Monday, November 02, 2009

AutoNation Relies on Demand Pull

AutoNation (AN) came out with an interesting press release. While they did disclose the effect of cash for clunkers on their financials they included this little snippet attributable to Mike Jackson, Chairman and Chief Executive Officer

“We are optimistic for the long term prospects of the auto industry based on the successful restructuring of the domestic auto industry, the move to a demand pull system, and the rationalization of the dealer network.”

Of particular note is their view that the industry is moving to demand pull and that they will therefore do well. Demand pull is normally viewed as when demand for goods and services exceeds supply. Investors just cannot see the demand for cars in the US exceeding the supply.

Of course AutoNation views the process that everyone must go through them and that this will create conditions for demand pull. That’s one hell of an arrogant assumption and I am concerned that management is thinking this way.