Ford dealers start service expansion
Stores add bays to develop a steady revenue stream
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On a typical day, all 30 service bays at Sam Pack's Five Star Ford in Carrollton, Texas, are busy from 7:30 a.m. to closing at 8 p.m.
"We generally write anywhere between 90 and 110 repair orders a day," says Mike Dielenhein, service and body shop director. The store's service department generates nearly $1 million in revenue during a typical month.
That number will only get larger. In the next 60 days, construction will begin on a new $14 million dealership, which will double service capacity from 30 bays to 60.
The dealership's expansion plans in suburban Dallas illustrate an emerging trend at Ford. After a long period of declining dealer population and consolidation, some Ford dealerships are adding service capacity again.
"We're getting to the point now, believe it or not, for the first time since the 1960s and '70s where our dealers in certain places will have to add service capacity," said Jim Farley, Ford Motor Co.'s group vice president for global marketing, sales and service, in an August interview. "It's pretty exciting, but it's a new muscle for us."
Frederiek Toney, president of Ford's global customer service division, says the company's dealerships lost 10,000 to 12,000 service bays since the financial crisis in 2008. The crisis resulted in a major reduction of Ford's dealership roster, from about 4,000 then to about 3,200 now.
But while surviving Ford dealerships see opportunities, they must reduce their reliance on warranty work as vehicle quality improves.
"Maintenance and general service repair are dominating service business for our dealers," Toney says.
The number of Ford vehicles on the road has been declining steadily since the crisis.
That will change late this year, says Toney. "We'll see the number of Ford vehicles on the road increase instead of decrease. In order to service those customers, we need to be sure we have enough service capacity."
Ford has formed a committee with dealers to discuss strategies for keeping customers once their warranties expire.
Ford has been active in helping dealers increase service revenue, says Lloyd Schiller, a Jupiter, Fla., industry consultant.
"Since the late '90s, Ford has had a very aggressive retail strategy for service and parts. I would say it's probably the leader in the industry from a retail standpoint," he says.
For instance, Ford dealers sold 3 million tires to customers in 2011 and are on pace to equal that in 2012, Toney says. Ford's plan to keep customers coming back to its dealerships starts with its Quick Lane maintenance. About 700 Ford dealerships have Quick Lane operations, and the number is growing by about 100 a year, he says. "That dedication to Quick Lane means they free up the other bays to do something else," Toney says.
At Sam Pack's Five Star Ford in Carrollton, the doubling in service capacity at the new dealership will enable Pack's technicians to do more light maintenance work by expanding its Quick Lanes capacity. The current dealership has four Quick Lanes. The one being built will have 12 to 14, Dielenhein says.
That in turn will free more lanes for heavier, more lucrative jobs. As vehicle quality improves and warranty work declines, all Sam Pack's Dallas-area dealerships are seeking more customer-pay jobs. Pack will add as many as eight technicians when the new Carrollton facility opens in mid-2014. He's also adding capacity at his three other Ford stores in the Dallas-Fort Worth area.
"We're establishing a relationship with that customer, so the maintenance items are coming back to us rather than the aftermarket competition," says Pack, who is a member of the committee helping Ford figure out ways dealers can expand their service business.
Service director Dielenhein says the dealership is rethinking the way it staffs the Quick Lanes, putting more experienced personnel in place.
"It used to be we'd put newbies in there, anybody who could fog a mirror. But you have to pay for the right personnel. We can't put a $9 an hour job [worker] in these jobs anymore."
Pack's four stores are also aggressively trying to lure new business.
Says Dielenhein: "We do advertise. We give away free oil changes for all new customers. We do the same for CPO customers. The real key is e-mails. People will respond to e-mails. They don't respond as well to phone calls."
Vic Diffee, owner of Diffee Ford-Lincoln in El Reno, Okla., says his service business has increased about 30 percent in the past five months as the oil business in his area is booming.
"We're in a spot where it's profitable for us to add service," he says. "It is because we're right in the middle of the oil patch."
Ford's Toney hopes that dealers can expand beyond just servicing the cars of customers who bought their vehicles from the store.
"In fact we're going to ramp it up higher trying to appeal to all of our customers irrespective of the age of their unit."
Consultant Schiller says there's an opportunity there for Ford and other carmakers.
"If you bought your truck from a private owner or a used-car dealer, you're not thinking of going to a dealer. But that business is out there, and it's a heck of a lot more lucrative than lube and rotating tires."
If Sam Pack learned anything from the recession, it's that new- and used-vehicle sales can change like the weather. That's why it's important to build a steady revenue stream in fixed operations, he says.
Says Pack: "If we're totally dependent on new- and used-vehicle sales, as you can see from 2008 to today, we're going to experience significant swings."
To build revenue, the store has to build long-term relationships with customers, which is one reason the average tenure of technicians at the Carrollton store is about eight years.
"The sales department sells the first car, and if you take care of the customer through the service department," Pack says, "the service department will sell the second car."
You can reach Bradford Wernle at bwernle@crain.com.
