Dealerships and auctions now aren’t the only businesses that must keep close watches for recalled vehicles.
The U.S. Department of Transportation’s National Highway Traffic Safety Administration announced that beginning on Wednesday rental car agencies must fix any and all open safety defects before renting out vehicles to customers.
The regulator explained Secretary of Transportation Anthony Foxx and NHTSA administrator Mark Rosekind have long advocated for safe rental cars free of open recalls, and the new legislation requiring it was recently passed by Congress in the Fixing America’s Surface Transportation (FAST) Act of 2015.
“When a family picks up a rental car on vacation, they should be able to expect it is free of any known safety defect,” Foxx said. “I thank Congress and the safety advocates who helped turn this common-sense idea into law.”
Federal law now prohibits any company or dealer with fleets greater than 35 vehicles to rent unrepaired recalled vehicles. The rule also extends NHTSA’s recall authority to cover rental car companies for the first time, giving the safety agency power to investigate and punish violators.
The legislation was championed by the family of Raechel and Jacqueline Houck, sisters who died in a rental vehicle that was under a safety recall but had not been repaired.
“This law gives NHTSA one more tool to protect the safety of U.S. motorists,” Rosekind said. “It’s critical that every recalled vehicle, whether new, used, rented or leased, is repaired as soon as possible. Rental agencies operate some of the largest fleets, so this law will go a long way in ensuring the cars and trucks on the road are safe.”
In 2014, the regulator said there were close to 900 recalls affecting 51 million vehicles nationwide. NHTSA has stated it will seek 100 percent remedy completion rates in open recalls.
Element Financial Corp. recently announced a pair of new leadership roles on its fleet management remarketing team.
The leadership of Element’s remarketing team now consists of Bill Cieslak and Paul Seger, both of whom have the title of vice president of remarketing.
Cieslak heads up upstream dealer direct and strategic sales channels, sales of medium/heavy truck, trailer and material handling equipment assets. Additionally, he also leads Element-owned dealerships and truck remarketing, and heads up strategic relations with the company’s bank syndication partners.
Meanwhile, Seger leads the remarketing via auctions and Element’s third-party remarketing services business.
“Service and growth are top priorities for Element,” said Tom Keilty, senior vice president, operations for Element’s North American fleet management business. “Having Bill and Paul in these key roles allows us to take a multi-channel approach to our U.S. remarketing services, combining auctions with a number of strategic sales channels, which helps to maximize returns for our customers.”
This new follows Element finalizing its acquisition of GE Capital’s U.S.-based fleet management operations last year.
Element had previously announced in June that it and GE Capital had entered into a definitive agreement for Element to acquire GE Capital’s fleet management operations in the U.S., Mexico, Australia and New Zealand for an all-cash purchase price of $8.6 billion Canadian, which at the time translated to roughly $6.9 billion in U.S. currency.
Kelley Blue Book senior analyst Alec Gutierrez said the fleet process leveraged by automakers “has really matured considerably” during the last three to five years.
That development is all the more important since so many new vehicles are leaving franchised dealership lots as leased units nowadays.
During a conference call on Tuesday, Gutierrez acknowledged, “There is healthy fleet and there is unhealthy fleet. Either way you look at it, the higher your fleet penetration there is an expectation that you could see a detrimental impact to your brand’s residuals, which in turn can influence your ability to lease in the future. And we know that leasing has become so important today.
“It impacts your ability to really move metal,” he added.
Many OEMs don’t disclose specifics in terms of exactly how many units land in fleets when they highlight their monthly sales totals. One company that does is General Motors, which reported that 20 percent of its January new-vehicles sales were in the fleet space, down from what it called its “historical” range of 22 percent to 24 percent.
In a separate analysis sent to the media, Kelley Blue Book senior analyst Karl Brauer noted, “While General Motors’ overall sales were flat last month, it made big strides in retail volume, delivering a much higher level of overall profit compared to last January.
“GM has been focused on reducing fleet sales and capturing retail share in recent months, and the trend continued in January,” Brauer continued. “If General Motors can maintain, or even grow, its total volume while depending less on fleet, the bottom line numbers will substantially improve. Mary Barra and the executive team appear committed to not chasing volume numbers, preferring overall profit as the benchmark of corporate health.”
On Tuesday, Gutierrez was asked to compare GM’s fleet strategy to what’s being implemented by its domestic counterparts at Ford and Fiat Chrysler Automobiles.
