Beyond the Transaction:

Labor shortage still challenges reconditioning segment

By Sarah Rubenoff, Auto Remarketing

Most industries today have felt the pains of an across-the-board labor shortage after the COVID-19 pandemic wreaked havoc on industries across the board. The labor shortage in the reconditioning and service departments was a challenge long before the outbreak of the COVID pandemic.

This just made it even worse.

That’s apparent from Auto Remarketing’s conversations with recon execs and leaders in March, who all vocalized how difficult it is to find quality recon workers that have the potential for long-term employment. Many candidates have a history of transient work. And now, the problem is finding any candidates at all.

Back in the summer of 2022, Mike Black, CEO of Dent Wizard, and others in the auto industry, cited labor shortage issues spurred on by the pandemic that had a long lasting negative impact on recon.

Last year was one of the most profitable for the auto industry in recent years. And rental companies and fleets are reconditioning vehicles instead of automatically replacing them. This means a need for even more recon workers. 

Technology like software programs that increase efficiency and transparency for recon have helped fill this gap a bit — but they are not a fix-all. The recon industry still needs more bodies in the shop.

The proliferation of electric vehicle sales is also putting stress on the recon labor market. Technicians need to be well versed on servicing EVs, which can be quite different from working on their ICE counterparts. EVs also often take longer to recon and repair.

In the past, EVs have been an afterthought for some. Now, dealers must have experienced techs to recondition these vehicles for certification and resale as quickly as possible in order to stay competitive.

And as supply for quality used vehicles remains historically low, many dealers are turning toward older vehicles to boost inventory levels. Again, this breeds more reconditioning needs.

And everyone knows if the recon department is held up in any way, it puts pressure on the whole dealership. There are simply far less students entering blue-collar professions after high school today than there were in the past.

“Kids these days just don’t want to hold a wrench,” said Mike Caggiano, executive vice president of U.S. operations for ADESA.

Patrick Brennan, senior VP of Manheim Marketplace, said finding quality, consistent labor in reconditioning is very high on the company’s priority list, as well.

“When we lose technicians or need to add technicians — it’s tough. It’s a tough labor market. They are highly sought after; people with these skill sets,” said Brennan.

And the auctions aren’t the only ones trying to scoop these professionals up. They are competing with OEMs, dealers and more.

“We are not immune to this challenge at all,” said Brennan. “ We certainly see this as being an ongoing issue, especially if the volume levels begin to pick up.”

As such, Manheim has launched technician training centers, or TTCs, at four of their physical auction facilities: Dallas, Riverside in southern California, Orlando in central Florida and one in New Jersey, as well.

“We have the four sites up and running. We have pushed about a hundred technicians already through those sites,” he said.

“We don’t typically have a lot of churn of turnover within our teams. But I’m sure, as volume comes back, we’re expecting to have to hire more in this area in the future,” said Brennan.

Ron Hope, CEO and chairman of the board at CARS Recon, echoed these sentiments: “One of the biggest challenges is definitely going to be labor. Finding labor today is not an easy feat,” he said.

Hope pointed out that recon service fees have largely remained the same since the Reagan Administration was in office. Labor fees have gone up significantly.

Coupled with outdated recon fee systems poses a significant challenge to the recon industry.

“That is a big obstacle and challenge in the market. It’s not really feasible long term,” Hope said.

The labor market is changing, but the same amount of work needs to get done in the recon department.

“So we have to find more creative and productive ways to do things, and still put out the same quality we’ve always delivered,” said Ed Gilley, senior VP of operations at CARS Recon.

The labor shortage in the market is top of mind for Rapid Recon, as well, but Anthony Greenhalgh, VP of marketing and sales operations, said that’s nothing new.

He has worked for Rapid Recon for seven years, but the previous 24 years were spent in the fixed operations department.

“Getting technicians was never easy. Kids coming out of school, they don’t wanna bend metal; they don’t wanna turn wrenches,” said Greenhalgh. “And so everybody was going to college. Now, technicians are making six figures and college grads are making $35-$40 (thousand) a year.”

“The labor shortage certainly isn’t new, but we are dealing with it, as it comes,” he said.

Kyle Bailey, CEO and founding partner of NuVinAir, offered an alternative perspective, saying that the labor shortage has actually helped his company evolve and form new partnerships.

“The value proposition of standardized vehicle cleanliness through safe, practical and innovative ways is that they don’t have to be so reliant on labor,” said Bailey.

He thinks the labor shortage will continue to be a challenge for the recon and auto industry at large, in part because of an aging workforce and difficulty finding replacements that can lead to companies outsourcing third-party vendors.

“You have this growing demand right now for consumer convenience, you know, such as rideshare and business travel is picking up. So you have a pressure on the industry that is creating this demand,” said Bailey.

Bailey contends that a decreasing labor workforce is in part due to pressure from the inflated dollar and the cost of living going up.

“So you have this almost perfect storm,” said Bailey. As to how this labor shortage has led to growth for NuVinAir? A focus on autonomous processes.

“We just introduced our Cyclone product … these guys or girls can put our device in a vehicle and remove odor in 15 minutes autonomously, which reduces the need to lean on a third-party vendor and sidelining a vehicle and losing money every day,” said Bailey.

Greenhalgh sees the most important elements of the recon industry today as “processes and people” — in that order.

Today, dealers are forced to build a process and then train their people to it. That’s the way it should be, said Greenhalgh.

For a long time, there was an abundance of available workers, and the stores would build processes around those people.

“It’s just wasteful. With dealers trying to reduce expense, we’re actually seeing some light at the end of the tunnel where dealers are writing their processes and saying, ‘Well, here is the training that is going to be required, and here are the tools that are going to be required in order for my people to fit this process,” Greenhalgh said.

Black, the Dent Wizard CEO, said this is an underlying labor issue across the reconditioning segment.

“Hiring, depending on markets across the U.S., is tough, but certainly there are pockets that are just much tougher than others,” said Black. “We have 4,000 employees, and we have to have that many and keep hiring.

“It’s our commitment that we make to our customers, that we’re not gonna put you at risk because we’re going to hire the right amount of labor.”

About Rapid Recon

Reconditioning workflow automation from Rapid Recon is the industry standard in time-to-line inventory turn and speed-to-sale vehicle revenue enhancement for automotive retailers. Benchmarking data based on 13 million vehicles processed uniquely positions Rapid Recon to advise dealers on how to improve their store’s profitability. Used by more than 2,000 dealerships, Rapid Recon ensures the accountability of processes, property, and people. Hence, dealers know answers quickly, find assets anywhere, and sell vehicles promptly to grow dealership profitability. CALL US: +650-999-0497