AutoNation: 'Cash for Clunkers' Will Benefit Company

I think 10% may be a bit conservative. From the empirical evidence department, I know several folks who are eagerly looking into the "cash for clunkers" program's details to get a new car. These are folks who have been putting off buying a new car for the past year and a half not wanting a new car payment. But, the advertised incentives, coupled with the age of their current vehicles, has them taking a very close look at this.

From Bloomberg:

AutoNation Inc. said the “cash-for- clunkers” law President Barack Obama signed may increase new- vehicle sales at the largest publicly traded U.S. auto retailer by 10 percent through year end.

AutoNation sold 65,698 new vehicles in the third quarter of last year through its 289 dealer franchises. A 10 percent increase from the law approved yesterday may mean “roughly” an extra 4,000 new vehicles because industry demand has been running as much as 40 percent lower than last year, according to Marc Cannon, a company spokesman.

“The fact that this incentive will be available only at new-vehicle franchises is a big advantage,” Chief Executive Officer Mike Jackson said in an interview. “At a minimum it will generate a lot of traffic.”

Knowing Jackson, my guess is that 10% is "in the bag" so to speak and he is looking for much more. In the past he has said about other statements of this order, "if we weren't sure we could do it, we wouldn't say it", and to this point, he has yet to let investors down on that. No reason to expect him to start now.

Disclosure: Long AN

Comments

[yellowhoard:]

I have seen July through November as the effective dates of the program.

Do you know if that means it start on July 1st?

Jun 29 08:35 AM

[optionsgirl:]

Here's a link:
www.gm.com/cash-for-cl...

On Jun 29 08:35 AM yellowhoard wrote:

> I have seen July through November as the effective dates of the program.
>
>
> Do you know if that means it start on July 1st?

Jun 29 09:42 AM

[TradingHelp...:]

Similiar program in the UK: Extract from recent comments.

"I’ll give you another example of how out-of-touch the bureaucrats are in the UK. The government is giving a £2,000 cash grant for new car purchases if the buyer part-exchanges their old, less fuel efficient car. Well you still need to put down say £13,000 to secure the average new family car. So the middle class and wealthy who have £13,000 or more sloshing around their bank account get a nice discount to buy a car. If someone doesn’t have £13,000 spare to buy a new car, (and I humbly suggest consumers like that need the help more), you get nothing. It’s redistribution of tax-payers money from the poor to those rich enough to buy new cars. Madness".

And my recent (AN) article for reference:

seekingalpha.com/artic...

Jun 30 08:53 AM

[karenc:]

Cash for Clunkers is only a very short term solution. A more long term one is to simply allow those people who donate car to charity to claim the book value on their taxes.

Jun 30 09:41 AM

[jaxon:]

KarenNC,

Cash for clunkers is not a good short term solution for consumers. It is filled with options for dealers to rip you off. Watch this investigation, tinyurl.com/nlv3ed

Jul 17 12:55 PM

[Mad Hedge F...:]

this is a surprise? Perhaps it was the newspaper gene in me that made me screech my car to a halt when I saw a near riot in progress at my local total Toyota dealer. The showroom was more jammed than the unemployment office, with eager salesmen recalled from vacations manning card tables set up in every available space. I managed to grab one peripatetic salesman by a lapel, who gushed that they sold 45 cars yesterday, compared to ten for a normal Friday, and that 35 of these were due to the Cash for Clunkers program. Sure I could get a $4,500 credit for my 1995 BMW (17 mpg), and apply it to a new Prius (50 mpg), taking the price down to $19,500 and the monthly payment to $450/month for five years. In fact, the government stimulus program was so successful, that it ran out of money in the first four days, and congress rushed to triple it to $3 billion on Friday. It was like the survivors of a ship torpedoed at sea were swimming frantically for the only piece of wreckage that floated. Assuming that the average car drives 10,000 miles a year, and the average swap generates a mileage improvement from 15 mpg to 27 mpg, junking 750,000 clunkers will save 30 million barrels of crude a year, 1.5 days of our total annual consumption, or three days of imports. I asked to see the cars that were traded in and was told that the lots for the dealer, the used cars, and the detailer were all full, but I could see some if I went to the Target nearby where they were renting extra spaces. There I saw the fleet condemned to clunkerdom, GM Safari’s, Jeep Cherokees, Buick Regals, Dodge Ram pickup trucks and vans, and Chrysler minivans by the dozen, all with “CFC” marked on their windshields, a certain death sentence. These sorry excuses for transportation will never belch blue smoke, nor drip oil on our interstates again. I can’t imagine a sorrier commentary on the management failure of the US car industry for the last 30 years.

Aug 01 04:30 PM