Satellite service centers may seem to be a perfect fit for the auto retail environment, but automakers have been very slow to open them.
Several major companies, including Chrysler Corp., Toyota, General Motors and Volvo, only recently began testing or announced test programs of the stand-alone service operations.
Satellite service centers joined the U.S. automotive retail landscape in 1991 when American Honda Motor Co. Inc. opened a dealer-owned and operated stand-alone service center in Madison, Wis. Toyota Motor Sales U.S.A. Inc. opened one of the newest centers in May in Baltimore.
No matter the brand, the forces driving satellite centers are the same: convenient location, customer-friendliness and the ability to perform warranty work, all while going head-to-head with the national aftermarket chains for nonwarranty, light and maintenance repairs.
And with good reason.
Service and gas stations and specialty garages such as Pep Boys and Penske Auto Centers control 56 percent of the nonwarranty repair business; independent garages grab another 20 percent, according to Charles Piszczor, manager of research and information at the Automotive Service Industry Association. That leaves franchised new-car dealers with about 24 percent of that business.
Since 1991, Honda has opened six more Honda Dealer Service Centers - an average of about one a year.
Ford Motor Co., which opened its first Ford Auto Care store in 1992, said in 1994 that it planned to have about 500 of the repair stores open by 1998.
But that will not happen.
Currently only two Ford and one Lincoln-Mercury Auto Care stores are open.
Two other centers are under construction and scheduled to open this year, said Jim Klous, Ford Auto Care project manager.
Spotty so far
There are only a handful of the dealer-owned centers operating in the United States, and as many reasons why the satellite service concept has been slow to expand.
While manufacturers and dealers who own satellite service operations say the stores are profitable, 'the success record has been spotty,' according to the National Automobile Dealers Association's fifth Project 2000 report released in June 1996.
'Putting service where the customers are, however, will be the key to long-term department profitability and the Project 2000 committee expects that dealers and manufacturers will continue to explore strategies to make that happen,' the report added.
Finding the right location is crucial to satellite service programs and often time consuming.
Neil Swartz, corporate manager of the service process team at Toyota Motor Sales, and James Roach, vice president of service operations at Honda, point out that it takes time to place a satellite center because each potential site must be carefully researched before giving dealers the go-ahead.
Local zoning issues must be sorted out, and housing and freeway patterns and the number of units in operation in a given area are studied.
Also, the centers must be coordinated with the respective company's market representation so the centers do not infringe on other dealers' market areas and will complement future market plans.
Swartz, who oversaw the opening of the first Toyota Customer Service Center in May in Baltimore, said Toyota has approved three more centers. Those centers should be open by next year.
'We don't see more than 15 to 20 of (the centers) nationally in the near future,' said Swartz. 'You have to put them where they are right for the customer; it's a customer-first philosophy.'
Roach said Honda is studying its top 25 markets to determine where future centers should go.
'These things are profitable and have a higher level of CSI' than the dealerships, he said.
Another factor slowing the growth of satellite centers is the downsizing of dealer networks. In recent years, automakers have been rethinking how many dealerships they should have and where those stores should be.
Some manufacturers' plans to reduce or consolidate their dealer networks include strategically placed satellite service centers.
For instance, Mercedes-Benz, which reduced its dealer count by almost 20 percent since the late 1980s, is planning dealer-owned, off-site Customer Convenience Centers to help fill the service void left by those now-defunct dealerships.
Ford said the centers are vital to the success of the company's retail plans for Indianapolis and Salt Lake City.
In May, Ford announced that it wants to replace the 20 dealerships that sell Ford, Lincoln and Mercury vehicles in the Indianapolis market with five or six Ford superstores, two or three Lincoln-Mercury superstores and five or six satellite service centers. Ford announced that it wants to replace the 17 dealerships in Salt Lake City with five multibrand superstores and 10 satellite service centers.
But as important as the centers are to the retail landscape, dealers still worry that the satellites siphon business from other like-brand dealerships near a center.
