Fixed Ops Journal - June 2018 - F28

"
'NANNY STATE'
FIXED OPS JOURNAL

"A $49.95 special is not going to generate customer
retention. It might generate a customer trial."
PETER LANZAVECCHIA, Burns Buick-GMC

 Dealer to GM: Stop interfering with fixed ops promotions in local markets

JIM HENRY

foj@autonews.com

ARLTON, N.J. - A prominent
member of General Motors'
dealer advisory board on fixed
operations says he wants GM to
end what he calls its "nanny state" interference with dealerships' fixed ops marketing
and purchasing.
Peter Lanzavecchia, president of Burns
Buick-GMC in suburban Philadelphia, says
the automaker's "intrusions" hurt dealer business in high-cost markets such as his by offering nationally advertised parts and service
specials. A GM spokesman says the automaker seeks to "build customer loyalty" with the
promotions.
"GM, with its nanny-state attitude, seems to
forget dealers are pretty savvy, and maybe
your go-to-market strategy in your own market, the market that the dealer knows best,
would have been effective," Lanzavecchia told
Fixed Ops Journal.
Lanzavecchia cites a GM deal for a $49.95
express service package that includes an oil
and filter change, tire rotation and multipoint
inspection. In his market, he says, that price is
too low.
"New Jersey, New York and Long Island are
different than Texas or Oklahoma," Lanzavecchia says. GM is restricting his ability to decide when and how he offers discounts to service customers, he adds.
Service specials are part of what GM calls its
National Retail Plan, which the automaker
says it maintains in collaboration with its dealer fixed operations advisory board, along with
other input from dealers across the country.
"Our overarching objective is to build customer loyalty through a great service lane experience, because we know that customers
who use the dealer service lane are far more
likely to repurchase," says GM spokesman Jim
Cain.
But Lanzavecchia says he's skeptical that the
nationally advertised offers create long-term
loyalty.
"A $49.95 special is not going to generate
customer retention," he says. "It might generate a customer trial. Our efforts at customer
retention are all focused on price, price, price."

PAGE 28

JUNE 2018

JIM HENRY

Peter Lanzavecchia
 Title: President
 Dealer since: 1985
 Dealerships: Burns Buick-GMC, Burns
Hyundai

 Location: Marlton, N.J.
 Age: 62
 Member: GM Dealer Fixed Operations

Advisory Board, GM Financial Advisory
Board, GM Dispute Resolution dealer
mediator, Hyundai Regional
Advertising Board, Hyundai Hope on
Wheels Board, New Jersey Coalition
of Automotive Retailers

Common complaint
Last year, Mark Scarpelli, then chairman of
the National Automobile Dealers Association,
accused automakers of interfering in dealership service departments. Scarpelli, who sells
Kia, Chevrolet, Chrysler, Jeep, Dodge and
Ram, did not name any
companies.
Scarpelli also complained about advertised
service specials, as well as
automakers'
demands
that dealerships buy supplies such as tires, oil and
replacement parts from
automaker-approved venScarpelli: Still
issues with OEMs dors. Car companies enforce those mandates by
tying compliance to incentives for overall
dealer performance, he said.
At this year's NADA Show in Las Vegas,
Scarpelli told Fixed Ops Journal that the problems he cited "absolutely" remain irritants

among dealers.
Lanzavecchia, in an interview at his dealership, also complained about purchasing mandates for tires, oil and replacement parts. He
says GM's oil program is "under review."
Without disclosing specific changes under
consideration, Lanzavecchia says GM and dealers are "working feverishly" to improve fixed
ops coverage - the percentage of a dealership's
net operating expenses covered by gross profits
from parts and service, including a collision repair center if the store operates one.
For Burns Buick-GMC, which has a body shop,
Lanzavecchia says fixed ops coverage is about 83
percent. Coverage of 100 percent is desirable, according to a common industry standard.

Hard times
Lanzavecchia says he's concerned that since
the Great Recession, parts and service business at GM dealerships hasn't rebounded as
strongly as new-vehicle sales.
"The market surged from 2009 to 2016,
right?" he says. "Fixed ops should be busting
at the seams with business, but it's not."
Instead, Lanzavecchia says, "GM dealer network service profitability had a rough 2017."
He says Burns Buick-GMC's service department netted just $55,000 in 2017, down from
$305,000 in 2014.
"That's a big change," he says. "There's not
the revenue growth that we need, and there's
been a massive increase in costs."
Rather than offer all service customers a discount, Lanzavecchia - who also operates a
Hyundai dealership next to his GM store - says
he prefers a "price and spend-back" strategy.
"If I could capture a reasonable price and
margins for the day-to-day stuff, like the lube,
oil, filter, tire rotation, then when a customer
starts to drift - like they've been away 10
months or 15 months - I could make them a
better offer, or maybe a really last-chance offer
when they've been away 18 months," he says.
"But I can't if I don't have any margin in" express service, he says.
In the long run, Lanzavecchia says GM and
its dealers will probably resolve their differences over fixed ops policies.
"Our goals and GM's goals are aligned," he
says. "But it's tough." 

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