DETROIT - The leaders of General Motors' new fleet and commercial group want to boost lease residuals by shaking up the way GM remarkets its used vehicles.
Rick Lee and David Hansen, the new general managers of the group, say they need to address declining market values of GM off-lease and off-rental vehicles by looking at new ways to remarket those cars and trucks.
They are investigating opportunities at wholesale auto auctions -where automakers resell the bulk of their used vehicles - and outside the auctions. They also are changing GM Certified, the automaker's used-vehicle certification program.
'I can tell you there will be no stone unturned,' said Lee.
Lee is no stranger to the used-car market. As executive director of GM's North American Operations fleet group, he has overseen GM's used-vehicle remarketing and certification programs since 1996.
But now he has a partner in Hansen. When GM merged its fleet operations with the commercial operations of Chevrolet and GMC on Jan. 1, Lee continued as supervisor of the remarketing program while co-general manager Hansen became supervisor of GM Certified.
The main goal of the two programs is to boost the market value of off-lease and off-rental vehicles. By doing so, GM can increase lease residuals - which are based in part on the average wholesale prices of used vehicles - and lower monthly lease payments on new vehicles.
NEW REMARKETING HEAD
Lee will oversee John Larson, GM's new director of remarketing. Larson takes on a program that remarketed 648,000 used vehicles at auctions in 1998, said a GM spokesman.
Larson, former manager of NAO fleet finance, replaced Bill Stierwalt on Jan. 1. Stierwalt now heads the remarketing solutions group of ADT Automotive Inc., a wholesale auto auction chain based in Nashville, Tenn.
'(Larson) brings some creativity, new thoughts and ideas to how GM approaches the remarketing side of the business,' Lee said.
He said it was too early to say how Larson would change the remarketing program. Lee said only that opportunities exist at the auctions and elsewhere.
Auction industry officials are never surprised when an automaker ventures beyond the auctions.
Darryl Ceccoli, COO of the world's largest auto auction chain, Manheim Auctions Inc., said automakers are always looking for ways to remarket vehicles outside the auction industry.
Some automakers have turned to the Internet and some have tried to sell their used vehicles at auctions directly to their dealers, but invariably they find they get the best value at the auctions, Ceccoli said.
'That's not to say other things don't fit into the formula on a limited basis,' he said.
Hansen will oversee Roy Pikus, who continues as brand manager for the GM Certified program. Pikus previously reported to Lee.
GM Certified, created in 1996, works to increase the value of used vehicles on GM dealer lots by offering consumers inspected vehicles with factory-backed service contracts. There are 817 dealers enrolled in the program, up from about 560 a year ago, Pikus said.
Although GM promotes GM Certified as its used-vehicle brand, the program previously stood alone outside GM's portfolio of new-vehicle brands, Pikus said. GM Certified now has a direct connection to GM's brand portfolio through Hansen, who reports to John Middlebrook, general manager of vehicle brand marketing.
GM Certified also will get a boost from GM's reorganized field staff by year end, according to Lee.
Pikus now trains GM Certified dealers through six contract employees. By the end of 1999, GM's new market area managers - about 200 - also will assist dealers with their GM Certified programs.
GM may tweak the certification program to make it attractive to a variety of consumers. In pilot programs in Cincinnati and Indianapolis, GM Certified vehicles are being sold with lower-cost three-month/3,000-mile warranty extensions instead of the standard 12-month/12,000-mile contracts.