AutoNation CEO sees tightening credit

DETROIT (Reuters) - AutoNation Inc (AN.N) Chief Executive Mike Jackson said on Monday the turmoil in financial markets could lead to a further contraction in credit conditions and the U.S. economy was in a "domestic recession."

Jackson, speaking at the Reuters Autos Summit in Detroit, also said the U.S. vehicle market was bumping along the bottom and any recovery in U.S. auto sales will have to be preceded by a stabilization in housing prices and wide credit availability.

The CEO of the largest public auto dealership group said it was unclear when the recovery in the U.S. auto market would begin as consumers were still "spooked."

"The American economy is clearly in a domestic recession," Jackson said. "The top-line number is being saved by exports, mitigating the impact on GDP."

"The consumer is spooked, struggling with value of their house, credit availability," he added.

Jackson said the bankruptcy filing by U.S. investment bank Lehman Brothers Holdings Inc LEH.N and the sale of Merrill Lynch MER.N would make the credit environment more difficult.

"The No. 1 issue for us as an industry is credit availability," he said. "The things that happened today are not going to improve the situation."

BOUNCING ALONG BOTTOM

Record high gas prices, tight credit and consumer uncertainty tied to a slumping housing market have combined to send U.S. auto sales down 11 percent this year through August.

Jackson said despite the decline in gasoline prices recently, consumer buying habits would not change until the housing market begins to recover and consumers could more easily get loans to buy or lease vehicles.

"I see it bouncing along the bottom and then a recovery," he said.

Jackson said Ford Motor Co (F.N) appears to be in the best shape among the Detroit automakers.

"Ford did the best job of marshaling capital," he said, referring to the automaker's successful attempt at raising $23.5 billion in 2006. "They should be in the best position to weather the storm."

Jackson said while GM has a lot of cash, the automaker has many issues to deal with such as its liability regarding parts maker Delphi Corp's bankruptcy.

"Chrysler is a little bit of a black box -- can't judge them today," he said, adding he expected all three U.S.-based automakers to make it through the industry downturn.

In wide-ranging remarks, Jackson said the U.S. auto franchise sector would undergo a continued shakeout over the next couple of years, but most dealerships available for acquisitions were overvalued.

In general, there is a roughly 25 percent to 30 percent gap between what a potential franchise seller is willing to accept and what the market will bear for dealerships that sell vehicles from transplant automakers like Toyota, Honda, Nissan and luxury car makers, he said.

(Additional reporting by David Bailey and Ben Klayman; Editing by Brian Moss and Richard Chang)