Fixing Their Image

During the halcyon days following World War II, new car dealers dominated the car-repair industry, performing 70% of all vehicle repairs. But dealers gradually tumbled from favor by sticking with business practices that continue to drive frustrated motorists into garages operated by independent mechanics and savvy mass marketers like Jiffy Lube International Inc.

Now, Chrysler Corp. and Ford Motor Co. are trying to recapture market share in the $170-billion post-warranty auto-repair industry by opening free-standing garages located closer to where customers live and work.

The repair shops will be operated by licensed Ford and Chrysler dealers, but the buildings will sport Chrysler’s “pentastar” logo and Ford’s familiar blue-and-white nameplate. And while dealers are hoping to rev up service-bay revenue, manufacturers are adamant that the prototype garages put customers first.

“Where the auto industry may have failed in the past is that dealerships are not perceived as being convenient as customers would want,” said Tom McRae, manager of Chrysler’s service development programs. “That’s been the stronghold of the competition. And what we’re trying to do here is try to answer those issues.”

So when the nation’s first Chrysler Neighborhood Service Center opened on Wednesday in Irvine’s Spectrum office and industrial park, workers were putting the finishing touches on a children’s playroom, installing computer docking bays and sweeping off the catwalk where customers are encouraged to talk with mechanics working on their cars.

Car manufacturers and their dealers are following in the tire tracks of independent garages and franchised repair operators like Midas International Inc., which dominate the post-warranty repair world largely on the strength of their conveniently located shops.

Ford and Chrysler are betting that smaller, stand-alone shops like Chrysler’s prototype in Irvine can help to erase negative perceptions that most motorists have about dealer service departments. And they’re experimenting with new designs, including wide-open service bays where customers can follow the action.

“When you bring your car to the dealer, sometimes it’s like it falls into a black hole,” acknowledged Mike Wagner, manager of the Chrysler Neighborhood Service Center, the first of half a dozen prototype stores that Chrysler is opening. “But we don’t mind if you go out and talk to the technician working on your car. In fact, we encourage it.”

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The prototype garages that Ford and Chrysler are opening are part of the ongoing upheaval in the way cars are sold and serviced. Rather than simply selling automobiles, manufacturers say they now want to perfect delivery and service systems to keep customers for life.

Ford and Chrysler haven’t said how many of the shops they hope to open. But observers believe the manufacturers will license the shops to their strongest dealerships--a business practice that would help weed out marginal dealers.

Car manufacturers like Ford, which has opened half a dozen Ford Auto Care centers--including one next door to Chrysler’s Irvine garage--face an uphill fight. Once car warranties expire, 70% of motorists head straight to independent garages and chain stores that are perceived as less expensive and more convenient.

Car dealers know that customers with cars under warranty won’t stray. But dealers also know that “owner pay” repairs carry fatter profit margins than warranty work.

And, as manufacturers continue to build better cars, the post-warranty repair pot will grow even richer as the life span of vehicles increases.

“The price of new cars is quickly outstripping the incomes of most people, so people are tending to buy used and keep cars longer,” said Steve Christie, executive director of the Dallas-based Automotive Oil Change Assn. “We’ve been growing at a healthy pace because of that trend, and we don’t see it ending any time soon.”

The quick oil-change business is a good indicator of the value that time-pressed consumers place on convenience. The oil-change association had just 50 members when it was founded in 1988; it now has 1,100 members with more than 3,000 locations offering basic fluid-maintenance services.

Surveys consistently show that motorists view dealers as more expensive than independent shops and franchise operators. So operators of the free-standing Ford and Chrysler garages say they’ll juggle pricing to be competitive.

Bob Tuttle, co-managing partner of Tuttle-Click Automotive Group, a dealership that owns the Ford and Chrysler shops in Irvine, maintains that parts and labor charges will be competitive with independent garages and the Jiffy Lube center that just opened across the lot from his new repair bays.

“There’s a myth in the business that we’re not competitive,” Tuttle said. “But we are. And we have better equipment and better-trained technicians . . . and, unlike the independents and franchises, we can service the entire car.”

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Industry observers say that rates charged by both independents and dealers will move higher as shops add expensive computerized diagnostic equipment needed to service new cars.

And, observers believe, independents and dealers are increasingly likely to engage in bidding wars for highly skilled technicians.

Then there’s the simple fact that Ford and Chrysler are testing the water at a time when the nation’s motorists are already hubcap deep in garages.

The nation’s 22,000 car dealers have an average of 13 service bays, and the number of repair shops--ranging from independents to dealers and retailers like Costco--has soared to more than 322,000, according to the Automotive Services Industry Assn., based in Elk Grove Village, Ill.

But automotive industry experts say the new garages aren’t simply about dealers chasing more lucrative repair work.

“Manufacturers are now looking at the whole picture,” said Gary McCoy, a spokesman for the automotive services group. “In the past they’ve primarily focused on new car sales. But now they realize that they can capture customers for a lifetime if they have a good experience with their repair needs.”

“It’s all about getting that new-car customer to come back,” agreed Ford spokesman Harold Allen. “Customer satisfaction through the life of the car is as important to us as eating and sleeping.”

Surveys show that motorists rank repair facilities alongside price when it comes to buying vehicles. Dohring Co., a Glendale-based market-research company, reports that 93% of car buyers rank the reputation of the dealership’s service department as “important” or “very important.”

But given the inability of dealers to retain customers when car warranties expire, many observers question whether powerful brands like Ford and Chrysler--along with their respective Motorcraft and Mopar parts lines--will be enough to recapture market share lost over decades.

“There are a lot of people out there who aren’t at all satisfied with service provided by dealers,” said Christie of the Automotive Oil Change Assn. “And when these new garages are marketing, even if it says ‘Ford’ on it, people will perceive it as a dealer-type operation.”

Manufacturers and dealers say they’re up to the challenge. “Our target isn’t just to move customers from one dealer to another,” McRae said. “It’s to capture customers from the Goodyears and Pep Boys.”

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Service Choices

A long with death and taxes, auto repairs are another constant of life. Each year, half of the nation’s motorists take their cars in for repairs and service, according to a survey by Simmons Market Research for the Automotive Service Assn. Here’s where consumers chose to take their cars in 1997:

Independent repair shop: 23.1%

Car dealer: 20.0%

Quick lube: 6.2%

Gas station: 5.2%

Tire store: 3.6%

Franchise or chain repair shop: 2.2%

Note: Totals do not add up to 100% because nearly half of consumers did not take cars in for service or repairs. Others used more than one shop.

Revving Up the Registers

The nation’s motorists spend billions of dollars to keep their cars in shape. When all services and the total retail value of parts and labor are included, the automobile repair industry sales total swells to $251.5 billion.

1997 Aftermarket Final Sales Value

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Segment Parts, in billions Labor in billions Automotive $102.1 $51.9 Heavy trucks 43.4 10.4 Paint/body work 16.5 15.3 Tools and equipment 6.9 NA Trim 2.8 2.2 Total aftermarket 171.7 79.8

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Source: Automotive Service Industry Assn.