AutoNation: Sales Recovery is Real -- But Real Slow

Improved auto sales in the first quarter are encouraging and all that, but don't fool yourself: It's going to be years before Americans buy 16 million new cars and trucks, as they did in 2007.

That's according to Mike Jackson, chairman and CEO of AutoNation (AN), the country's largest auto retailer. AutoNation expects sales this year of about 11.5 million, versus 10.4 million in 2009.

Jackson believes that this constitutes a "real, genuine recovery," even considering that Toyota (TM) resorted to a record discounting in March and April, in response to its ongoing recall debacle.

Jackson noted that Ford (F) and General Motors actually reduced their discounts, and still saw higher sales at AutoNation franchises. For all brands, AutoNation reported it sold a total of 45,438 new cars in the quarter, a 19 percent increase from the year-ago quarter. Total U.S. auto sales were up 16 percent.

AutoNation also reported first-quarter net income of $55.2 million, up about 60 percent. The improvement was exaggerated by losses, mostly in the year-ago quarter, from dealerships that AutoNation sold or closed. Not counting discontinued operations, net income was up a more modest 9 percent.

Jackson said AutoNation was particularly encouraged by a rebound in Florida. "Florida was one of initial states that started to decline 2007, and collapse in 2008. We have now seen two consecutive quarters of increase in Florida," he said.

AutoNation, which is based in Fort Lauderdale, operates 249 franchises in 15 states, but its gets 30 percent of its revenues in the Florida. Jackson said a key sign is that housing prices have begun to recover in some Florida markets.

"If you look at our results, it gives you a lot of confidence that this is a real recovery. Unit volume was up 19 percent. Content per vehicle sold (options) increased," Jackson said.

"All told, manufacturer incentives are down from a year ago," he said. According to Edmunds.com, the industry average for incentives was $2,742 per car in March, down from a record-high $3,165 in the year-ago month. Toyota incentives hit a record $2,256 in March, up from $1,565 a year ago, according to the shopping and research web site.

Toyota incentives are "appropriate" to keep people coming in despite the big Toyota recall situation, Jackson said.

Image: AutoNation