How important is service and parts revenue to AutoNation Inc.?
The nation's largest public dealership group says gross profits from its service and parts business cover 93 percent of its fixed operating costs. CEO Mike Jackson wants more.
"When I wake up in the morning, I'm 93 percent happy," Jackson told Automotive News. "My goal in life is to wake up in the morning and be 100 percent happy."
The idea that AutoNation could cover its fixed costs without selling a single vehicle is "literally a goal," Jackson says.
AutoNation's annual service and parts sales have risen steadily since 1999.
In the first nine months of 2005, the company reported service and parts revenue of $1.97 billion - a 7.1 percent increase from the year-ago period.
The extent to which a dealership's service and parts profits cover its fixed costs is called its service absorption rate. For the first 11 months of 2005, the average dealership's absorption rate was 53.1 percent, the National Automobile Dealers Association says.
Some dealerships have rates much higher than 100 percent, says Chris Denove, a vice president at J.D. Power and Associates. Those dealerships place emphasis on service business, Denove says.