AutoNation Ranks as America’s Largest Car Dealer

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AutoNation Inc. (NYSE: AN) ranks as America’s largest car dealer, but not by much. The Penske Automotive Group is second. After these two, no other operation comes close. The lack of concentration makes recall efforts extremely difficult during a period when recalls are at all-time highs.

According to WardAuto, AutoNation has 228 locations that generated sales of $9.9 billion last year. Penske has 194, which had total revenue of $7.6 billion. After that only 12 dealer networks have annual sales of more than $1 billion. The car dealership business continues to be controlled by smaller operations with fewer than 10,000 vehicles a year.

The car sales dealer concentration, or lack of one, presents a difficult challenge to manufacturers, particularly during a period of massive recalls, including the ones General Motors Co. (NYSE: GM) seems to announce every day. Auto industry research shows service across the dealer networks is uneven, as is the case in any large retail business. GM has to manage dealers it does not own as it tries to get owners of recalled vehicles to get those cars repaired. The process is part incentive and part coercion. It is compounded by the resentment almost all these dealers have about being kept in the dark about dangerous flaws just as much as the public or government were. The ripple effect is that dealers are on the front line of describing to customers that the resale value of their flawed cars has plunged.

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Friction between dealers and car companies is almost as old as the industry itself. During the recession and the Chapter 11 process at GM and Chrysler, scores of dealers were forced to close. Others had to fight their manufacturers to stay in business. The ill will created likely persisted for years, and it may not have disappeared altogether.

AutoNation is probably easy for the car companies to deal with. It is a public company and has central management. Coordinating with hundreds of smaller operations during a period of product flaw disclosures must be a nightmare.

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