In September 2015, AutoNation CEO Mike Jackson announced that AutoNation would discontinue selling any vehicles – new or used – with open recalls. This new policy includes not just those vehicles intended for retail, but also vehicles headed to wholesale buyers. The decision, while admittedly costly, is one that Jackson believes is the right decision as consumers buying vehicles from dealers are typically under the impression that all recall work has been completed and that they won’t have to worry about exploding airbags or bad ignition switches. This policy was extended to all 237 AutoNation stores. At that time, Jackson implored all dealerships to join in this movement and hoped that it would become an industry standard.

According to Jackson this new policy affected about 16 percent of the vehicles within AutoNation’s entire inventory across all dealerships. The next move was to replenish their inventory. AutoNation went on a mission to acquire 10,000 used vehicles to replace the dormant ones that had been taken out of their stores’ inventories while awaiting recall repair work. Of course, acquiring so many vehicles meant getting aggressive at auctions and other vehicle acquisition channels. The result is a decline in available used car inventory while prices paid to obtain front-line ready units by dealers outside AutoNation dealerships has increased.

Arguably, because of its size, AutoNation has the financial means to ground a good percentage of their vehicles, while many smaller franchises or groups may not. Having to sit on vehicles for an undetermined amount of time can be a scary proposition for dealers, and very costly. Should other dealers follow AutoNation’s lead, it could also affect the value offered to customers on trade: if, upon appraisal, the trade-in is found to have an existing open recall.

Perhaps this is why the industry as a whole hasn’t embraced Jackson’s vision. That vision, however, may be about to provide AutoNation a unique selling proposition and they are betting it will. Starting in March, in combination with a charitable campaign for cancer research, AutoNation is planning a $10 million campaign to raise public awareness that no AutoNation store will sell any vehicle with any open recall – even if that recall is something as minor as an outdated owner’s manual.

Recalls are a huge deal for consumers. They represent real – and in some cases life threatening – danger. The simple knowledge that, at least for now, the only dealerships in the country that will guarantee any vehicle purchased from them has no open recalls may just provide AutoNation with a competitive advantage. Will it force other dealers to follow suit? Or will AutoNation continue to build its brand image using the most important factor that oftentimes makes a consumer choose one dealership over another – trust? Only time will tell.

My hat is off to you, Mr. Jackson.

Automotive recalls present an opportunity to maintain and improve dealer and brand integrity while winning back lost customers and attracting new customers that typically do not service at a factory-certified dealer. Historically, however, recalled vehicle owners have been viewed as a nuisance by dealership personnel. They can at times be frustrated and emotionally volatile; too demanding and unwilling to spend money on additional repairs identified through a multi-point inspection. Many end up leaving negative responses on CSI surveys, even when they were treated well by the dealership. They are perhaps annoyed by the inconvenience of the recall in the first place.  It’s no wonder that many dealers avoid these customers altogether. Or, just try to move the through their store as quickly as possible without disrupting normal operations or other, happier customers.

Recall customers can be a little more emotional than your regular customer. Many have been inconvenienced, are irritated, upset and even scared. So, naturally, they need a little more hand holding.

Many of these customer desperately need their vehicle to be in good working order. These vehicles are often their lifelines -- they get them to work, shuttle their kids to school and run all of the various errands necessary to provide for their families. When unexpectedly confronted with a major disruption in their lives, such as an inoperable, or perhaps dangerously unsafe vehicle, it can easily trigger unwanted emotions that can then be taken out on you, the dealer.

However, while these customers may begin your relationship in a controversial and emotional manner, if handled properly, they can very easily become some of most loyal and profitable customers.

The key to gaining the trust and business of these – at times – difficult customers lies in handling them properly. And that usually requires a little training. But it is well worth educating service personnel, BDC reps, salespeople, and even the receptionist on how to properly handle any recall customer communications – be they by phone, email or in person. It is the very first step in transforming the customer experience of a recall customer.

