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Investing in the Future of Service: United Auto Group Raises the Bar

United Auto Group (UAG), the 2nd largest publicly traded automotive retailer in the U.S. as measured by total revenue, has 172 locations in the United States, all with service facilities. The first quarter of 2006 brought good news to UAG with increased profits. A large portion of that is attributable to a rise in service and parts revenue, according to Tony Pordon, senior vice president of UAG. The combination of investing in areas of the dealership with the largest margins and great leadership are driving the increase in revenue.
The leadership starts with Chairman Roger Penske, who wants to change the face of the automotive retailing market by exceeding customer expectations. To achieve this mission, UAG has and is continuing to investing heavily in the service and parts operations of their growing dealership empire.
Roughly 10 percent of UAG’s profits were driven by the Big 3 automotive nameplates during the 1st quarter of 2006. The remaining 90 percent came from foreign brands, explaining their focus on foreign nameplates. Luxury brands make up 60 percent of foreign brand profits. This continual trend over the last several years is what has fueled UAG’s focus on the luxury brand market segment. The best opportunity for growth within that specific market lies in the service and parts department.
This decision was not necessarily based on a lot of empirical evidence but on experience of UAG personnel. “If a customer has paid more for a vehicle or a luxury nameplate, they are more likely to take their vehicle back to the original dealership for certified service,” said Pordon. This information caused UAG to add more than 600 bays to their service facilities in the last 3 years, all in an effort to drive their service and parts revenue as a percentage of overall revenue higher.
UAG is serious when they discuss investing in their operations. It’s not purely about the number of bays they have – 3,400 and counting - but about all the extra effort they have put into their big picture of remodeling all their stores. Some of the extras included in their remodeling efforts are ceramic tile floors in the service bays; grid ceilings with adequate lighting and standardized lifts, tool benches and equipment.
Investing in items which contribute to employee satisfaction has a direct impact on employee retention. In the Phoenix area for example, air conditioning was added to the store service facilities. They incorporated locker rooms & break rooms into service remodeling plans. They have even installed name plates in bays recognizing the technicians’ accomplishments. “Our remodeled service facilities are clean inviting places to work,” says Pordon.
In fact, so clean that one Phoenix area store actually had a sit down dinner in the service bay area of the dealership. UAG believes their attention to details that are important to employees gives them the hiring edge. In a tight job market their attention to detail can mean the difference in good versus great employees.
Attention to upgrades and employee has absolutely paid off for UAG. In an industry known for high employee turnover, this organization has managed to keep turnover at just 31 percent for the 1st quarter of 2006. The rate for the entire year in 2005 was just 34 percent, well below the retail automotive industry averages. Controlling turnover improves more than employee morale; it also allows any company to excel with highly trained individuals on staff. Technicians are ASE certified and sent for additional training as needed to ensure they keep up with changes in the industry.
Service manager and service advisors need intensive training, and UAG provides it. Training is comprehensive covering the position, company, markets and brand training. Much of this training is accomplished through internal, regional training teams and store level training.
Customers are reaping the benefits of the UAG investments. Each customer is introduced to the service department. For many renovated dealerships this includes viewing the service department through a large window from the customer waiting area. This is designed to increase trust in the repair process. Customer accommodations have been upgraded to include plasma televisions in waiting areas, Wi-Fi, and coffee just to enhance the wait time experience. Loaner vehicles, reasonably priced details and free car washes are also available. Each new item that is implemented must help meet the ultimate goal of offering superior customer service.
How does UAG measure results in that many service facilities? “It’s really no different than how any large retailer accomplishes it. You hire a great management team, give them a budget, sales goals, define their market area and make sure they understand that the ultimate goal is to take care of their customers. Then they are measured based on that,” said Pordon.
Measuring sticks comes in a variety of forms. First, there is same store sales performance measurement which is used to measure any store that has been owned by UAG for more than 12 consecutive months. By comparing last year and current year performances, dealerships work to improve their own performance. Next, there are manufacturer CSI scores, which are extremely important to UAG in the overall analysis of performance.
There are two other measuring sticks used by UAG that are available to them due to the significant number of stores that they own. One is a like-brand comparison which allows, for example, all Honda stores to be compared to each other. The other is like-market comparisons. With so many facilities across the United States, similar markets can be isolated and stores in those regions can be measured against one another to increase performance.
The measuring of performance never stops nor do the renovation plans. Currently under construction is the Turnersville, NJ complex. The 66 acre, state of the art, campus-type complex will house between six and nine franchises. An aerial view of the complex reveals a dirt track behind the dealerships. “That ¾ mile dirt track will eventually be our paved test track, said Pordon. All service drives and customer test drives will ultimately take place on that track. This innovative approach of controlled test drives will ultimately lower insurance liability, which will result in lower insurance cost.
UAG is not done yet. “We are in the 7th inning stretch when it comes to our remodeling/renovation plan. I don’t know that we will ever get to the 9th inning because we continue to add stores, and then remodel them to bring them up to our standards,” said Pordon.
Focusing on meeting the standards of their customers and their employees has driven the UAG leadership team to invest wisely in what matters and it is paying off.
Vol 3, Issue 7


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