Worth the cost? Ann Arbor area car dealerships continue multi-million dollar facilities upgrades
Bill Crispin stands outside his Chevrolet Dealership in Saline. He said the blue steel beams he installed three and a half years ago will have to come down as part of an exterior renovation recommended by General Motors.
Ben Freed | AnnArbor.com
The Scio Township Board of Trustees approved the latest local renovation at its meeting Tuesday, an exterior remodeling of the LaFontaine Buick GMC dealership on Jackson Road.
According to a study released in February by the National Automotive Dealers Association, many of the upgrades are the result of pressure from the major automotive manufacturers to standardize the looks of their franchise dealerships.
Bill Crispin finished a major renovation to his Chevrolet dealership in Saline just three and a half years ago, but he is already planning another upgrade for later this year that he said could cost nearly $1 million.
“As a matter of fact, General Motors or Chevrolet comes to the dealerships and they tell you they want all of them to look alike. So if you’re driving in Boston or Florida or whatever and you pull into a Chevy dealership, the front ends will all look the same,” he said.
Dunning Toyota on Jackson Road is about eight weeks away from completion of a $2.5 million renovation.
Melanie Maxwell | AnnArbor.com
NADA data showed that between 2005 and 2012, annual total dealer investment in facilities upgrades averaged between $10 billion and $15 billion annually, causing average rent levels for dealerships to rise by approximately 28 percent to more than $400,000.
In Washtenaw County, a number of dealerships, including Gene Butman Ford, Suburban Cadillac-Chevrolet and Chelsea Chevrolet Buick, have all expanded in the past two years, and new Fiat and MINI dealerships have opened with sleek exteriors.
Dunning Toyota general manager and vice president John Taylor agreed that manufacturers have been leaning on dealerships to make their physical spaces more attractive to customers.
“There’s been a big push from the manufacturers to the independent business owners to create an environment for our guests that is more modern and inviting in every category,” Taylor said. His dealership is about eight weeks away from completion of a $2.5 million renovation.
“… At a certain point they said ‘we’d like to see you guys make an investment in this facility,’ so we did that and took it a step further with the LEED certification.”
Scio Township supervisor Spaulding Clark said he’s noticed that a number of car dealerships in the township have been a part of the renovation wave. He said he’s not sure of any others in line to make changes but that each time one dealer makes an upgrade it seems that those right around follow suit.
“Part of it comes from the manufacturer I think, but part of it comes from the dealer also,” he said.
“When one starts classing up their place the next one wants to do the same thing.”
According to the NADA study, some upgrades can show significant return on investment for the dealers, while the exterior and facade work favored by manufacturers has less impact on sales.
An exterior renovation approved Tuesday by the Scio Township Board of Trustees will bring LaFontaine Buick GMC's look up to manufacturer's standards.
Melanie Maxwell | AnnArbor.com
The NADA study said that in order to justify a $1 million investment, dealerships would have to experience a bump in sales of approximately 60 new cars a year, an increase that very few dealerships see after changing signs.
Crispin said that his previous facilities upgrade was a major improvement for the dealership, but he’s not as optimistic about the new exterior that General Motors has asked him to install.
“When I did my upgrade three years ago, sales and service increased 100 percent after the facelift,” Crispin said. “I built my store in 1978, so from ‘78 up to 2007 or 8 there’s a big difference. It increased sales; it meant more people came to work here, more sales people, more service people and more customers — that’s what really helped us. But this new upgrade? I don’t know how much it’s going to pay off.”
At Dunning Toyota, Taylor said that he expects the upgrade to have an impact beyond impressing customers. He stressed that salespeople and other employees look forward to the new working environment and the ability to show off
“I can’t say for sure what the return on investment will be in the upgrades. It’s really different in every market,” Taylor said.
“But it’s extremely exciting because it’s a new opportunity for us to provide a better experience for our customers and our employees.”
Taylor and Crispin agreed that aside from the standardized exterior, the highest priority has been improving the customer “waiting” areas. Both spoke of the need to use the renovations to create a unique look and feel for customers at their dealerships.
“The customer lounge is a major-league upgrade, and we’re going to bring in really good coffee; people like good coffee in this city,” Taylor said.