Consider this idea: build a “Recall Department” within your dealership with employees especially trained at handling owners with vehicles subject to recall work. The recall department will save your CSI by providing exemplary service and recall consultation. It will also quickly pay dividends through increased customer pay revenue from repair upsells and vehicle sales from service. Recall customers are a wonderful source of additional service revenue AND vehicle sales – if handled correctly.

Rolling out the red carpet for these consumers can greatly increase your penetration in your local market and win valuable customers for life.

So, what do you think about this as a way to help your dealership capitalize on its share of the $16.5 billion warranty and customer pay revenue opportunity that the 47 million recalled vehicles represent?

Very few sales managers would punish a salesperson upon receiving a complaint that they are calling, e-mailing or texting a customer too much. In fact, after assuring the customer that they will have the salesperson stop, that sales manager will probably follow up by giving the salesperson a high five. And, to ensure this communication can happen, most dealerships lay down quite a bit of cash for technology and tools that increase the chances of reaching a potential buyer. They have CRMs, cell phones, chat services and texting capabilities. However, despite all of this technology, there is one area in many dealerships that tends to fail at effective communication with customers. And that is in the service department.

Communication with customers doesn’t start and stop in sales. In fact, it’s even more important to communicate with the customer post-sale -- service revenue may be the only revenue stream you see from that customer for the next three years or so. 

Communication is the key to building customer loyalty and trust and to ensuring that the customer has a good experience. Why force the customer to continuously contact the dealership to inquire about the status of their vehicle when you could proactively notify them via e-mail, text, or whatever method of contact they prefer? Service advisors certainly get frustrated when they can’t get a hold of a customer to discuss service recommendations. And, a customer can get just as frustrated from a perceived lack of communication on behalf of the dealership.

Communication should start from the moment the customer pulls into the service drive. Try to make the experience a good one the moment the customer arrives. I know things can get busy out there. But, customers that are made to wait to be greeted, or that are brushed off by a busy advisor, begin their experience at that dealership on a sour note. If the service drive is really so busy that it’s difficult to greet every customer in a timely manner, it may be wise to consider installing a service greeter in the drive during your busy times. Once that customer has been greeted and consults with a service advisor, ask how they would like the dealership to communicate the results of the vehicle inspection and the status of their repair to them.

This is especially important when dealing with recall repairs, as these customers are more likely to be irritated and upset to begin with. A soft touch, reassurance, and some hand-holding will go a long way to transform an upset customer into a repeat one.

With an estimated 47 million vehicles subject to some recall or another, it’s highly likely that you will see quite a bit of recall work in the foreseeable future. Take the time to truly be attentive to customers. Utilize technology to regularly reach out to and communicate with your customers. When your customers are in the dealership, pay attention and make it a great experience. Your customers will be more responsive when you need them and appreciate you more. And, then you can perhaps turn that recall work into future customer pay and more lucrative opportunities.

Today’s cars come with very sophisticated technology, including live navigation with traffic and obstacle reports, collision avoidance systems, cell phone integration and wireless connectivity. Automakers are now investigating how they can leverage this technology to communicate any vehicle issues to vehicle owners. The OnStar system already reports vehicle concerns. These are collected from the vehicle itself and relayed via e-mail to both the owner and the dealership. These reports serve as a warning device to vehicle owners that their vehicle needs attention. Typically, these notifications revolve around regular maintenance, triggered by odometer readings, tire inflation pressures and other common indicators. But what if these connected cars could actually serve as notification centers? Or, better yet, receive actual updates to correct problems? The answer is -- they can. Tesla already does this.

One of the biggest challenges in implementing a recall is identifying and notifying vehicle owners. Manufacturers and dealers do send notifications. However, the sad fact is that frequently these are delivered to a previous owner; thrown in the trash unopened; or are viewed with skepticism by consumers. Some even believe the recall notice is simply a trick to get them into the dealership just to be upsold on additional services.

