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AutoNation posts profit in 3Q on lower costs

AutoNation Inc., the nation's largest automotive retailer, said Thursday it made money in the third quarter as lower costs and a boost from the Cash for Clunkers program helped it recover from a loss in the year-ago period.
/ Source: The Associated Press

AutoNation Inc., the nation's largest automotive retailer, said Thursday it made money in the third quarter as lower costs and a boost from the Cash for Clunkers program helped it recover from a loss in the year-ago period.

Automakers got a lift from clunkers, which spurred sales of nearly 700,000 new vehicles during the summer months. Big rebates lured in many buyers who otherwise would have waited until later in the year to walk into dealerships.

AutoNation, which owns about 245 new-vehicle franchises in 15 states, previously said it sold 13,000 vehicles during the program.

CEO Mike Jackson said the program was a signal to consumers that it was safe to begin to buy again.

"It was like a government seal of approval, like it's safe to come into the marketplace and buy a vehicle, that we're over the abyss we were staring into for six months or nine months where everybody was scared to death whether Armageddon was finally here," Jackson said in an interview with The Associated Press.

The program, Jackson said, was a shot in the arm for the industry, helped restart manufacturing, cleared off car lots and brought the system back to life.

"It's like a clean slate, so while we're still at a very low level, all these things give me optimism for the future," Jackson said. "We're at the absolute bottom of the cycle and we're looking at four, five, six years of growth coming up from a very low level."

Still automakers saw a Cash for Clunkers hangover in September, pushing down sales 41 percent from August and leaving the industry searching for signs of a recovery in October, when industry estimates expect sales to improve.

The company, based in Fort Lauderdale, Fla., said it earned $65 million, or 36 cents per share, in the three months ended Sept. 30. It lost $1.41 billion, or $7.99 per share, due to big asset write-downs in the same quarter last year.

AutoNation said sales fell 13 percent to $2.92 billion from $3.36 billion a year ago, but said its new vehicle unit sales decline was in line with industry figures from CNW Research. Jackson said the clunkers program boosted the company's bottom line by 7 cents per share.

Analysts surveyed by Thomson Reuters expected the company to earn 35 cents per share on $3.13 billion in sales.

Its shares rose 9 cents to $18.18 in afternoon trading Thursday.

For the quarter, the company said domestic segment income was $34 million compared with $25 million in the year-ago period, with a 11 percent decline in new vehicle sales. Income from imported vehicles rose to $63 million from $52 million last year, with an 12 percent drop in new vehicle sales. Premium luxury income was $44 million compared with $43 million a year ago, with a 19 percent slip in new vehicle sales.

AutoNation said its domestic and import segments benefited most from the clunkers program.

The automotive retailer's expenses fell about 10 percent to $380 million compared with the year-ago period.

AutoNation also said its board has approved an increase of capital investment to $150 million for 2010 and authorized an additional $250 million in stock buybacks. The company also announced earlier this week that it plans to complete the acquisition of Honda and Acura dealerships in Washington State by the end of the year.