“I think what we’ve seen in recent years is that while GM is doing a great job of managing their fleet mix,” he said, “Ford is a little more comfortable keeping it higher. And I think to a certain extent FCA has had to maintain higher fleet sales than the other two.”
Autotrader senior analyst Michelle Krebs, who also participated in Tuesday’s call, made a point about the fleet activities of two Asian OEMs in light of the rising popularity in SUVs and the softening sales of compacts and other sedans.
“We saw that Kia and Hyundai get more active in fleets, too,” Krebs said. “You see that happening with brands that are heavier in cars and they need a place for them to go.”
No matter whether foreign or domestic, these analysts aren’t seeing automakers revert back to perhaps the unwise strategies of the past where OEMs eventually dumped their excess manufacturing capacity and inventory into the fleet space.
“I think all manufacturers in general have done a pretty good job of ensuring those vehicles that go into fleet represent their product in the way that they want,” Gutierrez said. “What I mean by that is they’re not putting cars with vinyl seats and roll-up windows into rental fleets; which ultimately when those come back into the lanes at the auction and we start to analyze them, we see that as relatively detrimental impact to the overall value of that product line as a whole.
“It’s important to manage that mix,” he continued. “More importantly whatever that mix you decide is — if it’s 20 percent fleet, if it’s 40 percent fleet — you better make sure those vehicles you’re putting out there are going to positively impact those products in the marketplace and not negatively impact the perception.”
Gutierrez went on to mention that automakers are able to manage the perception challenges because the volume of data and the quality of that information have both improved significantly, too. He explained OEMs watch shopper activity, eventually sending vehicles into fleets that are similar to what might already be in franchised dealer inventory.
“There’s a focus on contenting those vehicles right so when they come back into the marketplace there’s going to consumers out there who don’t necessarily look at them in a detrimental way,” Gutierrez said.
“With all this access to data, they have more options at their fingertips to be able to unload that fleet inventory as it comes back so you’re not overloading the market as a whole,” he added.
Furthermore, Gutierrez pointed out that wholesale channels are much more advanced now to handle fleet disposal. For example, a large amount of convertibles or hybrids don’t sit idle at the auction; rather they flow into the lanes in places such as California where dealer — and eventual consumer — demand likely resides.
“(Automakers have) been able to not necessarily drastically change their fleet mix. You’re still talking 20 to 30 percent fleet mix for some of the domestics,” Gutierrez said. “But even with that target mix, they’ve been able to protect their residuals through various strategies.”
Various areas around the world, including college campuses, cities, residential areas, and peer-to-peer platforms have already or are in the works to be affected by General Motors’ vehicle-sharing initiatives. On Thursday, these initiatives united under one new GM brand: Maven.
According to GM, Maven’s mission is to give customers access to highly personalized, on-demand mobility services. Globally, the Maven team has over 40 employees with experience in the connected-car technology industry as well as ride- and car-sharing experts from Google, Zipcar and Sidecar.
“GM is at the forefront of redefining the future of personal mobility,” said Dan Ammann, GM’s president. “With the launch of our car-sharing service through Maven, the strategic alliance with ride-sharing company Lyft, and building on our decades of leadership in vehicle connectivity through OnStar, we are uniquely positioned to provide the high level of personalized mobility services our customers expect today and in the future.”
Here’s a breakdown of Maven’s expanded global offerings, as listed by GM in its news release:
City: Maven is announcing that it is offering its car-sharing program to more than 100,000 people in Ann Arbor, Mich., initially focusing on serving faculty and students at the University of Michigan.GM vehicles will be available initially at 21 parking spots across the city.
- Additional city-based programs will launch in major U.S. metropolitan areas later this year.
- Maven customers will experience seamless smartphone and keyless integration with the vehicle. Maven customers use its app to search for and reserve a vehicle by location or car type and unlock the vehicle with their smartphone. The app also enables remote functions such as starting, heating or cooling and more. Customers can bring their digital lives into the vehicle through Apple CarPlay, Android Auto, OnStar, SiriusXM radio and 4GLTE wireless. Each vehicle will provide an ownership-like experience with the convenience of car-sharing.
- Maven pricing is simple and transparent and includes insurance and fuel.
- As Maven grows, the team will use innovative ways of connecting personally with customers. Ann Arbor Maven users will have direct access to Maven leadership and core team members via the messaging application WhatsApp to share their experiences, ideas and thoughts with the team as they help shape the Maven service.
