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Letter to the SEC

AUTONATION, INC.

AutoNation Tower

110 SE Sixth Street

Fort Lauderdale, FL 33301

February 10, 2009

VIA EDGAR SUBMISSION

H. Christopher Owings

Assistant Director

Division of Corporation Finance

Mail Stop 3561

U.S. Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

              RE:

    AutoNation, Inc.

Form 10-K for Fiscal Year Ended December 31, 2007

Filed February 28, 2008

File No. 001-13107

Dear Mr. Owings:

     This letter responds to the comments that AutoNation, Inc. (the “Company”) received from the
Staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) by letter dated
January 15, 2009. For your convenience, we have set forth each of the Staff’s comments below
followed by our response to each comment.

Form 10-K for the Fiscal Year Ended December 31, 2007

Notes to Consolidated Financial Statements

Note 1. Summary of Significant Accounting Policies

Goodwill and Other Intangible Assets, net, page 52

    1.

    We have reviewed your responses to comments 1 and 2 from our letter dated October 9, 2008.
Please enhance your disclosures in future filings to explain in further detail why you changed
your management structure during 2008 from one enterprise-wide operating segment to three
brand-oriented operating segments. Your disclosure in the Form 10-Q for the quarterly period
ended September 30, 2008 that the change was made “in response to changes in the automotive
retail market, including the disproportionate decline in revenue and earnings from our
domestic franchises compared to our import and premium luxury franchises” appears to be fairly
broad and does not enable a reader to assess how management regularly evaluates the business
and responds to internal or external factors

impacting
the company. For example, it is not clear if you will return to your previous reporting structure if the
revenues and earnings from your domestic franchises return to their historical levels prior
to the economic downturn. Please tell us how the reorganization was structured, including
how segment managers were determined, how your CODM reporting packages have changed, and
whether or not you created new positions to fit the revised reporting structure, and explain
the extent to which management reviews and places reliance on financial information by
geographic region. Considering the CODM primarily reviewed consolidated financial
information in the past, please clarify how the CODM’s management of the business has
changed and why you now consider it necessary for the CODM to review disaggregated
information and allocate resources and assess performance on a disaggregated level. Since
you conducted your annual goodwill impairment test during the second quarter of 2008 with no
goodwill impairment charge deemed necessary, please also tell us the specific factors that
changed from the second to third quarters that resulted in no impairment during the second
quarter but a material impairment charge in the third quarter.

Response:

Changes in Operating Segment Structure

We will enhance our disclosure in future filings to explain in further detail why we changed
our management structure during 2008 from one enterprise-wide operating segment to three
brand-oriented operating segments. The following example demonstrates how we would consider
revising our disclosure regarding the change in our management structure:

In the third quarter of 2008, our domestic franchises were disproportionately
impacted by the unfavorable economic conditions in the United States, which included
high fuel prices, turmoil in the credit markets, general economic uncertainty, and a
decline in consumer confidence. Our domestic franchises derive a greater proportion
of their revenue and earnings from sales of trucks and sport-utility vehicles, and,
as a result of the increase in fuel prices during that period, demand shifted away
from those types of vehicles to smaller, more fuel-efficient cars. Additionally, a
reduction in the availability of favorable customer financing from the finance
captives of domestic manufacturers, including the discontinuation or limitation of
certain lease programs for domestic vehicles, contributed to the disproportionate
decline in sales volume from our domestic franchises.

In response to the difficult conditions in the automotive retail market and the
outlook for the automotive industry and, in particular, the domestic manufacturers,
our chief operating decision maker (our “CODM”), who is our Chief Executive Officer,
made changes to his management approach and began allocating resources and assessing
performance based on financial information for our domestic, import, and premium
luxury brands. Our CODM directed a review of the profitability, strategic fit,
and potential marketability of each of the stores in our store portfolio. Our
Corporate Development team reviewed our store portfolio and recommended to our CODM
the divestiture of certain underperforming stores, which were primarily domestic.
Our CODM approved the recommendations of our Corporate Development team, reaffirmed
our overall brand portfolio strategy to increase our mix of import and premium
luxury stores, and realigned our planning and reporting efforts to focus on
domestic, import, and premium luxury brands as separate segments of our business.

