To find out, we interviewed managers at 3 such service departments along with two service reminder vendors.  All involved agreed on one definitive fact: cheap oil changes will increase customer pay repair order counts.

One manager, who wasn’t particularly fond of ultra-discounted oil changes, says their owners believe cheap oil changes may influence a customer’s future vehicle purchase decision, but they had no hard facts to prove this assumption.

All three managers could tell us exactly what they were losing on each oil change, but only one actually tracked repair orders to see if advisors were trying to upsell needed services.

None of the managers could conclusively say cheapo oil changes had either a positive or negative impact on gross or net profit.  We agree this is a tough metric to compute and don’t see how anything other than an RO-by-RO review would provide an answer.

Our vendor friends agreed that some dealers make them work to their advantage, while others view it as “another damn oil change.”  One rep said cheap oil changes are quite effective when trying to regain “lost” customers, but questioned their effectiveness on a long-term basis.

One vendor theorized if a dealer averages $200 per customer pay repair order and you increased their RO count by 40 a month it should be a no-brainer, but that’s assuming you are still hitting that $200 average.

This brings us right back around to the service advisors and technicians.  All parties must recognize the intent of cheapo oil changes and what is expected on their part. 

Of course, you’re always going to have a certain percentage of customers who will take advantage of the discount and go to an independent shop for the transmission service you recommend, but that’s to be expected.

As one source put it, “Any discount service is intended to bring customers to the dance floor.  What happens after that is up to you.”

Describing the Lifetime Service Guarantee program as, “limited in effectiveness due to complexity, low dealer engagement and understanding of eligible part numbers,” General Motors scrapped the LSG program effective May 1, 2011.

When issuing this announcement in bulletin G_0000081421, GM inappropriately lumped the LSG program with the Goodwrench Service Merchandising Parts program when one has nothing to do with the other.

In its place, dealers will have the option to enroll in the new Certified Service Conquest Program (CSCP).  The CSCP has no resemblance whatsoever to the Lifetime Service Guarantee program and is simply a means of providing discounts on services and high volume maintenance parts such as air filters, oil filters, fuel filters, transmission filters, cabin filters, wiper blades and brake parts.

Coverage for LSG eligible parts will be honored under the original terms of the Lifetime Service Guarantee.  As of May 1^st, however, these same parts will only carry the standard 12 month/12,000-mile coverage, with some exceptions (i.e., ignition wires).

Contrary to GM’s statement, we’ve found the majority of dealers were enrolled and actively utilized the LSG program.  One manager said it was the best selling tool he had available, offering that it was much easier to sell an $800 A/C compressor if you could assure the customer s/he would never have to pay for that repair again.

While GM may be enhancing sales opportunities with the CSCP, they have also taken away another vital selling tool with elimination of LSG.

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Several variables are involved, and some (i.e., adequate parts inventory, employee attitudes, etc.) may require in-depth analysis and efforts to correct. However, several dealerships with consistently high CSI scores have some common traits that can be initiated by all dealerships.

Common actions by high scoring dealers include:

• Service advisors are trained to effectively write-up customer concerns in a clear and concise manner to ensure the technician has adequate information to evaluate and repair the vehicle.
• Service advisors use diagnostic worksheets as a tool to communicate the customer’s perception of the problem to the technician.
• Potential survey claims are identified with a stamp, or some other type of indicator, to advise everyone in the process (i.e., advisor, technician, parts person, cashier, manager) that this customer will be receiving a CSI survey.
• Dispatching of work is carefully monitored to ensure effective assignment of jobs to a technician that is qualified to complete the work.
• A quality control process is in place that emphasizes the service advisor’s responsibility to record all customer concerns and the technician’s responsibility to ensure the repair addresses those concerns.
• Technician training is emphasized. Skill levels are constantly monitored and updated. Each technician has a plan, timetable and incentive to increase his/her knowledge and expertise.
• Driveability, squeaks, rattles and wind noise are the most common problems requiring a second trip. Customers become part of the process through a road test to isolate the problem and delivery is scheduled to allow time for a test drive (not 5:00 p.m.).
• Shop comeback logs are kept to isolate training or other matters that require action.
• Technicians and advisors are paid a bonus based on the total service department CSI score. This fosters a “team” attitude among the staff. Also, CSI scores often do not contain adequate sample sizes to support individual based incentives.
• Advisors make time to contact each customer to discuss the status of the repair. Top advisors use the “Dr. Pepper” concept, simply meaning they set aside time at 10:00 a.m., 2:00 p.m. and 4:00 p.m. to make customer contacts and follow-ups.
• The number of repair orders handled by the successful advisor averages 17 – 22 per day. This allows adequate time to meet customer expectations. It is noteworthy that these dealers average 18% higher sales per repair order than typical Regional averages.
• Appointment systems with daily follow-ups and confirmations are essential.
• The Pre-Delivery Inspection process is taken seriously and limited to certain technicians.
• The service manager will spot check (without warning) a vehicle that has been PDI’d for delivery.
• Dealer trades and old-age inventory are re-inspected.
• Customers are contacted, prior to the submission of a warranty claim, to insure their complete satisfaction with the repairs performed.