Residential: In the first quarter of 2016, Maven will launch car-sharing services for Chicago residents in partnership with Magellan Development Group. Maven is also expanding its existing residential program in New York City (previously called Let’s Drive NYC) with Stonehenge Partners giving users on-demand access to vehicles and preferred parking options. Both programs combined will offer service to more than 5,000 residents.
Peer-to-Peer: Existing global initiatives include peer-to-peer car-sharing through the CarUnity market place in Germany. Nearly 10,000 users have signed up in Frankfurt and Berlin since mid-2015.
Campus: Various programs are running on GM campuses in the U.S., Germany and China to refine and test future Maven commercial offerings.
Karl Brauer, senior analyst at Kelley Blue Book, compared today’s automotive business environment to the early days of commercial Internet.
“The personal transportation industry in 2016 is feeling a lot like the Internet world of 1999,” Brauer said. “There's a massive collision occurring between start-ups and established brands, all of them jockeying for position in an uncertain world. The Maven launch will give GM broader reach in this dynamic atmosphere, but nobody knows which of these alternative transportation systems holds the greatest long-term potential. This is why we're seeing a shotgun approach coming from multiple automakers.”
Another KBB analyst, Jack Nerad, also the company’s executive editorial director, believes this is not only a learning experience but also a solid marketing opportunity for GM.
“While there is some debate over how important ride-sharing services will be in the future, there is no doubt that the top global car companies want to have exposure in the space and gain learnings from early adopters. A pilot program like GM’s Maven can not only provide those learnings but can also be a marketing opportunity, exposing GM vehicles to groups that might not otherwise consider them.”
The battle between supply and demand is nothing new to dealers — and as we head further into the forecasted growth in used-vehicle supply, wholesale price softening is to be expected.
The latter is the message from ADESA Analytical Services’ executive vice president and chief economist Tom Kontos in the December edition of Kontos Kommentary, where he summed up the year quite succinctly and set the scene for 2016.
“2015 was largely a year when strong retail used vehicle and CPO demand, benign new-vehicle incentive activity, and the embrace of upstream as well as traditional auction processes among remarketers diluted the usual negative impact of growing supply on wholesale values,” Kontos said in the report.
“Further masking that impact was the displacement of off-rental program vehicle volume that appeared in the first half of the year rather than the last quarter of 2014,” he added. “These high-dollar, late-model units biased average wholesale prices upward for much of the year.”
Unfortunately, that dilution of wholesale values started to clear up by the end of the year, most notably in December, where Kontos says prices fell by upwards of 1 percent on both a month-over-month and year-over-year basis for various segments.
Let’s break it down. Wholesale used-vehicle prices in December averaged in at $9,763, a decrease of 1.2 percent month-over-month and down 1.0 percent relative to December 2014.
The only vehicle segment that showed any significant monthly increase was the minivan segment, while truck values, in general, declined less than cars and crossovers.
Looking at the various types of sellers, wholesale prices for vehicles remarketed by manufacturers were up 1.6 percent month-over-month but down 3.5 percent year-over-year. For fleet/lease consignors, both metrics were down 0.1 percent and 0.7 percent, respectively.
Within the fleet/lease consignment category, off-rental risk units showed small month-over-month and year-over-year price increases.
Three-year-old vehicles, however, did not, Kontos said. These vehicles — which he said are a “proxy for off-lease vehicles” — showed significant declines in both pricing metrics.
Dealer consignment saw a 2-percent decrease in December, compared to November, and a 1.2-percent decreased compared to December 2014.
To check out Kontos’ full breakdown of wholesale used-vehicle prices by vehicle model class, click here.
Remarketing company FLD Inc. announced Thursday an internal promotion to fill the role of chief financial officer.
Taking the reins of CFO is Rita Miller, who joined the company as a comptroller in 2008.
According to FLD, in her new role, Miller will now be more involved with projections in budgeting, assisting with the introductions of new products and services to the market, and contributing to FLD’s efforts to expand globally.
“Rita has made tremendous impacts thus far in her time with FLD and has proven vital to our company’s success,” said Ron Sanders, FLD’s chief executive officer. “We look forward to continuing to grow FLD’s technology and services under her day-to-day leadership.”
Having grown up in Orlando, Miller graduated from Florida Atlantic University prior to becoming a CPA in 2005.