“Having WiFi, nice TVs, a nice lounge — that’s all just a ticket to get into the game now. We have to make our guests feel like they’re not just in some sort of waiting room. People want to have an experience at a car dealership.”
Ben Freed covers business for AnnArbor.com. You can sign up here to receive Business Review updates every week. Get in touch with Ben at 734-623-2528 or email him at benfreed@annarbor.com. Follow him on twitter @BFreedinA2
Comments
A2K
Thu, Aug 22, 2013 : 11:23 a.m.
I hate our system of dealerships...I want to go in, and just buy or lease a darn car/not feel manipulated and have to waste time on endless email, calls, visits between multiple dealerships. same feeling buying appliances or dealing with remodeling/home repair folks...it is archaic and frustrating!
michael corleone
Mon, Aug 19, 2013 : 6:27 p.m.
The Jackson rd. dealers are in a bad spot. When I leave for work in the morning, i grab a banana and get my sesi on!
yesisaidit
Mon, Aug 19, 2013 : 12:56 p.m.
will this help the service department at Bill Crispin??
yesisaidit
Mon, Aug 19, 2013 : 4:34 p.m.
well hopefully they will get staff that can do their jobs! and not break more things when you bring your car in for repair!
Ben Freed
Mon, Aug 19, 2013 : 2:37 p.m.
Crispin's expansion will include an expansion to the service dept. He is also opening a satellite location just a half a mile away that will include additional service bays and a specialized area for outfitting emergency vehicles including ambulances, fire trucks and police cars.
UloveM
Mon, Aug 19, 2013 : 12:36 a.m.
I hope I can buy a car online and have it shipped to my drive way.
Ben Freed
Mon, Aug 19, 2013 : 2:36 p.m.
This model of non-dealership is expanding and Tesla Motors is actually frustrating a lot of established car companies by using it already. The question is whether the majority (or even enough) Americans will trust the internet enough to purchase a vehicle sight-unseen without going for a test drive or being "sold" on its features.
Kyle Mattson
Mon, Aug 19, 2013 : 4:54 a.m.
I think many would agree with you UloveM. I recall reading or heading a radio segment regarding why the car buying process is essentially stuck in the 1980's. Basically it boiled down to laws that are in place in just about every state across the country that protects dealerships from competition like online sales with the reasoning that it helps employment numbers. If I happen to stumble upon the link to it I'll post it here, it was both fascinating and frustrating to learn that backstory of the industry.
Messa
Sun, Aug 18, 2013 : 11:34 p.m.
I wish they'd build a Jaguar dealership here. I'm tired of driving to Novi to have my car serviced.
amlive
Sun, Aug 18, 2013 : 7:20 p.m.
I guess I think CraigsList looks just fne as it is, and a trip to my mechanic for a pre-purchase check up costs me far less than a prorated portion of a $2.5M dealership decoration.
Jay Chuppy
Sun, Aug 18, 2013 : 5:02 p.m.
The issue that I see with making all dealers look the same is that dealerships are not fast food joints. I go to McDonald's or Wendy's because I'm hungry at least 3 times a day and I know that seeing a certain fast food exterior means I can get a menu option that I like. When I go shopping for a car the menu options have changed since the last time I bought one. Even if I buy a new car every three years the options are completely different. Cars are changing so fast right now that maybe the brand that I bought three years ago doesn't carry what I need now. Or maybe I had a loyalty to Pontiac and I can't buy them anymore. Perhaps I drove a sub compact Ford and now I can afford an Audi. There are any number of reasons for people to switch brands of new car. It's one thing to need to know fast food at first sight; if you're hungry you want to eat now. But is it necessary to know a car dealership at first sight? So many people explore their car options online anyway and fewer and fewer people simply show up to a dealership completely uninformed looking for a new car. It just seems too expensive to justify a million dollar facelift only a few years after we shelled out so much tax payer money to save these companies from their own problems.
Ben Freed
Mon, Aug 19, 2013 : 2:35 p.m.
Jay, As other commenters have pointed out, it's the dealerships, not the manufacturers who are footing the bill for the renovations. However, the reason many of the manufacturers are pushing them to standardize is that while you may not feel a strong brand loyalty to car companies it has been shown that many customers do (http://www.autotrader.com/research/article/car-news/129339/brand-loyalty-studies-show-mixed-results.jsp)
Solitude
Sun, Aug 18, 2013 : 7:46 p.m.