I was surprised to find the reporter assigned to this story so well-versed in one of the industries’ best-kept secrets. Obviously, he’d done his research. Although he had suspicions that it could be true, contacts with spokespersons from various manufacturers had been fruitless. In almost every case, he was stonewalled with, “We never pressure our dealers to avoid meeting ‘contractual obligations’ of vehicle warranty.”

He was suspicious of the double talk, however, and called us for an opinion. We were pleased to offer one. Without doubt, Goodwill repairs are not part of contractual obligations of vehicle warranty. This has been pounded into our heads for years. I recall a rep that would go ballistic if we referred to a Goodwill repair as “warranty.” “It’s NOT warranty,” he would exclaim anytime we made the mistake of calling it such.

Clearly, Goodwill is intended for repairs beyond the scope of warranty. With the majority of manufacturers, this usually includes repairs that would have been covered only if the vehicle was within time and/or mileage limits of warranty. Some manufacturers may also consider items such as broken windshields, scratched paint, etc. eligible for Goodwill consideration.

Punished?

Regardless of their use, they all have one purpose: Retain customers. Why then, are Goodwill repairs included with CPVS calculations? Honestly, we don’t feel they should be. Customer retention is a primary concern of all of us. Why then should we be punished for making a decision in the best interest of customer retention and satisfaction.

Think “punished” is too strong a word? Well, look at it a minute. Let’s say your store has already replaced four warranty transmission assemblies this month. Near the end of the month a customer’s vehicle is towed-in with a transmission problem just beyond warranty coverage and s/he’s asking for help.

Because of circumstances beyond your control, you’re put in the position of adding a $2,000+ repair to your CPVS calculations. While the manufacturers are always emphatic that a single repair shouldn’t, in itself, bring on an audit, the fact remains that a $2,000 repair doesn’t help!

Even though we’ve touched on this before, I will remind manufacturers that a customer doesn’t normally ask for Goodwill consideration over a dome lamp bulb. More often than not, it’s a substantial hit in the engine or transmission category. Can one really make an unbiased decision about a Goodwill repair knowing that it will affect CPVS numbers? The answer is: not really.

Service Directors often tell me they, or their counterparts in different parts of town, will sometimes avoid certain repairs—acutely aware of warranty expense ramifications. They’re not denying contractual obligations mind you. It might be that their transmission technician is “backed up,” or “in a two-week school.” Chances are that everyone reading this has either used one of these excuses or knows someone who has.

Even though manufacturers claim they leave Goodwill decisions to the dealership service managers, who hasn’t been asked or told to, “help someone out,” or “take care of it,” by their rep or Customer Assistance? Most managers routinely make a walk-around of a potential Goodwill vehicle, not to evaluate the condition, but to see where it was purchased. Customer loyalty is, and should be, a three-way street—good for the customer, good for the dealer and good for the manufacturer.

The majority of dealers recognize this, and spend Goodwill dollars wisely. Often I find dealers are tighter than the manufacturer when it comes to Goodwill. More often than not, they’re in the best position to make the best decision anyway.

Editor’s note: Shortly after Consumer Reports published the article regarding Goodwill/AWA repairs, Ford Motor Company removed After-Warranty-Adjustments from the Cost Per VIN Serviced calculations. Unfortunately, FMC again (April 2002) started using these calculations as part of dealer warranty expense calculations. Warranty Matters strongly disagrees with this practice. In the end, only the customer will suffer. GM recognized this problem a number of years ago and no longer includes Goodwill in the CPVS calculations, allowing dealers the freedom to make fair decisions regarding Goodwill repairs —Dave

Step 1: Dealer Self-Review – Dealership is allowed to self-review warranty issues and compliance from a computer generated list of claims. Although Ford suggests “two thirds of all dealers who enter this process exit at this stage,” our experience has shown this only to be true if the dealership can isolate the cause(s) and implement corrective action immediately.

Step 2: Warranty Root Cause Review – Actually a low-level audit, this step usually lasts less than a week. Depending on your situation, this audit may be conducted by either Regional Auditors, or Select Dealer Region Auditors. Because chargebacks are limited to the Standard Charge-back List, debits are typically less than $10,000.

