A car guy's Rx for fixing Detroit

(Fortune Magazine) -- Mike Jackson, 57, chairman and CEO of AutoNation

You'd think the guy in charge of the country's largest auto retailer would be doing doughnuts over the drop in oil prices to $60 a barrel. Well, he isn't. In fact, Mike Jackson is campaigning for higher gas taxes to reduce consumption. Having begun his auto career at the bottom - as a service technician at a Mercedes-Benz dealership in Cherry Hill, N.J.- Jackson, whose company is controlled by hedge fund manager Eddie Lampert, has always had an unvarnished view of cars. Here he explains his Rx for Detroit to Fortune senior editor Alex Taylor III.

What would you think of a GM-Renault-Nissan alliance ?

These things usually fail, and GM (Charts) is gaining momentum in its restructuring on its own. On the other hand, Carlos Ghosn [the chief executive of both Nissan (Charts) and Renault] has demonstrated the ability to create value. Without him, it is a nonstarter.

How about a GM-Ford (Charts) merger?

It is like saying to somebody who weighs 300 pounds that you ought to put on another 200 pounds because then you can lose more on your diet.

Why are merger talks even necessary?

Detroit is still paying for the sins of the past, when it had an insular mindset that was production driven, and it built cars with high cost and poor quality - a deadly combination. When the market shifted, the response was short term and incremental in nature. They are doing better, especially GM, but they have to move faster.

With all their problems, how can U.S. automakers get competitive again?

When you add it all up, they have a cost and perception disadvantage of $4,000 to $5,000 per car. They need to win back consumers with bold American designs, along with compelling everyday low prices.

Why are Toyota (Charts), Honda (Charts), and the other Asian companies so good?

They have used market-driven behavior for decades as they combine long-term strategic goals with short-term flexibility. They make mistakes, but they learn from them and embrace those lessons in future products. They have built customer loyalty for decades, and unless you give buyers a reason to change, they will keep buying their cars.

So why aren't you happy about the drop in oil prices?

I like a drop in crude oil prices - we send fewer dollars to OPEC. It is the drop in gasoline prices I have an issue with. If gas prices go down, American consumers will not change their behavior and it will undercut the economics of alternatives like hybrids. I believe we need to raise the gasoline tax by $1 a gallon, phased in over ten years, to change consumer behavior and drive down the price of crude.