Sonic Automotive Inc. is working aggressively to reverse a decline in its customer-pay service revenue and gross profit that has been caused, in large part, by the surge in factory recalls.
To rebuild its customer-pay business, Sonic has created a recruitment team to hire hundreds more technicians and has extended service hours.
The changes are in response to the customer-pay revenue decline since the fourth quarter. In that quarter, Sonic's customer-pay revenue fell 1.4 percent, while customer-pay gross profit slipped 2.1 percent. In the first quarter, customer-pay revenue fell 2.5 percent, and gross profit declined 3 percent.
Executives blame big jumps in warranty work for making it difficult to accommodate customer-pay repairs. Warranty work includes service work related to recalls.
"Our [first-quarter] warranty business was up 21.4 percent, heavily driven by BMW-Mini, up 32.4 percent; Honda up 57.9 percent; Cadillac up 59.2 percent and Chevrolet up 39.7 percent," Jeff Dyke, Sonic's executive vice president of operations, said in a call with analysts. "This has created a customer-pay performance issue for us."