Jackson encouraged by tariff talks

But AutoNation CEO warns of recession if administration fails

AutoNation Chairman and CEO Mike Jackson on Wednesday said the country “pulled back from the brink” on European tariffs a week ago, which he was “encouraged” to see.

Speaking on CNBC-TV’s “Squawk Box,” Jackson referred to President Donald Trump and European Commission President Jean-Claude Juncker’s agreement to new talks on the possibility of eliminating trade barriers between the United States and Europe.

“The stakes are high,” Jackson said, adding that if the Trump administration moves toward tariffs again it would put the auto industry and economy into recession.

Jackson said the industry has been absorbing the steel and aluminum prices but that European tariffs would be “heavily disruptive.”

“The average price of a car is $30,000. There no way anyone can absorb that. You can’t raise prices like that. The customers aren’t going to take it. Then the layoffs begin, and there we go,” he said on Wednesday.

Jackson, who also chairs the Federal Reserve Bank in Atlanta, said he has not had talks with President Trump about tariffs, though “we’ve talked with a lot of people in the administration.”

Meanwhile, AutoNation on Wednesday discussed its secondquarter earnings, sharing that it beat earnings estimates by a penny while revenues were in line for the second quarter. AutoNation’s second-quarter earnings were $97 million, or $1.07 a share, up 11 percent compared with $88 million, or 86 cents a share, in the second quarter of 2017.

Second-quarter 2018 revenue totaled $5.4 billion compared with $5.3 billion in the year-ago period. Same-store revenue totaled $5.3 billion compared with $5.1 billion in the year-ago period, an increase of 4 percent. Same-store profits of $839 million increased by 4 percent compared with $806 million in the year-ago period, driven by increases in used vehicle gross profit of 22 percent.

Jackson said AutoNation’s sales of used vehicles were strong during the quarter. AutoNation, the country’s largest auto retailer with 325 locations, has switched to a strategy of pre-owned sales over new car sales in the past two years. The company has opened five used car-focused stores so far.

During the earnings conference call with Wall Street analysts, Jackson said AutoNation USA stores were trending toward profitability. “We don’t expect to break ground on any additional AutoNation USA stores this year.”

Domestic sales were up 12 percent in the quarter; imports were up 4 percent; and luxury vehicles were up 1 percent.

On Wednesday, AutoNation also announced the acquisition of the southern California dealership Shelly BMW, which has annual revenues of about $140 million. The company also has signed an agreement to acquire Trade Secret Auto Care, a collision center in Plano, Texas, which will be AutoNation’s 81st collision and repair center nationwide.

Additionally, the company has expanded its partnership with selfdriving vehicle maker Waymo beyond long-term maintenance and repairs of Waymo’s fleet. AutoNation now has the exclusive ability to offer its customers in Phoenix, Ariz., the use of a Waymo to move around the city while their personal vehicles are being serviced at AutoNation dealerships.

AutoNation’s stock closed Wednesday on the New York Stock Exchange at $47.26 a share, down $1.27 or 2.62 percent.