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Service Executive Issue #13-12 (Full)

Fast Food Franchising Vet Tapped To Lead Meineke Car Care Centers

With new leadership atop Driven Brands (its parent company), Meineke Car Care Centers is experiencing a leadership shift of its own. Out atop Meineke is Keenan Moran, who has served as its president since 2008. In is Paul Clayton, a franchising veteran, who will take over as the company’s new president Oct. 15.

Clayton comes to Meineke with 28 years of franchising experience, having spent eight years as CEO of Jamba Juice and building the company into a nationally recognized brand. He also spent 16 years with Burger King in a variety of executive leadership roles, including president of North America, senior vice president of worldwide marketing and vice president of U.S. marketing.

It’s that time with Burger King that’s especially noteworthy. That’s because Clayton’s new boss (Driven Brands president and CEO Jonathan Fitzpatrick) also came to the automotive aftermarket from Burger King. For the seven years prior to joining Driven Brands, Fitzpatrick served as an executive vice president, as well as chief brand and operations officer, of the fast food giant.

Fitzpatrick became the leader of Driven Brands earlier this year, following the retirement of then-CEO Ken Walker. Walker had run Driven Brands — and, before that, Meineke — for the previous 16 years. He joined Meineke as president and CEO in 1996 after serving nearly four years as the president and CEO of Parts Inc.

Walker’s exit from Driven Brands came months after the Harvest Partners private equity firm acquired the company.

 

Nearly 3 Out Of 5 Consumers Will Stick With The Dealership After Their Maintenance Plans Expire

According to research from DME Automotive, both prepaid and OEM-provided maintenance plans have a powerful impact on dealer service retention.

“With nearly 3 in 5 consumers reporting they are likely to continue servicing at the dealership after their plan expires — compared to average dealer post-warranty retention rates of 22 percent to 40 percent (depending on vehicle make and age) — these programs can more than double service business that typically bleeds to the aftermarket, while also having a profound impact on retaining the young, traditionally dealer-averse, service shopper’s business,” explained Doug Van Sach, vice president of strategy and analytics at DME.

Among the automotive marketing firm’s findings is that 22 percent of U.S. car owners currently have a maintenance plan (beyond a standard OEM warranty). That breaks down as 15 percent with a complimentary plan like ToyotaCare, Experience Buick or BMW Ultimate Service, and 7 percent who have purchased a prepaid dealer plan.

While the majority (65 percent) of respondents in DME’s national survey report using their plan for “all” scheduled maintenance, only 25 percent have only used it for “some” of their covered services.

So, even though a free or paid-for plan is in place, plan-holders are still choosing to spend service dollars outside the dealership — a possible reflection of the lack of convenience traditionally associated with dealership service centers, according to DME.

Also, a significant percentage of plan-holders either are not being consistently engaged by their dealership or are not finding value in their plans, because 9 percent reported that they have not used them at all.

According to DME’s research, 69 percent of those with free or prepaid plans are either “extremely satisfied” (22 percent) or “satisfied” (47 percent) with the plan.

Those using their plans for “all” scheduled service at the dealership report the highest satisfaction: 75 percent are either “extremely satisfied” (30 percent) or “satisfied” (45 percent). While 66 percent of those using their plans for just “some” maintenance report being satisfied, only 7 percent fall into that that passionate “extremely” satisfied category.

Overall, 56 percent of those with a maintenance plan report that they are likely to keep servicing at the dealership when the plan expires (with only 1 in 5 claiming that they are unlikely to).

How much consumers use their plans and whether they exclusively service with that dealer correlates with a significantly higher likelihood to continue service with that dealership post-plan.

For instance, 62 percent of those that use plans for “all” service are likely to stick with the dealer. And, nearly two times more consumers in that group report that they are “very likely” (30 percent) to return to the dealership, compared with those that only have “some” maintenance performed under the plan (17 percent).

Young, under-35 servicers present the most profound loyalty challenges for dealerships, according to data from previous DME research. This new survey indicates that maintenance plans represent a major opportunity for dealerships to connect with and retain them.

Not only were those under 35 more likely to have a maintenance plan (31 percent) than those over 35 (18 percent), they also were significantly more likely to use their plans for “all” maintenance (72 percent) than older customers (61 percent).

