With used vehicles in short supply, vehicle-sales volume at ADESA Auctions Inc. is expected to decline again in 2012. But the top executive at the auction company's parent said the drop won't be as severe as in 2011.
Jim Hallett, CEO of KAR Auction Services Inc., also said the integration of newly acquired online auction company Openlane Inc. with ADESA's existing online offerings will take up to 18 months. Predictions for ADESA's volume do not include Openlane's sales volume.
The number of vehicles from customers such as captive finance companies in 2012 is expected to be lower than in 2011. But Hallett predicts that increases in sales of dealer-owned vehicles will partially offset those declines and that ADESA's quarterly volume declines next year won't be as steep as the 15 percent drop in the third quarter this year. That drop followed unit-sales declines of less than 6 percent in the first quarter and 14 percent in the second.
"We are hopeful that our dealer consignment volumes will continue to improve, and hopefully these volumes may offset the institutional volume declines," Hallett told analysts in a conference call this month.
Dealer consignment sales refer to dealer-owned vehicles sold at auctions. Those sales at ADESA increased to 45 percent of total sales in the latest quarter from 35 percent a year earlier.
KAR Auctions purchased online competitor Openlane Inc. in October for roughly $210 million. Openlane is expected to generate $100 million in revenues in 2011 and sell 300,000 vehicles, KAR Auctions said in a statement prior to the completion of the transaction.
Hallett said the purchase and integration of Openlane coincides with an expected increase in auction volume in 2013 resulting from an uptick in vehicle sales and leasing that started last year.
Hallett said sales of dealer-owned vehicles are a relatively small portion of Openlane's business, but the company has technology that allows do-it-yourself vehicle posting by dealers, complete with photos and condition reports, a feature that ADESA does not have.
"This is not only for the dealers, but it could be for the daily rental customers and others alike," Hallett said, of the posting feature. "So this is a whole new capability for us that we did not have in the past."
KAR Auction's net income for the third quarter rose 26 percent to $32.2 million, as revenue edged up less than 1 percent to $447 million.
KAR Auction doesn't disclose net income for its operating units, which also include salvage auction operations and a captive finance company. But the company said ADESA's revenues fell 10 percent to $241.3 million in the quarter. c