Rough road is forecast for car dealers' service departments

The service departments of auto dealers are headed for tough times.

That's the conclusion of a report issued Wednesday by consumer research company J.D. Power & Associates, which also released its annual rankings of consumer satisfaction with dealer service departments. Toyota Motor Corp.'s Lexus brand received the highest marks for dealer service among the luxury nameplates. Buick scored highest among non-luxury brands, after factoring out the Hummer and Saturn lines General Motors Co. is shutting down.

"It is mainly a function of lower auto sales. If sales were increasing or at least constant, dealers would have an influx of new owners to replace people they lose to independent service shops," said Jon Osborn, research director at J.D. Power.

Automakers sold 10.4 million vehicles last year, down 21.2% from 2008 and the fewest since 1970. Most analysts expect auto sales to grow by about 10% this year to about 11.5 million, still far below the 16 million to 17 million vehicles sold annually from 1999 through 2007.

J.D. Power surveyed owners of vehicles purchased from 2005 to 2009 and projected that their service department expenditures would drop 25% from 2009 to 2013. Service visits are expected to fall 19% during the same period.

"Dealers are going to have to do something to get more customers in. More competitive pricing would be one way to do it. Going after the quick lube business would be another way," Osborn said.

Some will consider opening service facilities not connected to showrooms, a move to increase customer convenience, he said. Typically, gas stations, tire stores, quick lube joints and other service options are closer to a person's home than the dealer where he or she bought the vehicle, Osborn said. And the overhead for these independent shops is much lower than that of the big dealerships because they have fewer amenities and less space.

"We just looked at five years of owners, but it does reflect a larger percentage of service business and warranty work," Osborn said.

Over time, many vehicle owners gradually defect to independent repair shops, particularly when the warranty expires, he said.

In its 2010 customer service index, J.D. Power also looked at satisfaction among vehicle owners who visit a service department for maintenance or repair work. The rankings are based on dealer performance during the first three years of ownership.

Lexus topped the luxury makers for the second straight year with a score of 837 on a 1,000-point scale. Most of the research was conducted before Toyota issued nearly 10 million recalls worldwide in recent months for a variety of acceleration and braking problems. Some Lexus models were caught up in the recalls.

Rounding out the top five nameplates in the premium segment are Cadillac (827), Jaguar (822), Acura (817) and BMW (816).

Among non-luxury brands, Hummer ranked the highest with a score of 815. GM said Wednesday that it failed to complete a deal to sell the line to a Chinese industrial company and will now close Hummer. Among the other top five brands in the mass market segment are Saturn (808) -- GM also is shutting down Saturn as part of a massive financial restructuring -- and two other GM brands, Buick (805) and Chevrolet (787). BMW-owned Mini ranked fifth with a 786 score.

The study measured customer satisfaction in five areas, including service quality, service initiation, service advisor, service facility and vehicle pickup. It is based on responses from more than 114,200 owners and lessees of 2005 to 2009 model-year vehicles collected from October to December.

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