Notably, those aged 25-34 (who used their plan for “all” maintenance) reported the very highest plan satisfaction (84 percent) compared with any age group. And, 62 percent of that segment reported that they are likely to service at the dealership post-plan.

 

Point of View: Meeting The Challenge Of Maintenance Plans

With the recent success of the Massachusetts Right To Repair legislation, it is easy to believe we are in great shape moving forward in regard to any competitive aspects concerning the car dealership service shops. No doubt that the R2R rules will certainly give us a level playing field from which to compete – and, in essence, that’s all the aftermarket needs to win the business. Yet, regardless of the advantages we may have over the car dealerships, and regardless of the factors we have on our side, there are issues out there that may challenge the aftermarket, factors that may not necessarily be under our control.

First of all, let me be very clear: I have never been extremely concerned about the aftermarket competing with the car dealer service centers. The aftermarket has many strong advantages over the car dealers. The limited number of OE-based service bays alone makes it an uphill fight for the car dealers — and that doesn’t even address the pricing issue — making the car dealer service option not a reasonable one for the majority of consumers. Those two factors alone have always made me a bit skeptical when the conversation turns to the “threat” of the car dealers.

There are, however, some factors in the field that should make us mindful of the competitive nature of the OE service providers.

First of all, because of the complexity of today’s vehicles and the various high-end electronic components in those cars, SUVs and light-trucks, we often are at a disadvantage in providing true aftermarket options for certain components. And, even when we have the manufacturers who produce quality components, too often, shops “prefer” the OE component and, way too often, just elect to source certain high-end electronic components directly from the dealer because they find it simpler. I certainly disagree with that approach, but I can understand the seeming logic.

Additionally, there is a factor out there working against us significantly, and, as the carmakers continue to look for more ways to enhance their brands, this factor will continue to be a significant one.

In this issue of Service Executive, we present some research from DME Automotive focused on the affect of prepaid and OEM-provided maintenance plans – especially those provided by the carmakers, programs like BMW’s Ultimate Service, ToyotaCare, Experience Buick and myriad others.

According to the DME research, 60 percent of consumers “are likely to continue servicing at the dealership after the plan expires,” a formidable habit formed during the maintenance plan period. Compared to average dealer post-warranty retention rates of 22 percent and 40 percent – depending on the specific nameplate – these plans seemingly lock the car buyer to the dealership for service and repair beyond the maintenance plan period.

Satisfaction rates with all of these maintenance plans (prepaid and OE) seemingly drive the loyalty as well, with 69 percent of respondents either “extremely satisfied” or “satisfied” with the prepaid plans. And 56 percent say they are likely to keep servicing at the dealership when the plan expires.

As a consumer and the “fleet manager” of four vehicles in our household, I am inundated with maintenance plan options for our vehicles, ranging from those prepaid aftermarket plans as well as the push during the purchase of a new vehicle. And, more and more, to promote the reliability of their vehicles, the carmakers have come up with these programs that support the car owner for anywhere from three to seven years. So, the trend will continue to impact us for some time.

Obviously, the key for us is meeting or exceeding service and maintenance expectations. As I have said many times before, when we deliver quality parts, do it right the first time, and deliver this first-rate service we are known for, the business will come our way.

There will always be competitive forces, and challenges will abound. But we can meet these challenges if we keep our eye on the prize – at all levels.

_____

Gary A. Molinaro
Editor/Publisher

 

BB&T Shares A Few Insights On Pep Boys

Bret Jordan and David Kelley of BB&T Capital Markets, in a Sept. 13 report, offered a few insights gleaned from a meeting with the management of Philadelphia-based Pep Boys. Among them is the analysts’ belief that improving service comps should boost revenue.

They contend that market share gains are continuing to drive positive third-quarter traffic count in service. “As management noted that general service categories are comping positive year-to-date despite lackluster first-quarter results (service comp declined 1.2 percent in Q1), we anticipate improving service comps in fiscal year 2013 (we estimate +2.3 percent) will drive service revenue growth of 6.4 percent year-over-year to $448 million,” Jordan and Kelley wrote. “Coupling this with likely seasonal battery volume improvements in the second half of 2013 (January end) as failure rates should spike with inclement winter weather (comping off a mild winter in 2012), we anticipate improving general service volumes for Pep Boys in fiscal year 2013.”