Just as a vehicle’s “check engine” light notifies consumers that there is an issue which needs addressing, the vehicles of today could apparently be equipped with some sort of integrated notification method that manufacturers could push to the vehicle when a recall is issued. Since the message is actually pushed to the vehicle itself, it should then reach the current owner.  We all know how irritating it is to constantly see warning lights on the vehicle console. One would think that consumers would take note and, at the very least, visit the dealership to diagnose the problem.

A recent article in Digital Trends states that this is in fact possible. Automakers are actively investigating how to implement this technology while ensuring that data security measures are in place. According to Colin Bird, a Senior Analyst for IHS Automotive, the ability for manufacturers to notify and/or push updates to vehicles could have significant benefits for automakers including reduced warranty costs, an increase in overall completion rates and improved customer satisfaction. The article states that this could in fact add up to an estimated $2.7 billion savings, and up to $35 billion by 2022, using estimates of over 152 million connected cars sold globally.

It’s all but certain that this feature will roll out as vehicles get more connected. While it’s one thing for a vehicle’s computer system to report tire pressure and trigger regular maintenance notifications, it’s quite another for that computer to detect a cracked hose, or a problem with the braking system. That being said, in time, it seems that all of a vehicle’s components will be monitored and we will have the ability to detect issues before they become major concerns. Of course, data privacy concerns and data encryption to prevent vehicle hacking are topics that will have to be addressed before this type of system is rolled out on a large scale. However, it would seem that this notification system integration could help ensure that all owners of vehicles affected by recalls are notified and would perhaps be more likely to take heed. It’s not quite so easy to throw your vehicle technology into the trash as it is a mail piece, or to ignore warning lights. So, consumers could well be more motivated to visit their dealer to correct whatever issues are present.

If you’re a dealer, no doubt you’ve heard all the buzz concerning recent legislation and regulations about vehicle safety and recalls. Consumers are scared and politicians are responding. With a record number of recalled units over the past 18 months, it’s no surprise that this is a hot topic of discussion and that action is being taken.

Dealerships are certainly making efforts to repair recalls – especially the Takata airbag related ones – but lack of supplies are holding them back.  With AutoNation announcing that they will no longer sell any vehicles subject to recall repair, dealerships have been under pressure to follow suit, despite the financial hardship this is likely to create for smaller dealerships.

A recent Automotive News article reported that Chevrolet has now implemented a program that will reward its dealers for selling certain model vehicles. But, will also punish them for selling any vehicles with open recall repairs. Due to popular demand of crossover SUVs, Chevrolet has implemented a stair step incentive program for three core models – Cruze, Malibu and Silverado – in order to spur sales of these vehicles. This lucrative program promises to pay $1,000 per vehicle if a dealership sells at least one more of each model vehicle than they had in the previous year. This will certainly motivate Chevrolet dealers to push these sales, as high volume dealers could see six-figure bonuses at the end of the year.

With rewards, however, comes a catch. Chevrolet tied stipulations into these bonuses stating that dealers who sell unrepaired vehicles subject to recalls will forfeit any bonus money, calculated by a percentage of sales. Automotive News states as an example, “a dealer who was found to have sold two recalled vehicles from a total of 100 for the month would lose 2 percent of the bonus.”

With the high volume of recalled vehicles, there’s no telling how many vehicles subject to recalls are sitting on lots unrepaired. Dealers naturally focus on completing repair work for their existing customers. So, to now essentially have to compete with themselves for needed parts, may present dealers with a quandary: Do they use these parts to make a new vehicle ready for retail, or do they use them to fix a customer’s vehicle? The priority should be replacing a vehicle that is on the road. This makes the roads safer not just for the driver – but for everyone.

This move by Chevrolet may spark similar moves by other manufacturers. It may be a way for manufacturers to convince legislators that they are taking steps to self-regulate, which could pre-empt any formal legislative actions.

Regardless, we’re certainly seeing a greater emphasis on recall repair completions and some teeth being put behind it by at least one major manufacturer. It will be interesting to watch this unveil and, hopefully, will work out in both the dealer’s and the manufacturer’s favor.