Jay, GM is not financing the upgrades to its dealerships, the dealers are. When it was closing dealerships, GM used the remodeling requirements as a "tool" to help it decide who got the ax. Dealers who refused to remodel, or who couldn't afford to, were first to go. Some really good, well-established local dealers ended up losing their franchises that way, like John Rogin Buick, in Livonia.
leaguebus
Sun, Aug 18, 2013 : 5:36 p.m.
Can't test drive a new car online. At some point a dealer will be involved. None of these dealers would have done the upgrades without thinking that it will increase their bottom line.
Defarge2013
Sun, Aug 18, 2013 : 4:57 p.m.
Great, because we need more mind-numbing homogeneity in our society. Also, as others have pointed out, when I look at one of these "remodeled" dealerships, I know the customer ultimately is the one who pays for it. It isn't older facilities that make for an unpleasant car buying experience.
Ben Freed
Mon, Aug 19, 2013 : 2:33 p.m.
All of the dealers I spoke with said that these days nice facilities are a necessity to get people in the door, but that it's still good salesmanship and relationships that sells the cars.
Great Lakes Lady
Sun, Aug 18, 2013 : 2:57 p.m.
This is what happens when you have government installed CEOs with no experience running a business. They are dictating to independent business owners "the look" of their facilities, because an overpriced consultant had to justify an overpriced fee.
jcj
Mon, Aug 19, 2013 : 12:10 p.m.
SMC Where are those Saturn dealers now?
Sparty
Sun, Aug 18, 2013 : 7:12 p.m.
How did the Government install a CEO to any of the Auto Companies? Please elaborate. Given that there are no Government Officials on any of the American Auto Company Board's, I am very interested in your response. Didn't FIAT purchase controlling interest in Chrysler? Didn't GM's Independent Board select it's own CEO? Before joining GM, Akerson was a managing director and head of global buyout for The Carlyle Group in Washington, D.C. He managed more than $50 billion in assets and more than 200 portfolio companies with several hundred thousand employees around the world. Akerson also served as CEO or president of several telecommunications and technology companies, including MCI, Nextel Communications, XO Communications and General Instrument, through periods of explosive growth and dynamic change. From 1985 to 1988, Marchionne was Group Controller and then Director of Corporate Development at the Lawson Mardon Group in Toronto. In 1989, he moved to Glenex Industries where he worked for two years as Executive Vice President. From 1990 to 1992, he was Vice President of Finance and Chief Financial Officer at Acklands Ltd. Between 1992 and 1994, he served as Vice President of Legal and Corporate Development and Chief Financial Officer of the Lawson Group, which was acquired by Alusuisse Lonza (Algroup) in 1994. From 1994 to 2000, he worked at Algroup based in Zurich, where he became CEO in 1997. He then took the helm of the Lonza Group Ltd. in Basel, after its spin-off from Algroup, serving first as Chief Executive Officer and Managing Director (2000–2001) and then as Chairman (2002).In February 2002, he became Chief Executive Officer and Managing Director of SGS S.A. of Geneva and, in March 2006, he was appointed Chairman. He was elected an independent member of the Board of Directors of Fiat S.p.A. in May 2003, until being appointed CEO in 2004.
leaguebus
Sun, Aug 18, 2013 : 5:33 p.m.
Bad things happen when car companies lose their passion for automobiles and let the bean counters do the thinking. Look who copied the Saturn model, Toyota with Scion, which is selling cars to this day. The US car companies are doing some amazing things these days, easily keeping up with the foreign manufacturers and in a lot of cases overtaking them.
NoPC
Sun, Aug 18, 2013 : 3:27 p.m.
Now, I'm not a big fan of government involvement, but this is called "Branding" (not government take over), basic Marketing 101. It's a smart thing to do.
SMC
Sun, Aug 18, 2013 : 3:19 p.m.
