Solving The Car Dealer Puzzle

The upheaval that the entire automotive industry has undergone has had more than a few positive side effects for the aftermarket.

On the one hand, a multitude of consumers who might have otherwise been inclined to turn their vehicles in at the end of the lease have decided, or been forced by a dreadful residual value and inescapable economic uncertainty, to hang on to not-so-old Betsy for at least a little longer than they had planned.

And, of course, this has precipitated an upward bump in business for some players in the industry, though not in every community. In some regions such as southern Ontario, the economic impact of manufacturing plant closures kept consumers hanging onto their dollars. Even the oil patch took a hit, as did the overheated pre-Olympic economy in the Vancouver region.

And then there is the car dealer shakeup. When something under 300 dealers from GM alone lost their franchises, overnight it created one of the biggest opportunities the aftermarket has ever seen. However, car dealers are used to a very different culture from the traditional aftermarket, and understanding their motivations is an important part of ensuring that aftermarket players will successfully bring these firms into the independent fold, so to speak.

Derrick Kosh, general manager at Grove Pontiac Buick (as it was called until late last summer), was a long-time GM dealer in Spruce Grove, Alta., just outside of Edmonton.

I first spoke to Kosh last fall, while he was still smarting from the news of termination from the GM family, and his plans to become a combined used car dealer, Bumper to Bumper store, and ACDelco service centre were still in the formative stages.

“Well, obviously the first thing we got was the e-mail from GM,” said Kosh. “This came out of left field. Every rep thought we were more than safe, after 34 years in the same location and in the same building.”

The push for a contingency plan was urgent. “What would we do in the worst-case scenario?” he recalls asking himself. “We had said we would go to used cars, then when it came down, we thought, let’s go to the aftermarket.”

The decision-making process involved some market analysis: the town has a population of about 30,000, served for the most part by three-and four-bay service outlets. With 23 bays, the Grove business would quickly become the largest independent service centre in town. The question still remained, however, of what signage the firm would fly.

Kosh says in the end it was a combination of tangible and intangible factors which helped the business decide. There was certainly a comfort level with the ACDelco business, and the offer by ACDelco distributor Avenue West Motorworks in nearby Edmonton to add trucks to serve them clinched that arrangement.

But Kosh also said that the culture of Bumper to Bumper and the approach of Sean Corcelli, general manager of Uni-Select’s Prairie region organization, was a welcome change from the corporate culture he was used to as a GM dealer.

“It’s so varied and the customers are so different. The customers coming through [before] were looking for a GM part; now people are looking for all kinds of stuff. The learning curve has made us nervous, but Sean and Uni-Select have been really good in helping with the transition.”

Since then, his attitude has not changed, even as the realities of their new independent status are setting in.

“It’s not theoretical any more. The GM signs are down and we’re flying on our own now. It’s going well, though not as good as we had hoped. Of course, I don’t know what my expectations were. We are learning quickly that we had to re-educate our people and the public.

“Really we’re running four separate businesses”–used cars, service, a parts store and a car rental outlet– “but they’re intertwined. It’s nice to see the way it is evolving.

“The biggest thing we have learned is to get your staff and expenses down. We tried to hang onto bodies, save as many as I could, but I probably should have cut more to begin with.”

He says, too, that they’re learning just how powerful a draw the GM sign was. Without it, the onus is on having the best front-line people to handle customers.

“Changing the dealership mentality is quite a task,” says Sean Corcelli. “I guess we take a lot of things for granted in the aftermarket, that people know how to jump in to provide the service levels expected. It’s not necessarily the same on the dealer side of the business.

“It is a transition and it is a different attitude.

“In a GM environment, there is enough of a magnet for customers to come to you. But in the jobber or aftermarket service and parts business, you have to find the customer and convince him to buy. This is a transition we have yet to complete. Inside sales have been very receptive and we are learning all the various products we have. In outside sales, we have to teach them how to pursue the sale.”

Corcelli admits he underestimated the gulf between the dealer experience and what would be required to be successful with an aftermarket model that is now being rolled out at four former GM dealerships under his direction.

“I regret that I didn’t have the foresight to see what a considerable transition it is. Maybe we are not the most sophisticated business in the world, but our connectivity and our electronic cataloguing have come a long way.”

He expected dealers to take time to adjust to dealing with 400 suppliers instead of one, and learning about service issues on non-GM vehicles, but having them understand what it takes to attract and retain the parts business is taking longer than expected.

“The aftermarket service levels needed woke me up to how good some of our jobbers really are. We have recognized, now that we are two months in, we have another step to go with our support. I am actually going to provide two sales representatives to assist him in growing his business. It’s too big an opportunity to not be proactive and aggressive.”

The model being rolled out in the Prairies, a combination parts store and service centre banner, is not turning out to be typical, though. More commonly, the plan being worked is the combination of used car dealership and converting the dealer service facility to an independent aftermarket banner program.

In Hamilton, City Motor Products owner Paul Burrows didn’t have to look too far to find a partner to make that happen: for some time now, John Pedersen’s T&H Auto Electric has operated its main branch in Hamilton out of space it rents from the former GM dealer.

Aside from jokes about delivery times–parts are literally walked across the building to the service area–Burrows says that he opted to partner with Pedersen’s operation for several key reasons: the ACDelco TSS program, which provided a sense of familiarity, and the fact that Pedersen’s team could be relied on. And his Bestbuy affiliation gives T&H the ability to fill virtually every part and supply need.

