FCA dealers are warned of 'bubble' in service work

An onslaught of recall-driven warranty work at Fiat Chrysler dealerships is a "bubble" that dealers should keep in mind when considering whether to expand their service operations, says the chairman of FCA's National Dealer Council.

"You don't want to build a church for Easter Sunday," said Tom Leonard, 49, co-owner of Fury Motors in South St. Paul, Minn. "You don't want to add 40 percent service capacity into your service departments if what we're seeing is a bubble of service work because of recalls."

About 11.6 million FCA vehicles were recalled in 2015. Many dealers are swamped by recall work and are forced to ask customers to schedule even routine service appointments as much as a month ahead.

"I don't think that Ford and Honda and Subaru are having the capacity constraints that Chrysler dealers are having right now," said Leonard. "I believe it's a bubble, and I think we'll get through this."

The advice contrasts with what most dealers have been hearing from Mopar, FCA's parts and service brand. In 2015, Mopar head Pietro Gorlier introduced an online analysis tool that enables dealers to forecast returns from expanding service departments.

The automaker said last year that its 2,650 U.S. dealerships need to add 5,000 service technicians, 1,200 service advisers and 6,000 service bays by 2018 just to keep up with sales growth. And its dealers are well on their way toward achieving that goal.

A Mopar spokesman said dealers added 2,700 service technicians, 600 service advisers and 1,600 service bays in 2015.

Gorlier says FCA's rising sales, and not just recalls, have increased service demand.

"While there is an increase in service demand due to recalls, this is not by any means the main driver of our business and expansion of service capacity," he said. "The majority of our dealers already have the proper capacity to handle this volume increase, since most of our network has shown a great attitude and customer-centric approach."

He said dealers may be able to improve service efficiency by means of alternative work schedules for service personnel.

"The vast majority of our dealers understand the importance of aftersales as a critical tool to gain and retain customers, and we will work with those who need help to plan the proper actions," Gorlier said.

Mopar has been advising dealers to consider expanding service capacity as the automaker's sales have increased since 2010.

Leonard's Fury Motors has Chrysler-Jeep-Dodge-Ram dealerships in South St. Paul and Stillwater, Minn., and a Ram Truck center in nearby Lake Elmo, Minn. Across the three facilities, Leonard says he has 80 service bays to care for the 3,000 new and 3,000 used vehicles he sells each year.

Leonard, whose one-year term as chairman started Jan. 1, concedes that "the biggest challenge a dealer faces today is managing their service business." But he said that if dealers choose not to expand their service, it's up to them to manage their operations as efficiently as possible to keep customers happy.