Manheim

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Manheim

6205 Peachtree Dunwoody Road
Atlanta, Georgia 30328-4524
U.S.A.
Telephone: (404) 843-5000
Toll Free: (800) 777-2053
Fax: (404) 843-5378
Web site: http://www.manheimauctions.com

Wholly Owned Subsidiary of Cox Enterprises, Inc.
Founded: 1945 as Manheim Auto Auction
Employees: 32,000
Sales: $2.5 billion (2005)
NAIC: 423110 Automobile and Other Motor Vehicle Merchant Wholesalers

A subsidiary of media giant Cox Enterprises, Inc., Atlanta, Georgia-based Manheim is the world’s largest wholesale automobile auction company, conducting more than 130 auctions around the United States, England, France, and Asia. Bids are also taken online through real-time webcasts of live auctions, and the company conducts mobile auctions where, because of prohibitive transportation costs, large fleets of cars are put up for sale. Closed to the public, Manheim auctions help used car dealers replenish their stocks with late model cars, drawn from the ranks of retired rental cars, cars off lease, and repossessed cars. Moreover, wholesale auctions in general play a key role in establishing the market for used cars because the sales figures they generate are used by valuation services such as Kelly Blue Book to estimate the “book value” of a particular make and model of a car. Because sales of used cars outstrip those of new cars, wholesale car auctions exert an impact on the general economy.

In addition to regular auction sales, Manheim hosts sales just for such high-end car brands as Mercedes-Benz, Rolls-Royce, Ferrari, and Porsche. At the other end of the spectrum, Manheim holds special sales for damaged, disabled, and recovered vehicles, as well as motorcycles and recreational vehicles. Further services offered by Manheim include reconditioning, mechanical repair, dent removal and body work, inspection services, and dealer financing. The company also offers information products (leveraging the information gathered at its auctions and from its customers), and provides remarketing services to consignors, including leasing agencies, company-owned fleets, banks, and lending companies. Through AutoTrader.com, Manheim serves general consumers with a web site that brings together buyers and sellers of used cars and trucks.

WORLD WAR II ORIGINS

After the United States entered World War II in late 1941, the auto industry ceased the production of new cars and turned its attention to the construction of tanks, jeeps, trucks, and other vehicles and equipment needed by the military. Americans at home relied on used cars so that by the time the war ended in 1945 there was a pent-up desire for new cars. Several years would pass before automakers were retooled and new car production was ramped up. In the meantime there was a high demand for used cars, resulting in high prices. Some businessmen in Manheim, Pennsylvania, a small town located about 60 miles west of Philadelphia in the heart of Amish country, sensed an opportunity to auction off used cars. The result was the launch of Manheim Auto Auction.

The idea for starting Manheim began with one of the cofounders, Arthur F. Walters. Born in North Carolina, he began his business career in 1929 with Firestone Tire and Rubber Co., working in the company’s laboratory department and eventually becoming manager. He helped develop testing cord used in the company’s racing tires and a recap mold to retread tires. But he wanted to go into business for himself and in 1936 moved to Lancaster, Pennsylvania, some eight miles south of Manheim, where he started a Firestone tire dealership followed by Lancaster Sales Co., an automobile business located on Manheim Pike between Lancaster and Manheim. According to the story he told to Lancaster’s Intelligencer Journal, the origins of Manheim Auto Auction were connected to an unruly pony owned by one of his friends. After the pony bit one of the children, Walters took it away and leased some land on which to keep it. A Ford dealer from the nearby community of New Holland, Ben Mellinger, spotted Walters with the pony and stopped to chat. “While we were talking,” Walters recalled, “we happened to look over at where they had a country sale where they were selling farm machinery or something. I said, ‘I wonder if we could sell cars at an auction.’ And he said, ‘We might be able to do it.’”

With the seed planted, Walters and Mellinger lined up three more partners who each contributed $5,000: Jake Ruhl, Paul H. Stern, and Robert Schreiber. Because Schreiber soon died from a motorcycle accident, his investment was returned to his widow, leaving four men, three of whom were car dealers, the other an insurance broker, to start Manheim Auto Auction. They bought seven acres of land, which they incorrectly assumed would provide ample room for growth, along with a Pennsylvania Farm Bureau building. While work was being done on the building, the partners conducted their first car auction in a Manheim horse barn. It was a humble beginning: Three cars, each entered with a nickel’s registration fee, were put on the block. Only one of them sold.

