AutoNation sees car sales rebound
Crediting fiscal discipline, nation's No. 1 auto retailer manages a profit and says it expects improvement later this year.
NEW YORK (CNNMoney.com) -- AutoNation, the country's largest car dealer chain, posted a profit for the first quarter of 2009 despite a 43% decline in new vehicle sales, and said it expects to see improved sales in the second half of the year.
Shares of AutoNation rose 7% in Thursday trading.
Jackson -- who said the performance came despite a seasonally adjusted annual sales rate of nearly 9 million, the lowest in nearly 30 years -- was more upbeat about the rest of 2009.
"Although first-quarter industry sales were lower than expectations, we agree with industry projections that sales rates will improve in the second half of this year," Jackson said in the statement.
Easing of credit will help sales, Jackson told CNNMoney.com, and he expects some a "cash for clunkers" stimulus bill to pass Congress.
"The downward spiral is broken," Jackson said.
Jackson expects second quarter sales to be equal of better than the first quarter's, he said. Sales will be running at about a 10.5 million to 11 million unit rate by the end of the year, he said, a slight improvement from today.
The company reported first-quarter net income of $49 million, or 27 cents a share, down from $56 million, or 31 cents a share, in the first quarter of 2008.
This year's first-quarter figure includes $9 million, 4 cents a share, in special items. Adjusting for those items, income from continuing operations was $40 million, or 23 cents a share.
Analysts had expected a profit a 16 cents this quarter, according to Thomson Reuters.
Sales for the industry overall declined by about 46% compared to the same period last year, according to figures cited by AutoNation.
AutoNation's income from domestic vehicle sales declined 47% in the first quarter compared to last year. Import vehicle sales declined 45% and premium luxury car sales declined 31%.
Auto dealers have been hit hard by declines in auto sales driven by a poor economy and tight credit. Sales of domestic vehicles, particularly those of General Motors and Chrysler, have been effected by concerns over the automakers business prospects.
Both automakers have recieved billions of dollars government financial assistance and are weeks away from a decision on whether that support will continue.
With one week to go before a April 30 deadline to form a partnership with Fiat, Jackson said he is not fully convinced Chrysler will survive. However, based on discussions he has had with the Treasury Department's autos task force, he said he does not see a Chrysler failure as an economic disaster.
"If there is an unwind of Chrysler, it will be done in an orderly fashion," he said.
The fact that the autos task force is also overseeing GM's restructuring will help them to control any damage from a possible Chrysler collapse by coordinating it with the GM restructuring, Jackson said.
For instance, valuable Chrysler assets such as its Jeep brand and its minivans could be transferred to GM, he said.
Jackson said he is fully confident that, whether through a bankruptcy process or out-of-court restructuring, GM will continue as an ongoing business for the long term.
In 2008, about 900 individual auto dealerships went out of business, according to the National Automobile Dealers Association. That's compared to a loss of 75 to 90 dealers in a typical year of economic growth.
AutoNation operates 239 dealerships under a variety of names across the country.
The auto retailer also announced that it had reduced its debt by about $500 million during the quarter for a total debt reduction $1.25 billion since the beginning of 2008.
Jackson credited a $200 million cost reduction program for the profit performance. He also cited lower interest rates and improved profit margins on used vehicles.
American consumers will face a permanently altered auto sales environment once the current industry crisis is over, Jackson said, adding that with manufacturing capacity reduced to better match actual demand, the age of heavy rebates and deep discounts will be over.