IAA Analyzes the Underlying Market Forces of the Salvage Industry. IAA Helps Crush Negative Legislation. IAA Makes E-Business Easy

Transcription

1 A NEWSLETTER FOR THE AUTO AUCTION INDUSTRY IAA Analyzes the Underlying Market Forces of the Salvage Industry 6 IAA Helps Crush Negative Legislation Catastrophe Conference Keeps Vehicle Providers in the Know

2 CONTENTS Letter From Tom O Brien President and Chief Executive Officer LETTER FROM TOM O BRIEN INSIDE IAA Analyzes the Underlying Market Forces of the Salvage Industry IAA s Salvage Report is a comprehensive, fact-based analysis of the past economic environment and its effect on the salvage industry today. It also details IAA s proactive initiatives that help provide aggressive returns across all salvage segments. The first of a three-part series looks closely at low-grade vehicles. IAA s Bike Sales Kick Off with Daytona Bike Week IAA exhibited at a popular Florida motorcycle rally in conjunction with the first Big Bad Bike Sales event, held March 3 in Orlando, Fla. The exhibit attracted motorcycle enthusiasts from around the world and further expanded the buyer base. IAA Helps Crush Negative Legislation With IAA at the helm, legislation that would negatively affect the salvage industry doesn t stand a chance. IAA played a leading role in opposing four bills that were recently introduced. From assignments to settlements, IAA s innovative e-business solution eliminates a lot of wear and tear for vehicle providers in terms of data entry and phone calls. Catastrophe Conference Keeps Vehicle Providers in the Know Vehicle providers who participated in IAA s first Catastrophe Conference came away with a wealth of knowledge that will help them weather major events. The event was so highly received, IAA plans to make it an annual tradition. As we reflect upon the end of first quarter, we are excited to report exceptional levels of buyer participation and returns. Our current level of return performance is unprecedented and is substantially exceeding the prerecessionary performance levels we enjoyed in early The improving economy, key customer partnership initiatives and IAA s competitive Hybrid Auction Model have resulted in our exceptionally strong performance. At IAA, we believe that understanding the drivers behind your business performance is as important as the performance itself. The strong used-car market and low available inventory are making rebuilt salvage vehicles an attractive, lowcost alternative source for buyers. This demand is further strengthened by the live IAA Run and Drive feature, in which buyers can see the vehicles operating during the auction event. In addition, our buyer participation levels have sustained their growth, fed by strong overseas demand, new buyer registration volumes and increased levels of buyers purchasing in the hybrid method, both live and live online. Additionally, I am pleased to announce the availability of the IAA Salvage Report. This report takes a two-year look back at how our increasingly dynamic economic environment has shaped the auto salvage industry. At IAA, we believe that understanding the drivers behind your business performance is as important as the performance itself. This report will enable you to have a much deeper perspective on not only what has happened in the recent past, but also enable you to anticipate what the future may hold. You will learn more about the report and how to obtain a free copy on page 5 of this issue. I encourage you to request one today. We continue to build on our momentum through investment in our leading Hybrid Auction Model, which combines live and live-online auctions; increased buying and selling options, including our latest innovation, I-Buy Fast ; and unique sales events, including our Big Bad Bike Sales. We also recently announced our latest technology advancement in salvage management, Mobile CSAToday, our new product that supports IAA s vehicle provider customers, by offering the freedom of mobility and the power to access their information easily. I am confident that we will continue to drive optimal business performance and solid returns at each of our more than 150 auctions through. As evidence of our customer-driven culture, we will continue to deliver exceptional value and excellent service to our customers. We look forward to the many opportunities to assist you in the salvage market through the year and will share the results of these efforts. As always, thank you for your continued business and support. n Tom O Brien has been the president, chief executive officer and a director of IAA since November Insurance Auto Auctions, Inc. All rights reserved. 3

