AutoNation eyes more LV growth

David Strow

Tuesday, Aug. 3, 1999 | 11:22 a.m.

It's been just two years since AutoNation USA opened its huge auto mall in Henderson. But since then AutoNation has become bigger in Las Vegas than most residents realize.

AutoNation Inc. now controls 10 dealerships and 16 franchises in the valley, including familiar local names Chaisson and Desert Automotive. These dealerships move an estimated 30,000 vehicles a year, accounting for $600 million to $800 million in annual sales. More than 1,250 local residents work for the company.

Starting this October, AutoNation intends to ensure that Las Vegans realize that it is more than just a megastore in Henderson. In October all of AutoNation's local dealers will begin carrying the tagline "An AutoNation Company" -- the first step in creating a nationwide megabrand.

"We'll be starting to build our network," Mike Maroone, president of AutoNation's retail group, said. "Our stores will feature common elements, operated on a common shopping experience."

The eventual goal, Maroone said, is to do in Las Vegas what AutoNation has done in Denver -- rename all local dealerships under the "AutoNation" brand, with a single inventory system and a common philosophy of fixed, or "no-haggle," pricing.

In Denver, the company has included other incentives to keep customers in AutoNation dealerships. Customers get discounted rates on rental cars from Alamo or National, and even get a discount on gas at some Denver stations. AutoNation owns the Alamo and National chains.

"We're making it difficult for the customer to shop anywhere else," Maroone said.

The company, which has a voracious appetite for acquisitions, isn't done in Las Vegas yet. Maroone said AutoNation is "talking with people" about more local acquisitions, though he said it's too early to provide more details.

"Clearly, we have a good foothold in this market," said Dan Grubb, who oversees AutoNation's operations in Arizona and Nevada. "We are clearly in position to be the market leader ... we are not done. I can assure you of that."

Big AutoNation competitors locally are Fletcher Jones and Courtesy, with six franchises each, Findlay Automotive with five and Towbin with four. New competition will arrive soon, when superstore rival CarMax opens on a 15-acre site near the AutoNation USA superstore in Henderson.

"We don't really have any one competitor," Maroone said. "But each individual store faces competition."

AutoNation already took out one of its largest local competitors, when it acquired Cross-Continent Auto Retailers Inc. of Amarillo, Texas. The September 1998 deal, valued at $187 million, added Toyota West, Nissan West, Chaisson Motor Cars and Las Vegas Honda to AutoNation's Las Vegas chain.

AutoNation only has 1.3 percent of the total U.S. retail automotive market, though that's a big chunk, when you consider annual car sales total $1.3 trillion.

In 1998, AutoNation recorded revenues of $16.1 billion, up from $9.1 billion in 1997. More importantly, the company recorded operating income of $535.2 million, compared to a loss of $11.9 million in 1997.

AutoNation is hoping to boost those sales through an unusual outlet in the future -- the Internet.

A month ago, the company launched AutoNationDirect.com, an Internet offering that allows customers to go through every step of the car buying process on line, from financing to delivery of the vehicle to a customer's driveway. Though it's now only available in Tampa, Fla., Maroone said the service will be available nationwide by the end of October.

AutoNation has operated an information and inventory system on the Internet since August 1998. About 600 AutoNation employees are devoted solely to Internet sales.

Maroone said AutoNation is approaching $500 million in Internet-driven sales so far this year. The company includes in that figure all sales that were initiated on the Internet, including, for example, a sale that resulted from a customer asking for a price quote through the Internet.

But he isn't afraid that a national car sales network on the Internet will cut into the sales of AutoNation's existing dealerships.

"We are able to draw from much further away than our existing stores (with the Internet), so we're not cutting into our own business," Maroone said. "Fifty-one percent of our customers that bought on the Internet wouldn't have bought in our stores otherwise."

As auto dealers consolidate, more and more independents are disappearing. AutoNation has absorbed several of them in Las Vegas over the past several years.

But Maroone doesn't think the one-store dealer is headed for extinction.

"High-quality entrepreneurs that reinvest their profits in their business will be here for a long time," he said. "Those that don't reinvest ... will have trouble."