Fixed Ops Journal - August 2020 - F22

FIXED OPS JOURNAL

NUMBER CRUNCHING

Metrics help service departments staff for rebound after virus-related shutdowns

JIM HENRY

foj@autonews.com

ealership service departments
have routinely used data to measure what works and what doesn't
in their operations. But the effective use of numbers to help steer fixed ops decisions is even more crucial to pull some service departments out of a deep hole created
by the coronavirus pandemic slowdown.
"Service departments are managing by the
numbers - what to measure and how to measure it, what the key performance indicators
are," says Rick Wegley, an NCM Institute instructor for NCM Associates, Kansas City, Mo.
Manny Escalon, service director for Beck &
Masten Buick-GMC South in Houston, says
that is how he is making decisions these days.
"It's all about the metrics," he says.
For instance, Escalon says the coronavirus
business slump this spring forced him to postpone adding a position to the dealership's
business development center. He estimated
the position would cost about $2,200 per
month in salary and benefits.
By mid-July, performance data had improved enough to give him a green light, Escalon says. The dealership's service department was on pace to rack up 3,300 total repair
hours for the month, about 10 percent ahead
of its goal, he told Fixed Ops Journal. Looking
at the numbers, Escalon expected the new position to produce appointments representing
up to $30,000 per month in gross profit.
Dealership service departments around the
country are going through a similar process -

Dan Korte, service director for Serra
Traverse City in Michigan, kept senior
techs during the state's coronavirus
shutdown despite the expense.

PAGE 22

AUGUST 2020

"It's all about the metrics" in making decisions,
says Manny Escalon, service director for Beck
& Masten Buick-GMC South in Houston.

monitoring data on repair orders, labor hours
per repair order and more. A primary task is to
decide how many positions to add, or add
back, when business rebounds.
"Say the dealership had to do some cutbacks
from COVID," Wegley says. "Who do you eliminate? The lower-paid employees? The express-service staff? You get an uptick in productivity, but gross margins go down because
you've got the higher-paid guys doing the express service."

Deciding on cuts
How to transition back to where a service
department was before the pandemic is a
question Wegley gets often. He advises look-

ing at the numbers. "How's the traffic count? If
the RO count is going up, then it's time to start
adding back," he says.
But in some cases, the jobs are gone for good
regardless of whether business has bounced
back. Lithia Motors Inc., for instance, cut
headcount by about 40 percent in April, with
plans to make about half of those reductions
permanent. That's partly because Lithia was
already restructuring, switching to greater use
of online technology before the pandemic arrived, the company says.
In a July 22 conference call, Lithia COO
Chris Holzshu says the chain's personnel expense was down 20 percent in the second
quarter vs. the beginning of 2020.
He says Lithia is working to reduce its selling, general and administrative expenses as a
percentage of gross profit and maintain it at a
lower level. Same-store adjusted SG&A as a
percent of gross profit was 64.8 percent in the
second quarter, down 4.8 percentage points
compared with a year ago, Holzshu says. In
June, SG&A was down to 57.4%, Lithia says.
"Our stores are well aware their biggest cost
is personnel," so that's where many of the cuts
are, he says. Lithia is working to make "sustainable" cost cuts in personnel and advertising, Holzshu says.
Lithia, based in Medford, Ore., ranks No. 3
on Automotive News' list of the top 150 dealership groups in the U.S., with new-vehicle retail
sales of 180,532 in 2019. At the end of 2019,
Lithia had 14,320 full-time employees at 188
see DATA, next page

Fixed Ops Journal - August 2020

Table of Contents for the Digital Edition of Fixed Ops Journal - August 2020