When John Larson became director of remarketing for General Motors on Jan. 1, he took charge of one of the largest used-car fleets in North America. GM's remarketing department sent about 648,000 used vehicles - including off-lease and off-rental units - to auction last year.
Larson, 36, previously served as director of finance for GM's North American fleet business. The remarketing department is part of GM's North American Fleet & Commercial Operations.
Larson spoke with Staff Reporter Joe Miller on April 8 at GM's headquarters in Detroit. Edited excerpts follow.
Officials at two auction chains, Adesa Corp. and ADT Automotive Inc., have referred to you as an out-of-the-box thinker. What do you think they meant by that?
I don't come in with preconceived notions because I haven't been part of this (remarketing) industry. I'm not tainted by the traditional ways of how we've done remarketing, and I think that leaves me open to new ideas.
What has been your biggest surprise coming into this industry?
I don't think I've been surprised by it, to be honest with you. It's just that in General Motors, the vast majority of my contacts are now all outside the automotive industry, so to speak ... where before there were a lot of internal GM customers that I spent a lot of my time with.
I still have the brand teams. And I consider it extremely important to integrate them into the entire remarketing process.
How does the remarketing department become more integrated with GM's brand teams? Why does that need to occur?
When you look at what a predominant role leasing plays in the marketplace, somewhere between 20 and 30 percent, that's a big piece of (a brand's) vehicles where the back-end performance (or resale value) relates directly to that brand's profitability. If you take into account also the number of vehicles sold to rental companies ... the back-end value of the vehicles drives completely your incentive costs.
(GM's Fleet and Commercial Operations) just finished an entire approach where we bring in all the brand teams and have a whole review with them. That's how we integrate our entire organization with the brands, and remarketing is a piece of that. So I've spent time with each and every segment of General Motors to talk about our views on remarketing and how to maximize GM's resale values for each brand.
Has GM chosen the auctions it will use this year?
We're still in the process of structuring that. I don't want to divulge the specifics of how we'll decide which auctions we use and whether that's going to change during the year. The ultimate measure that's going to drive me is maximizing GM's resale value. So calling me up saying, 'We have a good auction. I think you should use us,' doesn't mean anything to me. Send me data that show you're outperforming other auctions in your locale or region, and I'm going to move where we can maximize GM's resale value.
You recently estimated that GM will probably see about 400,000 off-lease vehicles this year, and about half of those will end up at auctions. You also estimated GM would remarket about 400,000 program rental cars. Is that a big increase over past years?
No. In fact, we're looking at a straight carry-over from year to year.
So are there any new challenges to your department in 1999?
When you're looking at billions of dollars of resale value, the challenge is always the same: How can you do it better, how can you do it more efficiently, how can you get more bang for the buck? ... Whether that means spending more money to make more money, we have no problem looking at those initiatives. Or if it means cutting down your expenses at one end to maximize your net revenue, that's an opportunity, too.
You've also said GM will stick mainly with closed auction sales, which only GM dealers can attend. Can you maintain resale values if you limit your auction sales to GM dealers?
We utilize closed sales for the vast majority of our units, and it seems to make more sense that way. But again, whatever doesn't maximize GM's resale value we'll be looking at. The question of open vs. closed sales is one of those criteria we'll make a decision on.
What other options are out there for GM's remarketing team other than the auctions?
The auctions have proved to be an extremely efficient means of (remarketing vehicles) in the past, but our radar screen is wide open. Whatever we can find in niches or in other ways to provide GM's maximum resale value, we'll look that way.
Are direct sales to dealers over the Internet still a small percentage of the vehicles remarketed by GM?
We launched (GM's dealer-direct Web site) in March. ... We're all about testing and measuring where we're going in the future, so we're looking closely at that operation. I don't expect it to be a huge percentage of General Motors' volume this year, but that will remain to be seen.
How involved are you in GM Certified, the company's used-car certification program?
We're linked at the hip. ... Roy (Pikus, director of GM Certified) and I are on the same floor. ... So we constantly work together on the initiative. ... We're integrated completely.
Have you looked at increasing the reconditioning of non-GM-Certified vehicles?
Sure. I wouldn't say necessarily that there's a need to do it. ... But if a dollar spent brings $1.50 back, I want to do it. We're examining those very initiatives that take place. A dollar spent somewhere that's hidden and doesn't get you any more value, where you're spending $300 to $500 a car ... that's probably not something we want to do.