Auctions already house hundreds of vehicles for varying lengths of time as they prepare to move those units down the lanes for closed, open and special sales. With more than 37 million vehicles being recalled by automakers so far this year, some auctions are seeing their resources being stretched to accommodate the storage as those necessary repairs are completed.

Auction Broadcasting Co. conducts a factory sale for General Motors at its facility in St. Louis. It delighted ABC president Jason Hockett to learn that a group of 60 Chevrolet Cruze sedans was included in an August sale.

Hockett indicated that Chevy Cruze models as well as Impala sedans began to pile up at ABC St. Louis beginning in July because they were included in recalls issued by GM, which has led the pack in recalls in 2014.

“That was very encouraging to see those cars start to let up with the repairs being done,” Hockett said.

“The bad thing for GM and some of these other automakers is they’re going to have a lot more volume to sell in the last quarter of the year, which would not be favorable,” he continued.

Because of new wholesale rules orchestrated by manufacturers in conjunction with National Auto Auction Association members, these recalled vehicles can’t be sold during closed factory sales until the recall repairs have been completed. In times past, if the recall was associated with something cosmetic, the vehicle would have still been sold on the wholesale market with disclosures made about the condition.

But nowadays, all recalls are treated the same. If the vehicle is under an OEM recall, it stays parked at the auction until a franchised store can get parts and complete the repair.

At ABC St. Louis, Hockett indicated the facility has more than double the volume of units that will eventually make it through the GM factory sale.

Meanwhile, over at Manheim, spokesperson John Heid reiterated the policy the company has in regard to recalled vehicles that are to be wholesaled.

“Manheim takes vehicle disclosures at sale very seriously,” Heid said. “We adhere to the National Auto Auction Association policy that requires the seller to disclose any matters that relate to the safety or integrity of the vehicle at sale. 

“Our goal is to ensure that every vehicle that runs through our auctions is represented accurately by each seller to buyers,” Heid went on to say.

Working With Franchised Dealerships

To the East, vehicle levels are starting to rise at Harrisburg Auto Auction, too. General manager Lynn Weaver indicated that even though a vehicle might be recalled, it doesn’t stop Harrisburg AA and other operations from going through the preparation process.

“The manufacturers or the remarketers have dictated that we can’t sell them until the recalls have been completed. Whether or not, we still have to pick the cars up for our client. We still have get them into the process as quickly as possible. If there is an outstanding recall, either they notify or we go into databases and look for our clients. We have to make sure those recalls are clear before we can sell the car wholesale,” Weaver said.

“The auction industry is getting involved with this directly whether they like it or not,” he continued. “We push it to the next level, which is the new-car dealer body in our local area and ask them to get these into the cue to get them fixed. That just depends on the volume and how many for this particular recall and how many cars they already have and whether parts are available.

“Most dealerships’ service business is a big and viable part of the operation, and to ask them to take these 10 cars this week and turn them around in a short time is next to impossible,” Weaver went on to say.

And if parts are on back order, that is holding the process back that much more.

“The franchised dealerships are doing the best they can. In some cases, these things get done in a couple of days. In some cases it’s taken almost a month. There’s some we don’t know when they’re going to get fixed because we don’t know when the parts will come,” Weaver said.

While that situation could create a significant level of frustration, Hockett acknowledged that auctions aren’t releasing their tension out on franchised dealerships, which in many cases are pressured by their own customer base to make repairs as quickly as possible.

“They really have been good. They know the problem. I don’t think there’s any kind of blame game at all. I think they’ve been very cooperative to work with,” Hockett said.

Potential Impact to Entire Remarketing Industry

With the industry breaking the record for the number of recalls in a single year, circumstances like what ABC St. Louis and Harrisburg AA are experiencing likely aren’t uncommon. Black Book senior vice president and editorial director Ricky Beggs explained that the situation leaves the wholesale market with a couple of big questions — how quickly can the vehicles be repaired and how quickly they can be sent down the lanes.

“Our only hope is two things,” Beggs said. “One is that they get all the parts to get them fixed all at one time. And the second piece I think the remarketers will be much more in tune with what’s going on and not just overload the market with those at one time. They’ll try to spread them out.

“It is a concern because the manufacturers that have some of these cars, at one time, they were able to actually sell them at a closed sale,” he continued. “But since some of their policies have changed, and they’re not able to sell them in a closed sale until they’re actually repaired. That’s delaying things a little bit. That’s keeping a few more in the pipeline that have to be remarketed. That’s a little bit of a concern.

“But I think the manufacturers will be very smart about it. The rental agencies that have these cars, I think they’ll be smart about it as well,” Beggs went on to say.

No matter how long it takes for the recall clog to clear at auctions, wholesale leaders are poised to respond.

“The auction world is very resilient. We’ll figure out how to handle this for our clients and the industry,” Weaver said.

Hockett added, “We’re grateful to have the cars and knowing that they’re there and will eventually sell. In the meantime, it’s a burden for the manufacturer and hopefully we can help them through this trial.”