Leading the Used Car Auction Digital Revolution with Jim Hallett, Executive Chairman, KAR Auction Services, Inc. (NYSE: KAR)

Compounders: The Anatomy of a Multibagger

My guest on the show today is Jim Hallett, the former CEO and now Executive Chairman of KAR Auction Services. KAR is a $2.25B market cap company that operates within the wholesale auto remarketing industry. Jim is very well known in the used car auction industry and has built up a wealth of knowledge over his close to 30 years at KAR. He joined the company back in 1993, then became CEO in 2009 and just this past April stepped back to Executive Chairman.

During his tenure, Jim has overseen the company’s spin-off of IAA, which is now a $7.3B market cap company on its own. He also has helped spearhead the company’s aggressive initiatives to extend its digital offerings and add scale beyond KAR’s physical car auction facilities.

In this wide-ranging discussion, we covered:

- Jim’s thoughts on KAR’s very important pivot to digital that occurred in 2020

- What has changed about the car auction industry over the last three decades

- Why he thought it was the right time to pass the torch

- Maintaining the company’s culture within a rapidly changing industry

- Why KAR believes that the model of the future is hybrid: digital and physical

If you are at all interested in how incumbent companies defend their turf against digital upstarts, this was a great discussion.

This episode of Compounders: The Anatomy of a Multibagger is sponsored by Tegus, an innovative and disruptive company that is changing the way professional investors work. For more information, please visit: https://www.tegus.co/

Timestamps for this episode:

1:50 - Introduction

3:42 - KAR’s rapid digital transformation

6:12 - Putting customer safety over market share

9:30 - Managing stakeholders during a transformational change

11:50 - Layering a digital strategy on top of a historically brick and mortar business

13:42 - Balancing KAR’s rapid digital transformation with the needs of customers

16:37 - Digitizing their dealer-to-dealer business through M&A

20:43 - Key lessons learned competing against digital upstarts

23:14 - M&A: to build or to buy?

25:30 - Successful leaders have to embrace change

28:56 - How do you know when to pass the CEO torch?

31:31 - Digitization of the used car auction industry

33:42 - Imparting a culture of optimism

36:42 - Growth opportunities via expanding into Europe

40:02 - Limiting management distraction while expanding outside the US

41:12 - Competing for digital talent from Indiana

44:40 - Pushing old school customers to digitize their business

48:42 - Maintaining a moat within an increasingly digital world

51:35 - Jim Hallett’s ideal legacy

54:45 - Biggest changes in the car auction industry over 3 decades

57:57 - Most underappreciated aspect of KAR’s hybrid model

1:00:25 - Why the industry may never be fully digital

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