GM's eBay plan: What about the dealers?

eBay has been selling used cars for years, but laws currently prohibit direct sales from manufacturers.

By , Staff writer of The Christian Science Monitor

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    GM's chief executive, Frederick Henderson, said Friday that the company is in discussions with eBay, the online auctioneers, to begin an experiment to sell vehicles in California.
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As an example of how General Motors plans to be more adaptable, chief executive Frederick Henderson said Friday that the just-out-of-bankruptcy company is in discussions with eBay, the online auctioneers, to begin an experiment to sell vehicles in California.

While it might be an experiment for GM's top brass, eBay has been listing cars for sale for the past 10 years on its website, eBay Motors. According to eBay, more than 30,000 franchise and independent dealers, including some GM dealers, have been listing used and certified pre-owned vehicles for sale. Last year, eBay reached 3 million vehicles sold since the website started.

So, what's new?

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GM may be trying to figure out how to sell new vehicles – not used ones – on the website, say auto analysts.

State franchising laws currently prohibit the sale of new cars direct from the manufacturer through auction sites such as eBay, says Jack Nerad, executive editor of Kelley Blue Book in Irvine, Calif.

"They are probably trying to figure out how to accommodate the laws in 50 states," says Mr. Nerad.

A spokeswoman for eBay, Leanne Furman, writes in an e-mail, "Dealers are held accountable to abiding to their state laws and regulations. eBay Motors provides the platform and serves as the marketplace. We do not hold any inventory or sell cars."

Since direct sales from the manufacturer are prohibited, Mr. Nerad says GM and eBay are probably trying to figure out how to allocate online sales to individual dealers. "You have to allocate and keep everyone happy with the system," he says.

This may be one reason that eBay issued a press release Friday saying Mr. Henderson's plan is still not a done deal.

"At this time, no plans have been finalized with General Motors," said the statement from eBay Motors vice president Rob Chesney. "We hope to support GM's new company and vision going forward." Mr. Chesney was not available for comment.

If GM does figure out how to get around the franchise laws, it could mean a major shift in car buying. "It will fundamentally change the interface between dealers and people buying cars," says Nerad, whose company is in the process of putting dealer inventories on its website.

Even if GM works out the bugs in its plan, will Americans be willing to buy a new car without kicking the tires?

They certainly seem enthusiastic about buying used cars on the Internet. One blogger, Jen's Solitude, writes that convenience was the major reason she and her husband purchased a used Ford Crown Victoria on eBay.

The blogger used the "Buy It Now" feature to avoid bidding against someone. GM's Henderson says that feature will be included in any deal with eBay.

Jen's Solitude cautions that it is worth spending time making sure there is no "unreported damage to the car," the title is legitimate, and manufacturing data inside the driver's door are available. Don't forget "to check for lot rot while you are at it," she adds.

But buying online is not for everyone. Bruce Wing, who lives in Missouri City, Texas, a suburb of Houston, says he uses sites such as eBay to do research. But then he prefers to go to a showroom for Texas Direct, which calls itself the largest eBay motor dealer in the world, to kick the tires.

"They are [just] 10 miles away, so if I am unhappy, I could throw rocks at them or picket or something," says Mr. Wing.

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