NEW BUILDING OPENS: 1947

The company fared better when it opened its new building in 1947. At the first sale conducted there, 33 cars were sold from a single “lane.” Anyone who wanted to attend was welcome and it was very much a local affair. However, that would change as the auction grew in popularity and carved out its niche in high-priced, late-model cars, with limited defects. By the time Manheim Auto Auction was running 200 cars each week, the partners decided they needed to impose some restrictions. Partly because the auction was taking away business from their dealerships, they decided to limit the sale to dealers only. Other changes also followed. A system of colored lights was established to quickly alert the bidders to the condition of the car on the block. An arbitration system was also established to settle disputes between buyers and sellers over undisclosed problems with a car or other matters. But there was another problem that had to be addressed that was threatening the growth of the auction: bad checks written by the buyers. To address this issue, the auction began to act as middleman, paying the sellers directly while accepting the checks of the buyers.

The refined operation thrived, so that by 1959 the auction was running three lanes of cars through its building and it became the largest auto auction in the world. A fourth lane was added in 1962 and a fifth four years later. By this time each lane, monitored on closed-circuit television, sold about 45 cars per hour, or 700 cars on a typical Friday night when the weekly sale was held. The bids came quickly, and the auctioneers closed each sale with the slap of foot-long pieces of garden hose, or telephone cable, in lieu of a gavel.

COMPANY PERSPECTIVES

Manheim is the world’s leading provider of used vehicle services and a marketplace for the millions of cars that change hands every year. Manheim supports sellers in achieving the maximum value and provides buyers a reliable and safe market to purchase a wide array of vehicles.

In addition to growing the business by adding lanes, Manheim Auto Auction looked to expand by acquiring other auctions. In 1965 the company bought the Bordentown, New Jersey-based National Auto Dealers Exchange. Then, in 1967, the Fredericksburg Auto Auction in Fredericksburg, Virginia, was acquired. The partners were interested in spreading the business across the country, and considered taking the company public in order to raise the necessary capital. Instead they elected to sell the company in 1968 to Cox Broadcasting, an Atlanta, Georgia-based company that had the financial muscle to take Manheim Auto Auction national.

Cox Enterprises was not involved in the automobile business, at least not directly. The company’s history dated to the late 1890s when James M. Cox bought the Dayton Evening News in Dayton, Ohio. He bought and sold other newspapers over the years, including the Atlanta Journal, which brought him to Georgia. He was one of the few newspapermen who did not fear the rise of new media. Rather, he embraced technology, becoming an early adopter in both radio and television. His heirs continued that tradition in the early 1960s by acquiring cable television systems. At the same time, the Cox family did not abandon the publishing field. The Cox Broadcasting unit launched a business- and technical-publishing division in 1966 and among its products were wholesale car price guides. Because auto auctions played a key factor in determining those prices, it made sense to acquire Manheim Auto Auction, the largest player in the field, as a way to gain access to valuable information.

Under Cox ownership, Manheim Auto Auction continued to grow internally. An onsite reconditioning center was added at the main auction site in 1968, leading to “Factory Sales Accounts,” in which company cars and rental cars were reconditioned to be auctioned off to dealers. This new source of vehicles helped to spur the car auction business, and it became quickly apparent to the parent company that there was far more money to be made in auctioning off cars than in publishing price guides. Cox put more muscle behind the Manheim division and began to acquire auctions around the country. A healthy business grew even stronger in the 1980s when automakers stepped up sales to rental companies, which did not keep vehicles in their fleets for very long and sold them off through the car auctions. By 1989 Manheim was operating 25 auctions. The original Pennsylvania site, in the meantime, increased to eight lanes but ran out of room after expanding from seven acres to 33 acres. To handle the increased business that came from Factory Sale Accounts and the new “Exotic Highline” sale of luxury cars, a nearby 100-acre site was acquired and paved to accommodate a 12-lane facility. In time it would be expanded to 29 lanes for the main Friday auction, and a large portion of those lanes would also be put to use for the Exotic Highline sales, held every second Thursday, and the factory sales that were held on Tuesdays and Thursdays.

Cox’s Manheim division nearly doubled in size overnight in 1991 when it merged operations with General Electric Capital Corporation and Ford Motor Company, resulting in a company that took the name Manheim Auctions, but remained under the control of Cox Enterprises. Ford and General Electric Capital had teamed up five years earlier to become involved in the car auction business, providing a way for Ford, which also owned a stake in the Hertz rental car chain, to sell rental cars and leased company cars. Ford and its partners auctioned off repossessed cars, as well. As a result of the merger, Manheim Auctions operated 46 car and truck auction houses, which sold about one-quarter of the 12 million vehicles that were auctioned off each year.

