Gen 3 Common issues we are now seeing

[GordoJay]

But not to get too far off topic, the real reason I am responding to this post is the completely false narrative that many people push about the service department making less money on warranty repairs. In fact, it is quite the opposite. Ford dealers operate on a negotiated labor rate which is GENERALLY, though not ALWAYS a higher labor rate than customer pay door rate. What happens is as the market adjusts and dealers increase their customer pay door rate, they can do a labor study and Ford will increase their warranty labor rate ABOVE the average customer pay door rate. Most of the time the service department is operating at this higher warranty labor rate until the market adjusts again and the customer pay door rate increases at which time they can perform another labor rate study.

Two questions. One, is this up-to-date information? Two, I heard that FMC recently dropped the number of hours reimbursed to dealers for repairs. By a lot. Which would reduce the amount reimbursed because that's the rate times the time. If time is small, the hourly rate could be very high and the reimbursement still stingy. Do you know anything about that?

 

[Keith88]

I know this is sort of off topic and an older post, but I was just reading through this thread and had to chime in on this, almost every aspect of this post is false.

At some level, the service department does create more profit for the dealership, but from an owner/dealer principal perspective the revenue generated from the service department goes towards what they call "service absorption" which is in a nutshell, the profit generated by the service department goes towards overall dealership operating expenses. 100% service absorption means the service department's gross covered all of the operating expenses of the entire dealership, therefore whatever sales generates is operating profit.

But not to get too far off topic, the real reason I am responding to this post is the completely false narrative that many people push about the service department making less money on warranty repairs. In fact, it is quite the opposite. Ford dealers operate on a negotiated labor rate which is GENERALLY, though not ALWAYS a higher labor rate than customer pay door rate. What happens is as the market adjusts and dealers increase their customer pay door rate, they can do a labor study and Ford will increase their warranty labor rate ABOVE the average customer pay door rate. Most of the time the service department is operating at this higher warranty labor rate until the market adjusts again and the customer pay door rate increases at which time they can perform another labor rate study.

Once people understand that warranty actually pays the dealer MORE than customer pay door rate, the rest of the narrative (dealers don't want warranty work, dealers would rather deny warranty repairs, or simply not performing warranty repairs "pumps up the profit margin") completely falls apart.

I can also tell you that in the 23 years Ive been in dealerships professionally at several different positions, the way service departments and service advisors operate have changed dramatically in the last 5-10 years. Now the almighty survey is king at a dealership. I personally know that most Ford dealerships (not all) would rather lose a few dollars here or there than to get bad surveys. Too low a CSI score can actually cost the dealership tens of thousands of dollars PER MONTH. One way to **** off an owner/dealer principal? Hit their personal income for $50,000 one month because the service advisor tried to sell "unnecessary" services too many times.

Times have changed, opinions like this seem to stick around but dealerships that operate to "rip off customers" don't stick around long anymore. Everyone is learning how to change and adapt to the increase amount of information out there. Service personnel are either embracing it or moving on.


Sorry for the long winded post and Im not personally attacking you, but part of my job is dealing with misinformation like this in my community and I feel the need to correct it when I see it.

-Joe

EXACTLY. CSI scores can make or break you. anything less than a9 or 10 and youre screwed.

 

[FordTechOne]

Two questions. One, is this up-to-date information? Two, I heard that FMC recently dropped the number of hours reimbursed to dealers for repairs. By a lot. Which would reduce the amount reimbursed because that's the rate times the time. If time is small, the hourly rate could be very high and the reimbursement still stingy. Do you know anything about that?

My experience has been that the warranty labor rate/hour is lower than CP door rate, but that varies by state and dealer. One thing that has not changed though is that the fixed ops (parts & service) makes the majority of money for the dealership. Not only are they billing the manufacturer for the hourly rate, but they have a parts markup allowance as well. So let’s say the dealer is following the service message to diagnose and replace shocks on a Gen 3 for a noise complaint. They get paid diagnosis time, book time for R&I, and then parts markup, which for a Gen 3 shock at a cost of $1500, means they bill it back to warranty at $2250 factoring in a 50% markup.

As far as the labor times themselves, there was never a decrease across the board. The times are determined by service labor time studies, which are based on an experienced technician with the proper tools on an unmodified vehicle. If the vehicle has been commercially upfitted or if there is corrosion that results in a broken fastener/component, the technician can claim “M” (straight) time to be compensated for the additional work. Sometimes labor times are reduced when they are part of a TSB because it’s considered a “directed repair”.

Regardless of all that, technicians in general get the short end of the stick. They are paid like a contractor (billable hours), but at the hourly rate of a direct hire employee. They’re expected to do all of the paperwork and parts ordering associated with the job without compensation. The dealer pays flat rate book time regardless of the inadequacies of their shop or equipment, logistical issues, capacity limitations, etc. and many will highly discourage “M” time for the fear of an audit. What other profession is an employee required to buy $100k worth of their own tools to make money for someone else while not being compensated for the actual time it takes to properly do their job? And therein lies the reason that Dealer Principals own private planes and yachts while the massive technician shortage only gets worse, and will continue to unless the entire compensation package and job requirements are overhauled completely.

 

[sc85fiero]

My experience has been that the warranty labor rate/hour is lower than CP door rate, but that varies by state and dealer. One thing that has not changed though is that the fixed ops (parts & service) makes the majority of money for the dealership. Not only are they billing the manufacturer for the hourly rate, but they have a parts markup allowance as well. So let’s say the dealer is following the service message to diagnose and replace shocks on a Gen 3 for a noise complaint. They get paid diagnosis time, book time for R&I, and then parts markup, which for a Gen 3 shock at a cost of $1500, means they bill it back to warranty at $2250 factoring in a 50% markup.

