AutoNation’s Berrard Steps Down as CEO
After helping to create AutoNation, which became a Goliath in auto retailing with 380 dealerships under its name, Steve Berrard announced Wednesday that he was stepping down in an effort to bolster the company’s stagnant stock price.
Berrard’s unusual exit comes after the company has encountered setbacks in its strategy of building a chain of outlets that could outperform the hodgepodge of local dealerships that dominate the industry.
The changes at AutoNation come at a turbulent time in the industry, when automobile retailing is undergoing an evolution with an uncertain future. The business has been roiled by the emergence not only of AutoNation, but of auto makers buying their own dealerships and of the rapid emergence of auto sales on the Internet. Experts are not sure which of the models will prevail in an industry characterized by cutthroat competition.
Berrard, 44, is a longtime associate of AutoNation Chairman H. Wayne Huizenga, with whom he shares the title co-chief executive. The pair built AutoNation in less than three years.
Company officials said Berrard was not forced out, but rather voluntarily offered to step aside to make room for another executive with broader auto retailing experience to assuage skeptical Wall Street investors.
“A new quarterback may help things,” company spokesman Jim Donahue said.
After going public in 1997, AutoNation’s stock soared to more than $40 a share. Investors saw the company as leading a revolution in auto retailing benefiting major consolidators that promote no-haggle pricing and would benefit from lower operating costs.
But the stock has since languished. It closed at $17.81, down 56 cents in trading Wednesday on the New York Stock Exchange.
The company was hurt by several missteps. The biggest was a misguided plan to develop a chain of used-car superstores. But losses quickly forced it to fold the used-car operations into its new-car dealership chain.
AutoNation also ran into problems in its rental car business. It took some losses caused by a glitch in a new computer reservation system installed at National Car Rental, which has since been fixed.
More recently the company has touted an experiment in Denver, where it is promoting the AutoNation brand with 20 dealerships that have no-haggle policies. It hopes to use the Denver model in other major markets.
It also is rapidly jumping into the Internet. On May 25, Berrard said the company expects to generate $750 million in annual Internet-based sales this year. Investors yawned, however, as AutoNation’s shares fell 2.3% that day.
Still, analysts say that AutoNation is a strong company. It has virtually no debt and last year reported operating profit of nearly $800 million on revenue of about $20 billion.
In an interview from his Fort Lauderdale, Fla., office, Berrard said that despite the company’s growth, operating record and proven ability to respond to problems quickly, a segment of the investment community remains wary.
He said some investors express concern about whether the company can weather a downturn, suggesting they would be more comfortable with a CEO who has a more extensive auto retailing background.
“It’s a damn difficult decision to leave,” Berrard said. “I love this company. But my job here is to deliver value to investors, even if I have to step aside to do it.”
Berrard, who owns 6 million AutoNation shares, will retain a seat on the board and continue as co-CEO until a new chief executive is named. The company said it had retained an executive search firm to hire a replacement from outside the company.
Berrard, who helped Huizenga, a self-made billionaire, build the Blockbuster Video store chain, plans to devote time to his closely held New River Capital Partners, a venture capital company.
His departure surprised analysts, who credit him with having the energy and vision to rapidly transform auto retailing, an insular business much in need of change.
Sheldon Sandler, chief executive of Bel Air Partners, a Princeton, N.J.-based auto retailing consulting firm, said the move was surprising and the timing was unusual because the stock has recently shown some signs of life.
AutoNation executives have been so frustrated by the company’s moribund share price that in May they hired Merrill Lynch to study ways to increase its value, including the possibility of separating its Internet venture as a tracking stock. But Sandler said that was unlikely to happen in the near term.
