AutoNation Aims to Be Great Power
Wayne Gretzky is trying out a new kind of Power play.
With the retired hockey great as its spokesman and 500 billboards touting its new image -- with the slogan “Who ya gonna call? Power!” -- car retailing giant AutoNation Inc. is hoping to build a regional identity and boost sales.
The company, which scooped up dozens of Southern California dealerships in the late 1990s, had done little to exploit its presence in the area. Now it’s spending millions to brand most of its outlets with the Power name.
AutoNation’s 43 new-car dealerships in Southern California racked up $2.9 billion in sales last year. But the market is expected to slow this year amid a weak economy, and analysts say the AutoNation needs all the boost it can get.
The Fort Lauderdale, Fla.-based company, founded by Wayne Huizenga, who resigned as chairman last year, operates 373 dealerships nationwide.
Southern California, which accounted for almost 15% of AutoNation’s total revenue in 2002, is one of its most important markets.
Yet the region is one of the last to be targeted for re-branding: The 15 dealerships in the San Francisco area are now all called AutoWest. And in Denver, where former Bronco quarterback John Elway became a successful dealer in the early 1990s before selling to AutoNation, the outlets all are Elway dealerships.
The name change in Southern California means some well-known local identities will disappear, including the Joe MacPherson chain in Orange County and the Peyton Cramer dealerships in the South Bay.
Industry analysts say placing a single identity on the region’s dealerships isn’t a bad move -- as long as AutoNation keeps a tight rein on dealers’ practices so the new identity strikes a positive chord with consumers.
“If not, then if someone gets burned by one Power dealership, there’s 32 others they’ll avoid,” said Tom Healey, head of the advertising practice at J.D. Power & Associates, the Westlake Village automotive marketing consultancy.
In Southern California, 33 of the stores will be renamed Power; the other 10, all luxury-car stores, will keep their current identities.
AutoNation said it selected the Power name because it evokes a can-do image, not to play off the well-known J.D. Power identity. In any event, Healey said J.D. Power had no complaints about the name choice.
AutoNation has had its ups and downs.
The stock is trading well below its historical high of $38.59 a share reached in January 1997, though it has been trending upward since former Mercedes Benz of North America President Michael Jackson took over from Huizenga as chief executive two years ago.
The stock closed Tuesday at $13.87 on the New York Stock Exchange, down 23 cents.
Ill-fated ventures into no-haggle new-car retailing and used-car mega-stores that took place when Huizenga was in charge have been abandoned. Under Jackson and company President Michael Maroone, both former dealership owners, AutoNation has settled into operating as a traditional multi-line dealership chain.
It benefits from huge economies of scale, said David Siino, an industry analyst with Gabelli & Co. in Rye, N.Y. “The company throws off tremendous cash.”
This week, AutoNation posted first-quarter profit of $84.4 million, or 29 cents a share, from continuing operations. But Jackson warned that sales could be off 5% for the year because of a softening car market.
He also said a recent tax settlement with the Internal Revenue Service would weaken AutoNation’s full-year performance.
AutoNation’s Southern California stores, representing 11% of its new-car dealerships nationally, last year accounted for some 15% of the company’s total revenue of $19.5 billion. Net income for 2002 was $381.6 million.
Included in AutoNation’s Southern California mix are several luxury dealerships, including House of Imports in Buena Park.They won’t be renamed because they are well-known. But the other dealerships have only local identities, and Maroone wants to change that.
“The value of having them all share a local market brand is that it gives us a common voice, message and identity,” he said.
“If you live or work in the Los Angeles area, we want you to consider the Power brand.”
To build the identity, AutoNation said it would launch a multimedia campaign with a major television presence and what company officials claim is the biggest regional billboard blitz in years.
AutoNation won’t divulge the cost of the campaign, but insiders say the company spends $30 million a year on advertising in Southern California and is earmarking a hefty chunk of the spending for the Power brand rollout this year.
Maroone said the company doesn’t expect quick results from the name changes.
“It takes 18 to 24 months” for people to get familiar with the new name and start thinking of the dealerships as part of a unit, he said.
One expected benefit in Southern California is the television time the Power group can buy with AutoNation’s regional budget.
Single dealerships and small dealership groups in media markets as big and expensive as Los Angeles “can’t afford to be on TV,” said Healey, the J.D. Power advertising specialist.
“But branding a whole group with the same name is economical for TV. They can push the Power name all over the region.”
