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November 2, 2017 12:00 PM, EDT
Alphabet's Self-Driving Unit Finds Another Maintenance Partner
Paul Sancya/AP

AutoNation Inc., the largest car-dealer group in the U.S., reached an agreement to maintain and help manage fleets for Waymo, the self-driving car unit of Alphabet Inc.

The multi-year service agreement starts with AutoNation supporting Waymo’s autonomous vehicle programs in Phoenix and Northern California and will expand to markets across the U.S. With its expertise in detailing, repairs and maintenance, AutoNation’s role is to keep the cars on the road for longer.

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AutoNation is the latest of several companies to team up with Waymo before its CEO John Krafcik has announced plans to offer a transportation-for-fee service. Waymo already has an arrangement with Avis Budget Group Inc., reached earlier this year, to manage the Phoenix fleet. And rather than build its own cars, it’s buying plug-in hybrid minivans from Fiat Chrysler Automobiles NV and is in talks with Honda Motor Co. to put its self-driving technology into some of the Japanese automaker’s cars. Its parent Alphabet has also invested in Lyft Inc., the closely held ride-hailing company.

“AutoNation’s service and maintenance is longer-term focused, leveraging our technical and cosmetic expertise with the goal of maximizing the useful life and appearance of Waymo’s vehicles,” CEO Mike Jackson said in prepared remarks.

RELATED: Waymo 'really close' to putting customers in self-driving cars

AutoNation shares surged as much as 15%, the biggest intraday jump since February 2009, after reporting the deal and third-quarter earnings. The stock advanced 11% to $52.74 as of 10 a.m. Nov. 2 in New York.

Service Revenue

The deal could give AutoNation a new revenue source at a time when U.S. auto sales are contracting after a record seven years of growth. Dealerships and aftermarket auto retailers also face a long-term threat to their lucrative parts and service businesses as online retailers like Amazon.com Inc. encroach.

Fort Lauderdale, Florida-based AutoNation reported broad-based revenue declines in the third quarter, including for new vehicles, used vehicles, and parts and service. Still, third-quarter profit fell less than analysts had predicted, with adjusted earnings of $1.00 per share beating the average estimate of 84 cents.

The company estimated that Hurricane Irma reduced net income from continuing operations by about $8 million, or 8 cents a share.