AutoNation taking writeoff to restructure

Wednesday, Dec. 31, 1997 | 10:17 a.m.

AutoNation USA brought something old and something new in its marriage with Southern Nevada.

Two local sales guides -- that's what they call the used-car salesmen who steer customers around the 20-acre facility at 1000 W. Warm Springs Road -- are on opposite ends in career experience, but both of them found something about the new dealership on the block that drew them to a company that has been trumpeted nationally as a catalyst for change in how Americans buy their cars.

Walt Rubyor is 71; Sabian Waldman is 21. Both are longtime residents who are among 125 employees at the local AutoNation and have been on staff since the no-haggle dealership opened its doors June 25.

Rubyor, a retired Chicago police lieutenant, found out about the company when visiting a retiree friend in South Florida. Waldman was managing the now-defunct Tom Green Motors when he was 19 and fresh out of Green Valley High School. Both say they strive to offer what AutoNation's Automotive Retail Group President Michael Maroone considers to be the key to the company's success -- making a customer feel comfortable in an environment long considered to be hostile.

"The best news I have to offer is that we have a 97 percent satisfaction rate among our customers," Maroone said in a recent visit to the Henderson facility. "We know that based on phone surveys we conduct on all our sales."

Maroone would not disclose how many sales have occurred in Henderson since the lot opened, but the local operation is part of a 25-store chain that expects to have $10 billion in revenues by 2000. Local statistics, he said, are not very telling because it usually takes 15-18 months for a new dealership to become established.

What is important, Maroone said, is that the word is getting out about how AutoNation does business.

But although sales guides and executives have a bright outlook on the company's future, all is not well with AutoNation's parent company, Republic Industries Inc., which is taking a huge writeoff to cover costs for a merger between its used-car and new-car dealerships nationwide. In addition, AutoNation is getting some competition in the Southern Nevada market.

Fort Lauderdale, Fla.-based Republic is planning a charge of $100 million to $150 million in the fourth quarter to cover merger costs.

Republic, the world's largest seller of cars and light trucks, said the charge will be more than offset by a gain from the sale of its electronic security business to Ameritech Corp. of about $250 million.

The auto retailer and trash-hauling company, led by billionaire Chairman Wayne Huizenga, believes that putting the 25 AutoNation used-car stores under the management of experienced new-car dealers will help to make the used-car stores profitable by the second half of 1998.

"This is one of the steps Republic has to make along the way to bring AutoNation to profitability," said analyst Keith Bossey of Robert M. Cohen & Co. who rates the stock a "hold."

Republic Industries reported an $18.4 million loss from the startup of its AutoNation chain in the third quarter, even as its total profit from continuing operations almost tripled to $124.4 million, or 28 cents a share, topping analysts' expectations.

In the fourth quarter, the company is expected to earn 14 cents a share, the average estimate of seven analysts surveyed by IBES International Inc. That compares with a loss from continuing operations of $65 million, or 26 cents a share, in the year-ago period.

On Nov. 21, Republic Industries fired 224 workers as it scaled back operations in Miramar, Fla., and Houston that recondition used cars for its AutoNation used-car superstores. Republic also put its AutoNation sales staff on commissions based partly on customer-service surveys. The company has been on a buying spree in the past year, agreeing to acquire 226 auto dealer franchises with more than $7 billion in revenue.

Among the new-car dealerships it has bought are two Southern Nevada outlets, the Desert Automotive Group, which sells GMC vehicles, Buicks and Volvos; and the single-store Tom Coward Lincoln-Mercury dealership.

Republic also acquired Silver State Disposal Services Inc., Southern Nevada's primary trash-hauling service, earlier this year. The company also oversees a handful of car rental agencies, including the Alamo and National chains. Huizenga, the former head of the Blockbuster Video chain, also has controlling interests in Extended Stay America, which has two properties in Southern Nevada, as well as three professional sports franchises in Miami.

The company has organized its auto dealers into 10 U.S. districts and hopes to boost its used-car business by using its best-managed new-car retailers as models, spokesman Jim Donahue said.

Financial analysts were informed of the charge last week, though the company made no public announcement of it, Donahue said. The charge was first reported Tuesday by the Sun-Sentinel of Fort Lauderdale, Fla.

While the charge was indicative of a financial struggle for the company, there's more on the horizon for the company as competition arrives in the no-haggle used car market.

Driver's Mart Worldwide Inc., which has a philosophy similar to AutoNation's, has begun hiring in Southern Nevada. Grand Rapids, Mich.-based Driver's Mart will be managed locally by Greg Heinrich and the chain will build its 10th store at the Valley Auto Mall in Henderson, just up the road from AutoNation.

Other dealers across the valley say they haven't altered their sales plans in reaction to their new no-haggle neighbors and the AutoNation crew believes that will work in their favor.

Waldman and Rubyor say they see a major difference in the attitudes of customers. It starts with the dealer's computerized inventory system.

"Most of the people who come in think it's fun to play with the computer," said Waldman, who said age has had nothing to do with the comfort level of the users. "They find the system fascinating and it's also easier to scan the inventory and create a portfolio of cars to look at."

Waldman was referring to a data base of about 1,000 cars, sorted by make and model, located on the lot so that each car type is in the same vicinity. Customers can search for cars they're interested in seeing on the computer and get a printed report sheet listing the car's features, the amount of mileage on it, the color, the price and an explanation of where to find it on the lot. In most cases, there's even a picture of the vehicle.

Customers can sort through the printouts before they look at the cars.

Waldman, who aspires to climb the corporate ladder at AutoNation, said he enjoys his role because he's able to relax more than he did selling elsewhere.

"There's a tremendous difference in the way you're treated here," said Waldman, trying not to sound too much like a salesman.

Rubyor concurred, explaining his opening-to-closing schedule as something he enjoys doing because of the people he works with.

"I'm not working because I need to," said Rubyor, who said he has a police pension and also worked in the wholesale liquor industry in Southern Nevada for several years. "I'm doing this because I enjoy the environment and the experience."

Maroone said another part of AutoNation that has raised a few eyebrows was the decision to keep the dealership's service center open 24 hours. He again offered no statistics to back up the success of the move, which occurred in September, but he said customers who are involved in shift work in Southern Nevada appreciate that mechanics can look at their vehicles at odd hours.

Maroone said the Henderson AutoNation is the only store in the chain that offers the 24-hour service.

BLOOMBERG BUSINESS NEWS contributed to this report.

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