BG Products Industry News

‘Tis the season to be of good cheer, and fixed ops departments have much to celebrate. The future for dealership parts and service departments is very bright. In fact, there has never been a better time in history to be in fixed ops than right now—and I’ll prove it to you.

Vehicles in Operation Increasing

There are more vehicles on the road today in the U.S. (over 273.7 million) than ever before in history. Compare that to 202 million vehicles in 2001; that’s growth of 71 million vehicles. Every year we manufacture more cars than we scrap, so the vehicle population continues to rise with no end in sight.

Service Centers Declining 

Today there are 225,000 service centers in the U.S. compared with 245,000 in 2001. That’s 20,000 fewer places to have cars and trucks serviced, repaired, and maintained. Sadly, about 4,000 of those shuttered service centers were dealerships. (From 21,900 in 2001 to 17,800 today.) So let’s put these two statistics together: 71 million more cars and 20,000 fewer places to have them serviced. Wow, what an opportunity. The “supply” of service centers is dropping and the “demand” of cars on the road is increasing; therefore, your service department has greater value today than it has ever had.

More Money Spent

Last year U.S. consumers spent $252 billion on customer-pay maintenance and repair. That’s up from $199 billion in 2006—a $53 billion increase in 12 years. We are in a growth industry. Okay, let this sink in; $53 million more is being spent at 20,000 fewer service centers. Wow. Did I mention the future is bright?

Dealership Getting Bigger Share

Of the $252 billion spent on vehicle maintenance, only $37.4 million was spent at dealerships. The sobering news is that number represents only 15% of the total. (100% of all cars were purchased at dealerships, yet only 15% of service dollars were spent at dealerships.) The good news is that dealers gained market share (from 14% to 15%) in the past year, which represented several billion dollars in growth.

As a sidebar, the $37.4 billion dealers collected from customer-pay maintenance and repair represented $20 billion in labor and $17.4 billion in parts. That means the parts-to-labor ratio was .87:1, which is a very, very good number and shows dealerships are starting to grasp the importance of performing preventive maintenance service.

Unperformed Maintenance Dropping 

Speaking of preventive maintenance, here is the most promising statistic from last year: unperformed maintenance dropped from $73 billion to $55 billion; that’s the lowest it’s been in over a decade. Obviously, the less unperformed maintenance, the less service money that was left on the table. The only way to recapture unperformed maintenance dollars is to perform more preventive maintenance services—and the only way to do that is by asking the customer to purchase needed, tech-recommended maintenance.

Seeing unperformed maintenance services on the decline indicates that service managers and advisors are starting to get it and it is paying off.

Time out. I’ve given you five indicators of great growth opportunities in the automotive industry. So, how is your service department doing? Are you experiencing the prosperity and growth in your shop? Is your personal income going up? Are you crazy busy all the time?

Or are your techs running out of work at 3:00 p.m.? Is your shop efficiency under 100%? Are your hours per CPRO under 2.0 hours? Are you saying, “what prosperity?”

If so, help is on the way. In 2019 I’ll be writing a series of articles centered around creating a sales culture in the service department. You can’t save your way to prosperity, you must sell your way to prosperity. The only way to grab your share of the $252 billion preventive maintenance pie is to ask for it. In 2019, I’ll show you how.

Statistics Sources:
AASA Status Report, NADA DATA, Lang Marketing Annual Report, and Auto Care Association Fact Book

Every year the number of higher mileage older vehicles increases. And every year dealership service departments lose more market share.

Vehicle owners almost always defect to the aftermarket as their vehicles get older and accumulate more miles. What’s worse is that many service managers, advisors, and technicians just shrug their shoulders and let them go. They accept this defection as a fact of life; “it’s always been this way and it always will be,” they think.

This negative thinking is so pervasive that it becomes a self-fulfilling prophecy. They expect the customers to take their service business elsewhere, and they do!

This has got to stop.

Unless you are crazy-busy all the time, you need to hold on to aging vehicles and reach out to those who have already forsaken you. It’s not like you’re being greedy…you just want it all!

The Opportunity

Look at this graphic: the opportunity is huge—and increasing every year.

Older Vehicles

The average vehicle on the road is 12.2 years old. That’s 20% older than a decade ago. Think about that; it means half of the cars on the road are over 12.2 years old. Older vehicles need more maintenance and repair.