3 SALVAGE REPORT Jeanene O Brien, Vice President, Vehicle Provider Marketing IAA Analyzes the Underlying Market Forces of the Salvage Industry We segment our vehicles at IAA to attract more buyers, increase competition and optimize returns across all salvage segments at the live event. IAA recently completed a detailed analysis of the auto salvage industry for 2008 and 2009 an invaluable educational tool for vehicle providers. The IAA Salvage Report examines the most significant events that occurred in the U.S. economy during that time; the major events that happened in the auto industry as a whole and what they may mean for the salvage industry in the future; how we segment our vehicles at IAA to attract more buyers, increase competition and optimize returns across all salvage segments at the live event; and how the economy has influenced all salvage segments. This is the first of a three-part series that will show what IAA has done to combat the economic turbulence of the past two years and what we are doing now to market all of our vehicles to their fullest potential and maximize our providers returns. IAA segments vehicles into low-, mid- and high-grade categories, promoting each one in unique ways. Each segment has unique characteristics and reacts to market factors differently. In this issue, we focus on the low-grade segment. IAA aggressively markets providers vehicles to lessen the potential negative effects that economic downturns can have on auction performance. At the same time, we educate our clients about the dynamic trends and indicators that influence total-loss returns, so they can better understand the economic environment. Low-Grade Vehicles Changes in the prices of vehicles in IAA s low-grade segment tend to correspond closely with changes in the prices of the metals from which they are made. Aluminum and platinum prices are strong drivers of the value of low-grade vehicles, along with the prices of intermediate materials such as steel mill products and engine belts. Factors that influence the prices of these raw materials include the available supply of these materials, the demand for consumer goods and the value of the U.S. dollar. Given that most commodities are priced in U.S. dollars, the value of the Vehicles in the low-grade segment have rebounded and are demonstrating consistent increases in value. dollar has a particularly strong effect on commodities prices. When the U.S. dollar depreciates against foreign currencies, as it did in early 2008, it increases the buying power of foreign buyers, which increases commodities prices. Therefore, the value of the U.S. dollar against foreign currencies is inversely correlated with movements in the prices of most commodities. When the U.S. dollar appreciated in late 2008 and early 2009, the value of low-grade vehicles declined. Simply stated, when the dollar strengthens, metals prices decrease. When the dollar weakens, metals prices increase and prices for low-grade vehicles tend to follow metals prices. Recession Hits Auto Industry The longest recession on record since the Great Depression was recorded in 2008 and It devastated new-car sales, led two American car companies to declare bankruptcy and forced the elimination of a record number of automotive brands. The government stepped in with its Cash for Clunkers program, aimed at boosting car sales and reducing the number of gas guzzlers on U.S. roads by offering consumers incentives to buy more fuelefficient cars. The program added an estimated 690,000 vehicles to the 2009 new light-vehicle sales total, which is estimated at approximately 10 million. In keeping with our proactive leadership in the auto salvage industry, IAA participated in the Cash for Clunkers program to help dispose of the vehicles and their parts. We processed clunkers in July and August, in full compliance with U.S. government regulations. In doing so, we provided assistance that included estimating the clunkers value, securing vehicle titles and selling the cars through our auction facilities so that they could be crushed or shredded. The Cash for Clunkers program helped increase metals prices. In fact, prices for crushed auto bodies have been on the rise over the last few months. This continued improvement has supported the uptick IAA continues to see in auction prices. Vehicles in the low-grade segment have rebounded and are demonstrating consistent increases in value. Request Your Copy If you would like to obtain a free copy of IAA s Salvage Report, please ontrack@iaai.com. In the May On Track, we will focus on IAA s mid-grade vehicle segment. n IAA s Bike Sales Kick Off with Daytona Bike Week IAA s first Big Bad Bike Sales event, held March 3 in Orlando, Fla., attracted a significant number of motorcycle enthusiasts, many of whom also participated in Bruce Rossmeyer s Destination Daytona. The bike sale kicked off a months-long promotion that will feature hundreds of motorcycles for sale at 15 specially designated IAA