After joining the company in 2008, she assisted FLD’s former chief operations officer, Laurie Conn, with administrative tasks, including non-auction-related human resources tasks as well as state and federal income tax issues.
“I have a great support team, and I am fortunate to have worked closely with the executive team for the last eight years as well as mentorship from Laurie Conn,” Miller said. “I am excited about the opportunity to help continue the growth and expansion of the company.”
Consolidated Asset Recovery Systems’ fourth appearance on the Triangle Business Journal’s annual Fast 50 list is also its first time coming in at No. 1, representing the top of the top of the fastest-growing private companies in the Raleigh-Durham area.
The company was founded by two software supply chain experts, Steven Norwood and Terry Groves, in 2005.
“We have a long history of growth and profitability,” Norwood said. “Our financial stability in the industry makes us the partner of choice for many service providers such as repossession, skip trace, door knock and auction agents. We are extremely grateful to our employees, customers and partners for helping make us the number one company on this year’s TBJ Fast 50 list.”
The Triangle Business Journal selects and ranks its Fast 50 winners annually based on a formula that counts revenue growth and profitability in the preceding three years – in this case, 2012 through 2014. The results and rankings were analyzed and verified by PwC, an accounting firm.
To find out more about CARS, visit its site here.
On Thursday afternoon, in the Philadelphia-area town of Mount Laurel, N.J. — where ARI is headquartered — it was 73 degrees, according to The Weather Channel’s website, with temperatures expected to hit 80 on Friday before dipping down into the 60s and below over the weekend.
None of that compares to what Bob Graham has in store next week, though.
The ARI vice president of vehicle remarketing and his wife Cheryl (who has worked at ARI for more than three decades, herself) are set to go on a polar bear expedition in Churchill, Manitoba, part of the Arctic region of Canada.
Conditions there on Thursday? Thirty-two degrees, but it feels more like 18 degrees, according to Weather.com.
Trips like that may be commonplace soon for the Grahams, as both are set to retire on the same day (Jan. 8) after a combined 77 years with the company — Bob Graham has been there 42 years; Cheryl Graham has been there 35.
The pair, which enjoys an adventure, have two more trips slotted for early 2016, both of which were planned before they decided to retire: a ski trip to Park City, Utah, and a trip to Bermuda.
In light of his upcoming retirement, Auto Remarketing asked Graham, whose retirement was announced by Vehicle Remarketing on Sept. 23, what he has enjoyed the most about the industry he was worked in for four decades.
“Without a doubt, I’ve enjoyed the people the most,” he told us Thursday. “The whole remarketing community is a community you can’t beat.”
Graham has been a big part of the community at the International Automotive Remarketers Alliance, where he currently serves as chairman of the board. Graham is also a past-president of IARA.
And not only has he enjoyed visiting with his peers in the industry at conferences like the NAAA Convention, IARA events, CAR and the National Remarketing Conference, but Graham has also found it rewarding to work with these same people to make the business better — and no doubt it has in the last few decades.
He started out as a clerk in the operations department at ARI 42 years ago, where one of his duties was to check all of the factory invoices.
“I often say that’s why I wear contacts today,” he said.
It wasn’t long before he transitioned to remarketing. Moving through the ranks and spending the next four decades there, Graham has seen a lot of change on this side of the car business.
From condition reports being filled out by pencil to where there are companies dedicated to handling those electronically and posting online today, it’s innumerable the ways the remarketing business has changed from the advance of the Internet — and, really, even before the Web came along.
“That whole progression for me is the most interesting part of remarketing,” Graham said.
And with those upcoming travel adventures and more to come, it’s likely the Grahams’ retirement won’t lack interest, either.
Hertz Global Holdings spent much its most recent financial performance report highlighting that the company is now up to date on all of its filings with the Securities and Exchange Commission. But Hertz also touched on its fleet plans on Friday, sharing a breakdown of how it is disposing of units as well as the volume of new vehicles it’s bringing into its portfolio.
The rental car company reported that it plans to reduce its fleet growth plans for the 2015 fiscal year by 100 basis points, decreasing its previous expansion strategy that ranged from 1.5 percent to 2.5 percent down to 0.5 percent to 1.5 percent. Officials insisted the move “reflects disciplined growth and utilization improvement,” and would leave their total fleet count during the second half of 2015 about 1 percent smaller year-over-year.