„Higher Mileage

The average vehicle on the road has accumulated mileage of 120,500 miles—roughly 10,000 miles annually. That’s up slightly from 2013 when accumulated mileage was 115,000 miles. Higher-mileage vehicles need more maintenance and repair.

„ Vehicles in Operation

There are 24 million more cars on the road than there were 10 years ago—273 million vehicles. I’ve been tracking this number for almost four decades and it goes up every year. Lots and lots of older vehicles with higher mileage need lots and lots of maintenance and repair.

„ Domestic vs Import

In 2007, domestic vehicles made up 66.7% of all the vehicles on the road…today it has dropped to 54.4%. Conversely, import vehicles on the road have risen from 33.3% in 2007 to 45.6% today. In a few years, imports will have the largest share of the American fleet.

Okay, so what? There are a lot more domestic dealers than import dealers, so domestic service departments need to be ready. If you are a RAM dealership, realize that you might have a BMW sports car in the service bay next to a Cummins diesel pickup. The core maintenance services on these two vehicles are remarkably similar and don’t require special tools, fluids, or parts.

Action Points

Why not create a business within a business? I’m talking about a “garage” in your service department. This is really not a radical concept, because you probably installed a “jiffy lube” in your shop years ago.

Now it’s time to install a garage that works on all makes, all models, all years, all mileages…the higher the better. Just start with one or two techs. They don’t have to be OEM factory certified A-level techs (which are getting harder and harder to find). There is a bigger pool of competent, hard-working, B- and C-level techs that might jump at the chance to work in your shop.

You might want to consider a simplified maintenance menu and create a marketing piece inviting customers to bring their “other car” to your shop.

Ask the parts department to provide estimates that give vehicle owners an aftermarket option on replacement parts. They’ll likely retail for 30%-50% less and the profit margin might be greater. (I’m sure this idea will cause some of you heartburn; but remember I’m talking about older, higher-mileage cars). If they defect to an aftermarket shop, they won’t be using OEM parts. Obviously, your profit drops to zero when customers defect.

You can do this…at least give it a try. You sold them the car, it ought to be yours to service…for life!

Dealership service departments have a great opportunity to increase traffic on the drive by pursuing recent used car buyers—those who bought from your dealership and those who bought elsewhere.

First, let’s look at the statistics (according to Lang Marketing):

 Almost a million vehicles were lost in 2017 due to hurricanes Harvey and Irma, creating a surge in demand for new and used vehicles.

 There were 42.4 million used cars sold in 2017; that’s up over two million units from 2014 when 40.3 million used cars were sold.

 The average age of used vehicles sold in 2017 was 4.5 years old. That is down from five years old not too long ago. (Newer vehicles typically bring higher prices, which may explain the next statistic.)

 The average sales price for used cars in 2017 was $19,500. That’s $1,400 more per car than in 2010 when the average sales price was $18,100.

Jim Lang of Lang Marketing makes the following observations:

“Higher used vehicle prices are generally positive for the aftermarket since they make it easier for consumers to justify investing in the repair and maintenance of older vehicles. Higher used vehicle prices also raise the value threshold for scrapping cars and light trucks, thereby keeping older vehicles on the road longer.”

So, as prices go up, many consumers are motivated to not only keep their old car but to spend some money on it to make it last a few more years. Yea! But the sobering fact is most vehicle owners aren’t spending that money at their local dealership; rather, they are heading to the aftermarket.

You’re okay servicing older vehicles in your shop, right? And you’re okay servicing any make or model, right? If you’re an import store that sold an F-150 pickup off your used car lot, then you’re okay having that vehicle serviced in your shop, right?

Most independent garages and franchised aftermarket shops are ready, willing, and able to work on anything. I’m suggesting your dealership should be, also.

There are 267 million cars on the road in the United States and that’s increasing every year. Combine that with the fact that the number of service bays are declining every year and you have the perfect opportunity for fixed ops growth…if you pursue it.

Action Point #1: First, let’s look at the low-hanging fruit. I’m talking about being intentional in retaining your pre-owned car buyers—making them lifetime service buyers. I see a plethora of new car retention programs designed to keep consumers loyal, but rarely do dealers aggressively pursue their used car buyers. That’s tragic and doesn’t make good business sense.

The action point is to give your used car buyers access to all of the retention programs available to your new car buyers. Things like “Engines for Life,” lifetime warranties, complimentary roadside assistance for life, and scores of other incentives to keep them coming back.

