Dealers are having a harder time covering their fixed expenses - ironically, because they're getting better products to sell.
The vast majority of overhead costs have been covered by the parts and service business - expressed as a percentage that is known as the absorption rate. But as vehicle quality has improved, dealers are getting less warranty business, Christine Cortez, senior vice president of global service and parts for the Chrysler group, said in a speech to the Automotive News World Congress in January.
Cortez said that in the 1980s, the industry averaged eight problems per new vehicle at delivery. That figure has dropped to one problem per new vehicle at delivery, she said.
She said her company is developing programs to help dealers recoup that lost business.
"The average absorption rate has been dropping a point and a half per year because warranty business dropped, and maintenance business didn't come in," Cortez said. "I looked at the average absorption rate two years ago, and it was 70 percent. A year ago it was about 68 percent and coming (down). That has to get reversed, and our dealers know that."
The Chrysler group is unveiling programs to help lure maintenance customers back to dealerships. One, for example, is designed to get dealers into the tire business by supplying them with competitively priced tires.
She sees the dealership's technical expertise as an edge over the independent garages and the chain lube, muffler and tune-up shops. To keep that competitive advantage, the Chrysler group offers high-tech training centers across the country that can accommodate 800 technicians at a time.
She said the company also is developing technology that will make dealers' service business more convenient for customers.
The following services are offered now or will be offered soon:
Said Cortez: "We need to get the rest of the service business back inside to the dealership where the knowledge and training are best. To do that, both the factory and the dealer have to blow up the old processes and do a lot of stuff new."