KAR Auction Services chief executive officer Jim Hallett insisted he "can’t think of anything that’s more critical on my radar” than ADESA’s ongoing integration with OPENLANE.

As the company rolled out its latest financial report this week, Hallett shared an update on how OPENLANE is melding into the KAR stable after being acquired last year.

“I’m very pleased with the progress our teams are making. I think they’ve done a great job of bringing these companies together,” Hallett told investment analysts during a conference call Tuesday.

As previously reported by Auto Remarketing, ADESA DealerBlock will be migrating to the OPENLANE platform, meaning dealers only have to use one set of log-in information to access both inventory listings.

Hallett also mentioned that ADESA’s closed sales are in the process of shifting over to the OPENLANE platform as well.

And just before the call, the company finished the full integration of both sales teams at ADESA and OPENLANE, which according to Hallett, “has surpassed my expectations in terms of the time frame of getting this done.

“The feedback from our customers has been very positive. I’ve been able to witness very strong relationships develop between the ADESA and OPENLANE staffs. We now have a fully integrated dealer consignment team and a fully integrated commercial sales team, and most importantly, we’re now approaching our customers as one company with one voice,” he continued.

One representative speaking with that one voice wasn’t KAR’s original plan.

“Our customers really wanted to be speaking to one person rather than having an OPENLANE rep calling on them and an ADESA rep calling on them and then even in certain cases there was an Insurance Auto Auctions rep calling on them. That was what they didn’t want,” Hallett acknowledged. “They really wanted one person who could interface with them and handle the account whether it be virtual or physical or send some cars to the salvage auctions.

“That’s the direction we took, which was not what we originally anticipated,” Hallett admitted. “Quite frankly, we anticipated that we’d keep two sales teams, the ADESA sales team and the OPENLANE sales team. But then we listened to what our customers had to say. Then it made perfect sense that we merged them under one sales team.”

Effectively immediately, the company said Jason Ferreri will lead commercial sales and Carol Sewell will head marketing and both executives will report directly to Bob Rauschenberg, ADESA’s executive vice president of sales, marketing and special services.

Along with the integration of ADESA and OPENLANE resources, Hallett also touched on another element that’s benefiting KAR thanks to last year’s acquisition — the transportation services through CarsArrive.

“If there was a hidden gem or a golden nugget in the OPENLANE transaction it would have to be CarsArrive, the only fully automated transportation solution in the industry,” Hallett insisted.

The company launched a pilot program during the fourth quarter to offer CarsArrive services at seven ADESA locations. These sites included:

—ADESA Colorado Springs
—ADESA Minneapolis
—ADESA Phoenix
—ADESA Pennsylvania
—ADESA Indianapolis
—ADESA Winnipeg
—ADESDA Toronto   
                 
Hallett highlighted the initial rollout helped dealers move thousands of cars during piloting span.

“In fact, many of our general managers are lined up and jockeying for position as to who will be the next to be installed,” he added.

ADESA’s 2011 Performance

KAR’s leadership hopes an improving wholesale market, as well as the resources now available through the OPENLANE acquisition, will help the ADESA turn the page from a challenging 2011.

ADESA determined its full-year revenue slipped 5 percent or $58.5 million to $1.017 billion, down from $1.075 billion. As a result, ADESA’s gross profit dipped 6 percent or $29.6 million from $464.7 million to $435.1 million.

In other full-year data, ADESA’s gross margin settled at 42.8 percent versus 43.2 percent for 2010.

The company explained the decreases in revenue and gross profit were primarily a result of a 7-percent decrease in the number of vehicles sold and a decrease in conversion rates.

“We knew the volumes were going to be impacted, but the volumes at the physical auctions were actually impacted a little bit more than we anticipated,” Hallett admitted.

“Our volumes in Canada hurt the ADESA volumes as well,” he continued. “You may or may not recall that automotive leasing came to a complete standstill in Canada in 2008 and 2009. With the very large market share that ADESA and OPENLANE have in Canada, the Canadian market was hit harder than the U.S. market.”

ADESA also pointed out selling, general and administrative expense increased $7.7 million to $219.6 million, primarily due to the acquisition of OPENLANE which accounted for approximately $10.8 million of the increase and fluctuations in the Canadian exchange rate, partially offset by decreases in compensation and incentive compensation expense, marketing costs and other miscellaneous expenses.

For 2011, ADESA’s used-vehicle conversion percentage declined to 60.7 percent (excluding OPENLANE) as compared to 65.0 percent for 2010.

Hallett noted the decrease in conversion rate was primarily due to the relative increase in dealer consignment vehicles sold, but that’s a development he also cheered.

“As much as we were disappointed with the volumes, we were very pleased with our dealer consignment initiatives. ADESA dealer consignment grew by 13 percent in 2011, compared to an industry that grew 10 percent,” Hallett recapped.

“If we look back to only a couple of years ago, ADESA’s volume in dealer consignment was less than 30 percent. At the end of 2011, ADESA’s dealer consignment was 42 percent,” he continued.

“The thing I feel good about is I feel that we still have much runway here to continue to grow our dealer consignment as the industry averages approximately 53 percent dealer consignment,” Hallett concluded.

Editor’s Note: Keep watch of AR Today later this week for a report on KAR’s discussion on the 2011 performance of Insurance Auto Auctions and Automotive Finance Corp. The company’s overall financial performance recap can be found here.