Capitalizing on Manufacturer Brands
Like many collision repair shop managers, Chris Rothfus has seen a lot of decline—among vehicle repairs, in revenues and of course employee ranks—during the past two years. But things are looking up for Rothfus’ employer: At Renton, Wash.–based Sound Collision Center, part of Sound Ford, estimates have picked up despite a mild winter. “We’re writing three or four more a day than we were, and I might hire another estimator,” he says. “It’s all we can do to keep up on the paperwork.”
After two tough years, those increased estimates are just one sign that 2010 could be a positive one for Sound Collision, which has been in business since 1975. There are others, too: Rothfus just hired two bodymen, and the shop recently secured two new DRP agreements. He expects to move into a new facility late in the year, plans to hire additional techs in the new shop and conservatively expects sales to pick up by $50,000 to $60,000 a month. “This economy has definitely been a struggle,” he says, “[but] we’re optimistic about this year.”
Other collision repair shop managers are feeling (cautiously, of course) optimistic about business these days, too. Jeff Miller, body shop manager of Sioux Falls Ford, anticipates a positive year after a tough 2009. Sioux Falls Ford’s sales department just added four new salespeople, and Miller himself expects to hire more techs.
Why the sunny outlook for these shops? One big reason is that collision repair shops that are part of Ford Motor Company dealerships are poised to benefit from the company’s positive brand image these days. They’re not facing Toyota’s quality crisis, they didn’t leverage the government’s offer of a bailout, and dealership closures around the country—more than 2,400 new-car dealership rooftops closed in the past two years, according to the National Automobile Dealers Association—are reducing competition to some extent.
“The thing that I’m seeing is the surprising backlash from customers about the bailouts,” Miller says. “At the dealership we never use the bailout as a leverage point, but I believe people have not forgotten. Many customers are making positive comments about how well Ford is doing. All in all, I think that Ford and Sioux Falls Ford have benefited from the current events, and we see positives coming.”
Building on Brand Equity
Indeed, in an industry blighted by bad news, Ford has emerged as a bright spot. Unlike its domestic competitors, Chrysler and GM, Ford didn’t declare bankruptcy or accept federal government bailout money—a decision that seems to be generating consumer goodwill. In February, Ford beat GM’s monthly domestic sales for the first time in 12 years. Ford has also made smaller cuts to its dealership network in the past year than some of its competitors. “We have been working very collaboratively with our dealers since 2005 to consolidate the network, recognizing that with current vehicle volumes and market share it’s not sustainable to have the dealership levels that we had back in the early 2000s,” says Ford spokesman Steve Kinkade.
While Ford has closed or consolidated 842 dealer rooftops since 2005, just 234 of those were in the past year. The company has also focused its energy on developing new products, with successful results: The Ford Focus was recently named the “Most Significant” vehicle of the 2010 North American International Auto Show by AutoWeek, and the company received the 2010 Car and Truck of the Year awards for the 2010 Ford Fusion Hybrid and the 2010 Ford Transit Connect. Ford reported a profit of $2.7 billion in 2009—its first profitable year since 2005—and saw a sales increase of 24 percent in January 2010 versus January 2009.
“For a long time, Ford was struggling along with all the other domestic auto makers, but when [president and CEO] Alan Mulally came on board, he leveraged the Ford assets and raised capital, and put that into product development,” says Jessica Caldwell, senior industry analyst at Edmunds.com. “We’re getting to the point where we’re seeing those products coming to market and they’re doing well.” Plus, she says, “they not only didn’t take bailout money, but … they marketed that aggressively, and that’s resonating with consumers. That, in conjunction with good press for their products, has really given them a good story to talk about.”
The new products should have a positive trickle-down effect for the company’s dealer-based collision repair shops. In the past, Ford relied heavily on SUVs and trucks, Caldwell says, “but now it also has a solid car strategy in place. That volume of business and the different segments is really going to help all the way down to collision repair shops, because they have a wider spectrum of vehicles to work on. I think that, along with higher volume, will help anyone involved with Ford and especially people working directly on Ford vehicles.”