Dec 23 was a sad day, indeed. A young man driving a 2001 Honda Accord was killed in an accident when his recalled Takata airbag shattered and he was fatally injured. Honda had previously made two attempts to contact and inform the original owner of the vehicle. When the car was sold to a second owner last July, Honda then sent a notice to the new owner. Honda also sent a second notice to the new owner, just the day before the accident.

Honda certainly did what it could to inform the owners. Perhaps they received the notices and discarded them. Maybe they didn’t open them at all. Or, it could be that the two owners did get the notices, opened them and simply chose not to take the time to have the work completed. We’ll never know. The sad fact is that a young man died.

The retail auto industry is really about two things – providing consumers with all the assistance they need to buy a new (or new to them) vehicle; and ensuring that the vehicles they own are roadworthy and safe to drive. And we do those things great.

However, the sad fact is that there are plenty of misperceptions about our industry in general. In fact, car dealerships (or car salespeople specifically) landed just under politicians in trustworthiness in a Gallup poll. Despite what may or may not have contributed to this stereotype in the past, this is far from the truth as far as most dealerships are concerned. There are so many great dealerships that strive to treat customers right; that are pillars of their communities; and that truly care. They far outweigh the minority who cling to that old school car mentality.

Every recall repair a dealership completes helps make that community’s roads just that much safer. Did the original or secondary owners of the Accord receive any notifications or outreach from their local dealers? Who knows – But, just as in television and radio commercials, it takes a minimum of a person hearing a message three times before they remember it.

Dealers are the good guys when it comes to recall repairs. The customers don’t have to pay a dime for the recall work. Do you get paid for it? Sure. But, from the customer’s viewpoint, you’re helping them have a safe mode of transportation.

Legislators are scrambling.  And, manufacturers obviously cannot do it by themselves. With the sheer volume of recent recalls, there is a certain level of “recall fatigue” among our consumers. They can get a little numb to the messages. We have to get a good clear message in front of these consumers, and do it enough times that they pay attention.

Make it a priority to contact and notify everyone in your market that needs recall repairs. Send high quality pieces that stand out and gain attention. Use multiple communications channels.  Instill a sense of urgency. Make it as convenient and easy as possible for your local community to complete the recall repair. And, let’s do this not because your dealership will make a few bucks; but because you’re helping make the roads safer for everyone.

A recent article in Automotive News highlighted a start-up seeking to help dealers offer loaner cars and delivery/pick-up services without the additional expense of staff. RedCap Automotive Technology is a concierge service that provides drivers in Uber-like fashion to dealers. Dealers who utilize RedCap’s concierge service are able to contact RedCap when a customer needs service. RedCap then arrives at the dealership, picks up the loaner car, takes it to the customer and returns to the dealership with the customer’s vehicle. When the service is completed, RedCap then returns the customer’s vehicle to the customer and brings the loaner car back to the dealership.

According to the article, dealers get more efficient use of their loaner car fleet as vehicles are returned faster because they no longer have to wait for a customer to finish their work day to return the loaner. In addition, it solves a major customer pain point of lack of time to bring in their vehicle. It also eliminates the need for the customer to wait. Automotive News reports that dealers using the service have experienced an increase in service revenue since customers are more likely to accept service recommendations over the phone, knowing that if they accept, they won’t be stuck waiting in the service lounge for an unknown period of time. Some dealers are even exploring ways to offset the service costs by selling it as a product through the F&I office.

Any time dealers can make it more convenient for a customer to get their vehicle serviced, they will see increased revenue and customer satisfaction. Another additional benefit I see is that it makes it easier for dealerships to schedule larger repairs and recall work at times that are convenient to the dealer. One of the biggest problems with the massive amount of recall work is availability of parts. And, once those parts arrive, the dealer must then track down a customer and schedule them to come in and get the recall work done -- which could be a week or more, depending upon the customer’s schedule. Dealers could use RedCap as a means to decrease the time between parts arrival and recall work completion. Now they can reach out to a customer and offer this delivery/pickup service at the dealership’s convenience. Since the customer experiences less disruption in their schedule, chances are pretty good that they will be more amenable to working on the dealership’s schedule, rather than finding a day and time that fits their schedule.

