22 November 2010

Auto retailers of a certain age will recall the days when no business plan would be approved unless it assumed an overhead absorption of at least 100%. In essence, the workshop was paying the fixed overhead costs of the whole of the business and the sales departments were delivering the profit on the variables.

So, how have we reached a state where the current industry average is only 65% (according to ASE) and the accepted benchmark is set at 80%? Have business overheads risen so sharply that they can no longer be absorbed or are we just not trying as hard in aftersales?

I got to think about this while listening to leading NADA training guru, Don Reed, at the recent ASE Aftersales Conference. Mr Reed is quite clear about his solution. In his own words: “it’s time to get serious about service”. You could be tempted to add the word ‘again’ to the end of that sentence.

There was nothing fundamentally new in his message but it was all good stuff. Senior managers need to pay as much, if not more, attention to aftersales KPIs as they do to sales. Service receptionists need to receive proper (and regular) training to become customer advisers so they can upsell with confidence. Waste and costs need to be measured and controlled. Technicians need to work a full day (or more, if possible).

He did float a couple of ideas which could prove interesting to try. Why are we creating so many ‘master’ technicians when most routine service jobs can be done with cheaper, less skilled mechanics? Why are service advisers bound to quote a price on the phone when really they should be trying to book an appointment?

You might want to try discussing those with your franchise manufacturer partners!

Meanwhile, back to the key question: is it still possible to achieve 100% service absorption? Obviously I don’t have access to detailed dealership financials but even I recognise franchise standards, property costs and rising wage bills have made that more difficult.

On the other hand, the facts are that the best performing dealerships in the UK are achieving 105%. So, if you’re simply ‘about average’, it might be time set out on your own personal quest for the holy grail of auto retailing.

CORRECTION: Last week in Auto Retail Agenda we said Black Horse was closing its consumer finance division. We would like to make it clear that it is only the personal finance arm that is closing to new business, not the whole consumer finance division. The closure will result in 311 job losses (not 420) by the end of 2011.

Have a great week, both in and out of the showroom. If you have a story for us, or want to get something off your chest, email rupert@auto-retail.com

Rupert Saunders

Tags: Agenda, ASE Group, business plans, This Week