AutoNation starts search for a CEO as Jackson steps back

By Joseph White

(Reuters) - AutoNation Inc said on Wednesday it will begin a search for a new chief executive as longtime CEO Mike Jackson plans to move to an executive chairman role at the largest U.S. auto retail chain next year.

Jackson has a contract to remain as executive chairman until 2021, the company said in a statement. The auto retailer's board has hired executive search firm Spencer Stuart, and will consider internal and external candidates, the company said.

Jackson told Reuters the board will run the search, but said the focus will be "on getting an outstanding leader. Everything else can be talked about," including whether a new CEO has experience in the automobile industry.

Jackson, who is 69, had been running the U.S. sales arm of luxury vehicle brand Mercedes-Benz before he took over as AutoNation's CEO in 1999. He led AutoNation's expansion to become the largest chain of auto dealerships in the United States with 340 new vehicle franchises in 16 states, as well as used-car showrooms and repair centers.

Over Jackson's 19 years at the helm of AutoNation, the company's stock has gained 258 percent and outperformed the S&P 500, which has gained 127.6 percent. Most of that outperformance peaked about three years ago, however, and the stock has been a laggard since late 2015.

The multi-brand, publicly traded dealership chain afforded Jackson a unique platform, from which he could challenge automakers in ways smaller dealers could not. In the run-up to the 2008 financial crisis, Jackson warned Detroit's automakers publicly and in blunt terms that their efforts to prop up profits by building large inventories of cars and using big discounts to sell them would backfire.

"Before AutoNation there wasn't a voice of auto retail. That created a certain imbalance and tone deafness in the industry which wasn't healthy," he said.

More recently, Jackson has contended with a decline in AutoNation's share price, which is down 15 percent for the year, as investors have bet that the U.S. auto industry is heading for a cyclical sales slump within the next two years.

Since 1999, AutoNation has repurchased roughly 85 percent of its shares. It has a market capitalization of $3.9 billion.

"We use the choppiness (in the U.S. vehicle market) to our advantage," Jackson said. "We, from strength, can repurchase our stock."

AutoNation in 2016 began refocusing investment and operations on expanding its high-margin vehicle service and repair businesses, as well as used-vehicle sales, as new vehicle profit margins contracted.

Jackson also entered a multi-year partnership with Alphabet Inc's Waymo self-driving car unit to provide maintenance and repairs for Waymo's fleet of vehicles.

Jackson said he expects his successor can use AutoNation's scale to pursue more brand extension beyond new-vehicle sales, and develop the chain's online presence. While major automakers except for Tesla Inc still rely on franchised dealers to deliver and provide warranty service for new vehicles, online shopping has cut down sharply the number of stores most customers visit before choosing a vehicle. Online pricing services have contributed to the squeeze on new vehicle profit margins.

(Reporting by Joe White in San Francisco; Additional reporting by Dan Burns in New York; Editing by Matthew Lewis)