Option C "Adjustment"

[Alan Nicholson]

During the month of December, we applied for Option A since the Option C increases have not been adequate to keep pace with expenses. Our 3 year agreement does not expire until 2001, and was not surprised when we were told that we would not be allowed to switch to Option A. I was surprised however, to learn that we would receive an Option C "adjustment", an increase of 7% from our December warranty rate. I was not aware that an Option C adjustment could or would be made. Hope this helps a few of you!

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Alan1149@aol.com

[lovemotors]

How is it that you got a 7% increase when the rest of us only got a 2.37% increase? How did you do that?

[Alan Nicholson]

It seems that Area Service Managers have the final say in Option A rate increases. While we are not on Option A at the present time, I did get the impression that GM would prefer that we remain on Option C. Perhaps this Adjustment to our existing Option C rate would get us to re-enroll in November for another 3 years. Perhaps an Option C adjustment is part of the un-written rules and procedures, Im not sure. All I can say for certain is that we applied for Option A, and received and Option C "adjustment" instead. Option C increases based on the CPI just won't cover your expenses.

I would speak with your ASM about the inadequacies of Option C increases, discuss the new programs and changes that GM has come out with recently. Talk with him about your tool expenses, distant learning, SI 2000 expenses, Dealership improvements, technician retention and recruiting. Include any expense that comes to your mind. Tell him you will have to switch to Option A, be prepared to fill out the paperwork. See what happens.

Our new rate is effective 02/6/00, and looks a hell of a lot better than the original CPI increase we received on 01/01/00. Good Luck


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Alan1149@aol.com

[RICH LOWE]

I STARTED AT THIS DEALERSHIP IN APRIL 99. OUR WARRANTY LABOR RATE WAS 20% BELOW OUR COMPETITORS IN OUR AREA. I COULD NOT BELIEVE NOTHING HAD BEEN DONE TO EQUALIZE. SO I WROTE A LETTER TO MY MARKET AREA SERVICE MANAGER STATING THE "GOOD BUSINESS REASONS" WHY WE SHOULD BE PERMITTED TO GO FROM $48/HR TO $55/HR. HE BALKED, BUT SUBMITTED IT TO DETROIT. IT TOOK A BUNCH OF PHONE CALLS AND SOME STRAIGHT TALK, BUT WE WERE APPROVE IN OCTOBER 99 TO $55/HR AND RECEIVED AN OPTION C RAISE IN JANUARY. DON'T LET YOUR MASM TELL YOU IT CAN'T BE DONE IN MID TERM OF OPTION C.

[Doug]

Personally, I like the option "c" and the no hassle increases. However, when we went to "c" we were ALREADY at the highest warranty rate in our area and we're still comfortable with our rate and the small increases.

However,I have heard stories of dealers who were well below market rate when they went on "c' and, obviously, they'll never catch up with the market unless they get a special adjustment as mentioned above.

[MARY SHERICK]

THE OPTION C IS GM'S PREFERENCE FOR ALL DEALERS. IT DOES HAVE GOOD POINTS, BUT ONLY AFTER A DEALER HAS USED OPTION A TO MAKE SURE THAT THE STARTING LABOR RATE IS COMPARABLE TO THE MARKET OPERATED IN. THIS REQUIRES WORK, AND CAREFUL ATTENTION TO MAINTAINGING CORRECT EFFECTIVE LABOR RATE TO SUPPORT THE "A" WARRANTY RATE. ONCE THE "A" RATE IS ESTABLISHED AT THE BEST RATE POSSIBLE, THEN "C" IS VIABLE. THE "C" METHOD ELIMINATES YOUR NEED TO CONSTANTLY MONITOR YOUR EFFECTIVE C/P RATE. HOWEVER, IF YOU DO NOT INTEND TO RESIGN AFTER THE 3 YEARS, KEEP A CLOSE EYE ON YOUR EFFECTIVE RATE, SINCE YOU WILL THEN HAVE TO RELY ON IT AGAIN. REMEMBER, GM HAS "HELPFULLY" MAKE IT EASY TO FIGURE, SINCE THE ONLY MAINTENANCE RATE NOT INCLUDED IN THE CALCULATION IS THE LUBE,OIL, AND FILTER SERVICE. THIS CAN GET DEALERS IN A BIND IF YOU DO LOWER COST PER HOUR COMPETITIVE BRAKE WORK, MENU SERVIVCES, TRANS SERVICE, ETC. YOU WILL ALSO BE ASKED TO PROVE YOUR EFFECTIVE RATE EVERY 6 MONTHS. WE GOT THE RATE ADUSTED TO WHERE WE WANTED IT ON A, THEN SIGNED C. AT THE 6 MONTH INTERVAL, WE HAD TO PROVE THE EFFECTIVE RATE FOR THE "A" INCREASE, EVEN AFTER WE HAD SIGNED UP FOR "C", AND GOTTEN THE INCREASE. THIS "REQUEST" IS NOT FROM THE MARKET AREA LEVEL, BUT HIGHER UP THE LADDER. OUR REP SHOWED ME THE REQUEST, BECAUSE HE THOUGHT GM HAD MESSED UP OUR RATE PLAN. FOOD FOR THOUGHT ANYWAY. WHATEVER YOU DO FOR AN OPTION A RATE, MAKE SURE YOU CAN PROVE ADEQUATE EFFICTIVE C/P LABOR FOR/

[Michael White]

Mary, I believe when they introduced option C, they strongly suggeste using going to it by requiring us to use LOF's and advertised specials in the calculations for effective labor rate.I recently read the P&P and confirmed this. Because we do over 1000 LOF's a month, our effective labor rate will never get close to our warranty rate. We would have to charge $110 per hour to get there.
Mike

[robc]

Clarification note: Under GM's Option 'A', which will establish a warranty rate equal to your effective retail rate, the R.O. sample does not include LOFs.

The rules for the R.O. sample are found in Article 1.5 on page 10, and state all customer labor repair orders ... except all federal, state or local legislated vehicle emission or safety inspections and lube, oil and filer service.

Keep in mind that payments by other third parties (insurance companies, service contracts, etc.) are also eliminated from the definition of "customer labor repair orders."



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** Rob, Editor WD&S **
Help is only a message post away!
robc@dealersedge.com