The pieces are falling into place for Wayne Huizenga, who wants to corner a chunk of the highly competitive but fragmented $1 trillion-a-year auto industry.
Alamo and National rental cars are under his Republic Industries Inc. umbrella, and he’s buying up auto dealerships to feed his AutoNation USA used-car superstores as they open around the country.
The man who built the Blockbuster video rental and WMX waste management empires also wants to finance consumer auto purchases, service anybody’s car and sell accessories, too.
“It leaves Wayne now in a position of strength that nobody else has,” said industry analyst James Hall of AutoPacific Inc. “He now has a bigger stick than I think anybody outside of a car company has ever had in the industry. The issue at hand is what is he going to do with it.”
Huizenga’s targets are the $310 billion used car market, $300 billion in new cars, $323 billion in auto financing, $128 billion in service and $13 billion in rentals.
More than 15 million new cars and trucks were sold and 4 million used cars under 5 years old changed hands last year. Average new car prices hit $21,600, nearly double the $11,000 average for used. But an industry quirk is that profits are three times higher on used cars than new ones.
“There’s a lot of opportunity for anybody out there,” Huizenga said. “We just want our share.”
Robert Friedman, an equity analyst with Standard & Poor’s Corp., has reservations about Huizenga’s targeted industry, which lacks the recurring revenues of waste and the high growth of video rentals.
The auto industry “is cyclical and mature and capital intensive and therefore prone to a downturn in the economy,” Friedman said. “He’s trying to grab a bigger piece of the same-sized pie instead of the pie growing.”
Details of Huizenga’s strategy have trickled out in recent months as deals were made.
Dealerships will be paired with at least 80 AutoNations in the nation’s biggest markets (there are seven AutoNations right now), guaranteeing a supply of trade-ins and cars coming off leases to the used-car lot.
Huizenga isn’t telling all, but he’s telling enough for analysts to project $7.5 billion in revenues for Republic this year, 25 times higher than in 1995, when he bought into what was then a waste company as an investor. A $2 billion buying binge since then, including a rash of new car dealer announcements since Christmas, is paid for with new stock.
Loyalists don’t feel like they need to know everything. They have almost a mystical trust in the man who went from a garbage hauler on the streets of Chicago to a billionaire business and sports tycoon.
After a shareholders meeting recently approving Republic’s stock purchase of AutoNation by a 99.9 percent vote, Huizenga hugged and kissed the 3-month-old daughter of an AutoNation employee, met a neighbor from 1965, shook hands, flashed a ready smile and studiously worked the crowd.
A woman circulated in the lobby with a handwritten poster calling Huizenga a financial wizard and preparing him for a “Nobel Prize down the road.”
Before asking a question from the floor, shareholder Robert Woods proudly proclaimed, “I’m part of the Wayne Huizenga fan club.”
Retired commercial real estate broker John Maguire said he owned Blockbuster stock, sold the Viacom stock he got when the companies merged in 1994 and bought into Republic to be back with Huizenga.
“There doesn’t necessarily have to be a correlation between what you’ve done before and what you do in the future,” Maguire said. “He has the knack. He just has the knack.”
Auto dealers are attracted to Huizenga because he lets them stay in place, running the businesses bearing their regionally recognizable names.
“What you’re seeing now is the result of months and months of work. These things weren’t just done because we went and visited a dealer in Kokomo, Ind., and said, ‘Hey, he looks like he has a nice, clean place,”’ Republic spokesman Ron Castell said. “These are people who know their business, know their market area.”
Since Huizenga is intent on building a nationally recognizable brand, he said the AutoNation logo, resembling a green interstate highway sign, will begin appearing on dealer paperwork.
AutoNation offers new-looking cars on a grand scale with pizzazz. Touch-screen computers guide browsers around a 1,000-car lot. Buyers get a feeling of security from a seven-day money-back guarantee, 99-day warranty and free roadside assistance for a year.
Like many Americans, shareholder Maguire never liked buying a car. He just didn’t trust dealers. But he has faith in one now.
“If, and when I need a car, I certainly will buy from Huizenga.”
Subscribe to the Morning Review newsletter
Get the day’s top headlines delivered to your inbox every morning by subscribing to our newsletter.