BB&T also believes that tires are likely to drive margin expansion. “With management noting a 500-basis-point decline in tire margins over the last 24 months, we anticipate recent declines in input costs (we estimate tire input costs are down 12.4 percent year-over-year and 6.1 percent sequentially thus far in Q3) should drive margin expansion in the second half of 2013 and could contribute to roughly 100 basis points in earnings before interest and taxes (EBIT) margin expansion by fiscal year 2014,” Jordan and Kelley wrote in their report.

They added: “Despite continued soft tire shipment volumes (August industry-wide passenger car shipments declined roughly 4.3 percent year-over-year), we continue to believe that the tire market remains in a state of pent-up demand with accumulated wear and seasonal trends poised to drive volume improvements.”

 

Former ASA Vice President Joins ESI

Bill Haas has joined the Educational Seminars Institute (ESI) as an automotive coach, bringing more than 40 years of automotive repair industry experience to the position.

Most recently, Haas was vice president of education and training for ASA, where he worked with a wide range of automotive organizations, including shop owners and managers, vehicle manufacturers, tool and equipment companies, parts suppliers, and program groups. Haas has been a guest speaker at various industry events, and has testified before Congress and state legislatures on bills and regulations affecting the industry.

Haas also has been a technician in a new car dealership and in independent shops, as well as a shop manager, parts counterman, shop owner, and technical trainer. He is an Accredited Automotive Manager (AAM) and has been a member of the Automotive Management Institute (AMI) faculty since 2002.

In his new capacity, Haas provides business management seminars, business consultation and performance coaching.

ESI is known for its Professional Business Development training series, In-Shop Training Support Program, Phone Coaching Program, Service Writer’s School and Mega Marketing Symposium. Automotive professionals with at least 20 years of industry experience teach all ESI programs.

 

Identifix Hires New VP Of Business Development

Roseville, MN-based Identifix Inc. has named Richard Gunderson as its vice president of business development. Gunderson is responsible for implementing the company’s long-term strategic business plan, including expansion into new markets both internationally and within the United States, product development, and extending sales channels. His duties also include maintaining relationships with Identifix affiliates, developing new business prospects, and serving as a project leader for new client on-boarding.

Gunderson previously was vice president and general manager of Autodata Publications.

 

Argus Analyzers, Midtronics Spar Over Court Ruling, Expired Patent

We have an update on a story we reported in the Sept. 12 issue of Service Executive titled “Patent Infringement Ruling In Favor Of Midtronics Upheld On Appeal.” At the time, we had not received comments from one of the other parties in this suit, Argus Analyzers.

Days after our story was published, we received a statement from Argus. We feel that it presents new information and warrants a follow-up report on our part.

Below is what we reported in the Sept. 12 story …

The U.S. appellate court has upheld a lower court’s ruling from 2011 that Argus Analyzers and BP Power sold products containing electronic battery testing technology infringing on patents held by Midtronics. The original complaint was filed six years ago. It was argued that BP Power, a Taiwanese company, developed the infringing products, and Argus imported and sold them in the United States.

In August 2011, U.S. Judge Milton Shadur of the Northern Illinois District ruled in Midtronics’ favor, ordering the defendants to stop making, importing, using and selling a number of their products, including AA350, AA400, AA500, AA500P and AA550P battery testers. Shadur also ordered the defendants to pay attorney fees and expenses.

Argus and BP Power appealed Shadur’s ruling in 2011. The U.S. Court of Appeals for the Federal Circuit in August 2012 unanimously affirmed Shadur’s ruling, and none of the relief sought in the appeal was granted. No opinion accompanied the judgment.

“The court’s decision definitively validates one of our foundational patents and the strength of our intellectual property portfolio,” Steve McShane, president and CEO of Midtronics, said in a statement. “Midtronics will vigorously defend our innovative technologies as we continue to invest in and advance battery management.”

 As of press time, we had not received a formal statement from Argus in response to the appellate court’s decision.

Here is what Argus sent Service Executive on Sept. 18 (emphasis added by us) …

The Federal Circuit Court of Appeals recently affirmed the lower court’s decision in a patent dispute that has been ongoing between Argus Analyzers and Midtronics since 2006. This decision concerns a now expired patent that Midtronics no longer has rights to enforce. Earlier in the litigation, Midronics dropped its claims against Argus as to another expired patent.