The car auction business continued to grow in the first half of the 1990s, due in large part to the rising price of new cars. Moreover, modern vehicles lasted longer than the ones produced 20 years earlier. Hence, the average age car on the road in 1995 was 8 years old, 2.2 years older than in 1970. To get an even greater share of the market, Manheim conducted its first live satellite auction in 1994, a year in which all U.S. auto auctions combined would sell $50 billion worth of used cars, or double the amount at the start of the decade. Another factor in the growth of auctions was the money to be made selling used cars to the public. Because there was more profit to be made on a used car than a new one, new-car dealers across the country were creating massive used-car lots next to their showrooms in order to cash in. To stock those lots they turned to the auction houses.

KEY DATES

1945:: First Manheim Auction held.
1947:: First permanent building opens.
1959:: Manheim becomes world’s largest auto auction.
1968:: Cox Broadcasting acquires company.
1991:: Operation merges with assets of Ford Motor Corporation and General Electric Capital Corporation.
1997:: First international venture established.
2000:: ADT Automotive Auctions acquired.
2006:: Office opens in China.

NEW CEO: 1996

In 1996 Cox Enterprises installed a new president and chief executive officer at Manheim Auctions, choosing Dennis Berry, the publisher of the Atlanta Journal-Constitution. While at first blush it appeared that naming a publishing executive to lead a car auction company was a reach, in truth Berry had been in the car-selling business for a long time. His start in the newspaper business was in classified advertising, which relied heavily on car listings. Car dealer display ads were also a major source of newspaper revenues. “The classified ad business is a lot like the auction business,” Berry explained to Automotive News. He continued, “You connect buyers and sellers, you provide quality service and you do millions of transactions.”

Berry quickly made his mark at the head of Manheim Auctions. Recognizing that he had direct access to the very car dealers his newspaper sales reps tried to contact, he set up booths at the auctions to sell ads for Cox newspapers. He also added auctions to the operations by acquiring the Greater Auction Group, the fourth largest auction company in the United States. Under his guidance Manheim Auctions began to explore international opportunities. A partnership with U.K.-based Independent Car Auctions Ltd. provided entry to the underdeveloped U.K. and European car auction market with the acquisition of Central Motor Auctions in the United Kingdom. Two other U.K. auction houses were subsequently added as well.

In the Cox tradition of embracing new technology, Berry sought to leverage the Internet to benefit Manheim Auctions, something that Cox had been doing since 1989. Sales calendars and auction inventories were made available to dealers on the Web, and the company opened the first CyberLot, Lexus Direct. Manheim Online was established as a price guide and vehicle locator for use by independent dealers, and the first Used Car Market Report was compiled and soon became downloadable to dealers’ personal computers.

Revenues at Manheim Auctions reached $1 billion in 1997, while the gross value of the vehicles sold totaled $28 billion. To drive further expansion, Berry launched a $413-million, five-year capital improvement program, the goal being to grow the company’s auctions into “dealer supercenters.” The money was used to upgrade computers systems, add reconditioning capacity, and increase the number of auction lanes. Moreover, the company took advantage of its auctions to add a consumer car-buying web site, AutoTrader.com, launched in 1999. All cars registered for a Manheim auction were automatically photographed and the images displayed online the following day, along with the name of the dealer that bought it. In 2000 Manheim Interactive Inc. was formed to house Manheim Online, providing dealers with auction tools, and Manheim Dealer Support Services, which offered a variety of business tools for independent auto dealers.

Although the capital improvement budget did not include money spent on acquisitions, Manheim Auctions was not reluctant to grow externally. In 1999 it bought five more U.S. auctions as well as auctions in France, Australia, and New Zealand. It also acquired Dent Wizard, a paintless dent removal service. Another 20 auction sites were added in the $1 billion acquisition of ADT Automotive Auctions in 2000.

The year 2000 also saw Berry leaving Manheim Auctions to become the CEO of the parent company, Cox Enterprises. He was replaced by Dean Eisner, vice-president of business development at Cox, who had played an important part in the founding of Manheim Interactive and AutoTrader.com as well as the ADT acquisition. With Eisner in charge the company continued to grow. In 2001 another $1 billion was earmarked to expand the business. The Manheim Used Vehicle Value Index was introduced in 2001. The following year saw the debut of myACCOUNT, a system that allowed dealers to participate in auctions online and in real time, as well as conduct other business with the company around the clock. The first simulcast sale was then conducted in 2003. In 2004 the company began emphasizing the auctioning of motor homes and recreational vehicles across the country and online, something that was already being done in some Sun Belt auction sites. New auction sites were acquired in Florida and Canada, and an operation was also launched in China in 2006. In recognition that the company was far more than an auction house, the name was also shortened to Manheim, a name worth keeping. After half a century in business, the Manheim name had become a formidable brand in the wholesale automotive sales industry.

Ed Dinger