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AutoNation says it won’t sell cars that need safety repairs

Mike Jackson, Chairman and CEO of AutoNation, speaks during a forum for the 2012 International Auto Show in New York, April 3, 2012. REUTERS/Shannon Stapleton

By Joseph White

(Reuters) - AutoNation Inc (AN.N), the largest U.S. auto retailer, said on Tuesday it will not sell any new or used vehicle that has an unrepaired safety defect, in a move that could boost costs but also deflect pressure from consumers, lawmakers and regulators.

The announcement comes after a record-setting run of safety recalls in the United States over the past two years.

Consumer groups and members of Congress have stepped up calls for legislation to forbid auto dealers from selling new or used vehicles that have been recalled for safety defects, but have not been fixed.

The new policy at AutoNation expands on earlier actions by Chief Executive Mike Jackson to stop sales of vehicles covered by certain recalls until defective parts were replaced.

AutoNation said its policy would apply to all 293 U.S. stores and cover wholesale and retail transactions.

“A blanket commitment not to sell vehicles subject to a safety recall is not without cost,” the company said, because parts may not be available and cars could be held longer in inventory. The company did not give an estimate of the potential cost of the new policy.

Customers may still trade in vehicles that have not had repairs required under a recall, the company said.

What to do with used vehicles subject to safety recalls is a thorny problem for U.S. auto dealers, particularly those that lack a franchise to sell new vehicles. A Chevrolet that needs work under a safety recall, for instance, can usually only get that repair at a Chevrolet dealership, which can in turn collect payment for the repair from General Motors Co (GM.N), which owns that brand.

AutoNation has new vehicle franchises for 35 major automotive brands, and can get reimbursement for recall repairs from most major automakers that operate in the United States.

Used car-only retailers, such as CarMax Inc (KMX.N), face obstacles getting recall repairs for vehicles they have for sale. CarMax, based in Richmond, Virginia, said in a statement last month that its sales associates will help customers identify recall repairs needed on a vehicle sold at one of the company’s stores.

But CarMax said the “current recall system is based on the manufacturer’s relationship with its dealers and registered vehicle owners, and not with independent used auto retailers, like CarMax."

(Reporting By Joseph White; Editing by Tom Brown)