Auto dealers are facing unprecedented pressure to invest in their facilities and want to quantify the return on that investment, Stephen Wade, chairman of the National Automobile Dealers Association said Thursday.
The NADA has commissioned an independent study to gather data on what dealers get for the millions they spend when automakers demand cookie-cutter dealerships across the country, reported The Detroit News.
The study, by independent consultant Glen Mercer, former partner of McKinsey and Co., started a few months ago. Results are expected in December.
"There is a real need for less financial pressure, not more," Wade said at an Automotive Press Association event in Detroit.
"And the timing is bad with the most pressure to invest at a time when dealers are least able to afford it," he said.
A big concern is factory-mandated "image" programs, he said, that set dealership standards, usually by brand, that dealers must meet.
It can cost millions to incorporate specific colors and materials for showrooms, display areas, lounges and service bays, as well as signs and overall appearance.
Wade said the demands often are "enough to convince people to leave the business, rather than make the investment."
Ford Motor Co., for example, has implemented new standards to denote Lincoln as a premium brand that may drive some rural dealerships, especially those which lost their Mercury franchises, out of business.
Chrysler Group LLC, in deciding which franchises to terminate during its corporate restructuring, included in the evaluation whether dealers offered all brands in a single facility with arches and a specific look for each marque. Chrysler also demanded standalone facilities for the Fiat brand.
Wade said many of these dealers feel they are acting on blind faith, investing now on promises of new vehicles down the road.
General Motors Co. began a major push in late 2009 to work with its dealers on revamping their stores to redefine each GM brand with a distinctive look.
Many automakers help dealers offset the cost with quarterly payouts for hitting sales, service and technology targets.
But dealers want economic data on whether the investment improves sales and customer satisfaction, Wade said, adding the findings will be of value to dealers and automakers alike.
Wade said NADA recognizes the need for standards, "but they should be realistic."
Dealers say financing for upgrades is tough to secure, and automakers can't guarantee a single additional sale because the new floor is a darker shade of gray, Wade said.
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