While RedCap is currently operating with just 50 retailers, it does plan to expand into several thousand stores in 2016. It’s certainly a valuable service for dealers to consider, and could be a great way to provide a better customer experience. It should certainly lead to greater customer flexibility as far as scheduling. It could also help decrease the lag time between parts availability and recall work completion. That’s a win-win for the customer, the dealer, and even the OEM!

In a newly released report conducted by J.D. Power and commissioned by the National Automobile Association, trade-in value reduction due to proposed legislation could have significant financial impact on both dealers and consumers. The “Used Car Safety Recall Repair Act” will prevent dealers from retailing vehicles with any open recalls. This could cause dealers to be hesitant in their trade-in valuations due to unknown recall repair delays in the future. Dealers forced to wait for a recall repair would undoubtedly assign trade-in values at a lowered amount, simply due to having to hold on to the vehicle. The study analyzed trade-in value reductions from recall initiatives that originated in 2014. The average trade-in reduction across the board was $1,210, factoring in both in and out-of-brand trade-ins. However, it was noted that vehicles with recall repair delays exceeding 90 days could experience a trade-in value decrease of up to $5,290 for in-brand dealers, and $5,713 for out-of-brand dealers. Recall repairs with delays exceeding 90 days accounted for 69 percent of vehicles traded in with open recalls during the time period of the study.

Were this legislation to pass, it could have a huge impact on sales in general. Consumers might be hesitant to accept trade-in value reductions and choose to wait until the repair is completed prior to trading in the vehicle, costing a dealer an immediate sale. Dealers could also be forced to sit on vehicles, which could be a financial burden. Surveyed dealers reported “less willingness to purchase an out-of-brand trade-in compared to an in-brand trade-in when faced with a repair mandate and a repair delay of unknown length,” according to the study. This legislation would also reduce the amount of available pre-owned vehicles available, which in turn would increase auction values and vehicle pricing to consumers, due to simple supply and demand economics. Pre-owned vehicle sales are typically more profitable than new vehicle sales as dealers have more control of their profit margins and back-end products such as warranties can be an easier upsell.

There’s little doubt that the safety of consumers is the primary motive of the legislation. That being said, dealers are making efforts and completing recall repairs as efficiently as possible, as parts become available and consumer awareness efforts increase. The ripple effects this legislation may cause would almost certainly have an enormous financial impact on the automotive retail industry as a whole. Perhaps the solution isn’t to force dealers to sit on inventory, but rather to shift the focus away from sales and towards increased production and availability of parts needed to complete open recalls. This would allow dealers to complete open recall repairs faster, which would reduce the trade-in aversion some may experience. Whether or not this would accomplish the stated intent of the legislation is unknown. But one thing is certain -- this legislation could certainly negatively impact our industry.

Unless you’ve been in hibernation for the past few weeks, you’ve undoubtedly been barraged with news and opinions about the VW Recalls. Regardless of the intent of Volkswagen, it’s quite fascinating to observe the polarizing reactions by owners of the diesel engine carrying cars. No doubt the government regulators are going to compel Volkswagen to fix all of the vehicles. It’s possible that we could see a buyback. Ultimately though, there’s a battle going on. It’s not quite the battle you would think, however. I’m not here to rehash any of the many arguments regarding Volkswagen itself, but rather to relay an interesting dynamic that now exists in regards to these vehicles and the consumers who own them.

There were many consumers who bought these vehicles because they wanted to be more environmentally friendly without sacrificing power. Similar to electric and hybrid vehicle owners, these consumers wanted to feel as if they were making a difference in the world, however slight. As bonus, they were treated to some tax breaks and lower fuel bills. Chances are that there are plenty of these diesel owners who aren’t exactly thrilled now that it’s been revealed that rather than contribute to the health of the environment, they have actually been polluting it at up to 40 times higher than emissions standards. These consumers aren’t happy and many want nothing further to do with their vehicles.

