CARMEL, Ind. -

KAR Auction Services appears confident that its flow of General Motors vehicles and wholesale activity with the automaker won’t just disappear suddenly now that OEM rolled out a program that offers U.S. consumers online access to an exclusive inventory of low-mileage former company-owned, off-lease and daily rental vehicles.

Coming off a year where net income spiked 27 percent year-over-year and revenue jumped 12 percent above a year earlier, KAR chairman and chief executive officer Jim Hallett responded to an investment analyst asking how GM’s Factory Pre-Owned Collection service might impact the company’s performance this year and beyond.

“A couple of thoughts there is No.1 is that it’s very much in its infancy,” Hallett said when the company hosted its most recent quarterly conference call. “It’s just getting announced and just getting started.

“Secondly, I would say to you our job is not to try and direct the car or direct the customer to any one particular channel,” Hallett continued. “We’re going to sell cars whatever way the customer wants to get them sold. And yes, we are very much involved in the process with General Motors of facilitating these transactions, and we will be getting fees when those transactions take place.”

Wall Street observers asked Hallett again about the GM program, which went live on Feb. 9. The KAR boss reiterated that however GM or any other consignor or dealer wants to move metal through the online or in-lane channels at ADESA, the company is ready.

“I think this is an initiative by GM to get in front of the remarketing cycle and basically, post these cars on a website where the customer can go in and can view the inventory,” he said. “If a customer is able to identify a car that he or she wishes to purchase, then they connect them with the dealer and the dealer transacts the deal

“I don’t see it’s necessarily taking anything away from the physical side at ADESA. In fact, overall, I would say that we would view it as an opportunity,” Hallett went on to say.

Better inventory opportunity for independents?

In the opinion of KAR chief financial officer and executive vice president Eric Loughmiller, the best pieces of inventory independent dealers can offer are vehicles that didn’t end up in the certified pre-owned department at a franchised stores. Based on the expectation of off-lease volume continuing to grow this year, both Loughmiller and Hallett see independent dealerships having a better chance of securing more of those units.

Why? For the simple reason that there is only a set amount of franchised dealerships and the likelihood that these stores cannot absorb all of the off-lease inventory themselves.

“We know that they’ve whittled down the population of franchise dealers. It’s franchise dealers that are primarily buying these cars for CPO purposes. They’re not adding any more franchise dealers so that population is not growing,” Hallett said.

“So at some point in time when they have enough supply, these vehicles have to get released to the open market and it gives the independents an opportunity to buy those vehicles,” he added.

Double-digit volume rise at IAA

In the fourth quarter, Insurance Auto Auctions posted a 14-percent increase in revenue because its sales volume grew by 16 percent year-over-year. An investment analyst wondered if IAA could keep up that pace based on what he heard Copart say during its conference call, indicating that salvage auction company “gained a big customer win.”

Hallett defended Insurance Auto Auction’s performance, which included a Q4 gross profit rise to $88.6 million.

“First point is, I would say that the performance at IAA is primarily driven by the volume increases,” Hallett said. “And then in regards to customers, bottom line is there is wins and losses. There is always RFPs that are going to come and go, and we’re going to win some, we’re going to lose some.

“But things I would point to and ask you to focus on is, I would ask you to focus on our performance. And when you take a look at our performance year-over-year and the volume increase that we’ve demonstrated, I would think that would point to we’re winning more than we’re losing,” Hallett went on to say.

3 notes on ADESA Q4 sales performance

The company mentioned a trio of highlights associated with vehicles handled by ADESA during the fourth quarter:

— ADESA sold approximately 152,000 and 115,000 vehicles through its online-only offerings in Q4 of 2015 and 2014, respectively. Of those figures, approximately 80,000 units and 72,000 units, respectively, represented vehicle sales to grounding dealers.

— Dealer consignment vehicles represented approximately 49 percent of used vehicles sold at ADESA physical auction locations in the fourth quarter, compared with approximately 47 percent a year earlier. Vehicles sold at physical auction locations increased 6 percent year-over-year.

— The used-vehicle conversion percentage at physical auction locations, calculated as the number of vehicles sold as a percentage of the number of vehicles entered for sale at ADESA auctions, decreased to 56.1 percent in Q4, down from 56.8 percent a year earlier.