Lower Labor Prices??

[GLEvans]

Business has hit hard times in our area. Our CP R/O sales are 1/3 less than they were a year ago. Our techs are lucky to run 28 hrs per week. Our parts sales have been hit hard as this used to be where our gravy was.

Last spring our service manager instituted a service matrix for labor sales. Sounded like a good idea as our parts matrix has worked well for many years. Now I fear they have priced themselves out of sales. The matrix starts at $80.00 /hr for up to 5 hrs labor per job. It gradually goes up to $100 / hr for any job over 22 hrs. I don't know the exact reason why we haven't had too many engine rebuilds or replacemants lately, but this may be it. (Yeah-they charge 23-25 hrs to install a long block on most of our vehicles.) Meanwhile, I have cut the prices on the assemblies we have in stock just to try to get them out of my inventory.

I have friends that work as service writers in various other dealerships (and franchises) and they feel labor prices are too high. Most are at $78-$85/hr. None are on a matrix. These guys are starving too. They feel there must be a way to get some of the CP business away from the independent shops that have labor prices from $40/hr to $60/hr. The boss believes the $80+/hr is fair and the service writers should be able to sell it because the dealership is so much better than the independents. I have tried selling parts that way, and it just don't work in our part of town. Price does it.
Opinions???

[mozuna]

Parts departments have used parts matrix for years. I have just moved into a new area and I am useing a labor grid were it seams the other stores in town are not. What is your psoted labor rate, what is your effective labor rate. The labor grid if properly designed is there to raise your effective labor rate. I have been at this store for two month and have increased the effective labor rate over 15.00 per hour. When I got here we were losing 3.00 for every menu we sold as we discounted the labor down and charged full matrix for parts. Did the service manager pull a labor rate survey , I performed this first and used a grid with the target effective labor rate at the average of the other dealers. Some dealers are 89.00 we are at 84.99 with an overall c/p effective labor rate of 79.80 were it was 65.00 per hour. I labor grid allows you to charge a little more the the higher jobs that the independents can not do while allowing you to compete for the smaller jobs. I was recently in an lmg meeting and what the manufactures are pushing is price comparisions with the independents on - oil changes, alignments, rotates, balance and braks. I pulled a local survey of the independents on these items and then figured an average and made our prices match that. GM says these are the items that draw people in and we should compete with. We had a record c/p hour and dollors month last month (my second month there) - and due to the effective labor rate an record net profit. at 35 percent net to gross
MIles

[RBickley]

GLEvans
The important "extra" when using a labor grid is to reprogram your thinking. You have to get away from $ per hour and start refering to $ per job. Also important is what is an acceptable dollar amount for your line, area, or customer base? At a previous employer, the SM was directed to have three different labor grids. (competitive, captive, and heavy.)

mozuna
It sounds like you are doing good at the new job.
Being a PM I have to ask you, at who's cost have your results come? Has your parts to labor ratio dropped? Is it at an acceptable level? What is your GP retained on RO mechanical parts?
Have you improved the total fixed ops bottom line?

[PucHed]

As far as competing with independents, one thing you need to look at is what they are buying parts for pricewise. If they are getting the parts at manufacturer's list less a discount, or matrix less the discount. We ran into this here at our store. As a customer, if you can go to a dealer and get a job at say, $150 parts and $75 labor, then go to an independent and get $100 parts and $60 labor, it makes a huge difference. As soon as we started charging matrix to independents (obviously not collision), both departments profited immensely. It's easier to sell the job if the independent is quoting $150 parts and $60 labor. At this point, what is $15 if you know a trained tech is handling it. On the other hand, we had help with the other stores in our area, this would be tougher in a competitive GM or Ford market than say, a Volvo store. Just my two cents.

[RBickley]

While working at a Nissan store, I tried matrix less 20% to mechanical in my PMA. The guys with Alldata chewed me up and spit me out. Finally I gave in and went back to list minus 20.

PucHed
My former dealer group used to brag about their Volvo dealer that had a 100% profit retained on parts. Dude, you may be a legend.

GLEvans
I was looking at some other posts. You were at a 1:1 and dropped to .90:1. If you don't mind, may I ask, what line/s to you work with?

[PucHed]

RBickley, alldata is occassionally a problem for me too, but generally, if you sit down and explain, honestly, where the difference is, as well as explain that you aren't undercutting them, it's not a problem. I also point out that 20% of $150 is $30, while 20% off $100 is only $20, so they make more too. I have had prolonged problems with a couple of shops, but I have only lost one total. Usually after I explain this, they understand, and stop quoting directly from alldata.

Once again, smaller brands are easier to do this with. I am not a Volvo store, I am a Saturn store, I was just using Volvo as an example. We couldn't do this at a Caddy store I was at before this. I was just throwing out suggestions.

[Mike Vogel]

Try using a matrix shaped like a bell, have it peak out between 6-8 hours and then come back down. I believe any matrix that continues to climb with higher hours will definitly price you out of competition.With a bell type matrix grid you can make up gp & elr lost on the competetive/maintenance items. On repairs the service advisor should be selling the value of the technicians training/experience along with the use of genuine parts.

[Pete]

I understand concern on increasing labor prices. My experience is that the grid labor pricing does not have any true defined basis for the labor charges other than the more the customer spends, the more we charge per hour. I prefer variable labor rate system where you can customize your pricing to achieve your desired ELR target while maintaining competitive pricing on certain items with the independent shops. The basis of variable labor rate system is on skill level, not how many hours the customer is being billed. Therefore, the harder the skill level needed to do the job, then the higher the labor rate. On lower skilled jobs, the lower the labor rate. Parts pricing on fast moving items (competitive) should be priced accordingly as well. How can dealers charge $9, 10 and even $15.00 for spark plug when they are advertised in the newspaper every day for half? This continues to project the perception that dealers are higher than independents.Your telephone is a major source of developing traffic for your service and parts departments. Are your advisors quoting huge diagnostic fees ( "it will cost you $90.00 to look at it")rather than offering to visually inspect the vehicle at NC?

Pete Daniel
ADC
Automotive Dealer Consulting, LLC
pete@consultadc.com


------------------