AutoNation's 1Q Profit Reinforces How Badly GM and Chrysler Are Hurting, and How Minor They Are Becoming
Of all the things for CNN to pick as an e-mail alert topic, AutoNation's profitable first-quarter results seemed quite an odd selection. But there it was:
It appears that CNN wanted harried readers who wouldn't dig deeper to think that the "auto industry" as a whole is recovering, or at least stabilizing, and that maybe there's even a way out for General Motors and Chrysler that doesn't involve a real bankruptcy.
Memo to CNN: Nice try, no sale. A desktop review of AutoNation's situation indicates that it is holding its own precisely because is relatively less dependent on Detroit's output than dealers as a whole, and less dependent domestically on Government, er, General Motors and Chrysler than it is on Ford.
CNN's actual report on AutoNation's results by Peter Valdes-Dapena told us how much sales declined in each of the company's major segments, but failed to tell us how important each segment is:
AutoNation, the country's largest car dealer chain, posted a profit for the first quarter of 2009 despite a 43% decline in new vehicle sales, and said it expects to see improved sales in the second half of the year.
Shares of AutoNation rose 7% in Thursday trading.
"We are very pleased with the performance of AutoNation (AN, Fortune 500) as we remained solidly profitable during the first quarter," Autonation CEO Mike Jackson in a company statement.
..... Sales for the industry overall declined by about 46% compared to the same period last year, according to figures cited by AutoNation.
AutoNation's income from domestic vehicle sales declined 47% in the first quarter compared to last year. Import vehicle sales declined 45% and premium luxury car sales declined 31%.
Auto dealers have been hit hard by declines in auto sales driven by a poor economy and tight credit. Sales of domestic vehicles, particularly those of General Motors and Chrysler, have been effected by concerns over the automakers business prospects.
Moving beyond Valdes-Dapena's obvious writing errors ("income" and "sales" aren't the same thing, and the correct verb in the final sentence should have been "affected"), the omission of the segment information presents an incomplete picture.
CNN's failure to report this information has nothing to do its lack of availability. Today's press release from AutoNation includes lots of relevant data. Let's start with this (bolds are mine):
AutoNation has three operating segments: Domestic, Import, and Premium Luxury. The Domestic segment is comprised of stores that sell vehicles manufactured by General Motors, Ford, and Chrysler; the Import segment is comprised of stores that sell vehicles manufactured primarily by Toyota, Honda, and Nissan; and the Premium Luxury segment is comprised of stores that sell vehicles manufactured primarily by Mercedes, BMW, and Lexus.
This is important: The Domestic Segment includes all of GM, Ford, and Chrysler. Vehicles in the other two segments are entirely manufactured by foreign-based companies.
With that in mind, here were the income (i.e., profit) results in each segment during the first quarter, also in the press release:
Domestic - Domestic segment income for the first quarter of 2009 was $15 million compared to year-ago segment income of $38 million. First quarter Domestic retail new vehicle unit sales declined 47%.
Import - Import segment income for the first quarter of 2009 was $30 million compared to year-ago segment income of $56 million. First quarter Import retail new vehicle unit sales declined 45%.
Premium Luxury - Premium Luxury segment income for the first quarter of 2009 was $41 million compared to year-ago segment income of $51 million. First quarter Premium Luxury retail new vehicle unit sales declined 31%.
Thus, over 80% of the company's quarterly segment income ([$41+$30] divided by [$41+$30+$15]) came from the non-Domestic segments.
As to unit sales, it's obvious that AutoNation's product mix was more heavily weighted to Import and Premium Luxury Vehicles than the market as a whole. Beyond that, in the Domestic segment, even though Ford is still a semi-distant runner-up to GM alone nationwide, AutoNation sold almost as many Ford vehicles as GM and Chrysler combined (again, all in the press release):
Sorry, CNN and Mr. Valdes-Dapena. You can't push generalized mush into my e-mail box and expect to get away with it. AutoNation is well-positioned because:
- It relies more heavily on non-Detroit vehicles.
- The Detroit company it disproportionately depends on the most compared to the market as a whole "just happens" to be the one that isn't going through de facto nationalization.
Kindly drive those two points into your heads, plus this: AutoNation will, from all appearances, be among the survivors.
Cross-posted at BizzyBlog.com.