AutoNation's CEO Rails Against 'Wholesale Incentives'

| About: AutoNation Inc (AN)

Staying on the topic of the Auto Industry, here is a great little tidbit about the CEO of AutoNation (NYSE:AN) speaking out against the Detroit automakers offering "wholesale incentives" in order to get dealers to carry more inventory during a time when sales are declining:

(From the WSJ): "...Mr. Jackson is at it again, this time railing against “wholesale incentives” — financial bonuses auto makers pay if dealers agree to take additional inventory. Chrysler just announced a program this week to get dealers to stock up at a time when vehicle sales at sagging.

At a J.D. Power & Associates conference in New Orleans, Mr. Jackson said the use of wholesale incentives is “a dangerous new development.” He said this is “not in the best interest of the manufacturer” because the extra vehicles any dealers order will most likely languish on dealer lots and the car maker will only end up slapping big rebates on them later to clear them out.

“To me,” he said, “it’s a little bit like being in winter storm and p—— on your boot to keep your foot warm.”"

While Mike may have used some rather harsh language you really can't argue with his point, Detroit needs to learn the difference between making a sale at any cost and making profitable sales. It's better to have a profitable 10% share of the market then to have a money losing 20% share of same.

In other news I don't know much about Mr. Jackson but I have to say I find his candor refreshing, as a consultant I deal with so much corporate double speak, spin and sugar coating that it sometimes makes me feel quite ill. Needless to say I'm the guy who sometimes ruffles feathers for being blunt, but what they call being blunt, I call being honest and objective.

But perhaps that's a topic for another post.

You can read the original article in full here; the WSJ's Auto Industry tracker is a great little blog on the auto industry and you can find it here.

Sources:

WSJ - Auto Industry Tracker: "AutoNation's Mike Jackson Calls New Incentives Dangerous" -- Neal E. Boudette, January 23, 2009.

Disclosure: at the time of publishing the author didn't own a position in any of the companies mentioned in this article; the ideas expressed are solely the opinions of the author and shouldn't be viewed as financial or investment advice.