MI Dealers May Want Some Numbers to Prove Renovation is Worth the Cost

Oct. 25, 2011 - PRLog -- DETROIT, M.I. – MI dealers may want to move forward from the downturn of the auto industry and forget about those dark days, but the effects of that trying time still remain. Automakers whittled down the number of their dealerships, and some are still attempting to do so by saying, “Renovate or close up.”
[Rewind: Michigan Lincoln Dealers Expected to Renovate or Give Back Franchise to Ford; $1 Million Ultimatum]
And now, according to a recent article in the Detroit Free Press, dealerships are asking their automakers for better proof the thousands or even millions of dollars they’re expected to sink into their dealership for costly renovations will help them in the long run and not push them out of business.
Stephen Wade, chairman of the National Automobile Dealers Association (NADA), speaking to the Detroit Free Press said, “These costs have a significant impact on dealer balance sheets, in many cases severely straining them, and in some cases, even persuading a dealer to leave the business.”
NADA is enlisting the help of a consultant named Glenn Mercer to help MI dealers and those across the nation see what or if the return-on-investment would be.
Competition remains difficult in the still struggling economic climate for MI dealers. MI Auto Times has seen both the best outcome and the worst for some of the local dealerships in MI:
[Rewind: Michigan Lincoln Dealers Down By One; Fall of Mercury Cited as Reason]
[Rewind: Michigan Buick Dealers: Less Like Dealerships More Like Exclusive Hangouts]
However, there is hope as September’s numbers proved dealerships are continuing to sell more vehicles as automakers continue to produce better, more fuel-efficient vehicles that meet customers’ demands for both design and price. With better looking vehicles in the showroom, it’s only natural for automakers to want a better looking showroom to match the vehicles that are inside them.
According to an Associated Press article, renovations can cost anywhere from $200,000 to $15 million. The article further stated the history of Detroit dealerships often looked something like this:
•   1950’s and ‘60s – The big boom years for Detroit dealerships.
•   1970’s – Arab oil embargo causes a shift to foreign makes with Toyota and Honda arriving on the scene with newer, better-looking dealerships in the suburban areas.
•   1980’s and ‘90s – The Detroit Three dealerships lose market share and face increasing competition among each other for the same customers, so little attention can be paid to interior design.
•   1990s and 2000s – Automakers are asking dealerships to make improvements, mainly voluntary, to help get an edge in above competitors.
•   2007 and 2008 – The Great Recession takes hold and destroys many livelihoods of those working in the automotive industry.
Although times are still tough for many, there are some dealers who can say they’ve stabilized somewhat, but will a renovation bring them more profitability or be the tipping point that could have them closing their doors forever?
MI Auto Times will follow the NADA-sponsored study and continue to monitor local MI dealers to see how renovations are helping or hurting them.
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