record profit for 2012.
The dealership group’s 210 non-luxury domestic and import franchises will use the AutoNation moniker beginning tomorrow in south Florida, Chief Executive Officer Mike Jackson said in an interview. The changes affect 80 percent of AutoNation’s franchises, giving them names such as AutoNation Chevrolet. Premium-brand stores such as those selling Bayerische Motoren Werke AG (BMW)’s BMW brand aren’t included.
AutoNation will become the biggest dealership network to operate under one brand in an industry that pioneered the U.S. franchise system, beginning with General Motors Co. (GM)’s predecessor more than a century ago.
“This hasn’t been done before at this size and scale,” Mike Maroone, chief operating officer of Fort Lauderdale, Florida-based AutoNation, said yesterday in a telephone interview. Jackson, 63, said his discussions with Maroone about a coast-to-coast brand strategy for AutoNation date back to their first meeting, arranged by founder Wayne Huizenga, as Jackson prepared to join the company in 1999.
AutoNation today said fourth-quarter net income climbed to $83.2 million, or 67 cents a share, from $69.4 million a year earlier. Profit beat the 64-cent average estimate of 13 analysts surveyed by Bloomberg and boosted adjusted earnings per share to $2.54 for all of 2012, setting records for both the fourth quarter and full year.
U.S. auto dealerships last year benefited from a 13 percent increase in new light-vehicle sales, the biggest annual gain since 1984, according to researcher Autodata Corp. AutoNation’s new-vehicle retail sales outpaced that growth, rising 20 percent to 267,810.
AutoNation rose 8.4 percent to $48.50 at the close in New York, its biggest one-day gain since Feb. 3, 2011. The shares have surged 36 percent in the past 12 months, outpacing the Standard & Poor’s 500 Index (SPX)’s 14 percent increase.
AutoNation will boost its marketing spending by $18 million, or about 20 percent, in the first half of this year to inform customers about dealership name changes, Jackson said. For example, Maroone Chevrolet of Pembroke Pines, a store located between Miami and AutoNation’s headquarters in Fort Lauderdale, will become AutoNation Chevrolet of Pembroke Pines.
AutoNation will maintain its footprint of primarily major metropolitan markets in the U.S. Sun Belt, stretching from California to Florida, Jackson said.
“We have no ambition to be a national brand,” he said. “There are parts of the country that we are not going into. Our concentration and focus will be strengthening our position for the markets that we’re in so that we’re the dominant brand.”
“AutoNation is a strong company and a great retail brand,” Reid Bigland, Chrysler’s U.S. sales chief, said in an e-mailed statement. “Standardizing the AutoNation name in the marketplace will not only benefit them but also the vehicle lines they represent.”
The company began negotiations with the carmakers in mid-2012 to get their approval for using its name to precede the 23 mass market brands that AutoNation sells, Jackson said. The move eventually will help the company save on marketing costs and boost its presence online and in search results, he said.
“Digital will be the deciding factor in marketing in the future,” Jackson said today in an interview with Mark Crumpton on Bloomberg Television. “It’s a much more powerful and compelling concept to have one, unified brand name.”
Revenue in the fourth quarter rose 13 percent to $4.17 billion, according to a company statement. AutoNation is forecasting industrywide U.S. vehicle sales to climb to the mid-15 million-unit range in 2013, from 14.5 million last year.
“We’re in the early innings of this automotive recovery from a retail point of view,” Jackson said yesterday.
The service segment of the auto-retail industry, which Jackson calls the “foundation” of AutoNation’s business, hit a cyclical bottom in 2012 and will begin to recover for at least the next five years, he said.
Dealers primarily service vehicles that are less than five years old, and the population of those cars and trucks on U.S. roads has dropped since the industry sales bottomed at 10.4 million in 2009, the fewest in 27 years, according to Woodcliff Lake, New Jersey-based Autodata.
“All those vehicles aren’t out there in the marketplace operating, so there’s a lag,” Jackson said. “There are simply fewer vehicles and fewer customers with cars to fix. Now, you begin to rebuild the units in operation, so each year there will be more available for service than there was the year before.”
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