Step 3: By this point the dealership has been under probation for at least a year without showing significant improvement on the GWMS report. This is a full-blown audit and chargebacks are not limited in scope. Any deviation from guidelines in the Warranty & Policy Manual are subject to chargeback. This audit may consist of either a face-value audit or an extrapolation audit. In an extrapolation audit, each debit is multiplied by eight. For example, a missing hard copy of a $1,000.00 repair will cost the dealership $8,000.00. These audits can easily top $40,000 – $100,000 and usually last at least 2 weeks and, on occasion—more than 6 weeks.

Step 4: Once you’ve made your way through Step 3, FMC will schedule a follow-up audit—with all claim deviations subject to debit—to the store within 6 to 12 months.  This is to insure the dealership is following guidelines.

Don’t fall victim to the Warranty Counseling Process. Many managers fail to recognize the factors that can drive out-of-line conditions on the GWMS report. We have the experience and knowledge to isolate these conditions and implement changes while insuring you are being paid for every legitimate warranty dollar.

As we’ve addressed, out-of-line CPVS scores are the precursors to either having a dealership placed on some sort of self-review, control process or audit watch. In a nutshell, what we do to one vehicle over a period of time affects your ratings and Big Brother is always watching.

If you happen to work with a franchise where the manufacturer provides an opportunity for you to be forewarned of out-of-line conditions before a full-blown audit, you will most likely have restrictions or limits placed on your ability to self-authorize claim payment. This type of control is pretty flexible and allows the manufacturer to isolate only conditions that appear to be out-of-line. Both Domestic and Import manufacturers use this system frequently.

Another option for the manufacturer is to place a dealership on probation until numbers are back in-line for a reasonable amount of time. These type programs are called probation periods, counseling process, self-reviews, etc. Often the manufacturer’s rep will want to be involved to some extent in the process. Unfortunately, many are ill-prepared to offer sound advice or guidance.

In some situations, the manufacturer (common with GM, Ford and DaimlerChrysler) will provide a list of claims that have been “identified as potential warranty concerns.” When viewed objectively, these will almost always paint a picture of what’s driving out-of-line conditions on a warranty expense report. Management should conduct a hands-on review of the entire history folder (never just a computer review). After all, the manufacturer is providing you with a list of claims they would be looking at if this had been a full-blown audit.

I stress “viewed objectively” for good reason. This is perhaps the hardest thing to do when involved in a self-review process. No one appreciates having their paperwork brought to question. In fact, when going through this process you may be shocked to see how may “problem” vehicles and/or customers are listed. It’s easy to become defensive when you’ve been doing your best to repair a condition, only to find that a computer has isolated it as a problem.

Remain calm. Remain objective. Take it as it is—an opportunity to segregate problems in-house, without a visit from the Iceman. Just because a claim is listed doesn’t mean the manufacturer expects you to debit all or a portion of it. Look for areas that may reflect charges that are not the responsibility of the manufacturer. Prime examples are: shop comebacks, misdiagnosis, over repairs, excessive parts, labor or sublet, shop supplies, etc.

Where prudent, debits should be accepted and controls implemented to reduce the likelihood of recurrence. Although it may not be noted in a self-review or counseling process, any suggestion of fraud should immediately be debited. (More on fraud later in this guide.)

As I said earlier, often it’s the $10.00 or $15.00 mystery part that may be creating havoc on warranty expense reports. “Excessive parts” is a common driver of out-of-line conditions. Ask yourself if they were really needed and documented.

A dealership where I was conducting a review had replaced a diesel engine assembly—in itself a sizeable repair. Reviewing the parts used, I found a complete set of glow plugs and exhaust manifold billed.

Since there were no comments to support these parts, I asked the technician what caused him to replace them. His response: “You don’t think I’d put in a new engine and use the old glow plugs, do you? What do you think I am, stupid?” Another technician standing nearby chimed in, “You probably should’ve replaced the controller too.” (We all had a good laugh.)

As for the exhaust manifold—it was damaged when it fell off his bench.

From a compliance standpoint, other items need to be examined too—always objectively. Incomplete or inadequate documentation such as management approval, missing hard copies, signatures, comments, etc. should be corrected, but not necessarily debited. The main thing here is to figure out how to break the cycle.

Again, compliance issues, in themselves, may not be the driving factor behind out-of-line conditions but, they will always be easy audit targets. A simple, but effective, means of help in this area is to keep the hard copy together with the warranty copy until the claim is paid. This can drastically reduce documentation shortfalls before a shop copy hits the history folder.

As you are reviewing claims during this process, you should be making notes to outline an action plan and determine how any excessive charges and/or non-compliance slipped through cracks in the first place.

