Automakers should watch their bloated inventories even though 2014 seems like it will be a good year for car sales, AutoNation Chairman and CEO Mike Jackson told CNBC on Thursday.
The automakers have a "pretty bizarre" way of calculating inventories to justify these levels, he said in a "Squawk Box" interview. "But if you cut through the bogus calculations and look at dealer inventory for the Detroit 3, it's over a 100-day supply. And it simply doesn't need to be there."
In response, Joe Hinrichs—president of the Americas at Ford—told CNBC: "We have been cutting some production in the fourth quarter of last year and in the first quarter of this year on a couple of our product lines where we saw the inventory grow a little bit."
(Read more: Ford beats on strength in N. America)
But Hinrichs added, "The industry is a little different now. With our capacity running max out, we actually grow an inventory in the winter, come down in the spring and summer because we run our plants full all year round. In the old days when we had excess capacity, we'd take the plants down in the winter and work overtime in the spring/summer to supply to the demand."
He added: "We're watching it carefully, but I think we're going to be OK."
Jackson called 2013 "the perfect year," following the release of a better-than-expected profit report. The dealer chain earned 83 cents a share in the fourth quarter. But revenues of $4.52 billion for the quarter were lower than the projected $4.59 billion.
Nevertheless, Jackson said, "I'm optimistic about 2014. Industry sales will continue to grow 3 percent to 5 percent. We'll break through 16 million units this year."
(Read more: Honda now a net exporter from the US)
"The powerful drivers are the same in that there's genuine replacement need [because of the] age of the vehicles on the road; great financing is available; and we have the best product offering from the manufacturers ever," he said.
Jackson added that he sees "very strong profitability from the suppliers, to the manufacturers, right through to retailers."
Hinrichs was also optimistic, saying the industry is showing progress when it comes to quality.
But an analysis by Stifel Nicolaus found that the auto industry in North America recalled 18.8 million vehicles—a surge of about 36 percent.
Hinrichs acknowledged that Ford had to address a couple of issues with the My Ford Touch system when it launched.
With 16 new products this year, he said, "We're very confident that we have the processes in place to have successful launches."