Fox Lake, Illinois - The news about deadly crashes linked to a faulty ignition switch, followed by wave upon wave of recalls, did not bode well for General Motors dealers earlier this year. It conjured visions of worried, frustrated drivers pouring into dealerships such as Raymond Chevrolet, outside of Chicago.
But according to service director Robbie Long, what looked like “great adversity” has turned into an opportunity.
The hundreds of customers bringing old cars into the dealerships leave in clean cars with a bucket of goodies; some drive home in a brand new car.
And the repairs, paid for by GM, are modestly profitable, dealers say, helping to pay general expenses as well as bringing in customers who might have been lost.
“In many cases these are customers we haven't seen in a long time or have never met before.”
Although the script is not what the dealership would have written, GM is delivering sales and service prospects to the door.
Certainly, there are dangers if the dealer doesn't give good service or if the recall parts are out of stock. Some cars are being called in for more than one problem, and Long says her dealers are careful to schedule only one visit per car.
“People just don't want to see us that often,” she said.
But as of early July, the dealerships were humming. GM as a whole posted a 2.5 percent increase in sales in the first half of the year, just a step behind the industry average of 4.3 percent.
Dealers across the nation displayed similar attitudes, for GM, Chrysler and other brands, several of which have now announced multi-million car recalls.
Don Lee, president of Lee Auto Malls in Maine which has 14 new-vehicle stores, mostly Chrysler and various Japanese brands, as well as GM, said recalls provide “an opportunity to look over the customer's car at no cost to them,” which often leads to more repair business.
More importantly, he said recalls lead to more sales: he estimates that 15 percent of new car sales at his Chrysler stores come via the service department. GM this week said that it had sold 6600 cars to customers who traded in vehicles with defective ignition switches.
“Aside from the bad publicity, which is never fun, we welcome recalls,” Lee said.
The General Motors recall offers at least four opportunities for business: fixing the recalled part, a $250 (R2630) cost for the Chevrolet Cobalt ignition switch that led the recall wave, other service and repair work, selling new cars and providing transportation to some waiting customers, paid for by GM.
Several factors have combined to turn what started off as a pure public relations disaster into a strong sales year for some GM dealers.
Dealers say GM has responded well to the crisis.
Chief Executive Mary Barra publicly apologised for the failures and distanced the “New GM” that emerged from bankruptcy in 2009 from the “Old GM” which made many of the recalled cars. The automaker has also benefited from a growing economy, and the highest profile recalls, for ignition switches, mostly affect discontinued models.
And last but not least, auto recalls have become so common with 29 million cars called in globally by GM and millions more by other brands, that consumers are suffering from “recall fatigue” and are not paying attention, dealers say.
“ I think perhaps people worry less about the recalls than the newspapers do.”
Rummaging through a box in his office, Mark Scarpelli pulls out packages containing parts for recalls, including a simple-looking gray plastic sheaf with a piece of black foam. It is a fix for a seatbelt in the Chevy Traverse, a large SUV. In a comprehensive safety review that followed the Cobalt recall, GM found the Traverse seat belt connector could fatigue and separate over time, and it recalled the vehicles.
The automaker pays the dealership for 45 minutes of labour to install the new part, said Scarpelli.
GM declined to discuss recall cost details. The company, which says it typically repairs 85 percent of cars within two years of a recall, also pays for campaigns to contact customers, such as sending a postcard every three months for two years to remind them their car is part of a recall, managing the fix, and rental cars.
Analysts say the largest share of the cost is labour.
Mike Bowsher, co-chairman of the GM Dealers Executive Board and president of the Carl Black Automotive Group, based in the Atlanta area, said his four stores sold 10 cars in one week to people who came in for recall repairs. Some bought the loaner cars.
Meanwhile, his parts and service business has set records three months running, thanks to the chance to upsell customers who might otherwise bypass the dealership for repair work.
“I would have never had a shot at that,” he said.
Reuters