Watch out, quick-lube shops, here comes VW
With improving vehicle quality cutting into dealerships' warranty work, Volkswagen of America wants more of its dealers to open quick-service operations to keep their repair shops busy.
VW has signed up 50 percent of its dealers for its Service Xpress program, which means adding bays, equipment and dedicated technicians.
"It used to be that we could live off warranty work and repair work," says Jimmy Ellis, an Atlanta dealer whose family has sold VWs since 1972 and who is chairman of the Volkswagen National Dealer Advisory Council. But those days are over.
VW launched Service Xpress in 2011 for quick, inexpensive turnaround on basic maintenance such as oil changes, filter replacements and tire rotations.
The materials that VW provides to dealers try to hammer that message home, telling customers they will "never have to settle for those quick-lube places again."
Don Stephenson, vice president of aftersales at Volkswagen of America, aims to have 70 percent of VW dealers signed up for Service Xpress this year and 90 percent in 2015.
"Parts aren't breaking. It's a simple explanation," Stephenson says. "We have to become more aggressive if we're going to pull in that revenue. Otherwise the dealers -- and it's not just ours, it's everybody's -- are going to feel the pinch."
VW sees benefits, too: The company says that after stores add Service Xpress, their customer service scores climb as customers are pleasantly surprised by how quickly the work gets done.
But there are challenges. Workers can grow accustomed to the old way of doing business, and a new approach can feel threatening to veteran technicians.
To ease the transition, VW suggests that entry-level technicians be assigned to the express lanes.
That is what Lewisville Volkswagen in suburban Dallas did. Alan Brown, the store's general manager, says the switch has helped morale in the garage because the most skilled technicians can handle lucrative, complicated repairs without getting reassigned to perform oil changes.
He said adding Service Xpress cost about $20,000, including new tools, lifts and technicians. The dealership's three Service Xpress bays usually handle about 145 vehicles per week, including more than 40 from 7 a.m. to 5 p.m. on Saturdays.
"There's an expense to it. But man, how it has calmed the shop," Brown says. "It has kept my A techs on the A jobs. If we had to go back old school, I would probably have a lot of frustrated people."
To set up the Service Xpress program, VW turned to Service Operations Specialists Inc. in Little Rock, Ark. CEO Blake Price says the company has used its model to set up programs with Chrysler (Express Lane) and Nissan (Express Service) and has four other brands in the pipeline.
Price says that two decades ago, roughly 80 percent of work in dealership service bays was repairs and 20 percent was maintenance.
Those numbers have flip-flopped. VW stores now do about 60 percent maintenance and 40 percent repairs -- partly because the brand has started offering free maintenance on its vehicles for the first few years of ownership.
Service and parts department sales at the average dealership rose 5 percent in 2013 to $4.8 million, according to new data from the National Automobile Dealers Association. But another trend line is troubling: The average dealership got 11.6 percent of its revenue from parts and service in 2013, down from 14.2 percent in 2008.
"We used to be in a low-volume, high-margin business," Price says. "Now we're in a low-margin, high-volume business. It's a different world. We're just trying to adjust."
You can reach Gabe Nelson at email@example.com.