General Motors is asking its 7,300 dealerships in the United States and Canada to use computer systems and services from either Reynolds and Reynolds Co. or Canadian vendor Quorum Information Technologies Inc.
The initiative could affect thousands of dealers that use a computer system from other vendors. It also could have a major impact on ADP Dealer Services, Reynolds' archrival in the dealer services business.
Although changing systems can be disruptive, GM says dealers will have a big incentive: major savings resulting from the volume rates it has negotiated.
GM gave no details on a dealership's potential savings.
Reynolds, of Dayton, Ohio, services 3,000 GM dealerships.
ADP, of Hoffman Estates, Ill., also services 3,000 GM dealerships.
Reynolds and ADP are the U.S. market leaders, with a combined share of 80 percent of U.S. dealerships. GM says having just two preferred computer vendors will make it easier to exchange critical data with dealers, and dealerships will reduce one of their biggest expenses.
The average monthly cost of a dealer management system is about $3,000 to $4,000, but dealers with multiple stores and hundreds of employees often spend $8,000 to $10,000 a month.
It's not clear how many dealerships will switch providers. Dealers often are reluctant to change because of training issues and operational glitches. One consultant advises dealer clients not to switch unless they can generate savings of 30 to 50 percent.
GM said in December that it is requiring 438 Saturn dealerships to switch to a Reynolds system in 2007. Saturn dealers use ADP.
Although GM wants all of its dealers to choose either Reynolds or Quorum, it stopped short of requiring the change for all brands.
"It is not mandatory," Dawin Wright, executive director of GM dealer development told Automotive News. "Dealers have choices, and it will ultimately be their decision as to which provider they may go to." Saturn, Infiniti and Lexus dealers are the only brands with factory-mandated vendors.
Reynolds will provide dealers with its existing dealer management system, ERA XT, and Quorum will provide dealers with its XSELLERATOR. These systems will be integrated more closely with GM's computers.