It is possible that KAR Global could reopen some ADESA auctions in early April, chief executive officer Jim Hallett said in a call with the investment community on Friday that detailed a wide range of company updates, including cost-cutting measures, operational statuses and more.

On March 20, KAR said it was stopping all ADESA physical sale operations throughout North America — including simulcast-only sales — for at least two weeks.

During the Q&A portion of Friday’s call, Hallett said: “We do have markets where we are restricted from operating. But we also have markets where there is an opportunity to operate. And in those markets where it’s permitted and it's safe, we could see ourselves opening some of our physical sales sometime in early April and then growing it from there.”

Asked later during the Q&A how the decision to restart auctions would be made, Hallett said: “I would say it’s based on two things. No. 1, we have to be legal. We have to follow the local directives, the local ordinances that have been put in place that legally allow us to operate in that market, and there are strong number of markets where we can operate legally. 

“Secondly, there has to be demand. No. 1, we have to have sellers that are willing to sell vehicles and on the other side of that equation, we have to have buyers that are willing to buy vehicles,” Hallett said.  

“So, if we can open up some of these markets and find that we can have some degree of success in servicing our customers, and that we can convert and we can sell cars, then we’ll continue to do that,” he said. “We would expect that we could be operating initially some auctions in early April.”

Hallett shared several other updates throughout the call, including some positive news on the digital front. One was this: KAR has enrolled thousands of dealers who previously only bought at physical auctions into its simulcast program.

Additionally, the number of simulcast bids the company generated the week of March 16 was over twice as many as it had every received in a prior week.

“These results give me confidence that we will be ready to get back to work more quickly through our simulcast and other online tools,” Hallett said.

He also touched on some operational adjustments the company has made. Hallett, president Peter Kelly and chief financial officer Eric Loughmiller will work without pay through the second quarter or longer, if needed.

The rest of KAR’s executive leadership has agreed to cut their own pay by 50% through the second quarter, and the board of directors has agree to forego cash compensation this quarter.

Among the cost-reduction plans, KAR is temporarily furloughing a “significant” number of employees, but Hallett said, “We do intend to bring these employees back as we see our business recovering.”

KAR is also prohibiting all business travel through April 17 and will extend that if needed. The company has ended any non-essential service provided by third parties at its locations and has delayed or cancelled any capital project at physical auctions.

These actions are expected to trim weekly cash outflow by $10 million per week, Hallett said.

He did note that there are areas that KAR needs to continue investing in, including real estate.

There are already high vehicle volumes on its auction properties, and KAR will need to add temporary storage space to accommodate this volume.

Furthermore, lease return volume is still expected to be high even amid lease extensions, he said.

In other words, cars have to be stored until volume returns.

On the repossession side of the market, several finance companies are temporarily deferring repos, Hallett said, but he emphasized there will be an “influx” of repo units arriving at auctions at some point.

“It is very important that I remind you that the off-lease and the repossessed cars come to us on what I call a one-way ticket,” Hallett said. “We will definitely sell these cars. It’s just a matter of when.”

He went on to mention the importance of technology investments in maintaining platforms.

“We will continue to invest in our technology. All projects that can be productive while working from home will continue. We do not expect our capital investment in technology to decrease significantly. We may delay some projects that have not yet started and will likely see reduced spending in the area in the near-term, but we’ll likely accelerate work where we can,” Hallett said. 

The company is asking its commercial sales team to remain in contact with the customers. Meanwhile, the dealer consignment is signing up dealers on all of KAR’s tech platforms.

KAR is also allowing selling dealers to inspect vehicles themselves and launch auctions on the TradeRev platform without having a representative come to their stores.

“If there are cars to be sold and demand for those vehicles, we have the tools and the platforms for transactions to continue,” Hallett said.

The company is withdrawing its guidance for 2020, but Hallett emphasized: “We believe that our balance sheet, including our cash position, is strong. We also believe that we have the resources to get through the temporary disruption and return to business as quickly as possible.” 

Returning to business, for anyone these days, will not be without challenges. But Hallett did offer a silver lining of sorts in the last of his opening comments.

“Listen, I know that we're facing challenging times here. Our management team is experienced, and we're absolutely up to the task of getting through this. In many ways, this is a more daunting situation than what we experienced in 2008,” he said.

“However, our financial markets are much stronger today and we have much greater confidence that when the world returns to normal and business recovers, the financial resources will be available to support the economic recovery,” Hallett said.

“In the meantime, my most important responsibility is to protect KAR. We realize the company must come first in all of our decisions. A healthy company will allows us to be there for our employees and our customers and our communities when all of us get back to our normal lives.”