by jlewis » Mon Apr 03, 2006 9:55 am
While I understand both concerns, you must first fully understand a couple of things. With regard to the ACDelco side of things: ACDelco distributors have been able to purchase GM parts at a price less than a GM Dealer for the past 75-80+ years. This is nothing new. Secondly, the vast majority of non-collision wholesale accounts (i.e. Independent garages) DON'T purchase genuine ACDelco parts for most jobs in their shops to begin with.
Most of these independent garages use non original equipment, off brand parts. The reason is simple. They generate far bigger profit margins with off brand parts than they can with ACDelco or Motorcraft parts. That being said, most GM and Ford Dealers had lost the majority of that market decades ago to the off brand parts market. GM and Ford Dealers still sell those independent garages non O.E. parts, but not a large volume of ACDelco or Motorcraft maintanence parts. This is true in most large markets. In fact, in reality, Dealers haven't sold many of the O.E. parts to their wholesale customers for a very long time, and it isn't because of ACDelco or Motorcraft distributors stealing their customers. It's because those customers have already made the decision to use cheaper non O.E. parts to begin with.
Fast forward to approx. 5-7 years ago. ACDelco began pushing their WD's into stocking and selling the "All makes - All Models" concept. ACDelco determined that there was some six billion dollars worth of off brand parts being purchased by independent garages across the nation and that very little of that six billion dollars included ACDelco parts. In there infinate lack of wisdom, ACDelco began punishing their WD's with less and less discount if they (The WD) didn't begin stocking more ACDelco parts for all makes of cars, other than GM. They also began forcing their WD's to aggressively begin calling on and attempting to sell more independent garage type accounts. They (GM) also began forcing their WD's to not only stock these non-GM parts, but to actually turn their inventory of these parts a minimum of twice per year. Did the WD's really care to do this? Absolutely not!! Nonetheless, without giving in to the pressure from GM, the WD's were put into a position by which they were risking their own ACDelco franchises by not falling into lockstep. Without giving in, the WD was simply put into a noncompetitive position by having more and more discount taken away from them. In most cases, WD's were simply terminated. In 1992 there were some 3500+ WD's in this country. Today, less than 95. WOW!
In reality, while many WD's have become far more aggressive in their pursuit of independent garage accounts, the total volumn of dollars being sold to those accounts has been minimal, at best. Let's put it this way: If ACDelco and their current WD's were forced to rely on independent garages to stay in business, the entire ACDelco divsion would become exstinct.
As far as WD's being able to purchase parts for less than a GM Dealer? Think of it this way: If they couldn't, most GM dealers wouldn't be able to maintain their CSI. In fact, CSI would drop drastically without ACDelco WD's.
Most WD's are still willing to not only make mulitple deliveries to the GM Dealer every day in an effort to service the Deales customers, but do so at prices that are less than published Dealer price. That not only allows GM dealers to keep their service customers satisfied, but has also allowed the GM Dealer to put additional gross profit in his own pocket at the same time. Most Dealers (Ford or GM)don't seem to complain when this occurs.
Back in the days prior to March of 1996 (When GM really put the screws to it's GM Dealers by cutting the published Dealer price to the most popular 7500 ACDelco part numbers by some 25-30%), most ACDelco WD's were willing to sell GM dealers their parts at published Dealer price less as much as a 25-30% discount. When a car was being repaired under warranty, the GM dealer was paid cost + 40% by GM, then was able to put an additional 25-30% in their pocket by purchasing that ACDelco part from their local ACDelco WD. Example: With a published dealer price (Prior to March of 1996) of $100.00, the GM Dealer was able to purchase that part from an ACDelco WD at a price as low as $70.00. They would then sell it under warranty, be reimbursed by GM for $100.00 + 40% or $40.00, then add the additional $30.00 in discount from their local WD. No one was complaining when the Dealer was able to generate 70% gross profit BECAUSE of the local WD, rather than the 40% that they would have WITHOUT the WD.
I fully understand the concern of the New Car Dealer. The perception is that they could be making more money by purchasing parts cheaper than the local WD. When put into practice, this can occur with customer pay pricing. In reality, the mathmatical matrix's used in today's dealer market will still mark up the CP price based on the published cost. Example: If the current published dealer cost is now $50.00, the CP price is usually approx. $100.00. If the dealer were able to pay the same as the WD, that part would cost him approx. $37.50. The CP selling price would be approx. $75.00, thus generating 25% less gross profit than before. In some cases where matrix's are not used, the dealer would be able to mark up the new lower cost to a selling price the same as before and generate more gross profit under CP.
Under warranty conditions, the dealer will simply gross less profit dollars when published cost prices are lowered. Simply stated, cost + 40% on a lower priced part is simply less profit.
So, be very careful when asking WHY an ACDelco WD is allowed to purchase parts for less than what a Dealer can. It's BECAUSE they CAN that helps keep the GM Dealer in business regardless of those WD's that have been forced by the manufacturer to take some business away from their Dealer accounts. When looking at the big picture, be very carefull what you ask for.
If GM and/or Ford finally gets to the point where they begin selling their Dealers at the SAME cost as they sell WD's, it will only cut further into the bottom line profit margins of the Dealer. The same thing General Motors did in March of 1996. Again, be careful what you ask for, it just might come true.
While not being familiar with Motorcraft, I'm certain that Motorcraft WD's have come under that same pressure from Ford Motor Company. I'm sure they too have been forced to go after the independent aftermarket garages in an effort to bolster the sales of motorcraft products at the expense of angering their loyal Ford Dealer customers. Come on guys, how much sence does it make to pick up that $600 per month independent garage and risk loosing the $15,000 per month dealer account? Clearly a retorical question.
Everything he said about the WD's is absolutely correct.