Rebuilding the Business
Of course, Ford dealerships, and their collision repair centers, have hardly escaped the recession unscathed. In 2007, Sound Ford (part of Sound Car & Truck Stores, which owns and operates seven outlets, including Nissan and Infiniti franchises, and is the state’s largest privately owned auto dealer) moved its dealership to a smaller location across the street—a move that was in keeping with CEO Mulally’s goal to reduce the company’s overall market share—and reduced its workforce by roughly 100 employees. Sound Collision also cut employees, reducing its techs from 13 to eight. (The shop currently has 11 employees total.) Shop revenues, which are about $2 million right now, have dropped 23 percent since 2008, and the number of vehicles repaired per month dropped to about 30 from 50. And in a sign that Ford’s vehicle quality is improving, the shop’s warranty work is down 80 percent.
In Washington, a total of 35 dealership rooftops closed in 2008 and 2009, according to the Washington State Auto Dealers Association, and Rothfus says several independent collision repair shops in the Seattle area have closed as well. While no one likes to see an industry struggle, in Rothfus’ opinion, some contraction in the number of both dealerships and dealer-based collision repair centers was necessary.
As a result, Rothfus, who joined Sound Collision in 2007 after selling his own shop in 2004, is working hard to ensure that Sound Collision is nimble enough to adjust to changing business conditions and well-positioned to capitalize on the opportunities that are presented when other shops close. Among the ways Sound Collision is doing that:
• Canvassing for Business. “I’ve spent a lot of time trying to get other sources of business,” Rothfus says. “I’ve gone out and canvassed other dealers who don’t have in-house collision repair centers, and asked what shops they recommend. I go right to the service manager, try to get a rapport going, and basically just try to get them to give us a try. There are still cars that need to be fixed, and we’re trying to be the guys who get the business.”
• Generating Dealer Referrals. Sound Collision also benefits from the fact that there’s just one other Ford dealer with a collision repair shop (which is also owned by Sound Car & Truck) within roughly 45 miles, Rothfus says. “Our referral base has definitely [broadened]; people from [pretty] far away are asking to have their car towed to us,” he says.
• Taking Advantage of Dealer Services. Being able to take advantage of Sound Ford’s service department is also helping the collision repair shop. Sound Ford’s service department is open seven days a week, “and that translates to more jobs for us,” Rothfus says. “With increases in the service department, we get more referrals. And the service department’s expanded hours help with our turnaround times.” (The shop’s average cycle time is 3.5 days.)
• Offering Additional Services. Sound Collision offers a free shuttle service, and in some case will pick up and deliver vehicles for customers. In addition, Rothfus hired a full-time, paintless dent repair specialist and offers the service to all customers. “In the last two years that business has grown; we bring in $12,000 to $14,000 a month just in that,” he says. “Insurance companies love it, and it saves everyone money and time.”
In tough economic times, such business-building moves are increasingly important. “People aren’t just coming in with a few thousand dollars in their pocket to get their car fixed,” Rothfus says. “You have to offer something else—whatever you can—to make it work. It’s not like it was 10 years ago, when you had cars lined up.”
Maybe not, but thanks to those efforts and the current positivism surrounding the Ford brand, business is looking up and negative perceptions about dealerships seem to be changing.
“The whole thrust for the last year has been to try and change people’s perceptions,” says Rich Snyder, owner of Sound Ford. Of course, he says, the company is getting goodwill for not taking the bailout money and not declaring bankruptcy, but Ford’s focus is on building and selling quality vehicles. And more vehicles on the road mean more potential collision repair shop business.
“Ford has a good image, but in the end it’s all about how good the cars are and how good the body shop is,” he says. “Right now we have a good body shop, and as shops close around us the opportunity [to grow] gets bigger. If we do our job right we’ll get the opportunity.”