One on One with AutoNation CEO Mike Jackson

Special To The Auto Channel
By Marty Bernstein
AIADA Contributing Editor

The day-to-day complexities of running a business that in 2006 generated a little shy of $19 billion dollars in sales from 257 dealerships selling 37 different brands in 5 states across the Sunbelt regions of the United States alone are simply staggering. On top of the everyday issues one would expect to encounter in the running of such an enormous retailer, add the decisions regarding corporate policies, planning, and programming — decisions that impact every area of the business and the company’s 26,000 employees.

If you can imagine all that, you have an idea of what Mike Jackson’s life is like. While his name is similar to the King of Pop, his long-list of accomplishments in the auto retail industry label him as a true King of Cars. Mike Jackson, the ebullient 58-year-old chairman and chief executive officer of AutoNation, has done more to change the shape of automotive retailing in America than any other. Getting time with Mike is not an easy feat, but I was able to meet with him a few weeks ago at AutoNation’s corporate headquarters in downtown Fort Lauderdale, Florida.

MB: Mike, what was your first car?

MJ: It was a 1959, Mercedes 190 SL with red interior and a silver top. My first car is the reason I’m in this business today.

MB: Please explain …

MJ: I was engaged and was going to get married upon graduation from college. My wife actually picked out the car. I had no idea what a Mercedes was and this was an old used SL that she thought was charming. So, we bought it for $1,500. We went to Cape Cod on our honeymoon and after 4 weeks we were broke and the car was broke. I went to the local Mercedes dealership and got a job in the service department — sweeping the floor, changing oil, whatever — and get the technicians to fix my car for me on the cheap. Which they did. And I fell in love with Mercedes and fell in love with the business. I never went to law school, just stayed in this business. It all goes back to that first car.

On Management Style

MB: Congratulations on being named the top automotive retailer in America by Fortune magazine.

MJ: It’s a fascinating business that’s endlessly challenging. AutoNation has received this prestigious award 5 out of the last 6 years.

MB: Did you go out to get that reward? Or did in just happen through your good business management style?

MJ: We never set out to actually get the award. We don’t have a deliberate strategy, a deliberate campaign or focus group or any of that. Our philosophy is ‘run the business the right way for the long term’ take super care of your customers and good things will happen. But we are very proud to be at the absolute pinnacle of five out of the last six years. It’s quite something.

MB: Can you tell me about your transition to retailing from manufacturing at Mercedes-Benz? How difficult was it?

MJ: (laughing) Which time? I’ve gone back and forth several times and that’s unusual in this business. I started in dealerships and then I went to work for Mercedes on the technical side of the business, eventually figuring out I was with an engineering company with a degree in political science and this was a problem. So, I moved over to the marketing and sales side of the company. But then I went back to dealerships for ten years and then back to Mercedes. And now I’m back to retail.

MB: How did your retail background help?

MJ: Somehow it uniquely qualified or prepared me for the challenges of AutoNation. In that spending so much time at retail, I can really relate and really understand what it takes to fix cars one at a time and to care for customers one at a time. There is no way around that. There is an immediate need within dealerships — you must meet customers’ needs. If you ever lose sight of that you’re going to have a problem.

MB: And what did your Mercedes background and experience provide?

MJ: Having worked for Daimler for so many years, I understood strategic planning, how to give vision and direction to a large enterprise, how to get a large enterprise moving in the same direction with everyone pulling in the same direction.

MB: And the two combine have produced what?

MJ: This feel I have for the business was a tremendous plus for me and I don’t think you could do it without it. It’s one of the factors one sees when a manufacturer tries to move to retail. How quickly they disconnect. How badly it goes. Because they don’t have that sensitivity — if you don’t have that sensitivity you have huge blind spots and are going to make terrible mistakes and end up in trouble very quickly.

On AutoNation’s Business Operations

MB: Reviewing your recent annual report and the SEC 10K form, I was amazed at the growth of profits in the service businesses. As the biggest auto retailer in America you set the bar that every other automobile dealer would like to emulate. Can you tell me how you grew this side of the business?

MJ: The first day I walked through the door here at AutoNation, I told everybody we have a tremendous opportunity on the service and parts side and that we are going to put in place strategies and practices that go after that portion of the business.

MB: With most manufacturers improving their quality it has resulted in lower warranty repairs, and most owners after their payments or leases expire go to other sources for service and repairs. What did AutoNation do?

MJ: The key is to come at it from the customers’ per-spective. Provide convenience, quality, value and pricing — because we have the hard part — the technical expertise. We have more technical expertise on these products than anyone else. But we still have to be convenient, offer value and quality and a guarantee.

MB: What were some of the new concepts and innovations?

MJ: We basically had to reinvent the way work was done in the service department. The idea of one technican working on one car is inefficient, highly inefficient. Now we take a team approach with different skill levels within the team so that there is a good balance so you are fully covered. That increased our productivity by 30 to 35 percent.

AutoNation’s Car Business

MB:With 37 different brands, both domestic and international in your inventories, some must sell better than others. What are your best-selling brands?

MJ:We take a diversified approach to the business. That’s one of the advantages of being as large as we are. We are diversified by business type — service, parts, used cars, new cars, financing and insurance, and we are diversified geographically, everything from California through the whole Sunbelt to Florida. So, today while we have difficulties in Florida and California because of the speculative real estate market, Texas remains fine. So, you spread your risk.

MB: Years ago if you were selling new cars the word ‘dealer’ was used, now it’s ‘retailer.’ Which do you prefer and why?

