Auto Nation CEO says gas prices will benefit Detroit

Mike Jackson is the Chairman and CEO of Auto Nation, the largest dealership group in the United States. Auto Nation showrooms around the country sell just about every brand of car offered here and Jackson is actually glad to see gas above $4 a gallon. While this may seem odd since sales have been in free fall lately, especially the once mighty and profitable full-size truck and SUV segment, it actually makes a lot of sense if you look out past the next quarterly report. For far too long, American automakers and consumers have had a mutually destructive co-dependent relationship. Car buyers liked big powerful trucks in an age of cheap gas and manufacturers were more than happy to supply the demand. As interest began to wane, automakers started piling on incentives to keep drivers on the hook and they kept buying prompting the manufacturers to keep building, etc. Unfortunately the lead times to get new product out in this industry are long and although new, smaller, more efficient products are coming, they will take time. In the mean time, carmakers and dealers are feeling the pain.
Jackson believes that pain was just what was needed to move the industry forward to make fundamental changes. Part of the problem is that government has enabled the co-dependency by trying to keep fuel prices low. At the same time they have added to the industry's grief by bringing on new fuel economy standards that are at odds with low fuel prices. As American car buyers have demonstrated time and again, they buy the most vehicle they can afford to operate. While driving gas prices down may benefit consumers in the short term, over the long run it will cause more pain. Jackson wants prices to stay up to help drive demand for development of a new generation of vehicles that will wean us off petroleum.

[Source: Wall Street Journal]