AutoNation CEO says U.S. needs more rate cuts

DETROIT (Reuters) - Car dealership group AutoNation Inc (AN.N) Chief Executive Mike Jackson said on Sunday the U.S. economy needs additional interest rate cuts by the Federal Reserve of at least 150 basis points to avoid the danger of recession.

"The Federal Reserve has been slow in recognizing the seriousness of the situation," he told Reuters on the sidelines of the North American International Auto Show, adding that the U.S. economy "needs a fiscal stimulus package."

"Another 150 basis points of cuts are needed over the six to nine months," Jackson said.

The benchmark federal funds target rate is currently at 4.25 percent.

Jackson, who runs the largest publicly-traded car dealership group in the United States, said the economy is a "challenge" right now and is hurting auto sales.

"The traffic (in dealerships) is holding steady, but the purchasing power of consumers has (been) reduced because of economic distress," Jackson said. "It's more difficult to put them in a car."

U.S. auto sales have been hurt by the weak housing market, gasoline prices and tough competition. Weak housing starts have also sapped demand for high-margin pickup trucks, which are typically bought by construction workers.

Some analysts have forecast that U.S. demand for light trucks and cars could dip below 15.5 million units on an annualized basis over the next six months.

In 2007, U.S. sales dropped almost 3 percent to 16.14 million vehicles, the lowest since 1998 and down from 16.55 million a year earlier.

"I feel better about 2009," Jackson said. "Anybody counting on a good thing in 2008 is going to be disappointed."

He also said he expects the economy to decline in the first half of the year and "perhaps deeper into 2008."

The CEO said the slowdown could also hurt the luxury segment. "The economy is volatile and vulnerable and even luxury is not immune to it," he said.

Jackson said AutoNation, which has not yet released its fourth-quarter and full-year results, is planning to weather the downturn by keeping its costs down.

"We have to be very disciplined on the cost side," he said. "There is very little opportunity on the revenue side."

(Reporting by Poornima Gupta; editing by Gary Crosse)