Goal: More hours and bays by 2018

Honda asks dealers to add service

Goal: More hours and bays by 2018

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Honda dealer David Griffith's service center is open seven days a week. But now American Honda Motor Co. wants him to extend his Saturday hours, he said.

Griffith, who owns Griffith Motors in The Dalles, Ore., isn't so sure. "I don't have the demand to justify adding hours right now," he said.

Griffith is one of hundreds of Honda and Acura dealers that American Honda is asking to add service bays, hours or both by 2018 to accommodate the automaker's forecast of rising sales. Honda's requests are not mandatory, but some dealers said they feel pressure to make the changes.

In May, the automaker recalculated its so-called Minimum Requirements for Facilities. The new calculation anticipates future sales plus the likely longevity of models on the road in each market. Past requirements relied only on potential sales, Honda said. The result is many Honda and Acura dealers will be asked to change their service operations to accommodate growing demand by 2018.

Bolstering


Besides customer retention, Honda wants its dealers to compete better against independent service shops, said Jenny Gilger, American Honda's senior manager for service operations, in Torrance, Calif.

"Financially the dealers are going to lose if they don't step up to provide the capacity the market needs. They will be leaving money on the table," Gilger said.

There are 1,044 Honda and 273 Acura U.S. dealerships. Honda will not disclose how many it is asking to improve their service operations. Gilger said that as a result of the 2018 requirement recalculation, 10 percent more dealers will be asked to make changes compared with the number of dealers Honda had previously identified as having deficient operations.

To-do list
Honda is asking some dealers to

• Extend service hours

• Add service bays, technicians

• Remodel flexibly, in case more bays are needed later

Case by case


"Each dealer's situation is unique and will be handled on a case-by-case basis," a Honda spokesman wrote in an e-mail. "Some may need to make minor adjustments, some major, and many in between." Honda will not help to finance any expansions.

In late June, Honda presented the updated requirements to a group of California dealers at a regional meeting, said a dealer who was there and asked not to be identified. The dealer said Honda's discussion of extended service operations is not new, but this time the request is "more formalized."

He said he would have to hire several service employees to extend his service hours by 15 hours a week, as Honda requested. He also would have to advertise the new hours. He questions whether he will earn enough revenue to offset the added costs. He said it will be a "tough call," but he feels pressure to do it.

"When there's a request made and supportive documents behind it and we don't fulfill that request, there are typically unintended consequences to us that we see down the road," he said.

Payoff


The payoff for expanding service operations can be substantial.

Brian Lam, platform vice president at DCH Honda in Paramus, N.J., completed a new service building four months ago.

Lam said Honda's been telling his store "for years" that service demand in his market was growing.

"We agreed, but we didn't want to do an offsite service facility," Lam said.

DCH Honda, which sells about 8,200 new and used vehicles a year, was recently able to buy adjacent land to build the new service center. The dealership now has 24 service bays, up from 16 in the old building, and eventually will have 39. Lam also hired about 12 additional service technicians. The store's monthly gross profit in service rose to $675,000 from about $575,000 in those four months. In two years he expects it to rise to $1.25 million.

Honda has talked to Paragon Honda in Queens, N.Y., about increasing its hours or adding service bays, said General Manager Brian Benstock. Paragon Honda's service center went to seven days a week in the late 1990s, he said. Now he may extend hours well into the night.

"More and more dealers are doing" Sunday service, Benstock said. "You pay rent seven days a week, you might as well make money seven days a week."

You can reach Jamie LaReau at jlareau@crain.com. -- Follow Jamie on Twitter


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