branches across the country. IAA s booth at Destination Daytona, which was held Feb. 26-March, attracted existing and potential buyers from across the United States and other countries including Belgium, Canada, Germany, Iceland, Poland, Russia and Turkey. After the Orlando sale, IAA personnel and buyers from the auction rode motorcycles to Daytona, Fla., where they enjoyed dinner, courtesy of IAA. The ride and dinner were held in conjunction with IAA s participation in Destination Daytona. It was great to meet so many people who are interested in our bike sales, says Mark Oliver, IAA s area manager for Florida. We had a huge influx of potential new buyers, so it was definitely a successful event. n Salvage Report IAA s exhibit at Bruce Rossmeyer s Destination Daytona drew the attention of motorcycle riders and other enthusiasts from across the globe. 4 Insurance Auto Auctions, Inc. All rights reserved. 5

4 LEGISLATIVE UPDATE IAA actively monitors legislation that would have a negative effect on the salvage industry and aggressively opposes these measures. IAA Helps Crush Negative Legislation Katerina Dotzeva Government Affairs Manager IAA is a leading ally for our vehicle suppliers not only helping them optimize total-loss salvage returns, but also acting as a legislative watchdog for salvage-related issues. We work in concert with state and federal governments and through registered lobbyists to facilitate legislation and regulation that ensure responsible business conduct and healthy expansion of the auto salvage auction industry. Current or completed measures in which IAA has participated include the following: Illinois Senate Bill 3312 IAA is opposing this bill, which would require vehicle providers to apply for and obtain salvage certificates for stolen vehicles, by working to amend the Illinois Vehicle Code. The bill would not provide any opportunity for providers to exchange salvage certificates for certificates of title if the vehicles were recovered with little or no damage, as earlier law allowed. Under the current Illinois Vehicle Code, vehicle suppliers that pay damages on total-loss claims arising from theft are not required to apply for salvage certificates unless the cars are recovered and have sustained damages that would render them total losses. The bill would delete this language from the code. Texas Senate Bill 1095 We played a key role in amending a provision to the bill that dealt with industry licensing. The provision stated that salvage dealers that dealt in used auto parts would not be required to be licensed as auto recyclers as long as the sale of used parts was incidental to the salvage dealers businesses. IAA successfully recommended that the definition of a salvage dealer in the proposed measure match the definition of a salvage dealer in the state code. Virginia Senate Bill 406 IAA was successful in its efforts to amend this bill to exclude salvage pools from having to maintain certain records for salvage vehicles, such as the price paid for vehicles and a photocopy of each seller s driver s license. We also helped exclude salvage pools from a provision that would have required them to file a written report with law enforcement listing the above required information. The bill passed the House and Senate and will be sent to the governor for approval. Wisconsin House Bill 668 We are opposing this bill and testified against it. The measure seeks to limit the buyer pool for salvage vehicles and junk vehicles in two ways: It would prohibit out-of-state buyers from obtaining a required buyer identification card unless the department (Department of Transportation) determines that the standards for licensing the motor vehicle dealer, wholesaler, or salvage dealer in the other jurisdiction are comparable or equivalent to Wisconsin s licensing standards. It would require buyer identification card applicants who are not Wisconsin salvage dealers, but who want to purchase junk vehicles, to obtain documentation from the Department of Natural Resources regarding compliance with or non-applicability of requirements that affect the auto recycling industry. This would deter buyers who are not Wisconsin salvage dealers from applying for the buyer identification card. n John Krupnik Chief Technology Officer IAA provides a comprehensive, 24/ e-business solution that can reduce cycle times for total-loss claims and allows vehicle providers to receive and process settlements without having to pick up the phone, re-enter information or manage paper documents. IAA enables providers to manage the salvage process from within their claims systems. When providers report total losses, the information they enter into their systems is automatically sent to IAA in real time as assignments. Within moments, IAA assigns and returns stock numbers to the vehicles