Opportunities Possible In Wake Of Dealership Troubles

In the next few years, the number of dealerships and their accompanying service operations will be reduced significantly, offering a unique opportunity for independents. Just last year, the National Automobile Dealers Association in the U. S. reported some 700 dealerships, representing about two per cent of 43,000 dealerships in the country, were closed; some 900 dealerships could close this year as well, possibly more. General Motors announced it wants to reduce the number of its U. S.-based dealerships to 4,700 by 2012, down from the current 6,375. Chrysler and Ford are also shedding dealerships with Chrysler dropping 287 last year and Ford 269. The foreign nameplate dealerships are also planning cuts. Canada is no exception to this. Dennis DesRosiers told The Canadian Press he expects 500 dealerships in Canada to close in the next five years, with major downsizing amongst the North American Big Three.

I suspect the numbers will be even higher, especially as rumors circulate once again of a forced merger of Chrysler and General Motors, which would involve shedding overlapping dealership and service operations, along with several brands of vehicles.

The upside to all of this (if you were wondering why I am mentioning all of this gloomy news in the first place) is the opportunities for independents. With so many dealership service operations slated to close, people have to take their vehicle somewhere to get maintained and repaired — and that is right into the bays of the independents. iATN did an online poll among its members and 60 per cent of the 3,600 respondents said they expect an increase in business, with 16 per cent predicting significantly more work.

The potential, therefore, for increased revenues and profits; the question is, “Are independents going to be ready for that work?”

Independents must keep in mind while the dealership service operations may diminish, those remaining will be the most profitable and aggressive. The automakers will invest in them -in terms of training, staff and equipment -to keep profitable service work coming; and they will ratchet up such rhetoric that to keep warranties valid on a vehicle, for example, service work must be done at the dealership’s operation.

Independents must do the same: invest in training, customer service, equipment and using new and old media to reach people with their message. They must resist the temptation to forego such investments because of concerns about the economy. In fact, it is now more important than ever to make those investments so independents can survive this economic downturn.

Consumer studies repeatedly find people taking their business to the independent service market because of the quality of service, expertise and care received. If the quality is not there, or is allowed to slip through a lack of investment or relying on gimmicks like the $19 oil and filter change (which one franchise shop I came across recently had) people will take their business somewhere else, to the remaining dealership service operations; or worse, foregoing work on their vehicles for as long as possible.

DesRosiers’ consultancy group in mid-February sent out some preliminary numbers on how much Canadians spent on their maintenance and repair work last year. He notes a decline of 1.5 per cent, the first in a decade, driven largely by Canadian curtailing their spending in order to save money. Times are tough, certainly; but independents will make things tougher if they act shortsightedly.

Do you agree? Disagree? Let us know! letterstotheeditor@ssgm.com

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Independents must invest in training, customer service, equipment and using new and old media to reach people with their message. I will go so far as to say that it is now more important than ever to make those investments so that independents can survive this economic downturn.