Since Hertz began a fleet refresh in September of last year, the company reported that its current average fleet age is four months lower. Hertz also mentioned that 37 percent of its fleet had fewer miles than when the campaign started.
When 2014 closed, Hertz reported in updated SEC filings that it operated a peak rental fleet in the U.S. of approximately 517,500 vehicles, keeping those units for an average of 20 months.
Turning back to its financial presentation, Hertz broke down how it disposed of those units during the first quarter, which concluded on March 31. The company said it moved 44 percent of those units through Hertz Dealer Direct, which gave the company a net benefit of about $300 per unit. Another 23 percent of the units went through the Hertz Retail and Rent2Buy channels, giving the company a net benefit of about $1,000 per unit.
The remaining 33 percent Hertz’s disposed rental fleet ended up going down the auction lanes.
Hertz senior executive vice president and chief financial officer Tom Kennedy emphasized that significant work has been done in managing the company’s fleet, simultaneously controlling costs and driving customer satisfaction.
“We are continuing to make progress to modernize and align the rental car fleet more closely with demand trends, and to improve revenue execution capabilities,” Kennedy said during the company’s quarterly conference call on Friday.
“I want to thank our fleet planning, fleet remarketing, and sales and operations teams for their outstanding execution of a very complex fleet rotation plan,” Kennedy said. “Through their efforts, our customers have begun to take notice of our refreshed fleet.”
Other company news
On Friday, Hertz also highlighted that it has filed its annual report on Form 10-K for the fiscal year ending Dec. 31, which includes the restated results for 2012 and 2013 as well as selected unaudited restated financial information for 2011.
In addition, the company has filed its quarterly report on Form 10-Q for the period ending March 31. The Company is now up to date on all of its filings with the SEC and with its New York Stock Exchange listing requirements.
Hertz went on to mention that it’s progressing with its planned separation of its equipment rental business (Hertz Equipment Rental Corp. or HERC) as well as its capital allocation, cost savings and capacity plans.
“Today's filings are an important step forward, and our attention is now on realizing Hertz’s full potential,” Hertz president and chief executive officer John Tague said. “While much work remains, I thank the Hertz team for their efforts to bring our filings up to date while continuing to remain focused on our customers and our future.
“Going forward, we are committed to developing a differentiated customer experience and premium brand position for Hertz that is No. 1 in the industry, while revitalizing Dollar and Thrifty into leading value brands,” Tague continued. “We aspire to be the best rental car company in the world, recognized for the quality and convenience of our products and services, as well as the value we will create for shareholders.”
Tague went on to say that, “2015 is a transition year for Hertz. We are making important investments in our fleet, systems and service, and adding new talent to complement the existing expertise throughout the company. In addition, we are taking actions to rationalize the company's cost platform, dramatically improve customer satisfaction and reset our capacity.
“These actions and early results are indicative of the progress we are making across the organization,” he added. “Our commitment to the company's share buyback program is reflective of our confidence in driving operating performance that is sustainable and enables us to return capital to shareholders.”
Dominion Dealer Specialties, a division of inventory management provider Dominion Dealer Solutions, launched what company officials dubbed New Car Incentives for Dominion Inventory Manager.
The company highlighted Dominion’s New Car Incentives feature can provide dealers with automated access to manage and apply new-model OEM rebates, as well as incentive information to assist with pricing and merchandising new vehicles.
Officials pointed out the Dominion Inventory Manager automatically can access the information and help dealers instantly apply incentives with its pricing data, comments, photos and overlays.
Dealers using the New Car Incentives can receive notification alerts for available new rebate and incentive information. Dominion contends this feature can let franchised dealers nationwide ensure their vehicles are in a consumer’s comparison set. With this enhanced guidance, dealers can develop a faster, more comprehensive approach to their appraisal process.
Dominion’s New Car Incentives have a proprietary rules engine with more flexible pricing management. Dealers can apply rules as needed to ensure their vehicles are marketed accurately and syndicated directly to all websites and portals.
Furthermore, dealers can also set rules to automatically apply or remove new car rebates and incentives.
“New Car Incentives helps dealers streamline their new car merchandising and pricing process,” said Jennifer Ryan, product director for Dominion Inventory Manager Solutions.
“Providing complete visibility and a more automated process not only promotes a more profitable sales approach, but also achieves the ultimate goal of driving a more consistent, timely and accurate consumer shopping experience,” Ryan went on to say.