“We have fought long and hard on behalf of our customers to bring truly technically advanced, high value products into a market long dominated by a single company with dominant market share who has demonstrated a history of aggressively suing new competitors with the profits from 30 year old technology” commented Andrew Kallfelz, President of Argus Analyzers. “Fortunately the outcome of this case has no impact on our customers because the products deemed to infringe were replaced by the non-infringing and state of the art AA360/1000 series products almost two years ago and, most importantly, because all of the Midtronics patents involved in this case have expired and can no longer be enforced against anyone. Our decision in 2006 not to license our cutting edge and patented technology to Midtronics despite its threats of litigation means that we emerge from this litigation with the ability to deliver technologically advanced products at an excellent value to our loyal customers.

“While Midtronics trumpets a decision on expired patents, the practical reality is that while these foundational Midtronics patents on AC conductance are now entirely in the public domain, the patents that drive the unmatched accuracy, speed, and cost effectiveness of Argus’ products remain valid and enforceable. Argus will continue to leverage the truly innovative and highly accurate and patented LPR test technology as well as other cutting edge patented technologies to bring less expensive and highly valued solutions to battery industry customers globally.”

Kallfelz concluded, “We are very thankful to all of our customers in the USA and globally who continue to encourage us to deliver new and cost effective advanced solutions.”

Midtronics was given an opportunity to respond to Argus’ claims.

The following statement is attributed to Steve McShane, the CEO and founder of Midtronics (emphasis added by us) …

 “This suit was originally filed in July 2006. The patent in question expired on May 1, 2012 — between the time the original decision was handed down in August 2011 and when that decision was upheld on appeal in August 2012. That does not negate the original actions on the part of Argus/BPPower. Both the U.S. District Court and Federal Circuit Court of Appeals found that Argus willfully infringed patented Midtronics technology, meaning that Argus was not only aware of our patent rights, but chose to deliberately ignore them.

“As part of the judgment and based on the court’s findings regarding “defendants’ willful infringement and recklessness of their litigation conduct,” Argus and BPPower have been ordered by the court to pay Midtronics’ legal fees and other litigation costs arising from the original case and its appeal, which now total more than $1.2 million.

“The Argus statement dated September 11, 2012 misrepresents the findings of the courts and the facts of this case. The Argus press release references a BPPower patent that Argus claims to utilize in their products. Midtronics has never shown any interest in that patent and it was never an issue in this case.

“Midtronics currently holds more than 100 active patents in battery analysis, charging, and management technology that the company will continue to vigorously defend against infringement when warranted.”

Editor’s Note …

We make no judgment regarding the veracity of either company’s claims. That’s for legal professionals to determine (if necessary), and we certainly are not experts on the law. We do feel that Argus makes a bold argument, as does Midtronics, and both companies should be given a venue in which to be heard.

 

Automotive Service & Repair Week Briefs

Mechanical Management Symposium: This year’s Automotive Service & Repair Week (ASRW) will include a new event designed for mechanical shop owners called the Mechanical Management Symposium (MMS). This six-hour education program is scheduled for Wednesday, Oct. 10. Tickets for the MMS are included in the purchase of a Super Pass or can be purchased individually online or on-site for $175.

NASTF Annual Meeting: The National Automotive Service Task Force (NASTF) will, once again, hold its annual meeting during ASRW. The meeting will run from 1:00 pm to 4:30 pm on Saturday, Oct. 13. The agenda for the meeting includes presentations by the Renewable Fuels Association, AASA and a number of NASTF committees. It is open to all ASRW participants, both attendees and exhibitors. Registration is available online at www.ASRWevents.com. Seating is limited.

CARS 2012: Event organizers are reporting that the size of this year’s Congress of Automotive Repair & Service (CARS) will be 73 percent larger in terms of square footage when compared to CARS 2011. CARS is the show held during ASRW dedicated specifically to mechanical service and repair professionals.

