Many Dealers Reluctant to Invest in Facilities Upgrades

A number of dealers in attendance at last week’s National Automobile Dealer Association convention expressed frustration over automaker’s requirements that they upgrade their facilities.

One such dealer, Tommy Mansfield, said he risks losing out on $40,000 per year in General Motors’ incentives if he doesn’t invest between $300,000 and $500,000 to upgrade his Chevrolet / Buick store located in Russellville, Kentucky.

Mansfield said, “I don’t like it. Here I’ve got my dealership back on track, almost debt-free. Now all of the sudden I have to borrow money to make my store quote ‘better’.”

Adding to his frustration is the fact that he just finished paying off the last remodel of his store. That remodel was done in order to comply with GM’s last major facilities upgrade campaign in 2000 and had a price tag of $200,000.

Tensions are growing between a number of automakers and dealers like Mansfield who say financing for the required upgrades is still tight. Many also feel uneasy about increasing their debt while the overall health of the U.S. economy remains in question.

Automakers claim that the recent rebound in auto sales has led to increased competition and they see upgraded facilities as necessary to remaining competitive. They feel that dealers should be willing to help pay for renovations now that they are once again operating in the black.

Although automakers are once again focused on the appearance of their dealerships, many dealers feel that the emphasis should be on rebuilding their workforces which, in many cases, were decimated over the last couple of years.

McRee Ford owner Mitchell Dale said he’s more focused on manpower than his facilities.  His Dickinson, Texas dealership sold 1,350 new vehicles last year. To keep up, he said he’s looking to add about six new employees.  “We will begin this year looking at bricks and mortar,” he said, “but we’re really in the process of trying to recruit people.”

Fairfield Auto Group president Stephen Kaiser said he’s received “light pressure” from Chrysler Group to erect a $75,000 arch to the front of one of his dealerships in Muncy, Pennsylvania. “I can understand their point,” said Kaiser, “I just wish they had offered a little help.” Chrysler spokesman Ralph Kisiel said the automaker does help dealers pay for improvements through its dealer-standards program.

Mazda and General Motors also help dealers pay for facilities upgrades by paying them a per-vehicle bonus.

Toyota’s image program provides its dealers with financial assistance for facilities upgrades. The image program is a voluntary program that dealers may opt into. In some cases, however, a store acquisition may be contingent upon meeting the company’s image standards.  Toyota’s vice president of retail market development, Ernest Bastien, said approximately 38 percent of Toyota’s dealers have already renovated their facilities with assistance through the program.

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