LOS ANGELES - Nissan North America Inc. has turned a corner in fixing what was one if its sorest points: remarketing.
An effort to streamline the turnaround process on used and off-lease cars has slashed the company's bloated inventories. It now takes 39 days for a used Nissan to find a new retail owner, compared with 112 days in April 1998.
At the industry standard rate of $12 for each day a vehicle sits, multiplied by an entire used-vehicle fleet, that's an annual savings in the hundreds of millions of dollars, said Jim Yates, director of remarketing for Nissan Motor Acceptance Corp.
Granted, the hot market has put a solid foundation under Nissan's turnaround. And with certification programs, demand for used vehicles is high. Both factors have helped Nissan turn the corner.
But the company also made some changes to better manage its portfolio:
1. Restructuring. Previously, as many as four employees could be involved in tracking a used car through the process. Now, one person is responsible for each step of the process for each vehicle.
2. Automation. Once a step in the process is complete, a new computer system automatically notifies the next person in line what to do. No more missed phone calls or lost faxes.
3. Matching the market. Rather than try to send mismatched vehicles to auctions until they finally find the right price, Nissan now allocates vehicles to regions that have the best chance of selling them for the best price.
4. Accepting the market. Nissan now figures it's cheaper to unload the car for a lower price than to hang onto it in hopes of getting a better price, while absorbing interest and reconditioning costs along the way.
It's a good thing Nissan has gotten its act together.
Three years ago, Nissan was buying thousands of sales a month with expensive subvented leases. That means a flood of vehicles will be coming back in from lease over the next few months at the rate of about 20,000 vehicles a month. That rate is expected to slow to a more manageable 10,000 a month next spring.
Already, it has had an impact. Nissan used-vehicle inventories have swollen to 30,000 vehicles from 15,000 last June. But that's still down from the high of 50,000 in early 1998.
'Our mad dash in 1996 to hit sales numbers means some increased volumes are coming due now. We'll be opening some more auctions, because we can't expect our dealers to buy all our cars,' Yates said.
Yates said Nissan got caught in a dirty cycle in 1996, when Nissan set up 'foolish' subvented financing programs to hit unrealistic retail sales goals.
The result: A $683 million loss in the 1998 fiscal year. About $383 million of that amount was for just one year of underestimating the reserve needed to cover the disparity between the subsidized value and the market price. The remaining amount set aside a one-time charge of $100 million extra for each of the following three years.
Noted Yates: 'We have a worst-case scenario where we have a lot of cars coming back, because of the gap between the contract value then and the market value now. But we've reserved appropriately. If we manage the inventory levels, by next summer it will be behind us.'