Keynote Address: Business turnaround expert Dick Cross will deliver the keynote presentation — titled “Unlock Your Hidden Greatness” — at the opening general session scheduled for 8:45 am to 10:00 am on Thursday, Oct. 11. He will elaborate on concepts from his new release, “Just Run It! Running An Exceptional Business Is Easier Than You Think.” Tickets for the opening general session are included in the purchase of a Super Pass, or are $35 if purchased individually and may be purchased online or on-site in New Orleans.

NACE 2012: This year marks the 30th annual NACE show. Event organizers plan to recognize the 11 companies and the four attendees that have participated in all 30 shows. The four attendees who have attended all 30 NACE events are Jack Caldwell (honorary designation), Jerry Kottschade, Kathy Moyer and Chuck Sulkala. The 11 exhibiting companies are ABRN, ASE, Audatex, Automotive Service Association/Auto Inc., BodyShop Business, Car-O-Liner, H&S Autoshot, I-CAR, Mitchell, Pull-It and Steck Manufacturing.

 

Zafco’s Martino Tire Selects Vast Enterprise

The Martino Tire Co. will deploy the Vast Enterprise point-of-sale and management system from the MAM Software Group.

Founded in 1959, Martino is billed as the largest Goodyear dealer serving central and south Florida, providing a variety of tire and auto services. Historically a family-owned business, the company was recently acquired by Zafco Retail, a global tire and automotive organization headquartered in the United Arab Emirates.

Zafco’s expansion plans for Martino includes the addition of a commercial warehouse and seven retail stores in 2013. Martino expects to add an additional 27 retail stores and three warehouse locations by 2015.

 

Sky Blue Adds Disinfecting, Cleaning Items To Its Offering

Sky Blue Industries now offers Excelyte disinfecting solution and Catholyte Zero cleaning products from Integrated Environmental Technologies Ltd. (IET). Sky Blue is a manufacturer and distributor of chemicals and provides services to various transportation and auto care businesses. Its customers include auto and truck rental fleets, transport carriers, transportation maintenance facilities, car dealerships and fast-lube shops. Sky Blue primarily distributes products in Utah, Idaho, Nevada, Wyoming and Montana.

David LaVance — the chairman, president and CEO of IET — said there is a “tremendous opportunity” for Excelyte and Catholyte Zero throughout these industries, ranging from the cleaning and disinfecting of passenger cars to the cleaning and disinfecting of long-haul trucks.

Steven Griffin, president of Sky Blue, added that the growth in bacteria and virus outbreaks has created the need to disinfect automobiles and trucks, especially those vehicles that are rented to the general public and those involved in produce and food hauling. “The Excelyte and Catholyte Zero solutions allow us to offer our customers an effective, non-toxic, environmentally responsible alternative to hazardous chemicals traditionally prevalent in commercial use.”

 

Ashland Consumer Markets Hires Global Brands VP

Heidi Matheys has joined Ashland Consumer Markets as its vice president of global brands. She is responsible for leading brand management, strategy, marketing and consumer research for the Valvoline family of branded products, which includes Valvoline NextGen motor oil. Matheys reports to Sam Mitchell, senior vice president and president of Ashland Consumer Markets.

Matheys most recently was senior global marketing director of Dailies Total 1 at ALCON, a Novartis company, where she was responsible for brand development and the global product launch. Matheys’ background also includes account management at Young & Rubicam Advertising on the Lincoln Mercury business, as well as media buying and planning for a number of automotive dealers and associations at Graham Advertising.

 

Q2 Parts & Service Results For Major Auto Dealer Networks

Nearly all of the publicly traded dealership groups posted higher year-over-year parts and service sales in the second quarter of 2012. The only exception was the Asbury Automotive Group.

Click here to see the chart.

 

New Mopar Operations In Australia, Japan, Russia

After opening Mopar facilities in Argentina, Brazil, China and the United Arab Emirates, the Chrysler Group and Fiat have added Mopar parts distribution centers (PDCs) in Australia, Japan and Russia.

The 107,640-square-foot facility PDC in Port Melbourne, Australia will distribute parts to nearly 75 dealer locations. The 118,400-square-foot warehouse in Japan is located in Yokohama and will support 145 outlets. In Moscow, a 48,440-square-foot facility will distribute parts to nearly 140 dealers.

Mopar has more than 50 distribution centers worldwide.

