General Motors will send fewer used vehicles to auction this summer. The automaker has cut the number of sales dates at almost half the auction sites that handle vehicles it sells exclusively to its dealers.
Dan Kennedy, GM's remarketing manager, says the decrease in the number of used vehicles available in GM-sponsored auctions this summer will be "pretty significant." Kennedy says 16 of the 35 auction sites that sell GM-owned vehicles on consignment will hold one GM-sponsored sale a month in May, June and July, instead of the typical two a month.
"We've communicated this to our dealers and auctions," Kennedy says. "A dealer doesn't want to go to auction for 40 or 50 cars. So we'll accumulate some volume and those marketplaces will sell once a month with some higher volume, probably a hundred or so, maybe a little bit more, to attract the dealers.
"We're also working with our rental partners to bring rental risk vehicles into our closed sales."
Risk vehicles are those for which the rental company assumes the financial risk of remarketing. In contrast, program vehicles are vehicles purchased by rental companies for which the automaker assumes depreciation risk and remarketing expenses.
Industrywide, there is a lower supply of used vehicles, which has cut the number of vehicles available at auction. That is largely due to rental car companies' keeping vehicles in their fleets longer, and, during the recession, weak retail sales and sharp cutbacks in leasing, which means fewer vehicles coming off lease now.
Jim Hallett, CEO of KAR Auctions Inc., parent company of ADESA Auctions, warned analysts during a quarterly conference call this month that vehicle volume at ADESA and in the entire industry will be "softer" in the second quarter than in the first quarter.
Six of the auction sites at which GM is cutting sales are owned by ADESA, the nation's second largest auction company. One is owned by Manheim, the nation's largest auto auction company. The rest are independently owned.
Kennedy says he expects vehicle volume at GM-sponsored auctions to pick up in mid- to late-August. "History shows that rental accounts will de-fleet in August or September," he says.
About 75 percent of the retired rental vehicles that GM will sell at its sponsored auctions this fall will be 2012 models and will have "extra thousands" of miles on their odometers, ranging from the "mid-teens to the high 20,000s," Kennedy says.
The extra in-service time for those vehicles will not prevent dealers from finding vehicles that qualify for GM's certified used-vehicle program because the company reconditions and repairs its vehicles before they are offered for sale, he says. The miles on those vehicles will still be well below the 75,000-mile ceiling GM imposes for its certified used vehicle program.