Chrysler has been considering the idea of dealer-owned off-site repair centers for several years, but held off because of opposition from dealers, dealers say.
In January, Chrysler announced plans to open two Chrysler Neighborhood Service centers this summer.
The centers will be operated by Poquoson Motors Inc. (Chry-sler-Plymouth) in Hampton, Va., and Westside Chrysler-Plymouth-Jeep-Eagle in Albuquerque, N.M.
Chrysler spokesman Mike McKesson said the company still expects to open the pilot stores this summer, but that no other information is available about the project.
Dick Shaker, owner of Lincoln-Mercury Auto Care in Naugatuck, Conn., said there was some resentment on the part of other dealers when he built his six-bay center in 1992.
After owning the center for three years, Shaker said Ford called him and asked him to talk to the Parts and Service Dealer Council about his center.
Shaker said he could tell from the tone of the questions that the people on the council were unhappy about the concept.
One dealer, he said, was upset that he performed some warranty work at the center; another thought the centers should be operated by dealers whose dealership service department had exceeded its capacity and did not have the space or money to expand.
Then about a year ago, members of his 20 group visited the center. They saw how the center operated and left with a positive feeling of the center concept, Shaker said.
Chuck Howarth, Honda parts and service director for the first satellite service center in the country, agrees that politics among dealers has hampered the growth of the centers.
Howarth said the Zimbrick Honda Service Center in Madison, Wis., has been so successful, the parent store, Zimbrick Honda, is going to build another on the east side of town within six months to a year.
Howarth said both the parent store and the satellite store perform mostly customer-paid work.
The satellite averages about 60 vehicles a day, with about 95 percent of the work customer-paid; about 90 percent of the service work performed at the dealership is customer paid.
'Hondas are not warranty-repair intensive' he said.
Still, the Zimbrick center resists the satellite service mold.
Unlike most satellites that specialize in light repairs and maintenance, the store has revamped its labor force and tooling to take care of all repairs, from oil changes to transmission overhauls.
The center found it inconvenienced customers to send them to one place for light repairs and maintenance and another place for heavy repairs, Howarth said.
Also, while most satellite dealers pay technicians a salary, Zimbrick's satellite store pays them a flat rate based on Honda's flat-rate manual.
'We like for our technicians to work better, faster and smarter to make more money,' Howarth said. 'Honda's flat rate is fair to the customer and fair to the technicians.'
In March 1996, Volvo Cars of North America Inc. opened its first satellite service center in Los Gatos, Calif., about 10 miles from the parent store, Smythe European in San Jose.
Volvo spokeswoman Jeannine Fallon said the company is still evaluating the center and that it is difficult to say if or when other centers will open.
In August 1996, GM's Service Parts Operations said it would start testing service satellite stores this year, but has declined to give any new information about the stores.
A flying start
Other manufacturers are moving their programs along.
The 13-bay Toyota satellite center in Baltimore has been open barely two months, but the center is off to a flying start, said George Castaneda, service center director.
The center is built to Toyota's Image USA specifications, which include a red, white and gray exterior and Toyota signs. Consumers who want to wait while their vehicle is being serviced can use the center's three work stations with modems or relax in the lounge that has TV and free coffee, tea and hot chocolate. Rental cars, shuttle rides and a children's room stocked with toys also are available.
The center has four technicians and expects to hire six more, Castaneda said.
By early July, the store was servicing about 80 vehicles a week and should be operating in the black by the end of the month, Castaneda said.
Located about three miles from the heart of downtown Baltimore, the store is using radio advertising, direct mail and billboards to help publicize that it is open.
While most of the satellite center's business is from its immediate community, its greatest challenge is to draw more business from people who are working downtown.
Castaneda said the store is considering everything from promotions via business e-mail addresses to handing out fliers in the downtown area.
'It's a good start,' he said, 'but we can do a lot more.'
Arlena Sawyers is an Automotive News staff reporter based in Detroit.