Wednesday, July 25, 2007

Don't fire dealers: Let them handle service

Edward Lapham is executive editor of Automotive News.


Edward Lapham
Automotive News
July 25, 2007 - 3:52 pm

There's too much violence and not enough sex in the car business, especially for the Detroit 3.

Think I'm wrong?

If there were more sexy products in Detroit 3 showrooms, General Motors, Ford and Chrysler would be a lot healthier. And if they were healthier, there wouldn't be as much talk about the need to whack a percentage of their dealers, which is commercial violence.

No one denies that many Detroit 3 dealerships aren't making money or that if some dealerships went away, those remaining might increase their new-vehicle throughput and make more money.

But that simple math problem begs the question of how best to do it.

Here's an interesting idea suggested by one astute reader: Rather than simply close a bunch of dealerships, why not let some of them stay open as franchised parts and service operations?

If it sounds vaguely familiar, it's because manufacturers in Europe sometimes use service-only dealers, especially in rural areas and smaller towns.

Over here, where dealership gluts tend to be in urban areas, the theory goes that if margins are better in service, parts and accessories -- and we know they are -- it would serve the brand and its customers to let some dealers stay in business focusing on customer service.

Instead of losing an outlet, the manufacturers would gain greater exposure with an expanded number of service centers. Existing customers wouldn't need to drive farther for service and could be romanced with brand promotions and enticements at the service centers. And with the exception of the sales staff, the local economy would be spared a spike in unemployment.

It also might put a stop to much of the factory vs. dealer violence.

And wouldn't that be a lot sexier?

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