“If you know John, you know that you can go to him for anything. I think the transition was pretty easy and pretty clean. I was pleasantly surprised, though I didn’t really expect a whole lot of hiccups. John is pretty careful.

“We found that so far so good–[we’ve been] officially into it now for three weeks,” he said in mid-December.

“This wasn’t a particularly large surprise to us,” says Andrew Joyce, general manager at City Motor Products. As a business, they weren’t prepared to make the multi-million dollar investment to re-image the building and meet GM’s ongoing demands, so they knew the day would come when their welcome with GM would be worn out; but it was the timing that caught them off guard.

“We had a plan formulated for a while now, for a couple of years even. It was more just a speeding-up of that.

“I don’t think anyone else was prepared, certainly not for the timeline. On March 1, 2009 we thought we would be continuing as a GM dealer. To have that timeline drawn so quickly . . . . Regardless
of the decision on future plans, we had to hustle along.”

This helped their decision to move to the ACDelco offering.

“This option was presented and it had the pieces we needed. We had the benefit of having John in our building, so from a parts order fill, delivery, etc. standpoint, there were no issues.”

Like other dealers, Burrows is finding out how much effort it takes to keep customers coming in to the service facility.

But he is also learning how many of his decisions under the GM regime were moulded by that organization. With that gone, old assumptions have disappeared too.

He advises jobbers who are wooing dealers, “Be there. Talk to them. Make sure they understand all of the things that they have to do to get there. One of the things that I really noticed was how much the manufacturer aimed my decision-making process from the supply side.” The loss of that overbearing corporate entity has meant questioning past assumptions on everything from the cost of computer systems (a topic he is still struggling to come to terms with) to bulk oil.

“A lot of the coercion was subtle,” he says.

“As things were transpiring, a lot of dealers were looking around to what they should do,” says Pedersen. “They were looking at used-car lots, but a lot didn’t realize that the ACDelco program was an all-makes, all-models program.”

Pedersen says that the training aspect of the program was another strong draw for dealers.

“The TSS program sort of mirrors the GM philosophy, but it offered the training and technology.” In fact, he says, the more general training available from TSS was seen as beneficial.

“And we had a retention program that was every bit as good as the dealers’, but the cost was a lot less.”

Pedersen, echoing comments by Burrows, says that the most difficult transition may be in getting their computer systems up and running in a way that is appropriate for an independent service business.

“Some are going to have to make changes,” says Pedersen. “They have some very expensive computer systems. They are going to have to look at some changes that way.”

Despite the potential recognized by many in the aftermarket, it is interesting and perhaps a little disturbing to note that neither Grove Motor Products nor City Motor Products was inundated with proposals from jobbers or WDs.

In the case of Grove in Alberta, it was Kosh who made the call to Uni-Select, after his first call to another group made him feel that “they were doing me a favour.”

And, despite the fact that T&H Auto Electric is located in City Motor Products’ building, it was never a given that it would be City’s key supplier.

“There was not much doubt about where we were going to do business, but we also didn’t hear anything from the other jobbers. No phone calls. No mailers. Nothing. And I wasn’t quiet about going. There was an article in the paper two days after we got our notice from GM. I am amazed jobbers aren’t knocking down the doors of the 250 [GM] dealers and finding out who is staying and who is going.”

One organization that is working the streets hard is NAPA associate Ideal Supply Company. Vice-president sales and marketing John MacDonald says that they have several dealers in the region surrounding Listowel, Ont., where the 25-branch business is based.

“The GM dealers that have lost their franchise”–and have not closed– “in our trading area are still looking for some form of identity. With us, Autopro fits the mandate perfectly: great national identity and integrity and a good warranty. That’s really the route that we are looking at.”

He expects to have six to eight dealers online over the next few months.

MacDonald says that a proactive approach seemed obvious, but that they were careful about who they approached.

“We got a list of every GM dealer who was closing. We know them all here, and they are all good customers of ours. We put together a prospectus on our core competencies, and then let them see what the fit was.

“From that it has been a great success.” He says that it has been a question of making sure that the former dealers they approach will meet the criteria required to satisfy the banner program’s requirements, and that Ideal Supply will be able to meet their obligations too.

“We have been aggressive in following up on every single person on the phone and in person and we have been pretty successful in that.”

And, while MacDonald says the company philosophy is to walk, not run, there is a sense of urgency.

“The window is going to be open and the window is going to close, and shame on us if we don’t take full advantage of it. I truly believe that the storm is not over yet. For other dealer networks there are going to be consolidations and territories that are going to be condensed. And if you position yourself now, you will be able to capitalize on that. We aren’t pressuring everyone to be first, but we are pressuring some to be first into the market.

“We were proactive. We did cold calls. We did the ‘what if?’ scenario. We went forth and said, ‘Here’s the opportunity, what do you think?’”

“I think we’re handling it in a way that we can control the destiny of our installed customer base. We’re controlling our destiny; we’re not just going out to mass-market all the dealerships. Every single one we have gone after, we have been successful.”

“It’s such a great opportunity for our aftermarket,” Corcelli concludes. “In our division, I’m fairly confident that we have called on everyone. Now, most of the benefits are through the sale of merchandise through 2010. This is just an unprecedented opportunity. That’s why it’s full speed ahead. I’m high on it.

“Here we have a fledgling aftermarket business. Now go to work. Put all your knowledge into play. I’m sure we can do it.”