Best-Kept Secret in Industry'

Remarketing is “the best kept-secret in the industry,” says Mark Mathews, director of General Motors Corp.'s used-vehicle operations.

Not much attention is paid to used-car sales, which totaled about 43.7 million units in 2007.

“The ad money and the excitement go to new cars,” but the dynamics and profit potential of the used-car arena is “incredible,” he says.

Coming from GM's finance and manufacturing side, Mathews has been in his current post for about a year. It's been an eye-opener.

“I've met a lot of interesting people, a lot of characters,” he says. “Remarketing is a unique business.”

And a big one.

GM's used-car activities generate more than $10 billion in annual resale value for the auto maker. GM's certified used-vehicle program has grown to about 500,000 units a year, more than four-fold since 2001.

Upon assuming his current assignment, “I needed to understand auctions,” Mathews tells the National Remarketing Conference in Las Vegas. “In the good old days, they were more art than science. They've come a long way.”

But as a newcomer, he sees room for improvement in remarketing.

“There appears to be costs everywhere,” Mathews says. “I came from manufacturing where costs are squeezed out. This business needs to take a lean-manufacturing approach to drive out costs.”

The remarketing industry tends to solve problems by throwing people at it, he says. “Sometimes it uses too many bodies.”

Remarketers must improve processes or they will add costs and end up playing catch up, he tells conference attendees. “It is not fun playing catch up in this game. What the domestic auto makers have gone through is not what you want to do.”

Facility and employee costs are rising “and we can't just raise fees because costs are going up,” he says. “You have to control costs. The OEMs need you to reduce costs. You need to do more in cost effectiveness than you're doing now.”

He proposes a standardized process that eliminates waste, promotes efficiency, maximizes cash flow and increases profits. “Technology will help, but it is not a cure-all.”

Internet auctions are great, “but there have to be brick-and-mortar facilities, too,” he says. “It can't all be about the Internet.”

One of the main functions of his operation is to try to keep used-vehicle residual values up because they affect new-car demand and prices.

But some dealers apparently want it both ways, depending on whether they are buying used or selling new.

Says Mathews: “On one hand, dealers will say, ‘You have to keep up residuals so I can make money.’ On the other hand, they'll say, ‘I paid too much for that used vehicle.’ Hello?”

Strong used-car residual values are vital for increased profits and improved lease competitiveness, he says. “We've taken residuals on as a significant corporate priority.”

Mathews is a strong advocate of factory certified programs.

Auto makers' certified pre-owned vehicle programs — in which late-model vehicles are inspected, reconditioned as needed and sold at a premium with a warranty — accounted for 1.64 million vehicle sales in 2006 at franchised dealerships.

“Certified is the third segment, a very profitable one between new and used cars,” Mathews says.

He says certified sales exploded in the first years of the decade, but have “kind of leveled off.”