But you can’t stop there. Customer loyalty in and of itself won’t make you any money. You can’t deposit loyalty in the bank. Forgive me for stating the obvious, but you can only deposit money in the bank, and the only way that will happen is when the service advisors sell something!

Don’t assume your advisors understand the big picture. Take the time to have a service sales meeting and lay out your two-fold used car buyer retention strategy:

1: Get them back on the service drive.

2: Sell tech-recommended services to keep their cars trouble-free and fun to drive…and to keep them coming back!

Action Point #2:
Secondly, equip your advisors with word tracks that are brief and easy to learn. For example, if you implement some type of lifetime engine warranty on all of your used cars, you might coach your advisors to check vehicle history and say, “Mr. Customer, I see you are already enrolled in our Engines for Life Program. In order to keep your coverage intact, you would want our performance oil change package, right?”

Or you might have them say, “All of our pre-owned vehicles come with Lifetime Roadside Assistance as long as you choose our “better” or “best” oil service. Which one of the oil change packages best meets your driving needs?”

The intent here is to give your advisors an opening sentence—a proven phrase that will “get them started” on the road to a sale. Most professional advisors can take it from there if you can just give them a starting point.

Action Point #3: Lastly, proactively reach out to “lost souls”—vehicle owners that haven’t been on your service drive in over a year. Most folks have their oil changed twice a year, so if you haven’t seen them in that amount of time, they’ve defected to the aftermarket. Oh, you’ll see them again if they have a catastrophic failure that’s covered under warranty, but for routine maintenance, you’ve lost them.

Go get them back! How about a car care clinic on a Saturday morning? Make it a grand party with hot dogs and those inflatable bounce thingies for the kids. All fixed ops personnel will be needed, from “A” techs to lube dudes to porters. The centerpiece of the event is a free multi-point inspection performed on every vehicle.

Granted, it’s a lot of work, but if you regain 20-30 lost customers, it’s a great success. Plus, you’ll sell lots of labor hours simply by having your techs get their hands and eyes on every vehicle.

So many used cars, so little time. Go start rounding them up. It’s worth it! My personal thanks to Jim Lang of Lang Marketing. For more information on the Lang iReport, you can visit langmarketing.com.

This article is for leaders—dealers, general managers, and service managers—the men and women who have been given a sacred trust to shepherd their employees and the dealership to success.

Once you, as a leader, have embraced the message, then I think it would be a good idea to pass this article on to your employees.

Shakespeare wrote in “Hamlet” Act III Scene I “To be or not to be.” A motivational speaker and personal trainer that I know says, “What you be, they are becoming.” One of my favorite authors says it like this, “Your employees pay more attention to what you do than what you say.” Behavior is caught, not taught.

The Draconian parenting philosophy of “Do what I say not what I do” has never worked and it never will. Yet I see this happening every day in the business world; managers have one set of standards for their employees and a different set of standards for themselves. (Good heavens, I’m starting to sound like Dave Anderson!)

So, are you a student, a disciple, or a disciple-maker? Let’s start by defining each:

Student: A learner (a person who is trained but never produces)

Disciple: A learner and a doer (a person who applies what they have learned; result: increased revenue via addition.)

Disciple-Maker: A learner, a doer, a believer, and a teacher (a person who is held accountable by their superiors to continue applying what they have learned; result: increased revenue and exponential growth via multiplication.

Rather obviously, the goal of every owner and manager ought to be to become a disciple-maker—and to have teammates that share the passion. What you be, they are becoming. It starts at the top. Let’s look at some examples that better explain each category:

Student example: Management sends a service advisor to a sales training seminar. However, the manager does not attend. When the service advisor returns from the training, he immediately goes back to doing what he has always done. He never applies anything he has learned. The manager doesn’t know what the advisor learned, therefore he does not have the ability to hold the advisor accountable. Nothing changes. It was a total waste of time and money. Unfortunately, this is the pattern that happens most often in the automotive business. Management is under the mistaken belief that the key to success is having trained service advisors. It’s not. The key to success is having trained service advisors who are held accountable to sell maintenance service—who are held accountable to apply what they have learned.

Disciple example: In this scenario, again, the manager does not attend the training. However, the service advisor has enough drive, energy, and desire that he does apply what he has learned. However, after a few days or weeks, because there was no accountability and the manager doesn’t really know or understand what he’s doing or why it doesn’t take long for him to return to his old ways.  And even though he applied it for a short time, it didn’t become part of his DNA.

