AutoNation's chief warns of reckoning for autos, U.S. economy

ORLANDO, Florida (Reuters) - The U.S. auto industry and the nation's economy face a reckoning despite recent gains in economic growth and vehicle sales, both fueled by stimulus programs, the head of the largest U.S. auto dealer group said on Friday.

However, Mike Jackson, chief executive of AutoNation Inc , said auto sales will not suffer in the next few years as that reckoning is at least a decade away.

"There is a day of reckoning coming for the U.S. economy and for America," he said at a J.D. Power & Associates conference ahead of this weekend's National Automobile Dealers Association annual convention.

Jackson said those who would dismiss his gloominess need only recall he made similar dire warnings from 2004 to 2007 before the U.S. auto market slid to 28-year low in 2009. At the time, Jackson warned that automakers must stop producing too many cars and piling on generous consumer incentives in order to sell them.

U.S. sales of 10.4 million in 2009 came after more than 10 years of sales that had averaged nearly 17 million.

Since 2009, U.S. auto sales have risen each year, to reach 14.5 million last year, and most forecasters say they will reach between 15 million and 15.5 million in 2013.

Jackson said the federal monetary policies of low interest rates and sharp increases in the balance sheet of the U.S. Federal Reserve are two major stimulus efforts that may come back to haunt American consumers.

Recent economic growth has been around 2 percent annually, he noted.

"It's only 2 percent with this unbelievable artificial support that's not sustainable," said Jackson. "So we have a long way to go with this economy."

Jackson said the U.S. government has to make difficult moves to cut spending for Social Security programs in the coming years. But he's not convinced that Washington will have the political will to make the necessary moves.

Lacey Plache, chief economist for Edmunds.com, agreed with Jackson's assessment, but like Jackson said it was difficult to peg the timing of the hit to the U.S. economy.

"The wealth effect is leading consumers to a sense of over-confidence because they see the stock market going up," Plache said in an interview at the conference.

That stock market would not be as high if it were not for the temporary stimulus measures, said Plache, who agreed with Jackson that Washington should consider measures that may be painful in the short-term but in the long run will benefit the economy and the auto industry.

"People feel better, so they are buying cars," said Plache. "But we have to get our monetary and fiscal houses in order."

(Reporting by Bernie Woodall; Editing by Dan Grebler)

Source: http://news.yahoo.com/autonations-chief-warns-reckoning-autos-u-economy-204217429--sector.html

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