2

As a result of these actions, in the third quarter of 2008, we determined that under
Statement of Financial Accounting Standards No. 131, Disclosures about Segments of
an Enterprise and Related Information, we had three operating segments: (1)
Domestic, (2) Import, and (3) Premium Luxury. We have determined that our three
operating segments also represent our reportable segments. Our CODM may in the
future, based on our results of operations or developments in the automotive retail
market, make further changes to his management approach that could impact our
operating segment structure.

In connection with the change in our operating segment structure, to facilitate management
review of our segment results, we added new, segment-specific presentations to the internal
reports (the “Internal Reports”) that we provided to the Staff on a confidential and
supplemental basis with our letter to the Staff dated September 10, 2008. Additionally,
Mike Maroone, our Chief Operating Officer, became the segment manager for each of our new
segments. Mr. Maroone is directly accountable to and maintains regular contact with our
CODM to discuss operating activities, financial results, forecasts, and plans for each of
our new operating segments. Our CODM concluded that, given Mr. Maroone’s deep understanding
of our Company and extensive experience in the automotive retail industry, no additional
segment managers were necessary. No other material changes were made to the structure of
our organization.

In addition to the new segment-specific presentations, the Internal Reports continue to
include consolidated financial information and disaggregated financial information based on
product lines, specific brands, and regions. In the third quarter of 2008, we determined
that our CODM allocates resources and assesses performance based
primarily on financial information for our domestic, import, and
premium luxury brands. Our CODM confirmed again that he does not regularly
review region-level information for purposes of allocating resources or assessing
performance. The region-level information continues to be used by various members of
management and staff for analytical purposes.

We also note that paragraph 15 of SFAS No. 131 indicates a preference for segmentation based
on products and services. We believe that the presentation of our domestic, import, and
premium luxury segments allows users of our financial statements to better understand our
business and assess prospects for future cash flows and, as such, is consistent with the
objectives of segment reporting as stated in paragraph 3 of SFAS No. 131.

Goodwill Impairment Test

We had concluded that there was no impairment of goodwill as of the date of our annual
impairment testing (April 30, 2008), and that no triggering event requiring an interim test
of goodwill impairment had occurred as of June 30, 2008. In the third quarter of 2008,
given the significantly deteriorating conditions in the automotive retail industry, we
determined that discounted projected cash flows were significantly lower than as determined
in our assessment of goodwill for potential impairment as of our annual assessment date of
April 30, 2008. In addition, the market price of our stock was significantly lower during
the third quarter of 2008 than during the second quarter of 2008. The change in our
discounted projected cash flows and stock price resulted in us concluding in the third
quarter of 2008 that the carrying value of our single reporting unit exceeded its fair
value, which required us to perform the “second” step of
our goodwill impairment test. We concluded that goodwill associated
with our single reporting unit was impaired. We
then performed an impairment analysis for our reporting units resulting from our new segment
structure and concluded that goodwill associated with our domestic reporting unit was
impaired. See Note 4 of the Notes to Unaudited Condensed Consolidated Financial Statements
in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 for additional
information about our goodwill and franchise rights
impairment charges.

* * * * *

3

     In providing this response letter to the Staff, the Company acknowledges that (i) the Company
is responsible for the adequacy and accuracy of the disclosure in the above-referenced filing, (ii)
Staff comments or changes to disclosure in response to Staff comments do not foreclose the
Commission from taking any action with respect to the above-referenced filing, and (iii) the
Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or
any person under the federal securities laws of the United States.

     If you or any member of the Staff has any questions regarding the responses set forth herein,
please contact the undersigned at (954) 769-3145.

    Respectfully submitted,

    /s/ Michael J. Stephan

    Michael J. Stephan

    Vice President — Corporate Controller

    cc:

    Michael J. Jackson, Chairman and Chief Executive Officer, AutoNation, Inc.

Michael E. Maroone, Director, President and Chief Operating Officer, AutoNation, Inc.

Robert R. Grusky, Audit Committee Chair, AutoNation, Inc.

Michael J. Short, Executive Vice President and Chief Financial Officer, AutoNation, Inc.

Jonathan P. Ferrando, Executive Vice President, General Counsel and Secretary, AutoNation, Inc.

Hector Mojena, KPMG LLP

Jonathan Awner, Esq., Akerman Senterfitt

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