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Under the heading “Administrative Allowance” in the GM Service Policies and Procedures Manual (Article 1.5.10, item a) it states: “. . . the following items are eligible for a 0.2 hour administrative allowance in conjunction with warranty repair/exchange through an AC Delco Service Center, or sublet to other qualified service facilities”:

• Radiator or Heater Core
• Diesel Fuel Injection Pump
• Glass
• Convertible Top
• Padded/Fabric Top
• Interior Upholstery & Trim
• Certain Wheel Refinishing (where clearcoat is removed by media blasting)

The following electronic components exchanged through the Electronic Exchange Program are eligible for the 0.2 hr. administrative allowance and an additional $20.00 in Net Item.

• Radios and related Audio Products including XM Radios
• Multi-media (DVD & CD)
• Entertainment/Video Systems
• Instrument Clusters
• Heads-Up Displays
• Night Vision Cameras
• OnStar Modules
• Navigation Systems
• Adaptable Cruise Control Modules (with radar head)

The section goes on to say certain “items are eligible for 0.3 hours additional administrative allowance (for a total of 0.5) only when repairs are completed at a sublet location and Dealer provided for the movement of Vehicle to and from that location.” These items include:

• Windshield, Side, or Rear Window Glass
• Interior Upholstery, Headliner, and Trim (does not include instrument panel)
• Convertible Tops
• Padded/Fabric Tops

All claims for this additional allowance require initials of the employee authorizing vehicle movement on the related job line.

When coding these labor operations, the LTG used to read: “Policy S,” or “Policy S- an additional 0.3 hours if vehicle delivered to and from repair location.” This provision is still applicable, however the reference to Policy “S” was temporarily removed from the LTG and reinstated as “Coverage S1, or S2.” With WINS claims processing this additional time is placed in the “regular labor hours” column

Customer Reimbursement claims are due a 0.2 hr. administrative allowance. Allowances for customer reimbursement claims may not be evident since you use the related labor operation.

Second (and this one may be considered hidden) under Article 1.5.12, item e, it states: “Dealer reimbursement for tires replaced under vehicle warranty will be at Dealer net cost of tires and any mounting, balancing and freight charges not covered by the tire manufacturer, plus a 0.2 hour handling allowance on each tire replacement RO” (once per RO). This procedure is to be used when replacing tires that failed as a result of a defect of another warranted component.

Many dealers remain unaware of the allowance for recycled air conditioning refrigerant. When replacing an air conditioning component because it was leaking, Technicians will usually have refrigerant billed on the repair order. However, the Dealer is also due reimbursement for recycled refrigerant when replacing a noisy (not leaking) compressor for example.

This reimbursement is at Dealer cost for GM refrigerant plus the appropriate parts handling allowance. No parts mark-up allowance is appropriate if you are using non-GM refrigerant (it is easy for an auditor to determine which type is used).

Refrigerant replaced due to a leak in the system should be submitted in the “parts” section of the claim (GM type only) with appropriate mark-up. All recycled refrigerant, as well as non-GM type should be submitted in the “net amount” column. You may claim the parts mark-up in “net amount,” applicable to the year model, only when using GM type refrigerant. Non-GM refrigerant must be sold at cost!

Since refrigerant is seldom issued over the counter these days, it is important that your technicians and warranty claims administrator are familiar with these procedures. All repairs to the A/C system that require recover/recharge of refrigerant should have freon billed to the repair order. Current systems (R134a) hold approximately two pounds of refrigerant (rear air units require more) and anything in excess of three pounds (including one for leak test) may cause the claim to reject for excessive parts/net amount.

If you may be using recycled coolant, a similar procedure applies. Reimbursement for recycled coolant and refrigerant is covered under Article 1.5.17 of the P&P. It is GM’s intent to provide a means of encouraging the use of recycled coolant and refrigerant when possible. Only coolant and refrigerant recycled by GM-approved Dealer equipment is permitted.

Many dealerships overlook their ability to claim a handling allowance for parts supplied from GM Divisions at “no charge” to the Dealer. Article 1.5.2, item f of the P&P addresses this provision. Current procedure for claiming this allowance is to bill the part number on the repair order and the mark-up only should be entered as the sale price.

For parts with no published part number or price, Dealers should contact GMSPO. While GM may only provide an engine or transmission occasionally under this arrangement, the handling allowance is usually sizable and should be claimed when appropriate.

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Mr. Henson will also consult with JLRNA’s staff regarding Policy & Procedure updates and benchmarking of audit standards.

Warranty Matters has enjoyed a close relationship with Maserati North America since 2004 when they were selected by Ferrari Maserati North America to conduct a benchmark of corporate warranty policy and procedure against industry standards.  Since that time, Ferrari and Maserati have become separate companies, although they still operate from the same building in Englewood Cliffs, NJ.