ADESA Inc.'s acquisition this month of a six-site auction company will help ADESA sell more dealer-owned used vehicles on consignment, said the CEO of ADESA's parent company.
"These are sites we may not have even looked at in the past," Jim Hallett, head of KAR Auction Services Inc., said during a quarterly conference call with analysts and journalists. "In fact, I would say they are not in secondary markets; in many cases they are tertiary markets. We feel this falls very much in line with our dealer consignment initiative."
Hallett said the acquired company is focused on sales of dealer-owned vehicles, and each of its sites sells 5,000 to 10,000 units annually.
ADESA and other auction houses are putting more emphasis on selling dealer-owned vehicles to help make up for a decrease in off-lease vehicles. Hallett said dealers are retailing more of the vehicles they take as trade-ins, which also contributes to the industrywide used-vehicle shortage.
ADESA's unit sales fell almost 7 percent in the third quarter from the year-earlier period. But sales of dealer-owned vehicles increased to 35 percent of total sales, from 32 percent a year earlier, Hallett said.
The auction industry is expected to show an 8 percent decline in volume in the third quarter, he said.
ADESA acquired the Premier Auction Group, which runs Bay Auto Auction in Bay City, Mich.; Dealers Auto Auction of Michigan in Clare, Mich.; East Tennessee Auto Auction in Fall Branch, Tenn.; Montpelier Auto Auction in Montpelier, Ohio; Premier's Las Vegas Auction in North Las Vegas, Nev.; and Wisconsin Auto Auction in Lomira, Wis.
Former Premier President Bob Hubregsen has joined ADESA as a vice president.
The acquisition brings the number of ADESA sites in North America to 70.
Additionally, ADESA has started construction on a greenfield auction in Las Vegas to be named ADESA Las Vegas. The 45-acre site is 10 miles north of the Las Vegas Strip. The auction will open next spring.
ADESA's third-quarter revenue fell 1 percent from a year earlier to $267.4 million. The decrease resulted primarily from lower vehicle sales, and was partly offset by a 6 percent increase in per-vehicle revenue.
ADESA's gross profit declined 4 percent to $119.7 million, and its gross margin slipped to 45 percent, from 46 percent.