This sales trend signals tough 2016: AutoNation CEO

AN CEO:  Auto industry entering challenging new chapter
AN CEO: Auto industry entering challenging new chapter   

The U.S. auto industry saw record sales in 2015, but a flat December may portend a rougher road ahead, said Mike Jackson, the leader of the nation's largest dealer chain.

"Let's talk about December, which I consider to be a true bellwether month every year as an indication of what's going to happen," the AutoNation chairman and CEO told CNBC's "Squawk Box" on Wednesday. "I know it looks like a … cherry on top of this beautiful [ice cream] sundae of 17.5 million [units], but actually I think it's more like a prune."

U.S. auto sales totaled a record 17.47 million in 2015 even as December numbers trailed expectations, according to figures from research firm Autodata.

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"The industry calendar moved three days and a January weekend into 2015. So that's 9 percent more days. And we have 9 percent more sales. If you correct for the calendar, that means sales are basically flat [for the month]," Jackson said. "I'm looking at significantly higher inventories; higher incentives from the manufacturers; and bigger discounts from us, the retailer. We had to discount an additional $250-$300 a car, compared to a year ago."

Putting his concerns into perspective, he said: "Go back to 2000, the last time we had records, if you look at the next five years, industry sales were very good." He continued, "However, the quality of the earnings [at that time] deteriorated dramatically as the industry really couldn't manage flat sales."

"You'll hear a lot of happy talk from everybody else in the industry," Jackson said. "[But] I'm saying we're in a new chapter here."

Under this scenario, Jackson expects margins and earnings to be hurt at AutoNation for a quarter or so while the company re-positions itself through cost cutting, a reduction of inventories, and finding "the right line between volume and quality."

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— Reuters contributed to this report.