Dealers, automakers face CPO challenges after Harvey & Irma

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CARY, N.C.  - 

With hundreds of thousands of vehicles potentially impacted by Hurricanes Harvey and Irma, the destruction from the storms and its effects on the car business is multi-faceted and complicated, to say the least.

One head-scratcher that comes to mind: What happens to cars that were previously certified pre-owned but sustained damage during the storm?

“You’re going to have, I think, quite a few dealers that were in the hardest hit areas that are going to have cars that are under water, and then it comes a question of, how are you dealing with those cars?” said Bob Gapinski,  who is vice president of business development for the automotive division at SGS, an inspection company.

“How are you getting people in to take a look at those cars, get those cars moved out, make sure that nothing slips through the cracks … it’s question of how are you dealing with those cars, making sure that you’re not having any cars slip through the inspections?’” and making sure internally or through an inspection company that a car that was certified is still, in fact, certified, Gapinski said.

It’s about taking care of the previously certified vehicles that may have sustained damage. But it’s not just an issue for dealers, Gapinski said.

“You’ve really got it on two different levels. You’ve got the individual dealers that have certified the cars, and they’re now dealing with the aftermath here,” he said. “They’ve got cars that are going to go from being absolutely untouched to cars that are under water, and everything in between.

“But then you have the OEM, who also has got their own concerns in dealing with this. It’s similar problems, just on a massive scale,” he said.

“So, now we’ve got the concern of making sure that all of our dealers that have certified cars are handling them properly, that they’re doing a review of every vehicle that may have been impacted and that no compromised cars are staying in the certified program,” Gapinski said.

The latter is what Gapinski said is likely “the biggest consideration” for automakers, who are trying to make sure they are “not damaging the brand, damaging the certification” by missing previously certified vehicles going out into the marketplace with some kind of water or flood damage.

At BMW of North America, the company said it had “a very low number” of certified BMW units that were damaged from the storm. But, nonetheless, the company is still reaching out to its dealer body to make sure there are no hiccups.

Kevin Rustad, who is the national pre-owned sales manager at BMW of North America, said in an email that BMW is “sending our dealers a written reminder that any vehicle that has been damaged and no longer meets CPO eligibility requirements must be removed from CPO inventory.”

At American Honda Motor Co., marketing specialist in auto remarketing Karla Miyoshi said in an email: “We have not yet seen an impact of affected units as dealers are still measuring impact to their inventory. The national office is working diligently and closely together with dealers to minimize the impact the situation has had, and AHM will continue to monitor impact and work to resolve any dealer issues that the storms have created.”

Miyoshi added: “For certified pre-owned, we are interested to know the final number of affected units to see if there’s a potential for closed auctions and as always, our trained technicians will ensure customers receive the highest standard of certified pre-owned vehicles with our 182-point inspection.”

‘Identify whether the vehicle has been compromised’

Gapinski said SGS is currently reaching out to the industry now to let them know SGS has teams that can help them with these issues.

 “Really for us, the help can come in a bunch of different ways,” he said. “It can come in, first and foremost, for us to inspect the vehicles, to identify whether the vehicle has been compromised.”

Actually inspecting the cars is their primary service, “but over and above that, we can also help in the ways of … inventorying vehicles, making sure that all vehicles are present and accounted for, helping to not necessarily recondition but moving vehicles to the areas where they need to be put.”

But, Gapinski emphasized, “Identification of damage is really where we shine.”

Gapinski added: “In times like this, where you have just massive numbers of vehicles that need to be assessed, you’re just not going to have enough people, whether it’s at the dealership, whether it’s insurance companies, OEMs (or) anybody that’s dealing with these vehicles, they’re just not going to have the capacity.  They’re not going to have the resources to do it, so we’ve got people that we can mobilize.  And we can come in, and we can help out any of the entities that are dealing with the aftermath of the storm, we can help.”

How automakers are reacting

Asked how he sees the aftermath of the storms affecting CPO demand, BMW’s Rustad said: “We believe there will be an increase in demand for our CPO vehicles because many consumers will be seeking to replace a vehicle that was lost as a result of the hurricanes.  

“We are offering a $500.00 credit to anyone who has lost their vehicle due to flooding or water intrusion, and the damage can be verified through their insurance company,” Rustad said.

Speaking specifically about Harvey’s damage, General Motors spokesperson Jim Cain said by phone that as devastating as that hurricane was, “our dealers, by and large, were lucky.”

The damage to their inventory was “modest,” both in terms of new and used vehicles, Cain said.

And to help with some of the demand, GM is diverting some of the off-lease and rental fleet vehicles, he said. Additionally, the automaker’s parts and service division is expediting delivery of parts.

With Irma, Cain said, damage to stores wasn’t necessarily the issue. The larger problem was stores losing power.


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