April 26, 2011 / 12:37 PM / 7 years ago

UPDATE 2-AutoNation sees shift to U.S. automakers

* Q1 EPS 46 cents vs Wall Street view 43 cents

* Cuts 2011 industrywide sales view on Japan

* Shares down nearly 4 percent (Adds details on Q1 results, outlook, comments)

DETROIT, April 26 (Reuters) - AutoNation Inc AN.N, the largest U.S. auto dealership group, expects slower growth in U.S. auto sales this year, with Detroit automakers taking a larger share of the market at the expense of Japanese rivals that have been a mainstay of AutoNation’s business.

The company reported a nearly 26 percent gain in first-quarter earnings on Tuesday but warned that full-year vehicle sales would fall short of its previous forecast because of supply disruptions caused by the earthquake and tsunami in Japan.

The Fort Lauderdale, Florida-based dealership group cut its full-year industrywide U.S. sales forecast from 12.8 million vehicles to about 12.5 million.

AutoNation shares slumped 3.9 percent to $33.17 in morning trading but remain up about 18 percent from the start of the year.

Chief Executive Mike Jackson said he expects parts shortages and production delays to cut output from Japanese automakers by 600,000 to 700,000 vehicles this year.

He said it was not clear whether Detroit automakers would be able to make up for that shortfall because of their own difficulty in sourcing crucial parts from Japan, but he forecast that General Motors Co GM.N, Ford Motor Co F.N and Chrysler would gain market share.

“The domestics will get a bigger piece of the pie,” Jackson told Reuters. “There is a renaissance going on with Detroit product which is the real deal.”

Jackson had been sharply critical of U.S. automakers before the industry’s wrenching restructuring that culminated in the 2009 bankruptcy filings by GM and Chrysler. He has been more positive on their outlook since.

Import brands led by Toyota Motor Co 7203.T and Honda Motor Co 7267.T accounted for over half of AutoNation’s first-quarter new car sales at its 243 U.S. franchise dealerships.

By contrast, U.S. auto brands represented only about 32 percent of its sales in the quarter.

But Jackson said U.S. consumers who shifted from import brands to U.S.-made vehicles in the coming months would be “very pleasantly surprised” by the gains in quality by the Detroit automakers.

He also said the shift in market share from Japanese brands to Detroit could be a permanent feature in the U.S. auto market even after the earthquake-related supply disruptions fade in 2012.

“The fact that you’ve broken a decades-long shift of share from the domestics is important,” he said.

HIGHER MARGINS

AutoNation reported first-quarter net income of $69 million, or 46 cents per share, up from $55 million, or 32 cents per share, a year earlier.

Analysts, on average, had forecast 43 cents per share, according to Thomson Reuters I/B/E/S.

Jackson said U.S. consumers were shifting to smaller vehicles in the face of higher gasoline prices and said the auto industry was better positioned to meet that demand than it was in 2008 when a spike in gas prices shocked consumers.

“This is a much more rational migration. There is no panic. There is no freakout,” he said.

Lower inventories of new and used vehicles has driven vehicle prices higher, and that trend will drive higher profit margins for both automakers and dealers.

“Margins got compressed in the crash,” Jackson said. “I always thought margins would normalize. Certainly that process is underway.”

AutoNation relies on repair work and service for over 45 percent of its gross profit. Executives said the replacement parts business has not been affected by the shortage of components from Japan. (Reporting by Kevin Krolicki; editing by John Wallace)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below