Keeping his service departments running like a well-tuned engine has always been important to Bill Wallace, owner of Wallace Automotive Group in Stuart, Fla.
But it takes on even more urgency now. New-car margins continue to be narrow, new-car sales are slowing and fierce competition for consumer dollars is putting even more pressure on Wallace and other franchise dealers to wring more profits out of their fixed operations.
And it’s happening at a time when there is an industry-wide shortage of auto service technicians.
It’s a part of retail automotive that is still profitable for franchise dealers, so it’s crucial that dealers get their share of that business, said Wallace, who sells 14 brands at 11 dealerships.
That means “making sure your website information is clear, concise and intriguing and then delivering on that with a good product in terms of good service and taking care of people,” he said.
“I can’t image how any retailer is making any decent return on their investment if they’re not really doing a bang-up job in the fixed-operations side of things.”
New-car sales have always been the more glamorous side of auto retailing. But fixed operations — the service and parts departments and body shop — is the financial nuts and bolts of the business and is expected to cover all or most of a dealership’s overhead.
That can make the shortage of technicians a threat to dealership profitability.
Citing U.S. Bureau of Labor Statistics, the National Automobile Dealers Association said about 750,000 auto technicians are employed by the auto industry. NADA said nearly half work at new-car dealerships.
Not keeping pace with attrition
To keep pace with attrition, the industry must replace 76,000 techs annually, but technical schools are graduating about 37,000 technicians a year, leaving an annual void of approximately 39,000 technicians, NADA said.
This year, the association’s charitable arm, NADA Foundation, spearheaded its Workforce Initiative in an effort to attract and train young people to careers as automotive service technicians.
The initiative features a website, nadafoundation.org., which includes an interactive U.S. map of training and scholarship opportunities for aspiring technicians and videos featuring technicians touting what they like about their careers.
Considering that the demand for auto technicians is high, and the supply is low, why is it so hard to attract young people to the profession?
Adam Robinson, CEO of Hireology, a Chicago hiring and talent management software company, said candidates in any profession, including auto technicians, look for some major attributes.
No. 1 is a career path that includes things such as management training, certifications and free tools. Another is life balance, meaning that the dealership presents a life style that is possible by offering flexible work schedules and policies that are employee friendly.
Robinson also suggests that dealers take a hard look at their pay plans. He said the current generation of employees is more interested in pay stability than maximizing their take-home pay.
Counting on compensation
For example, if a service shop pays employees an hourly rate, no matter how busy the shop is, and a dealership pays for completed work on a flat-rate plan, “your dealership is at a disadvantage relative to the other job opportunities,” Robinson said.
“In a flat-rate pay plan my earnings are uncertain — we could be really busy, or we could not be busy, and I only make money if I’m finishing work.
“But with my skills, I could go to a third-party repair shop and make a flat rate whether we’re busy or not and know what I’m going to make. I have pay certainty. We need to think about how we’re compensating our technicians.”
Robinson also said dealerships should have an online site dedicated to career opportunities. “Nearly 80% of all searches for employment in the United States originate on Google,” he said.
Group 1 Automotive seems to have taken a page from Robinson’s playbook.
Daryl Kenningham, Group 1 president of U.S. operations, said the company’s ability to hire and retain service technicians and advisers has improved as a result of having implemented a four-day work week in 65 of its U.S. stores.
“It is driving better employee retention and has enabled us to increase our same store headcount by 344 technicians in the last year, a 16% increase,” and increase service adviser headcount by 13%, said Kenningham. He made the comments during the publicly held dealership group’s July conference call outlining its second quarter earnings.
Group 1 is on track to implement the four-day work week strategy at about 10 additional U.S. stores “by the end of the third quarter which will cover approximately 85 percent of our service and parts revenues,” Kenningham said during the Q2 earnings call.
On a same store basis, Group 1’s service and parts revenues grew 10.1% in the quarter.
As of June 30, Group 1 had 116 dealerships in the U.S.
When techs find dealers
Wallace said finding service technicians, in general, can be hard but finding technicians that have expertise repairing vehicles of lower volume brands, is even harder.
He considers himself lucky to have hired two Volvo technicians who were trained in Europe — one who lived in Sweden and wanted to move to south Florida, and the other who had already migrated to the United States, but was ready to make a career change.
Wallace welcomed both technicians, who more or less found him, with open arms.
“These two guys have been great; they’re both terrific employees,” he said of the Volvo techs — one he hired two years ago, and the other who has been with him for seven years.
“In one case, he wanted to move into the south Florida area and wondered what his opportunities were to work in Volvo service,” said Wallace. “Of course, we just latched right on to him and said, ‘Absolutely, you should move in our area.’
“In the other case, we heard from Volvo representatives about a fellow who had inquired with Volvo about what the possibilities were. We were aggressive and tracked him down and said, ‘please come in for an interview, and we’ll give you an idea of what the opportunities are.’ We had just spent a lot of money on our Volvo facility, and I think he was impressed with that.”
Auctions pinched, too
Auto auctions are being pinched by the tech shortage, too, and National Auto Auction Association is a supporter of NADA’s Initiative.
Tony Markese, vice president of reconditioning at Manheim, said his company reconditions about 3 million vehicles annually and assists auto company clients and dealers by performing “high quality” mechanical and body reconditioning vehicles to a retail-ready status.
That means that dealers, who don’t have the capacity or don’t want to do the work themselves, can buy vehicles at Manheim auctions that are retail ready, Markese said.
To keep its pipeline of technicians full, Manheim decided to grow its own with an apprentice program kicked off this year.
Apprentices enrolled in the 12-week program work with experienced Manheim technicians who serve as mentors.
Markese said TechForce Foundation, with which Manheim has partnered, is helping spread the word about the program. TechForce Foundation is a non-profit organization dedicated to polishing the image of the transportation industry and exposing middle- and high-school students to the profession.
“We have a great culture and tons of opportunity,” he said. “They can be a mechanic for us for five years, work their way up and someday be a general manager at a location.”