This is what happened when GM created the Saturn division, back in the late 1980s/early 1990s. There were no government installed CEOs back then (and there aren't any now). GM wanted all Saturn dealers to look the same, and they did, since they were all in new buildings. Other manufacturers saw Saturn's success, and so they too decided that all their dealers must look the same. This has been going on for the last 20 years. Not sure how you've missed it.
walker101
Sun, Aug 18, 2013 : 2:41 p.m.
Maybe now he can take the Kid Rock approach ($20 any seat) by selling his cars so the average Joe can afford, I bet he'd sell 1000% more cars.
Tom Joad
Sun, Aug 18, 2013 : 1:42 p.m.
A million dollar renovation equates to 1000 $1000s to pay for it, so essentially the consumer is picking up the bill. I'm sure they'd sell a lot more cars if they knocked a $1000 off the price instead of earmarking it towards superfluous renovation on a building.
Ben Freed
Mon, Aug 19, 2013 : 2:31 p.m.
Tom, Instead of raising the price to kick the bill back to the consumer, many dealerships try to simply sell more cars. This is why the "expansion" type renovations have consistently produced better ROI than the "standardization" renovations.
SMC
Sun, Aug 18, 2013 : 3:16 p.m.
You clearly have no idea of how the car industry works, do you? If dealership renovations resulted in a price increase on every new car they sold, customers would simply drive an extra 10-30 miles to the next-closest dealer to buy the same car at a lower price. In fact, many people do that anyway, often buying a car from 100 miles away, to save $5 to $10 on their monthly payments.
johnnya2
Sun, Aug 18, 2013 : 2:32 p.m.
You would be wring about that. In fact, companies research this every day. McDonald's Corp spent MILLIONS to revamp the interior of their restaurants and drive thrus. The units that made upgrades sales rose at the fastest rates. You can believe that lower prices will sell more cars, but people pay more for a better shopping experience. If you believe the lowest price always wins then Yugos would be the number 1 selling car in America. Of course you have a simple option, Shop at a place that hasnt upgraded in decades.
RUKiddingMe
Sun, Aug 18, 2013 : 1:28 p.m.
It would be great if Ben could expand his work to cover some city expenditures. We need a few headlines like "preparing Fuller Road station; is it worth the cost?" and "tear-down/rebuild of AATA station and multiple facility renovations; is it worth the cost?" and "$750,000+ fountain that looks like it doesn't work when it's working; it's not worth the cost" (hey, they can't all be questions, right?)
Ben Freed
Mon, Aug 19, 2013 : 2:30 p.m.
We have a phenomenal City beat reporter Ryan Stanton and an excellent editorial board who regularly take up those questions!
Sam S Smith
Sun, Aug 18, 2013 : 12:39 p.m.
Anything to raise the already extraordinary high cost of buying a car! Does anyone besides me remember when you can buy a car without going into massive debt?
jcj
Mon, Aug 19, 2013 : 12:07 p.m.
@notnecessary johnna2 will never get it! I wonder how many credit cards and installment loans he has? BTW ... I have none.
leaguebus
Sun, Aug 18, 2013 : 5:26 p.m.
Great Joe, but what happens if the fuel lines rust out as happened on our 1999 Accord? No one would do the work on the Accord because the places where the fuel lines ran were also rusted out. If you are a good mechanic and have the time, you certainly can drive older models for years, more power to you!
Joe_Citizen
Sun, Aug 18, 2013 : 3:04 p.m.
Yeah I bought my car for 2600 cash, and it was in mint condition, and still runs like brand new today, 2 years after i bought it from the original owner. My car was 10 years old and 190,000 miles, when i purchased it. It now has 230,000, and drives, runs, and looks brand new. Here is the clincher about my car no one will ever guess, is that it is a Ford Windstar, and it had a recall on it and they installed and brand new rear axle, and undercarriage motor harness. 3-4K"s worth of work done for free. so sense they did that, I just went and installed new shocks and springs, and had the front end rebuilt with new parts, so for all intensive purposes, my car is like brand new, and it is a 2001. So yes there is a way to buy a car without going into major debt.
notnecessary
Sun, Aug 18, 2013 : 2:54 p.m.
Johnnya2 - or it's because as a society we are far to willing to bury ourselves in debt and installment payments. I am old school, if you don't have it paid off you don't own it.
johnnya2
Sun, Aug 18, 2013 : 2:44 p.m.
