AutoNation to scrap cars ruined by floodwaters
FORT LAUDERDALE — Fort Lauderdale-based AutoNation, the country’s largest car retailer, plans to scrap vehicles damaged by floodwaters generated by Hurricane Harvey in Texas, CEO Mike Jackson said Tuesday.
The move will hurt sales for August, but Jackson said that by early next year he expects a “snap back” in auto sales in the state.
“Thousands of thousands of vehicles have been destroyed. Anytime you get a flood level in a vehicle
above a foot or two, you really should scrap the vehicle. The damage that’s done to the electrical systems in these high-tech cars — just forget about it. They’re all going to have to be replaced,” Jackson said on CNBC-TV’s “Squawk Box” Tuesday morning.
Florida and Texas make up 45 percent of AutoNation’s business. During the second quarter, which ended in June, sales in both states were down 5 percent.
He said vehicles from other dealerships across the country would be brought into Houston to replace those the company intends to destroy.
Jackson said there’s little question that insurance policies will cover the damages caused by Harvey. Houston has gotten more than 40 inches of rain — “more rain in a few days than it gets in a year,” he said.
“Insurance companies have declared it a flood situation and they are going to pay,” Jackson said.
AutoNation has 17 dealerships in Houston. While its Corpus Christi dealerships reopened Monday, many in Houston remain closed, he said.
Spokesman Marc Cannon said AutoNation has “teams on the ground. They hope to start the assessment later today. Travel on the roads with the water is slowing down all the assessments.”
Jackson said he couldn’t say when the dealerships would reopen. “Even though we have some stores we could, employees simply can’t get back and forth in a safe manner,” he said.
AutoNation employees at those dealerships are being paid during the disruption, Jackson said.
Houston’s vehicle sales already are down 25 percent year-to-date over 2016, he said. But Jackson said he expects the Texas economy and auto sales to recover in either the fourth quarter or the first quarter of next year.
“That’s the American way. We rebuild . ... We take the punch and go on from there,” he said.
In trading Tuesday on the New York Stock Exchange, AutoNation stock closed down a fraction to $41.765.
“The damage that’s done to the electrical systems in these high-tech cars — just forget about it,” AutoNation CEO Mike Jackson said of vehicles swamped by the floodwaters.