When shop owner Mark Salem declared at the 2003 Global Symposium that he bought in excess of 50 percent of his parts from new car dealers, the audience responded with gasps and groans. Were Salem’s buying habits the norm and we failed to realize it?
As it turned out, a statement like that made for good drama, but was more of an acrimonious anomaly than widespread reality. Fact is that the dealership noose has loosened. According to AAIA, automotive aftermarket sales by new car dealers are forecasted to drop to 28.2 percent this year. This statistic has actually been in decline since 2001 when it reached its peak at 31 percent. That should make us all feel better, but before you wrap yourself in euphoria, you don’t want to underestimate or discount the burning desire the OEMs and their dealers have to increase their aftermarket business.
Reminding us of this at this year’s Symposium was Jonathan Steinmetz, a Morgan Stanley analyst. He follows four large public dealers in the country, including AutoNation, which is the largest.
Since it is the largest, let’s take a look at what AutoNation is doing. CEO Mike Jackson has made it clear that his goal is to have parts and service profits cover fixed operating costs. With fixed costs covered, the profit from every vehicle sold would be pure profit. It would give AutoNation dealers the latitude to construct deals more aggressively so that they can increase sales volume and service volume. By the way, did I mention that the company is already covering 93 percent of their fixed ops with parts and service profits and that many other dealers in the country are exceeding 100 percent?
Especially interesting are AutoNation’s “warranty clinics.” It’s a simple program where the service department holds monthly clinics to educate customers about their warranties. This is a significant break away from the traditional way of sales covering warranties at the time of vehicle delivery.
There’s little doubt that the service department talking about warranties –– what they cover and what they don’t cover –– probably leads to talking about service capabilities, as well as selling some extended warranties that virtually guarantee dealers all repair and maintenance work for up to at least 100,000 miles. And once consumers make the decision to make the investment, the rest of the story is history.
What is particularly scary about AutoNation’s warranty clinics is that 60 percent of its customers attend them.
It would be timely to roll out a specific industry campaign exposing their true costs and benefactors (yes, the dealers). The campaign’s name? How about “Dealer or no dealer?”
Have consumers come to you with concerns over Toyota and Honda recalls?
Yes
45%
No
55%
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Source: Aftermarket Business,
7/18/2006 Click here