"I remember when you could ride a horse into downtown AA and didnt even need a car" If you prefer, you could build your own car on your time if you think you could do it cheaper. I bet your business model would fail. There are plenty of cars on the market for you if you think the price is too high. A brand new Nissan Versa can be had for under $13k sticker. Why isnt it the number 1 selling car in the US? Because people do not confuse price with value.
Lou Perry
Sun, Aug 18, 2013 : 12:22 p.m.
The operative paragraph is "many of the upgrades are the result of pressure from the major automotive manufacturers…" Different than a McDonald's car dealers compete with other same brand dealers in their area. Differentiating a given dealership is important. Even different McDonald's interiors are different; UofM decorations in A2, in the Bronx Yankee's and so on. Why shop at Lafontaine rather than Suburban Chevrolet? With each dealer conforming to the same box and promoting there great customer service it all comes down to price. Working with car manufactures over the years they've never truly understood the retail part of the business.
Lou Perry
Tue, Aug 27, 2013 : 1:09 p.m.
Mr.johnnya2 have you ever seen a local ad for a McDonalds? McDonalds does not want one store competing or different than an other. Moreover, to have a McDonalds franchise you are required to be in a specific location based on traffic.
Solitude
Sun, Aug 18, 2013 : 4:10 p.m.
Of course, there are benefits, also, in that automakers were tired of people never even considering their products because they didn't want to endure a crappy experience at a dealership. I'd have been happier if they'd have mandated standardized and more thorough sales person training and qualifications, because a good salesperson can earn a customer for life working out of any location. I don't care how pretty your building is, if your sales staff is awful, you will lose money over time.
Solitude
Sun, Aug 18, 2013 : 4:02 p.m.
2nd para., 1st sentence, add "is" after "and that."
Solitude
Sun, Aug 18, 2013 : 4:01 p.m.
Johnnya2, you both are right. Lou Perry is taking about what it takes for someone to initially decide to walk in a dealer's door, and you are talking about what it takes to either keep them there or keep them coming back once they do. There are definite disadvantages to the homogenized look GM has mandated that dealers "voluntarily" adopt, and that it inevitably leads people to believe that the experience will be the same no matter where they go, which, as Johnnya2 points out, is far from true. Differences in dealership appearances over the years developed as reflections of the people who owned the dealerships, just like the appearance and decor of your home reflect you. Once you got inside, you could tell a lot about a dealer's customer service philosophy by the way he spent his money inside. If a dealer had a crap waiting area and crap bathrooms, etc., people are going to develop unfavorable impressions about the whole place. Customers usually extended that impression, good or bad, and often unconsciously, to the quality of the sales and/or service staff.
johnnya2
Sun, Aug 18, 2013 : 2:39 p.m.
"Different than a McDonald's car dealers compete with other same brand dealers in their area. " WHAT? That might be the most ridiculous statement ever. McDonald's on State Street competes DIRECTLY with McDoanlds on Lohr. The Mcd's on Washtenaw east of 23 competes with the one west of 23. (For the record, these are owned by DIFFERENT individuals) It seems you have no idea about the retail part of the business, since SERVICE and a good sales person will be able to sell no matter what box they are selling in. If you think it only comes down to price, then why in every dealership I have ever dealt with is there always a top performer in sales, and in most of them the same person is the top performer each and every month? It certainly isnt on price.
clownfish
Sun, Aug 18, 2013 : noon
Dear GM: It is bad enough that every town in America looks the same, do we really need every dealership to look the same? I can tell a Chevrolet dealership by the Chevy sing out front, it does not have to look the same as the dealership in Omaha, I'll figure it out.
snark12
Sun, Aug 18, 2013 : 11:56 a.m.
I've heard that pressure from Audi to remodel his dealership is one of the reasons Howard Copper sold his business. Does anyone know if Germain will be upgrading?
Ben Freed
Mon, Aug 19, 2013 : 2:29 p.m.
We have not seen them apply for permits or approval yet from any municipal entity, but as Spaulding Clark told me, the townships are often then last to know when an upgrade comes.
Susan Montgomery
Sun, Aug 18, 2013 : 11:39 a.m.
Psst - 4th paragraph "Cripsin" should be "Crispin" ...