American Honda Motor Co. and General Motors are among the auto companies closely monitoring dealerships' compliance with their certified used-vehicle programs -- and sometimes cracking down on those who bend the rules.
Honda, GM crack down on certified-used rule benders
Brian Butts, manager of auto remarketing at American Honda, and Larry Pryg, national manager of GM Certified used operations, said most of their dealerships administer their programs properly. But those that don't, get temporarily suspended from the programs.
It's all about maintaining the programs' integrity, Butts and Pryg said. Neither would say how many dealerships have been suspended from their programs or detail the violations.
"I think every OEM is concerned with ensuring that the dealerships are properly certifying the vehicles, doing what's necessary both pre- and post-sale," Butts said.
The suspensions are one reason American Honda's certified used sales are down this year, Butts said. Another reason is because the company's off-lease volumes -- the bread and butter of certified used programs -- are down this year, the result of production cuts in 2011 after the earthquake and tsunami in Japan. That supply shortage has affected certified-used sales, Butts said.
Through August, American Honda certified used sales dropped 7 percent from the year-earlier period to 186,248 vehicles. Industrywide sales of certified used vehicles rose 9 percent in that period, putting them on track to top last year's record 2,113,173, which was up 15 percent.
American Honda is restructuring the certified-used programs for Honda Division and its luxury sibling Acura and expects to introduce improved programs this year, Butts said. Among other things, the company is changing how it oversees dealer compliance, he added.
"Unfortunately, we can't visit every dealership ourselves, so we have companies that assist us," Butts said. "We want to ensure that we're doing the best we possibly can to ensure that our dealers are certifying the vehicles properly and documentation is complete and accurate."
Honda Division and Acura dealerships that lose their right to sell certified used vehicles are suspended for 90 days. They must submit written action plans and work with field staff to correct the problems if they want back in, Butts said.
GM's Pryg said GM Certified has monitored dealers' performance "for years," but began adding emphasis about 18 months ago.
"For the first time, we said, 'If you fail [GM audits] consecutively, we will remove you from the program,'" Pryg said. "That's a discussion we've had with dealers for over a year. The idea is to fix them, not get them out."
Pryg said GM Certified representatives visit participating dealerships one to four times a year. Dealerships are graded on how well they execute the program. Those that do well get fewer visits. Stores that need to improve get more visits.
"This is our way of keeping our promise that the car is properly certified," Pryg said.
GM Certified, which includes Buick, Chevrolet, GMC, Pontiac and Saturn brands, increased its unit sales 10 percent through August to 255,077.
Bill Fay, Toyota Division general manager, said Toyota dealers do an "excellent job defending and supporting the parameters of the program, but we have to stay on it like everybody else does."
So each quarter, a third-party inspection company, on behalf of Toyota Division, conducts unannounced audits at participating dealerships to inspect the quality of the vehicles being sold as certified, said Tom DeLuise, Toyota Motor Sales national manager of certified vehicles and rental car sales and operations.
"We'll decertify a vehicle, if in fact it needs to be," DeLuise said. "But in those situations, we'll sit down with our dealers and counsel with them and say, 'Here's what you need to do to make sure that the cars are right.'"
Toyota Division's certified used sales dropped 6 percent through August to 239,251, also in large part the result of lower off-lease volume due to the 2011 earthquake and tsunami.
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