In addition, diesel vehicles, which have historically held their resale value, are now seeing those values tank. According to an article in Wards Auto, values fell by as much as 7.9% vs. 3.5% for gasoline models.  The article told the story of a blogger in California who attempted to trade in a 2014 Jetta TDI with 14,000 miles on it and an MSRP of $30,550. CarMax offered him just $15,000. He tried to trade it in for another Volkswagen, and then a Subaru, and, according to the article, left feeling “treated like (he had) STDs.” The article stated that, logically, no dealer wants a bunch of trade-ins that they can’t retail. Makes sense to me.

Right now, there is this group of VW vehicle owners in the U.S. that want new vehicles. Dealers are hesitant to take in these diesel vehicles since they cannot retail them until the recall work is completed, or a buyback occurs. Given that the ultimate outcome is still unknown, it’s certainly logical to undervalue an undesirable trade-in.

Volkswagen has responded with the implementation of a guaranteed buy-back program for some 2.0 liter diesel engines, which offers dealers pre-crisis values for vehicles which can’t be sold within 60 days. This will certainly alleviate some concern from dealers. However, it’s possible that only dealers that can afford to hang on to vehicles for 60 days would be interested. Even so, a guaranteed buyback price would only be attractive if the dealer can take the car in below the buyback value, guaranteeing revenue whether the vehicle is retailed or sold back to VW. Regardless, this is a great move by Volkswagen to try and regain the trust of both their owners and dealers.

The one thing that I haven’t yet heard anything about is the incredible conquest opportunity this group of vehicle owners presents to other automakers. There’s no doubt in my mind that at least one OEM has had secret meetings discussing how to capitalize on this. Anytime you have a lot of people that want new cars, but need help getting there, a lot of creative minds start planning.

It will be interesting to see if any OEM (or dealer for that matter) decides to take the plunge and cherry pick this low hanging fruit.

While consumers regularly patronize independent repair facilities, dealers have always been able to rest assured that any recall repair work would remain in their hands. However, according to an article in Automotive News, that might be about to change. Seems as if the NHTSA is concerned with the speed at which dealerships can perform recall repairs - specifically ones involving the massive amounts of vehicles affected by the Takata airbag failures. Nationally, the recall repair completion rate sits at 22.5 percent, according to the article. With 19 million vehicles spanning 12 manufacturers that are subject to this replacement, the NHTSA is considering expanding recall repair services to include independent repairs shops. Of course, there are many challenges involved in making this effective, including the contractual obligation Takata has to only sell supplies to manufacturers. As well as manufacturers requiring that these repairs are completed at franchised dealers. These hurdles, however, could be trumped by a regulatory body concerned with expediting these repairs.

The concern here is that in allowing independents to perform this work, manufacturers have no control of the quality of the repair. In addition, this move could set a precedent that independents are included in future recall repair work, should this situation come to fruition. Perhaps this is one reason manufacturers are pushing dealers to expand their service departments so as to accommodate an increase in shop capacity. Either way, recall repairs – both large and small - are a staple of any dealer’s service department revenue. In giving independents the ability to perform recall repairs, the NHTSA would certainly be biting into revenue that dealership’s need to stay operational.

So what’s the solution?

Understandably, for the safety of consumer’s that own these vehicles, the regulatory body is focused on ensuring that they are repaired as quickly as possible. I’m sure that dealers would love to grab as much of this recall work as possible. However, many of the affected vehicles have gone through multiple owners throughout their lifespan –some are up to 10 years old. So, following a paper trail to identify their current owners is a challenge for the NHTSA.

If your dealership took the time and used resources to identify and reach out to these consumers through multiple channels, perhaps there would be an increase in the notification success rate. Then an action increase would follow (i.e. more customers coming in for the recall work) which could begin to alleviate the NHTSA concerns. In the end, all they really want is to expedite the completion of repairs. Take steps now to reach out to these owners. You’ll find that service revenue and sales opportunities increase. You could, perhaps, even help the automotive industry cut this unprecedented shift of recall repair work to independents.