This is so tragic because the advisor is all fired up—ready, willing, and able to produce—yet due to a lack of support from the manager, everything fades away. This is one reason there is such a high turnover in the automotive industry. Weak managers who don’t believe in training now have a self-fulfilling prophecy: “See, I told you so. All this training gets us nowhere; it’s a waste of time and money.”

Disciple-Maker example: The manager and the advisor attend the training together. The general manager and the dealer go, also! It sends a message that training is important; that training matters. There’s going to be accountability to a standard. It’s a new day. Things are going to change. There’s a new sheriff in town. Now when the advisor returns from the training, management all the way up to ownership knows what is required of the advisor to succeed. Therefore, everyone is held accountable up and down the management chain. What’s the net result?

The sales training works because the advisors are held accountable. They now have become disciple-makers who teach and train customers, who themselves become disciple-makers with their friends and family. In other words, the service advisor’s sales presentation is so clear that not only do the customers buy the maintenance services, they “buy-in” to the concept that preventive maintenance saves them money. This is true success. This is what you’re looking for, isn’t it?

So managers, ask yourself, “Am I a student?” (Which doesn’t make me or the dealership any money), “Am I a Disciple?” (Which will add a little bit to the bottom line, but not much), or “Am I a disciple-maker?” (A game-changer, a guy who is out there getting it done and holding my people accountable to get it done.)

Excuses: These are some of the most common excuses for not becoming a disciple-maker:

1. Can’t afford the time “I’m too busy. We’re short-handed.”

Let’s take a reality check for just a minute. I understand the fact that a dealer can’t attend every training event for every department every time. And I understand that a service manager can’t attend every OEM technical training class that he sends his technicians to or every sales training class his advisors attend. But the more engaged you, as a leader, are in understanding what your people are learning, the more effective you’ll be at holding them accountable to do it.

At the very least attend one training event a month with them. Additionally, you could commit to being present at the beginning of most meetings held at your dealership, simply to welcome everyone, thank them for being on your team, and to let them know you support the processes and techniques they are learning.

2. Can’t afford the money “I hate to invest in people that I don’t think will be around very long. We have a high turn-over rate with our advisors and managers and we just don’t want to invest in them.”

It has been said that it is far better to train people and have them leave than it is to not train them and have them stay! If you invest in the training and hold them accountable to implement what they’ve learned, then your team will increase their production and give you a great return on investment.

3. Too lazy to do it; unmotivated “Quite frankly, I just don’t care.”

(Obviously, nobody is going to say this out loud but this is the attitude that many in management have.) Their thinking goes something like this: “I’m just not that passionate about it. I’m making an average salary, I have average personnel, we have an average dealership, things are going along pretty good. I just don’t want to put out the effort to get to that next level.” In other words, what you’re doing is “good enough” and you don’t want to invest the time, money, energy and effort to be great. By the way, you know the old saying, “the enemy of great is good.”

It’s easy to get worn out in the automotive service business. Long hours, customer expectations and demands, computer issues, technicians—it can suck the life out of the most optimistic among us.

That’s why we all need to be energized with fresh ideas. Just a reminder that I’m writing to managers and leaders—you are the folks that need refreshing the most. Attending training seminars with your service team will refresh you. If nothing else, do it for yourself.

In summary, if you’re looking for maximum return on the time and money you invest in having your people trained, this is the way to get it. Disciple-makers make disciples that go on to make disciples. This is contagious multiplication. What you be, they are becoming! “Go ye therefore and make disciples.”

“What is true environmentalism? The Obama administration told us you can’t be about jobs and growth and protect the environment. I simply reject that! We can do both,” according to Scott Pruitt, Administrator of the US Environmental Protection Agency.

“I think true environmentalism is really environmental stewardship. We have been blessed with wonderful, abundant natural resources in this country…and to whom much is given, much is required,” Pruitt continued.

“We need to be about managing the resources God has given us. So, we can do both—providing jobs and growth while being good environmental stewards.”

Last fall I had the privilege of sitting down with Administrator Pruitt to discuss the EPA’s impact on the automotive industry and to gain some insight on what the future holds concerning regulatory mandates. The event, “A Fireside Chat with the EPA” was attended by hundreds of professional automotive fixed ops consultants from all across North America and around the world.

