We asked fixed ops managers: Generally, is it better for a service department to operate its own body shop or outsource its collision repair work? Why?
“It is best to outsource. Dealing with manufacturers and their policies, it is getting tougher to stay profitable as a body shop. The manufacturer requires expensive, specific tooling for aluminum vehicles to be a certified body shop. Insurance companies are starting to mandate strong pricing policies for parts and labor to cut costs. Probably worst of all is the slow paying by the insurance companies that forces body shops to carry large accounts receivable balances. We are noticing at our dealerships that insurance companies are pushing a lot more [damaged] aluminum vehicles to a total loss due to the cost of parts.”
RALPH RODRIGUEZ, Fixed ops director, Pendragon North America, Irvine, Calif.
“It’s good to have your own body shop in-house. You have control over the quality of work and employees, and cost of labor and training. Having the body shop in-house can help cover your fixed expenses, which will increase your fixed absorption rate. If you’re in a dealer group with other stores, you can pretty much internalize all repairs at one location. You can also market aggressively based on the size of your group. It could be a really good profit center, as opposed to having to create liability by outsourcing your repairs. A well-run body shop in a dealer environment can be very profitable and can also help absorb a lot of the expenses the dealership has.”
DANIEL NEGALHA, Fixed operations director, McGovern Automotive Group, Brockton, Mass.
“Because we have intercompany relationships with the body shop, if we need a favor we take it over there. If [a vehicle] just needs a buff or something like that, they’re more apt to help us out. If it’s outsourced or an outside shop, they’re going to send me a bill every time a car shows up at their doorstep.”
MARK LESTICO, Director of fixed operations, Cerritos Acura, Cerritos, Calif.
“A body shop is a perfect thing to supplement earnings. By repairing the cars here, you have better control over the quality, which results in better customer satisfaction and retention. A big factor in running a body shop is to make sure that you repair the vehicle using the manufacturer’s required or recommended procedures, so we can monitor that. If you give that vehicle to XYZ Auto Body down the street, you don’t know how he’s fixed it, and ultimately you’re putting your name on that car. When people sublet body work, they’re still liable, because they’re the ones giving that shot.”
JIM KOWALAK, Director of operations, Daytona Toyota, Deland Kia, Palm Coast Ford (Fla.)
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