In Dave Roberts’ view, there are four reasons why collision centers work well for some dealerships and not for others.
“In the simplest terms it has to do with scale, technicians, training and relationships,” Roberts, managing director of body shop consulting firm Focus Advisors, said during the Sept. 27 Fixed Ops Journal Forum.
For starters, Roberts said dealerships are trying to achieve scale by having enough brands feeding their collision centers to produce good cycle times, thus keeping technicians busy and earning money. They also want to cultivate long-term relationships with customers by getting vehicles in and out in a timely manner.
But insurance companies, which are consolidating like a lot of body shops, have different motivations. They are trying to keep repair costs lower and are not concerned about cycle times.
“So you’ve got these forces that are in competition for the benefits of the industry, and yet they have different objectives,” Roberts said.
Like many service departments, collision centers are struggling to find repair technicians. And for dealerships with a low volume of work, retaining the valuable techs they have is difficult.
“You can train a technician and get him certified on all sorts of vehicles and processes, but if somebody else comes along and offers him an extra 20 hours a week or an extra $30,000 a year, they’re going to go where the money is,” he said.
As vehicles get more complex, dealerships have had to decide whether to invest in more technically advanced collision repair equipment such as measurement and calibration systems to keep up. And some might not be willing to sink money into these necessary machines.
“If they’re going to sell more and more complex vehicles, they’ve got to have the equipment to repair them or they have to have a place to send them where they will be prepared,” Roberts said. “And so when you look at the number of systems that are integrated on a 2022 car versus one for 2014, it’s orders of magnitude larger. The number of calibrations that have to be done on a new car today before it can be sent back on the road is again orders of magnitude larger than it was eight years ago.”
In addition to the cost of the machines, collision centers also need to invest in the right people — technicians, painters and calibration experts — to properly run them.
Potential parts sales growth
Another factor in whether operating a collision center makes sense is the number of parts a dealership can sell as part of the repair. But Roberts cautions that many insurance companies don’t want to use manufacturers’ parts, “so you’ll have to fight with him about that,” he said.
A dealership selling its collision facility to an outside group — likely a multiple-shop operator — would result in higher parts sales because it would be doing a higher volume of repair.
Roberts said a dealership could opt to lease the space to the MSO and share in the profitability. Or it could repurpose that space to perform more mechanical repairs, resulting in higher gross profits.
Connect with local body shop
For collision repairs, dealerships instead could develop a relationship with a local body shop and funnel work there.
“When you send them just to one place, you’ve got their attention and they’ve got your attention,” Roberts said. “And when you do that, you’re going to get a much better length of repair. You’re going to depend upon these folks to really perform for you and you can hold them accountable for doing that kind of work for you as a dealer.”