AutoNation Shows Marked Improvement In Profit Per Employee

I thought AutoNation's (AN) management made it too easy for me to pick on them as they tried to focus investor attention on excuses (like California and Florida housing market conditions) versus take responsibility for lackluster performance, while Lithia (LAD), Group 1 (GPI) and Asbury (ABG) management teams more appropriately spent their time discussing how they were trying to become better retailers.

I have not kept secret my concerns with AutoNation's management, particularly their treatment of stakeholders. And I thought the first quarter conference call was a perfect illustration of management trying to discuss everything BUT the important issue (becoming a better retailer).

So I set about to show you a couple other metrics that would finally "put the nail in the coffin" of how they are destroying shareholder and employee value. Sadly the data ran contrary to the point I was trying to prove. My mission is to raise your level of understanding, not sell you some spin or agenda. So when I find data points that run contrary to my opinion, I will be just as quick to provide that data as I am to bring data points that support my opinion. Here it goes. . .

As you know, one of my criticisms of AutoNation's management team is that they seem to neglect their employees (based on comments from current and former AutoNation employees and even other third party data sources). But at the end of the day, what really matters are not anecdotal comments, but the actual profits each employee generates (and in a commission driven business that generally is what the employees receive as well).

I was therefore impressed when I realized that AutoNation reported their general quarterly employment levels in each press release (going back more than half a decade). So when I crunched things like operating profit (including floor plan) and gross profit (not including floor plan interest expense) per employee, I noticed a pretty substantial improvement.

In the first quarter of 2007, based on the data I crunched, AutoNation's gross profit per employee was $29,324, up from $28,578 in the first quarter of 2006, and $23,800 per employee in the first quarter of 2001.

Operating profit (including floor plan interest expense) worked out to $6,184 per employee in the first quarter of 2007, down a bit from the $6,333 in the first quarter of 2006, but still up substantially from the $3,452 in operating profit per employee they generated in the first quarter of 2001.

I think if management treated investors (and folks like me that write to investors) and employees with a little more respect, and ultimately focused our attention on how they were trying to improve store and employee productivity than point to excuses (like California and Florida housing) and energy programs that seem more political in nature, stakeholders might begin to respect and appreciate some of the really good things they are probably doing.

AN 1-yr chart: