Comments on AutoNation Superstore closings

[sallen1]

I just learned that AutoNation has closed all of their used car superstores in California and elsewhere. The news should be in your paper today, 12/14/99. I have a couple of comments and do not intend any offense to those who work for an AutoNation dealership. The reason your dealership was purchased by AutoNation is because it is one of the best in the country and that has a lot to do with who works there.

First of all, when AutoNation hit the scene with what they called 'a new way to buy a car' there was a fantastic amount of press. The gist was that the traditional used (and/or new) car dealer was THE problem and AutoNation was THE solution. What happened? Well, to me it's obvious that the business model of 'one-price, no haggle' may be difficult to implement for used cars. It is also obvious that the AutoNation superstores was missing two essential components to be successful: Service and motivated personell. My question now is 'what will happen to the superstores?' Have you seen one? They are quite impressive stores in great locations (Spectrum in Irvine, Ontario Mills Mall, etc.)

AutoNation says they are going to focus on the 500 or so franchised dealerships they currently own. I feel for the dealers that sold these stores for AN stock because the market value is very low.

Fortunatly, these current events reflect favorably on the remaining, independant dealers. Please stay focused on what makes you succesful: Your People.

my thoughts

scott

[mbowers]

Let's see --

Earnings under expectations
$430 to $490 billion charge off
Close all used car stores
Lay off 1,800 people

All bad news, yet the stock price is up a little today.

[David Cates]

AutoNation recently moved an existing Ford dealership (Seminole Ford) into the superstore in Orlando, Florida. I heard that some of the dealers in town were upset about it, but there was nothing they could do to stop it. The superstores definitely make for quite an impressive new car / truck dealership.

I have also heard the Superstore in Jacksonville, Florida was not doing as good as they had hoped, so they may be planning the same thing here.

My guess is we will see more of this.


David

[GreggT67]

It seems all the AN used car operations weren't doing as well as they expected. Most of them were built to sell about 750 cars a month but were lucky to sell 250 to 300 cars a month. Being that far behind expectations will do wonders to the bottom line.

I wouldn't be too worried about the dealers who sold out to AutoNation. The general belief is that AN overpaid for most of the stores and with this big dip in the stock, it would probably bring valuation in line. It is rumored that some dealers may have had a stock price gaurantee in their deals so even if the stock dips, they are safe. That may explain the stock buybacks they've been doing.

There may be a brain drain in some of the first stores purchased. Most upper management contracts were written for 3 years and that 3 years is going to be up soon. It will be interesting to see if anyone leaves.

[mbowers]

I'm with Gregg. The dealers were wealthy before they heard of Wayne Huizenga.

Looks like the JAX store is going to become a Chrysler/Jeep dealership.

Keep an eye on the Tampa Bay area. I heard that the AutoNation brand name will be scrapped and the company will experiment by calling its Tampa dealers "AutoWay."

[EFConn]

Ultimately, if you are simply going to sell Used Cars as a Commodity, Brick and Mortar "Mansions" do not make a good model. Watch out for the dot.com Used Car sites, they may figure out a feasible long-term model. (iMotors.com and BestOffer.com come to mind) But they still will only be small piece of the Used Car pie. Autonationdirect.com could help their new franshises sell as many Used Cars down the road as their old "Taj Mahals" did.