Morningstar | AutoNation CEO Jackson to Only Be Chairman in 2019. See Updated Analyst Note from 19 Sep 2018
AutoNation chairman, CEO, and president Mike Jackson, 69, has long said he is pacing his working career with Penske Automotive Group boss Roger Penske, 81. Jackson told Automotive News in 2013 that he's in for whatever Roger is in for. This statement made us think Jackson would not be stepping down as CEO for a long time, but it turns out age 70 is when Jackson wants to transition the firm to a new leader. AutoNation announced Sept. 19 that Jackson will become executive chairman sometime in 2019, once the firm hires a new CEO. AutoNation also extends Jackson's contract to now expire at the end of 2021 instead of 2019, but it did not say he will retire at that time. AutoNation's board is working with recruiting firm Spencer Stuart to find a new CEO.We are not changing our fair value estimate. Although Jackson's departure from day-to-day leadership alleviates key man risk we've believed existed with the stock, we do not think the next CEO can perfectly replace Jackson because we think he is one of the best dealer CEOs. AutoNation is better with Jackson than without him.
AutoNation in recent times has had some senior leaders leave, such as Mike Maroone and Bill Berman. COO Lance Iserman, a 17-year company veteran, is a possible CEO candidate, but he only became COO in June 2017 after then president and COO Berman abruptly left the company in May 2017 with no explanation after only three months in the senior leadership role. The hiring of a recruiting firm suggests to us an outsider is more likely to get the job. We think the next CEO will come from a large public or private dealer group. We wouldn't be disappointed to see AutoNation hire its former CFO--and former Asbury Automotive Group CEO--Craig Monaghan. However, we don't think that is likely because he is in his early 60s and recently retired from Asbury. Two surprise hires would be Waymo boss John Krafcik, 57, or Penske president Bob Kurnick, 56.
Krafcik held senior automaker roles such as leading Hyundai USA before becoming president of TrueCar and then joining Waymo in 2015. He probably has too much financial incentive to leave Waymo, which is part of Alphabet, but Krafcik and Jackson know each other and the two firms have an arrangement for AutoNation to service Waymo's autonomous vehicle fleet. Kurnick is also vice chairman of Penske Corp. and a director at Penske Corp. and Penske Automotive Group. We think he would be very difficult and expensive to lure away from the Penske umbrella.
AutoNation, through its subsidiaries, is an automotive retailer. The company provides a range of automotive products and services, including new vehicles, used vehicles, parts and service, which includes automotive repair and maintenance services as well as wholesale parts and collision businesses, and automotive finance and insurance products, which include vehicle service and other protection products, and the arranging of financing for vehicle purchases through third-party finance sources. The company owns and operates new vehicle franchises from stores located in the United States, in main metropolitan markets in the Sunbelt region. The company has three segments: Domestic, Import, and Premium Luxury.
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