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Will volume slow? Dealers hedge bets by beefing up service bays, technicians, wait areas and more

Automotive News
March 28, 2016 - 12:01 am ET
Maintaining a healthy service department will be more important than ever as the industry nears a possible new-vehicle sales plateau.

AutoNation Inc. CEO Mike Jackson warned of such a plateau at the Automotive News World Congress in January, stating that the industry began to transition from a growth mode to a plateau phase in the fourth quarter of 2015.

Some dealership groups already are paying more attention to their service and parts departments -- which traditionally help stores survive economic downturns -- even if they don't necessarily agree that sales will soon turn south.

Puklich Chevrolet in Bismarck, N.D., has already begun feeling that plateau in growth. The downturn in the oil boom has hit the dealership's local market. The result for Puklich has been a sharp upswing in service demand as customers choose to repair before they replace.

The solution to a fumbling and overbooked service department at Puklich was a simple shift in workflow: All communications for the department are now handled by the business development center.

"In other words, we are doing all of the things now that we should have been doing all along but didn't need to," said Steven Zaun, the dealership's general manager. "Imagine that. It actually works."

As the business development center follows up with customers more regularly, Puklich Chevrolet's service department has seen a shift in its business. The department is getting more than just the typical routine maintenance and recall work, Zaun said. It has become its customers' primary mechanic.

"Calling back customers was a lot of extra work for the service department before. But for the BDC, that's just their job. They do it without any issue," Zaun said.

At Larry H. Miller Subaru Boise in Boise, Idaho, General Manager Ty Leuthold knows that when the industry plateau arrives, the key to a healthy service department will be to keep customers coming back even after the warranty expires.

Right now, his service department is offering a variety of conveniences designed to set it apart from the independent mechanics in the area, including a bigger, faster quick-lube staff and an app for scheduling and keeping up on routine maintenance.

"So let's say the market stays strong for longer than we expect. The question is still: Who's servicing your customers — you
or someone else?"
Ty Leuthold
Larry H. Miller Subaru Boise

Building for service
Leuthold said all efforts are on strengthening customer retention, and an upcoming facility update will focus solely on improving the service experience.

"The biggest thing we're doing right now is building a new facility in which the size of the service base is nearly doubling," he said.

On top of a bigger garage, the service base will also include an outdoor dog park and community garden for customers to use while they wait for their vehicles to be serviced.

"This is something a big majority of our faithful customers said they would enjoy, and that's important to us," Leuthold said.

A pager system will enable customers to walk the grounds freely and still be alerted the moment their vehicle is ready.

There has not yet been any sign of slowing in the sales department at Larry H. Miller Subaru Boise, but Leuthold said he doesn't need to wait for a warning sign.

"So let's say the market stays strong for longer than we expect. The question is still: Who's servicing your customers -- you or someone else?" he said.

Larry H. Miller Dealerships ranks No. 10 on the Automotive News list of the top 150 dealership groups based in the U.S., with retail sales of 62,476 new units in 2015.

Service tech pay at dealerships has become highly competitive.

Beefing up staff
The stores of Bergstrom Automotive, a Neenah, Wis., dealership group, are seeing fewer repairs per vehicle but an overall jump in total repairs. This is the result of a steadily growing population of units in operation, COO Tim Bergstrom said.

"More units in operation in that first four years of life is creating a higher demand," he said. "We as a dealer body have been focused on being better at dealing with that."

The obstacle is finding enough technicians to staff the busy service bays, he said. The biggest hit to Bergstrom's hiring pool is an increase in high school students pursuing universities over trade schools.

"It's not facilities that we need," he said. "It's a labor force."

Bergstrom and his team have started several recruiting programs at local high schools and technical colleges, and the quick-lube service departments at every store serve as effective employment and training pipelines for entry-level technicians.

"The express lube is always joining up and communicating with the main service garage, so that offers a lot of experience for those entry-level technicians from the colleges or the high schools," Bergstrom said.

Bergstrom Automotive ranks No. 72 on the Automotive News list of the top 150 dealership groups based in the U.S., with retail sales of 13,203 new units in 2015.

Mark Rogers, a dealership management consultant for the National Automobile Dealers Association, said most dealers he interacts with are not worried about a plateau or a downturn in the industry just yet.

"Dealers are definitely not in panic mode," he said.

Rogers said the price gap between routine maintenance at dealerships vs. the independents is shrinking, and on top of that, new technology in vehicles is making it harder for independents to offer the same range of repairs even after the warranty expires.

Dealers can have an advantage when it comes to attracting technicians because they can offer more competitive salaries, Rogers said.

"As far as service goes, dealers are already being competitive with independent" mechanics, he said.

Dealerships already have renewed their focus on their service departments in recent years as a result of soaring vehicle sales and recalls. That higher focus will pay off in the years ahead whether sales plateau or drop, he said.

"They're really going to be set up" to handle future demand, Rogers said, "no matter what happens."
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