Obviously, the laws and policies that come out of Washington, D.C. affect all Americans, but no agency has more impact on our industry than the EPA. From regulatory bans on lead in gasoline to emission mandates to compliance demands as a result of the Clean Air Act, the EPA has had a profound impact on automobiles.

On the topic of regulation, Pruitt said “One of the greatest issues for businessmen regarding energy and the environment is regulatory uncertainty—is a businessman supposed to follow the regulation (created by a federal agency) or the statute (created by Congress)?”

“The previous EPA created regulations that were not tethered to any statutes. Capital will not be put at risk by businesspeople if there is regulatory uncertainty.”

The Administrator on many occasions has said that the purpose of a regulation is to “make things regular.” In other words, regulations should bring clarity, not confusion. If there was ever an industry that needed consistency, clarity, and certainty, it’s the automotive industry.

Therefore, I asked him about Corporate Average Fuel Economy standards, which are actually set by the National Transportation Safety Board with input from the EPA. The CAFE standard for 2025 is a whopping 54.5 mpg. For our industry to attain that number, which is almost 20 mpg higher than it is today… well, I just don’t see it happening.

Specifically, I asked him to explain the process in order to find out if there’s any way to roll CAFE back to a more attainable number.

According to Pruitt, “the mid-term review in April 2018 is important…in looking ahead to 2025. In essence, the review is to evaluate if the projections were correct…or overly optimistic.”

“The Obama administration rushed the mid-term review by pushing it up 16 months to January 2017.

The EPA under the Trump administration will be doing the review at its appropriate time in April 2018.”

I think it will be very interesting to see what they find out. I am assuming they will find out that the projections were way out of line and I hope they will recommend a lower, more realistic target. We’ll see.

Pruitt went on to say, “Concerning the design of vehicles, we shouldn’t go to Detroit and say, ‘manufacture a segment, a percentage, of your fleet that no one wants to buy!’ Rather, we need to look at what vehicles people are actually buying and then strive to make them fuel-efficient with acceptable emissions.”

Okay, time out. Let that soak in for a minute. Here’s a member of President Trump’s cabinet, a cabinet secretary who runs a powerful federal agency, saying let the people decide. Let the market dictate the direction. Let’s find out what people want and help the manufacturers meet the demands of the market and at the same time achieve environmental mandates. Wow, what a common-sense approach! How refreshing.

“If you make vehicles that people don’t want to buy, then it’s counter-productive,” Pruitt concluded.

It’s counter-productive because people will hold on to gas-guzzling, high-emission, older vehicles longer. That’s bad for the environment and for new car sales.

I pointed out to the Administrator about government involvement designed to influence vehicle manufacturing: specifically concerning mandates for increased fuel economy and decreased emissions. This was the desired outcome, yet the new engine designs are susceptible to fuel deposits and that has had the reverse effect: deposits actually reduce fuel economy and increase emissions.

So, the federal government’s mandates have caused the exact opposite of what they were intended to do. Therefore, I respectfully asked the Administrator, “When does the government need to get out of the way?”

Pruitt responded, “My philosophy is that the market is the better governor of those things. The government, when it mandates certain things or implements price controls, it can have a detrimental effect. It’s always best when technology and innovation control the market. American innovation and technology, when left to drive the process, always work best. Government is slow and reactionary while industry moves to get things done quickly and efficiently.”

It seems to me that the EPA has been a political hot potato since its creation in the 1970s. EPA policies have a polarizing effect in our society with strong emotions on both sides. Pruitt summed it up like this:

“So much of what we do at the EPA has been politicized…and it shouldn’t be. What’s ‘Republican’ or ‘Democrat’ about cleaning up a superfund site? Nothing! Clean water and clean air should not be political…so we are working hard to change the discourse and have meaningful discussion.

In the past, the EPA exercised regulatory overreach and lost sight of its core mission. We are trying to bring clarity as we go forward.

We have lost civility in our discourse—we need to get back to a reasonable discussion.

We need to celebrate the achievements in innovation and technology that we have made in this country with respect to clean air and clean water. We need to embrace how far we’ve come.”

Well said, Mr. Administrator. Well said.

My personal thanks to Scott Pruitt for taking time out of his busy schedule to sit down and discuss the issues that impact our industry. Due to his vision and leadership, I believe the relationship between Washington, D.C. and the automotive industry will be stronger and have more synergy than ever before. The best is yet to come.