As far as the labor times themselves, there was never a decrease across the board. The times are determined by service labor time studies, which are based on an experienced technician with the proper tools on an unmodified vehicle. If the vehicle has been commercially upfitted or if there is corrosion that results in a broken fastener/component, the technician can claim “M” (straight) time to be compensated for the additional work. Sometimes labor times are reduced when they are part of a TSB because it’s considered a “directed repair”.

Regardless of all that, technicians in general get the short end of the stick. They are paid like a contractor (billable hours), but at the hourly rate of a direct hire employee. They’re expected to do all of the paperwork and parts ordering associated with the job without compensation. The dealer pays flat rate book time regardless of the inadequacies of their shop or equipment, logistical issues, capacity limitations, etc. and many will highly discourage “M” time for the fear of an audit. What other profession is an employee required to buy $100k worth of their own tools to make money for someone else while not being compensated for the actual time it takes to properly do their job? And therein lies the reason that Dealer Principals own private planes and yachts while the massive technician shortage only gets worse, and will continue to unless the entire compensation package and job requirements are overhauled completely

The warranty rate should not be lower than the customer pay door rate, as I stated above it CAN happen if we experience a high rate of inflation and the dealer increases the door rate before the annual warranty labor rate index increase. Additionally, the last few years Ford has made an option for dealers to receive an automatic warranty rate index increase without having to perform the customer pay labor rate study.

Ford sets the annual AUTOMATIC increase at CPI (consumer price index) plus .5% meaning an increase of 5.0% CPI would yield the dealer a warranty labor rate increase of 5.5%. The number can be even higher if the dealer chooses to perform a manual study.

-Joe

 

[G2G3Iconic]

My experience has been that the warranty labor rate/hour is lower than CP door rate, but that varies by state and dealer. One thing that has not changed though is that the fixed ops (parts & service) makes the majority of money for the dealership. Not only are they billing the manufacturer for the hourly rate, but they have a parts markup allowance as well. So let’s say the dealer is following the service message to diagnose and replace shocks on a Gen 3 for a noise complaint. They get paid diagnosis time, book time for R&I, and then parts markup, which for a Gen 3 shock at a cost of $1500, means they bill it back to warranty at $2250 factoring in a 50% markup.

As far as the labor times themselves, there was never a decrease across the board. The times are determined by service labor time studies, which are based on an experienced technician with the proper tools on an unmodified vehicle. If the vehicle has been commercially upfitted or if there is corrosion that results in a broken fastener/component, the technician can claim “M” (straight) time to be compensated for the additional work. Sometimes labor times are reduced when they are part of a TSB because it’s considered a “directed repair”.

Regardless of all that, technicians in general get the short end of the stick. They are paid like a contractor (billable hours), but at the hourly rate of a direct hire employee. They’re expected to do all of the paperwork and parts ordering associated with the job without compensation. The dealer pays flat rate book time regardless of the inadequacies of their shop or equipment, logistical issues, capacity limitations, etc. and many will highly discourage “M” time for the fear of an audit. What other profession is an employee required to buy $100k worth of their own tools to make money for someone else while not being compensated for the actual time it takes to properly do their job? And therein lies the reason that Dealer Principals own private planes and yachts while the massive technician shortage only gets worse, and will continue to unless the entire compensation package and job requirements are overhauled completely.

"What other profession is an employee required to buy $100k worth of their own tools to make money for someone else while not being compensated for the actual time it takes to properly do their job?"
Pretty much every health care provider in America that owns their own business, with Insurance serving basically as an employer (they set the terms of the work).

 

[FordTechOne]

"What other profession is an employee required to buy $100k worth of their own tools to make money for someone else while not being compensated for the actual time it takes to properly do their job?"
Pretty much every health care provider in America that owns their own business, with Insurance serving basically as an employer (they set the terms of the work).

Well that’s a business owner, so the equivalent would be the owner of a service facility. Technicians are expected to invest in equipment at an owner level while having no equity in the business.

 

[G2G3Iconic]

Well that’s a business owner, so the equivalent would be the owner of a service facility. Technicians are expected to invest in equipment at an owner level while having no equity in the business.

Fits better than you think. A health care provider really has no say in the policy dumped on them by the insurance company. A service facility owner gets to set the terms of service delivery. Insurance companies set the terms of service delivery from a procedural and financial standpoint, with no windfall from MASSIVE insurance profits. So in that regard it is a better comparison than you understand.

 

[FordTechOne]

Fits better than you think. A health care provider really has no say in the policy dumped on them by the insurance company. A service facility owner gets to set the terms of service delivery. Insurance companies set the terms of service delivery from a procedural and financial standpoint, with no windfall from MASSIVE insurance profits. So in that regard it is a better comparison than you understand.

I believe that. However, the technicians do not own the service facility, that is the differentiation. They have zero equity in the business. Unless I’m unaware, the employees of a Healthcare provider do not need to invest $100k of their own money in equipment to do their job.

 

[GordoJay]

I believe that. However, the technicians do not own the service facility, that is the differentiation. They have zero equity in the business. Unless I’m unaware, the employees of a Healthcare provider do not need to invest $100k of their own money in equipment to do their job.

Yup. Most docs have gone from owning a practice to punching a clock.

 

[Mallon3194]

Just and update on my part for anyone going through the same issues, buy back has been approved! Only took around 3weeks to here back!