Automotive News - February 8, 2010 - 30

30 • FEBRUARY 8, 2010 INSIGHT Tough economy doesn’t deter factory push for store upgrades Arlena Sawyers asawyers@crain.com Imagine a dealership with vehicles suspended from an atrium ceiling, with an elevated walkway that allows shoppers to walk between the vehicles. Or how about showcasing a hybrid in a green display, with a recycledbamboo floor and touch-screen monitors that allow consumers to configure vehicles digitally? It’s called “brand-scaping,” says Wael Berrached, CEO of Eview 360, an industrial design company that has designed Ford Motor Co. dealer- ships around the world. “There is no reason you can’t create a brand-appropriate, consumerfriendly retailing experience in the automotive industry,” says Berrached. Even in good times, vehicles hanging from the ceiling may not be feasible for most dealerships. In today’s economy, the idea seems as feasible as flying cars. Some manufacturers have eased off demands for dealership upgrades. But others continue to push for spending on showrooms to meet the needs of a changing market. Some- times that means added spending on information technology rather than fancy storefront facades. Either way, automakers are running into stiff resistance from cash-strapped dealers. Offers to help To ease the tension, some automakers, including General Motors Co., are offering to help pay for the work if dealers follow factory guidelines. GM requires dealers to separate GM and non-GM brands and finish the work in about three years. But GM will take five to 10 years to This Eview 360 rendering suggests a more consumer-friendly showroom of the future. But in the present, dealers struggle to make the investment. reimburse dealers. And the payments will be based on sales, not the cost of the upgrades. John Murray, president of Teal Construction in Houston, says as little as 10 percent of his business is devoted to dealerships, down from 80 percent two years ago. Dealers “aren’t building anything,” says Murray, whose company specializes in dealership construction and design. But at some point, the economy will recover. Automakers want their retail networks to be ready for higher volumes. For example, Toyota Motor Sales U.S.A. Inc. is urging dealerships to expand to meet anticipated sales growth. Ernest Bastien, vice president of retail market development at Toyota, says many Toyota brand dealerships have not kept pace with Toyota Division’s 30 percent new-vehicle sales growth between 2000 and 2008. That’s where Toyota’s Image USA II comes in. The dealership upgrade program, introduced in 2004, includes customer-friendly amenities such as wireless Internet access and a separate area for the Scion brand. The upgrade also includes expanded service departments and special lanes devoted to quick oil changes. From 2005 through 2009, Toyota dealers spent $3.8 billion on Image USA II, including capacity improvements such as parking structures, Bastien says. Factories’ wish lists Here are some features automakers want dealers to add. Chrysler: iShowroom, a touchscreen technology tool for both employees and customers GM: Dealership business centers Toyota: More service lanes Source: Companies Evolve ant arched entrance with signs identifying the dealership’s brands. Almost 500 Chrysler dealerships have carried out the exterior design, the company says. ‘All good’ One of those new stores is Wes Lutz’s Extreme Dodge-Chrysler-Jeep in Jackson, Mich. Lutz says he started upgrading his store last summer after adding Chrysler, Jeep and Ram. He says the $150,000 he shelled out for the modifications was well-spent. “Those are all good things,” he adds. “That’s how you raise the value of a franchise.” In addition, Chrysler has created iShowroom, an employee training tool also designed for consumers who like to gather information for their vehicle purchase online. Chrysler thinks its dealers will embrace iShowroom as a customer service tool. The tool, introduced in December, can be installed on dealership computer desktops and on large touch screens. Consumers can check which vehicles are in stock and outfit vehicles in a variety of colors and option packages. Steve Hill, GM’s general manager of retail sales support, says the company is encouraging dealers to set up on-site business development centers, an evolution of showroom Internet departments. Each center handles sales leads from the Web sites of GM, dealers and third-party lead generators, and sets up sales and service appointments. Scheduling appointments helps dealers estimate sales and profits and manage employees’ time. Scheduling also can ease work flow in the service departments, which typically are crowded in the early mornings and virtually deserted in the afternoon. A few large GM dealerships have the business centers now, Hill says. He estimates that half of all dealers will establish in-house centers and half will outsource that task, allowing the center to be staffed 24 hours each day. But dealers are hesitant to spend more on their stores this year, an online survey conducted by Automotive News found. “I would like to upgrade our facility some in 2010,” one respondent replied anonymously, “but I believe preserving capital and minimizing debt in our current economy to be much more prudent.” c Adapt to the Changing Environment and Create New Profits with AUL. Since 1990, we’ve been helping vehicle owners protect their investments while helping dealers strengthen their profits. Contact us today to learn about how you can not only survive in today’s competitive environment, but thrive. Sufficient service stalls “We determine service department requirements based on the number of units in operation and projected units in operation going out five years. We have learned there is a high correlation between having enough service stalls and customer satisfaction and retention,” he says. By mid-January, 424 of Toyota’s 1,231 dealerships had completed Image USA II upgrades. An additional 100 are scheduled for completion this year, Bastien says. Chrysler Group says the remaining dealers in its consolidated retail network can expect more sales per store. Chrysler reduced it dealer network by 789 stores last summer as part of the company’s bankruptcy reorganization. But some surviving stores will have to expand to accommodate additional sales and service volumes that come with adding brands, the company says. Chrysler wants its dealerships to carry its four brands — Chrysler, Dodge, Jeep and Ram — under one roof. Of Chrysler’s 2,352 current dealerships, 81 percent already do the company says. The remaining stores are expected to carry all four brands by the end of 2011. In 2003, Chrysler introduced a brand design calling for an aluminum composite exterior and a gi- 800.559.2495 www.aulcorp.com Service Contracts. It’s what we do.® © 2009 Associates Underwriting Limited L.L.C.

http://www.aulcorp.com http://www.aulcorp.com

Automotive News - February 8, 2010

Table of Contents for the Digital Edition of Automotive News - February 8, 2010