The body shop technicians must be certified by a third-party auditor to fix Mercedes-Benz vehicles. The shops also are contractually obligated to use genuine Mercedes-Benz parts, which they buy wholesale from the dealerships. That provides another lucrative revenue stream, Hardin says.
"The shops benefit because they don't have to do any of the tedious clerical work, like ordering parts or keeping customers updated on the status of their repairs," Hardin notes. "They just have to fix the cars to our standards.
"In turn, we handle all the customer-facing duties — holding the customers' hands and providing red-carpet concierge service."
Moreover, the body shops don't have to spend money on advertising because the dealerships funnel plenty of work to them. One shop even built a second facility that's devoted just to repairing Mercedes-Benz vehicles, he added.
The arrangement also benefits the auto group in other ways. For example, the dealerships don't have to invest in expensive capital improvements such as body shop facilities and repair equipment.
"Every shop has to have a frame machine mandated by Mercedes-Benz that costs about $200,000," he says. "About three-fourths of them also have more than one spray booth."
To handle the kind of volume those nine shops do, which is about 300 to 350 repair orders a month, Park Avenue would have to build a body shop with about a dozen frame machines and at least a dozen spray booths, Hardin says.
"The facility probably would have to be bigger than our entire dealership," he says. "And better yet, we'll never outgrow a building. Instead, we'll add another body shop."
Furthermore, finding enough qualified mechanics to fill such a facility would be "a staffing nightmare," Hardin says. "The body shop business is tough because insurance companies dictate the payment rates," he explains. "They're like HMOs for cars. Finding people that want to get into the field is tough because they can make more money as a flat-rate mechanic."