AutoNation is the largest car selling chain in the U.S., so when its CEO speaks at a major industry event, people tend to take note and react.
So last week when Mike Jackson, AutoNation CEO, spoke at the Automotive News World Congress, his harsh criticisms and praises for the American automakers likely reached their intended targets in Michigan.
Jackson specifically took issue with the known practice in which major automakers offer “stair-step” style kickback programs for dealers based on the volume of vehicles they move, either on a monthly or an annualized basis. The CEO pointed out that the practice has negative and counter-productive effects – particularly for dealers who he believes lose trust from customers due to the inconsistency of pricing.
For example, at one point in the month a dealer may tell a customer that the best possible price they can offer is one amount, but towards the end of the month if the next step is either reached or close, dealers may then be able to offer lower pricing. The net result is that customers lose trust in dealers as they get word of the inconsistencies.
“It undercuts the confidence, goodwill and integrity around your pricing. Customers no longer believe us when we tell them: ‘This is the best price you’re going to find,’” said Jackson.
Rather than simply offer complaints, the outspoken CEO also offered his suggestions to side-step the stair-step problem: price vehicles closer to their average transaction prices in the first place, effectively reducing the need for hassle-filled negotiations that potentially alienate customers. Jackson also suggested that the money otherwise used on incentives could be put towards fixing specific issues over the life of the products they would have been used to sell.
Praise amongst the problems
Not everything Jackson discussed had a negative undertone, and in fact, some had a very positive message. The CEO discussed how happy he was with the Detroit Three for transitioning away from their old habits of forcing an excess of vehicles onto dealers and then devaluing the products with heavy incentives in order to maintain higher volumes of sales. This was an issue Jackson had taken on in the past, and the AutoNation chief likely hopes that his newest complaint will be handled in a similar fashion.
Not everything Jackson discussed had a negative undertone, and in fact, some had a very positive message. The CEO discussed how happy he was with the Detroit Three for transitioning away from their old habits of forcing an excess of vehicles onto dealers and then devaluing the products with heavy incentives in order to maintain higher volumes of sales. This was an issue Jackson had taken on in the past, and the AutoNation chief likely hopes that his newest complaint will be handled in a similar fashion.
Interestingly, Jackson also took a moment of his time behind the mic to give praise to Ford Motor Company, and more specifically, its CEO. The AutoNation chief said that the city of Detroit ought to, “pass a hat and take up a collection to build a statue [of Alan Mulally].” Jackson believes that Mulally’s decision to take part in the bailout discussions – despite opting out of government assistance for his own company – was key to the survival of both General Motors and Chrysler.
Jackson believes that by putting the spotlight on Ford it gave hope to Congress and taxpayers that American automakers were capable of changing for the better if given a chance.
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