To the Editor:
Keith Crain's June 12 column about the potential profits in the back end of a dealerhip was right on ("Don't ignore the shop's potential").
I was in this business 50-plus years in wholesale and retail. In many of the business management seminars I attended and conducted, one of the major points addressed was the lost potential in the service department.
An auto dealership is actually four businesses under one umbrella - new-car sales, used-car sales, service and parts. And if there is a body shop, it becomes five businesses. A successful dealership must treat each unit as a profit center.
Many years ago, as a district manager for Pontiac, I had the good fortune to have as one of my dealers an individual who recognized that and was extremely successful. He always had 100 to 110 percent fixed coverage or fixed absorption, meaning that all his expenses were covered before he ever sold a new or used car. He also had a truck franchise, which helped him achieve those numbers.
I do not know the current national average for fixed coverage, but when I retired about 12 years ago, I believe it was 48 to 50 percent.
While that dealer was an exception, there is a lot of room for improvement in our industry. As Crain mentioned, aftermarket vendors are profiting by marketing services and products to our dealers' customers that the dealers should be promoting, such as quick lubes, tire centers, quick tuneups and specialized accessories.