and makes pick-up arrangements. We eliminate labor-intensive, redundant processes that can delay vehicle processing, and settlement and file closure, says Ken Luper, director of sales integration development at IAA. IAA provides real-time updates on each vehicle s status and processes any updates originating from providers systems. For example, if a provider changes the claim number for a vehicle in IAA s inventory, we automatically process that information and update our system. Our e-business solution is not limited to data exchange. We can also send and receive salvage and settlement documents and vehicle images. Additionally, IAA provides an electronic settlement approval process that allows vehicle suppliers to review and approve vehicle charges. Upon approval, IAA s electronic funds transfer service enables providers to automatically receive salvage proceeds directly into their accounts. Our e-business solution simplifies the entire salvage process, says Brian Hildreth, director of IAA s corporate development. Providers can proactively manage the salvage process efficiently using the most current and accurate information available. n Catastrophe Conference Keeps Vehicle Providers in the Know Mark Walsh Senior Vice President of Sales CATASTROPHE CONFERENCE As a principal source of auction data and trend analyses, IAA not only stays abreast of what s happening in the total-loss salvage industry, but also shares that information with vehicle providers so that they can adjust to changing market forces. As part of our proactive approach, we recently brought together senior claims professionals and a number of catastrophe specialists for the IAA Catastrophe Conference, to explore new strategies, tools and best practices for catastrophe management. More than 60 representatives from 40 insurance companies attended the event, held Feb. 3-5 in Orlando, Fla. Catastrophe handling has changed dramatically over the last decade, says Don Hermanek, Chief Client Officer at IAA. This is an ideal time to bring together the industry leaders and leading service providers that work with them. At the same time, the industry needs to work with government agencies to improve the overall process. This conference was a step in the right direction. A panel of experts led by Brian Sullivan of Risk Information Inc. and the weekly Auto Insurance Report newsletter, discussed targeted topics indepth, including the need to interface with government agencies, such as the Federal Emergency Management Agency (FEMA), after a catastrophic event. Over the next few months, IAA will work to bring together industry leaders and FEMA to help create a response plan for vehicle providers. From IAA, vehicle suppliers heard how we work closely with them to estimate total-loss volumes for severe-weather events, so that we can deploy appropriate resources to affected areas immediately. We shared details of our comprehensive, capacity-based Catastrophe Response program, emphasizing that we have multiple storage locations, which include existing IAA branches and sister company ADESA locations; storage facilities within 10 to 20 miles of IAA and ADESA sites; and remote storage and sale areas. We also explained how our Run & Drive auction helps fuel higher returns for weather-damaged vehicles that move under their own power. Buyers are willing to pay, on average, an additional $500 for a vehicle that has an operable engine in IAA s Run & Drive auction than one that is not drivable. Finally, our Hybrid Auction Model, which combines live and live-online bidding and buying, increases salvage returns. IAA received positive feedback about the conference. We plan to hold the event annually. n 6 Insurance Auto Auctions, Inc. All rights reserved.

5 ABOUT IAA About Insurance Auto Auctions, Inc. Insurance Auto Auctions, Inc. provides the advantage in salvage auto auctions with their Hybrid Auction Model combining live and live-online auctions, North America s broadest salvage auction facility footprint, a strong global buyer base and high vehicle returns. IAA s more than 150 facilities across the United States and Canada provide vehicle suppliers and buyers with powerful solutions to process and acquire total-loss, recovered-theft, fleet lease, donation and rental vehicles. The IAA Hybrid Auction Model, including live, live-online, and proxy bidding, united with their mature global buyer base and diverse inventory produce some of the industry s highest returns for vehicle providers. With 28 years in the industry, IAA holds a comprehensive warehouse of salvage auction data. For more information regarding IAA visit our website at Send comments about OnTrack to: ontrack@iaai.com Insurance Auto Auctions, Inc. Two Westbrook Corporate Center, Suite 500 Westchester, IL Insurance Auto Auctions, Inc. All rights reserved.