|Kinder, Gentler, Used Car Selling Found Unprofitable|
|Subject||Shut-down condition and supply curve|
|Topic||Production and Cost|
|Key Words||Seller, prices, salaried, commission, fixed costs, rebates, sales, staffing, profitability, pay, advertising.|
AutoNation Inc. is the largest seller of new and used cars in the U.S. In its 37 used car superstores, there are typically over a thousand cars. Prices are marked and are not negotiable. Salespersons are salaried, not paid by commission.
This approach has led to problems. Fixed costs are high. The fixed prices have allowed competitors to undercut AutoNation. In addition, rebates on new cars have made late-model used cars less attractive.
As a result, AutoNation is closing most of its used car superstores and turning the rest into the used car portions of its new car dealerships. Overall company sales will fall only 5 percent because its core business is its 409 new car dealerships. Reductions in the staffing of corporate offices should help their profitability. Pay and advertising will be cut at poorly performing dealerships.
(Updated February 1, 1999)
|Source||Keith Bradsher, "AutoNation To Close Stores And Cut Jobs," The New York Times, December 14, 1999.|
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