New-car volume is down, front-end grosses are falling and back-end grosses are being challenged by consumer groups.
It looks dark for dealership profitability. Is there a new silver bullet looking for a place to lodge? I haven't found it yet, but I'm looking. However, in our continuing efforts, to be a resource of information for dealers, Dixon Hughes PLLC and Ward's Dealer Business are continuously scanning the industry looking for opportunities for dealers.
While most of the ideas we discover are not franchise specific, some are. Or at least they start off that way and spread to other franchises. While this idea is not the silver bullet, perhaps it's a copper one for today's General Motors dealers and perhaps it will spread to other dealerships in the future.
After a successful experience with Hummer, General Motors has changed the process surrounding the installation of dealer-installed factory accessories and the way GM pays dealers for installing these accessories.
Many factory accessories that are ordered on vehicles (primarily light trucks such as the Hummer) now arrive separately from the vehicles themselves via the GM parts distribution network.
While the vehicle arrives at the dealership on a transport truck, accessories arrive separately. They are delivered to the parts department and installed by dealership personnel during the pre-delivery inspection (PDI) process.
However, in order to get paid for the installation of these accessories, the labor operations must be added to the PDI claim. As a test, Rob Campbell of Warranty Dollars and Sense took 50 PDI claims for GMC Colorados in one store, and tested them to see if the dealership did indeed properly request reimbursement from the auto maker for these dealer-installed factory accessories.
He found a high error rate. The dealership often had not claimed full reimbursements based on the amount of time it took for installations.
The greatest risk of missed revenue related to dealer-installed accessories is at dealerships where the installation process is completed by employees who are paid hourly rather than by flagging time.
Such dealerships should take time to investigate their process to determine if a weakness in the system of internal control has caused the dealer-installed accessory installation time not to be claimed from the factory.
If this is the case in your dealership, then steps should be taken to put in place those systems necessary to capture this additional fixed-operations income that these installations represent.
Dealers have only 180 days to go back and claim reimbursement from GM for any time not claimed for performing these installations.
It may require firing questions at your service manager to make sure you hitting the bull's eye with this new opportunity.
Don E. Ray is a CPA with the Dixon Hughes Dealer Services Group. He's at 901-684-5643 and [email protected].