Dear Dealer & General Manager:
All the economic indicators and the automotive industry analysts are optimistic about the remainder of 2012. I even saw one prediction that said new car sales will flirt with a figure near 14 million units.
Used car gross profits remain solid and overall customer satisfaction indicators are continuing their steady climb upward.
I’m very optimistic, too; yet, I have a concern, and that’s why I’m writing this letter. When “the wheels came off” the automotive industry in 2009, many of you looked to fixed operations to carry your water. It worked! The 70% gross profit from service and the 40% gross from parts looked really good at the time, and it kept the dealership afloat.
Many dealerships have been looking at their parts and service departments with fresh eyes over the past three years. Yet, in my 30-year automotive career, I’ve had several dealers tell me that fixed operations is a necessary evil and they’d be fine without it. Granted, I haven’t heard that kind of talk in quite a while, but the mind-set still exists.
So here’s my concern, actually, it is more of a request: Now that new car sales are improving, now that the red ink is disappearing, now that the automotive business is starting to be fun again, don’t forget about fixed operations!
Your service department is the consistent cash cow, it is the number one source for customer retention, it is the lifetime annuity stream, it is the only source of sustainable profit in good times and bad.
For many dealerships, the recent decline in new car sales has resulted in a decline in repair order counts on the service drive. If, heaven forbid, new car sales were to tumble again, the “fixed operations safety net” will not be as strong…that is, unless you have a plan to offset the decline.
Most dealers and general managers spend the majority of their time on the vehicle sales floor and neglect the service sales floor. I’m asking you, Mr./Ms. Dealer, to be as passionate and knowledgeable about the sales floor that’s in the back of your dealership as you are the one that’s up front. I’m asking you, Mr./Ms. General Manager, to set sales goals and conduct sales training each week for your service sales team.
My friend Jeff Sacks says in bad times we develop good habits and in good times we develop bad habits. In other words, it’s easy to “get religion” when the heat is on and then slack up when the pressure goes away. Please don’t let the impending upswing in new car sales cause you to lose your focus on fixed operations.
Please don’t get content with a profitable front end while letting service flounder on its own.
Please don’t think to yourself, “Hey, that’s why I hired a service manager…that’s his job.” Maybe so, but competent managers look for the owner to set the pace. They want to be challenged, they want to be held accountable, and they want to please their superior.
My greatest frustration with the automotive business is this: leaders that won’t lead and managers that won’t hold their personnel accountable.
Those who won’t lead are the individuals who have the most stress, the greatest setbacks, the highest personnel turnover and who leave the most money on the table.
I’m writing to you because you are a survivor, you made it through the darkest period our industry has seen since World War II (maybe ever). You held on, and now you’re ready to reap the rewards.
The greatest days of the automotive business are ahead of you, both in fixed and variable operations.
Contact me if I can help you achieve your goals. I really do care!
Respectfully,
Charlie Polston
BG Products, Inc.
P.S. It may be that some of you can’t relate to this letter, because you don’t have a profitable parts and service operation. Maybe you mentally wrote-off fixed ops a long time ago and just see it as a drain on the dealership.
A service department that aggressively and responsibly sells preventive maintenance services will make a profit…period. If you want to know how, then visit the Dealer magazine website and look at the archived articles I’ve written over the past couple of years, or e-mail me at [email protected]. Like I’ve already said, I really do care!
