September 19, 2018 — After nearly 20 years at the helm of the nation’s largest dealer group, the AutoNation Mike Jackson joined in October 1999 strategically is not much different than the one he will step away from in the next few months.
Jackson, 69 years old, announced earlier this morning he will step aside as chairman, CEO and president in early 2019 and become executive chairman, a role he is signed for through 2021. The transition will happen once the board names a new CEO.
Jackson has had a remarkable run. Today, AutoNation is in much better shape financially than it was in 1999 when late founder Wayne Huizenga convinced Jackson to leave his post as head of Mercedes Benz North America to lead the publicly traded dealer group. At the time, AutoNation, which had grown to more than 260 dealerships with 400 franchises along with 34 used-car supercenters over a four-year period, was plagued by low margins and waning credibility on Wall Street. Revenues are somewhat similar — $21.5 billion today compared with $20.1 billion then — but AutoNation’s 3.9% operating margin in 2017 is much healthier than the 2.3% it posted in 1999.
(According to the most recent data from the National Automobile Dealers Association, the average dealership generates about 2.3% in profit. The six publicly traded dealer groups — AutoNation, Penske Automotive, Lithia Motors, Asbury Automotive, Group 1 Automotive and Sonic Automotive — averaged 3.4% operating margins in 2017.)
During Jackson’s tenure, AutoNation generated a shareholder return of approximately 340% with an earnings per share increase of 570%, according to a statement from the company today.
Shortly after Jackson took over AutoNation the stock dropped to about $4 a share but started climbing almost immediately. After dropping back to the $4 range during the recession a decade ago, it reached as high as the mid-sixties in 2015, and now has settled back into the $40’s. Revenues also dropped to just over $10 billion during the recession, but have steadily increased the last several years.
Jackson wasted no time in reshaping the company. In many ways, AutoNation was a discombobulated group of companies thrown together by acquisition. In the late 90’s, the company included a national waste disposal firm, and companies in the electronics, car rental, used cars and franchised dealerships sectors. Huizenga had already begun transitioning the company into one solely focused on retailing new cars spinning off the car rental agencies and the waste disposal company while changing the stock symbol from RII (Republic Industries) to AN (AutoNation) in April 1999.
Jackson, though, sharpened AutoNation’s focus. He immediately moved to take AutoNation out of the used-car super store business shutting down 23 of its 26 used-car super centers and rolling the other three into its franchised operations in his first couple of months (eight others were operated by third parties). He also shifted its focus from becoming a national brand to creating strong local and regional brands.
Jackson also moved AutoNation from being a public company in name only to one with strict corporate processes and procedures. AutoNation integrated technology systems while eliminating high-priced dealer management systems. The company also implemented strict inventory controls. The group began getting rid of dealerships that proved to be a drag on corporate earnings and replaced them with stores and brands generating stronger margins.
The moves paid off. In his first full year, Jackson increased AutoNation’s operating income from 2.3% to 3.5%.
The company also was a pioneer in the nascent digital age launching AutoNationDirect.com and creating an online lead management tool called Compass.
Fast forward to today as the auto industry moves into uncharted waters. To prepare for the future, Jackson has returned AutoNation to its roots while diversifying from being solely a new car dealer group.. Strategically, the company has come full circle. It has approximately 240 franchised dealerships selling about 350 brands — not much different than in 1999. Although, the mix is much different today and is less weighted toward domestic brands — with revenues split evenly between domestic, import and luxury. Within the last five years, AutoNation once again has begun building a national brand, renaming most of its dealerships with the AutoNation moniker while creating AutoNation Express to manage digital online sales.
The company also has added finance and insurance products along with parts, accessories to the AutoNation brand. It’s also returned to the used car business creating the AutoNation USA brand with five used-car super centers with several more planned. Additionally, the company has added 81 collision centers and recently announced a partnership with Waymo to service its fleet of autonomous vehicles.
But the company has stayed out of the quickly growing vehicle subscription space, mainly due to concerns about a sustainable business model.
Jackson said this morning on CNBC’s Squawk Box the time is right to make the transition. The board is considering candidates for his replacement from both inside and outside the company with the criteria being the person has to be an outstanding business leader. It will be interesting to see if anyone from inside the ranks at AutoNation catches the board’s attention. bench that has changed in recent years with former long time President Mike Maroone leaving to start his own group in Colorado in 2015 and his replacement Bill Berman leaving in 2017. Nevertheless, key executives such as Chief Marketing Officer Marc Cannon, CFO Cheryl Miller, Executive Vice President, Sales and Chief Operating Officer Lance Iserman, Executive Vice President of Customer Care and Brand Extensions Scott Arnold will likely get hard looks.
Jackson’s automotive career began by accident in 1971. He had his sights on Georgetown Law School following his graduation from St. Joseph’s University in Philadelphia. Those plans were derailed when his 1959 Mercedes 190SL broke down while on a trip with his wife. To pay for repairs, Jackson negotiated with a Mercedes dealership to work as a technician’s apprentice for a few months. He soon abandoned the law school plans and became a Mercedes Benz service technician.
By 1974, Jackson left the dealership and joined Mercedes as a technician specialist helping dealership service departments solve difficult technical issues. In 1979, Jackson partnered with a group of investors from Europe buying a Mercedes store in Maryland. Under Jackson’s leadership, the sleepy store transformed into a regional powerhouse of 11 dealerships selling several European luxury brands over a 10-year period.
Following a two-year stint as head of Mercedes’ national dealer council, Mercedes executives convinced Jackson to join the manufacturer as senior vice president of sales and marketing in 1989. It was a difficult time for Mercedes as sales fell below 60,000. Jackson changed the marketing focus to one that better suited the U.S. market.
Meanwhile, Mercedes began pruning its number of dealerships which had swelled to more than 400. Following his promotion as president and CEO of MBUSA in 1998, Jackson reduced the discount margin dealerships received for several vehicles (the difference between MSRP and dealer invoice) from 13% to 7%. The move proved to be controversial but was instrumental in driving sales to record levels above 200,000.
Jackson decided to leave Mercedes and join Huizenga following the Daimler Chrysler merger.
Although some dealers grumble at Jackson’s outspokenness — he’s a frequent speaker at industry conferences and is a regular guest host on CNBC’s Squawk Box — he has been a fierce defender of the dealership model and often is willing to tackle tough subjects publicly such as pushing back against manufacturer stair-step incentive programs and inventory practices.
As a capstone to his nearly 40 year career that is winding down, Jackson was inducted into the Automobile Hall of Fame this year.