• Logout
  • Member Center

Auto industry’s rebound continues

 

AutoNation’s car sales up 13 percent as buyers scoop up cheap loans and give up on clunkers. Next up: fixing dents. Repair dollars still in the doldrums.

dhanks@MiamiHerald.com

Car buyers may be getting even braver.

AutoNation reported a 13 percent revenue boost for the final three months of 2011, thanks largely to higher sales on domestic vehicles. The national chain of auto dealerships with headquarters in Fort Lauderdale predicted an even stronger 2012, as cheap auto loans and a mending economy prompt more consumers to replace aging vehicles.

Fourth-quarter profits slightly beat expectations for AutoNation, finishing the quarter up about 3 percent to $70 million. AutoNation’s vehicle sales hit $9.7 billion for the year, up 13 percent from 2010 — the latest sign of recovery for an industry on the precipice during the depths of the financial meltdown.

“There’s a lot of pent-up demand,’’ said Rick Case, owner of six Broward dealerships as well as locations in Atlanta and Ohio. “People need cars. And banks want to finance cars. They don’t want to finance houses.”

Taxes collected on auto sales in Broward and Miami-Dade are up about 15 percent from lows set in the fall of 2009 in , according to state figures. Compared to 2010, they’re up 4 percent in Broward and 6 percent in Miami-Dade as of October, the most recent month with available numbers.

Nationally, dealers are on track to sell about 13 million new vehicles in 2011, up from 11.5 million in 2010. In an interview with CNBC touting AutoNation’s record per-share profits Thursday, CEO Mike Jackson predicted industry sales would hit 14 million by the end of 2012.

“That says something for the entire auto industry and for the economy recovery that’s under way in the United States,” Jackson said. “Autos will be a bright spot for the U.S. economy this year.”

AutoNation owns clusters of dealerships across the country, including Maroone in South Florida and dealerships that once carried Denver Broncos legend John Elway’s name in Colorado. On a day when the S&P 500 index finished down slightly, AutoNation (one of the index’s 500 component companies) saw its stock gain about 1 percent to $36.82

Thanks to steady purchases of its own shares AutoNation posted a record earnings-per-share for the fourth quarter: up 9 percent to 49 cents a share. AutoNation announced another $250 million in “buy backs” on Thursday, a plan that can boost stock prices by reducing the number of shares for sale.

Taking the long view, both auto sales and AutoNation remain battered by a downturn that shuttered about 3,000 dealerships across the country and put Chrysler and General Motors into bankruptcy as part of Washington’s bail-out of the industry. The current rebound began with 2009’s tax-funded “Cash for Clunkers” program, in which Washington paid people to trade in their older vehicles.

Between 1997 and 2007, auto sales have averaged about 16.5 million a year, which is still 20 percent above the 14 million Jackson expects for this year. Locally, sales tax from auto purchases are down about 25 percent from peaks set in 2006. Cars also older than ever, with the average age of an American vehicle hitting 10.8 years in 2011, consultant R.L. Polk & Co. announced last week.

AutoNation’s income statement reflects the damage too: the $13.8 billion in total revenue AutoNation collected in 2011 is 18 percent below 2006’s total, the last full year before the 2007-09 recession. In fact, AutoNation is bringing in only about 10 percent more than what the company made in 1999.

Brian Sponheimer, an auto-industry analyst for Gamco Investors in New York, noted AutoNation’s luxury sales helped give the year-end results a boost, with AutoNation up 10 percent compared to the 7 percent for the industry overall. “They’ve done an outstanding job from a profits standpoint,” he said.

One element of AutoNation’s business remains in the slow lane. Revenues from AutoNation’s service departments are up just 3.8 percent in 2011, as customers continue waving off extra maintenance, fixing dents and replacing worn tires.

That’s holding back profits, since service is the most profitable place in a dealership. While AutoNation makes about seven cents for every dollar spent on a new car, it takes 40 cents in profit from every dollar spent in the service department.

Mike Maroone, AutoNation’s chief financial officer, said the improving economy has customers spending more freely on service. “We’re seeing a shift in that trend for the first time in three years,’’ he said.

dealsaver
The Miami Herald: Subscribe now!

Join the discussion

The Miami Herald is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

We have introduced a new commenting system called Disqus for our articles. This allows readers the option of signing in using their Facebook, Twitter, Disqus or existing MiamiHerald.com username and password.

Having problems? Read more about the commenting system on MiamiHerald.com.

Hide Comments

This affects comments on all stories.

Cancel OK
0 comments

  • Videos

  • Quick Job Search

Enter Keyword(s) Enter City Select a State Select a Category