 

Nissan Picks SiriusXM For Telematics Services

Nissan North America is the first car company to launch a new range of telematics services from Sirius XM Radio that includes emergency support for accidents, stolen vehicle tracking, and roadside assistance, as well as audio entertainment. “Offering telematics services is a logical next step for SiriusXM, building on our advanced in-vehicle technological capabilities, subscriber management expertise, and proven experience providing national service to drivers,” said SiriusXM CEO Mel Karmazin.

 

New Executive Director For Car Connectivity Consortium

Nokia veteran Alan Ewing is the new executive director of the Car Connectivity Consortium (CCC), a global collaboration working to develop smartphone-based connected-car technology. Its members have created MirrorLink, a technology standard for controlling a nearby smartphone from the steering wheel or via dashboard buttons and screens. CCC members include automakers, smartphone manufacturers and aftermarket consumer electronics vendors.

 

Auto Affordability Improved In Q2

The purchase and financing of an average-priced new vehicle took 22.9 weeks of median family income in the second quarter of 2012, according to Comerica Bank’s Auto Affordability Index. Consumers on average spent roughly the same amount on new cars in the second quarter of 2012 as they did in the first quarter.

“Auto affordability improved by 0.3 weeks of median family income, but that was not enough to boost auto sales in the second quarter of 2012,” explained Robert Dye, chief economist at Comerica Bank in Dallas.  “Tepid job creation and slow-to-moderate income growth in the second quarter weighed on retail sales, even though interest rates remained near historic lows.

“Households may be feeling better about unleashing their pent-up demand for automobiles in the third quarter, with August light vehicle sales rising to a 14.5-million-unit annual rate.”

 

California Will Be The Dominant Plug-In Electric Vehicle Market

According to a new report from Pike Research, the state with the highest plug-in electric vehicle (PEV) sales over the remainder of this decade will be California, followed by New York, Florida, Texas and Washington. Additionally, between 2012 and 2020, nearly one in every four PEVs sold in the United States will be sold in California, the report concludes.

 

News Briefs 10/3/12

Universal Technical Institute (UTI) says it has laid off roughly 50 employees nationwide, reducing its total headcount to approximately 2,200 employees. According to management, the moves were made to “better align our cost structure with our lower average student population.”

The Car Care Council reminds businesses that they can add a link to the council’s free customized service schedule and e-mail reminder service to their websites as a customer resource. October is Fall Car Care Month.

Matco Tools is raising money to support Susan G. Komen for the Cure. Through September 2013, for each product purchased from a list of selected items, the company will donate 15 percent of the sale — with a guaranteed minimum donation of $100,000 — to the breast cancer research and awareness group.

Service King Collision Repair Centers has purchased Express Autobody, a collision repair center in Georgetown, TX. This gives Service King its 50th location in the state and its sixth in the Austin marketplace.

AutoBody America, a Nashville-based collision repair operator, has opened its 20th location in the Mid-South, establishing its first shop in the Knoxville market.

• GEICO’s new smartphone application now allow users to request a range of emergency roadside assistance services, including jump-starting a dead battery, changing a flat tire and calling for a tow.

 

Event & Trade Show Briefs 10/3/12

• The Automotive Training Managers Council (ATMC) will hold its annual reception from 5:00 pm to 6:30 pm on Oct. 31 at the Sands Exposition Center in Las Vegas during Industry Week. All people with an interest in training can attend. During the reception, ATMC will honor the winners of the 2012 National Excellence in Training Awards.

ASA Automotive Systems (formerly ASA Tire Systems) says that that its 15th annual InfoExpo Conference drew more than 130 attendees. The event was held Sept. 9-12 in Tucson, AZ.

 

People Watching 10/3/12

Tire Group International (TGI) has appointed industry veteran Bill Hirst as the vice president of program sales for its domestic division. Hirst previously spent eight years at TBC Corp. as the executive vice president of sales for key brands such as Sumitomo. Prior to that, he spent 10 years as a vice president of sales and marketing at Treadways Corp.

Michael Makowsky of Oakville, CT is the Mitchell 1 “Educator of the Year” for 2012. Makowsky has been an automotive instructor at the Porter & Chester Institute in nearby Watertown for six years. His career background includes time working at various Chevrolet dealerships over 35 years.