MJ: We are in the retail business. That has to get in everyone’s head. Once you switch it to retailer rather than this idea of dealing — which is adversarial on negotiation and all that — we are there to take care of customers. Today, customers have more choice than ever and they love the choice. But with choice comes complexity. The customers are also time constrained.

MB: How do you help AutoNation’s customers solve the issue of time constraint?

MJ: With solutions. Customers are looking to retailers for solutions, “Who is going to give me a solution? I have a need. I have a want. I love all this choice. I need a solution.” They want the most added-value in the shortest amount of time possible. It takes the utilization of process and technology to solve that equation.

MB: How can technology help in your stores selling situation and environment?

MJ:Let me give you an example. Here in Florida we developed a program called Smart Choice. It’s a program we are taking across the country: A customer comes into a store, we do a computerized need analysis of which vehicle is right for them, a decision is made and a price is decided upon. Within two minutes the customer will get one piece of paper from the salesperson that summarizes the entire transaction and offers all the options in menu form for financing that vehicle. The salesperson tells them, “Here’s your vehicle, here’s what it lists for, here’s what we are selling it to you for, the trade-in, the taxes involved, here’s all the different financing options depending on how much you want to put down, the term, whether you’re going to lease or buy…

MB: That’s amazing. What has this done for your business?

MJ: There is no back room. No F&I. We’ve cut transaction times by 50 percent by doing this. I must tell you; however, the technology to make that happen took us years to develop and put in place. The point is we have the size, we can afford the huge investment in research and development, we have the vision to win for the customer and we created something that is a unique benefit for the customer. It’s a win for the customer. It’s a win for our associate — they are much more productive, they can get more done in one day because they are selling more vehicles a day. It’s an easier way to do business. Therefore, the increased productivity means a bigger gain for the company. So, it’s win, win, win.

AutoNation’s Role and Responsibility in the Retail Automobile Business. The Auto Industry and Jackson’s Thoughts for the Future.

MB: Recently, Irv Miller of Toyota and I discussed the incumbent responsibilities of being No. 1. What is your position on being number one?

MJ: Yes, there is a responsibility of leadership. If you look at most industries there has always been a clear voice from the customer and the retailer with that industry into the suppliers and manufacturers of that industry. In the retail automobile industry we were missing that because everybody was so small relative to the size of the manufacturers. There was an imbalance, which I do not think was healthy.

MB: You’ve been quite vocal, Mike, about your position on the gas tax in America. I assume that is a corporate issue?

MJ: That’s a perfect example. We’ve had five presidents in a row who have said our dependence on imported oil is a matter of national security. Actually, on this issue you can pick whether you’re motivated by global warming or national security — it doesn’t matter. If you look at the issue and want a serious energy policy that’s going to make a difference — because in this period with these five presidents we’ve gone from importing 30 percent of our oil to 60 percent of our oil — so, obviously we don’t have a policy that’s dealing with this.

MB: What can be done?

MJ: You come to the conclusion that you must deal with supply, with the consumer and you have to bring in new technologies as an accelerator, as a game changer. Therefore, you need a policy that addresses all three components.

MB: How best is this accomplished?

MJ: My expertise is on the consumer. When it comes to fuel consumption and fuel economy do not listen to what people tell you they are going to do, look at what they actually do. Take model year ’06 with all the discussions about fuel economy and everything else, fuel economy for the cars sold will be basically unchanged. It’s the same as the last 25 years.

MB: Can this attitude, in your opinion, be changed?

MJ: Look around the world, other industrial societies have had the political courage to tax gasoline at higher rates and got a change in behavior. Technology is the same in Europe as it is in the U.S., but European fuel economy is 36 percent higher than we are. Why? Gasoline is more expensive, so fuel economy moves up on the demand list of consumers.

MB: Since you sell both Detroit brands and international brands, are you concerned about a consumer or political backlash against the international brands?

MJ: I think there is relatively little chance of that today because such a large percent of the foreign manufacturers manufacture significant numbers of vehicles in the United States and it is U.S. citizens producing those vehicles. People talk about how America has lost its manufacturing might. I will observe we are producing more vehicles in the United States than ever!

MB: And at the retail store level, what are you experiencing?

MJ: When it comes to the consumer and you’re reaching into their pocket to spend $28,000 for a vehicle, I don’t care what the bumper sticker is on the car they are trading in, they are going to be in the marketplace looking for the product that best meets their needs regardless of where it was produced. That’s how consumers behave. The foreign manufacturers have done the responsible thing and built plants in the U.S. and employ significant numbers of Americans to produce the cars.

MB: With such a widespread retail organization, politics must be important. How does AutoNation deal with this?

MJ: We take that responsibility on right here. In all our states we are very active politically and have a responsibility to do so. There’s a certain advantage being the biggest. We have excellent relationships with the various state governments in which we operate.

Ending on a Personal Note

MB: What are you most proud of in your association with AutoNation?

MJ: The accomplishment of our associates, the culture that’s been created that’s enabled us to attract talented people because they see the opportunity to develop careers for themselves that lead to more responsibility than they’ve every imagined and a spirit that celebrates success. But we get up every day trying to figure out how to do it better, smarter, faster than its ever been done — How do we win for the customer? How do we win for our associates? How do win for the company?

MB: How did you bring about this change?

MJ: Today, there’s an understanding that collectively we are far smarter than we ever were or are individually. By having a culture where we are constantly discussing and debating between smart people how to do it smarter, better and faster, from that great ideas come and good decisions are made that we execute. Creating that dynamic within the company — that’s what I take the most satisfaction in having shepherded — the creation of that culture. Culture is difficult to talk about, let alone create. But we have done it here and I take great satisfaction in that.