Today’s automotive climate is undergoing quite of bit of turmoil. Between chip shortages leading to decreased new car inventory and used car prices skyrocketing for dealers and consumers, dealers still have to fight for every dollar they earn. In doing so, they are forced to gravitate to used vehicles out of necessity.

The lack of new car inventory isn’t all bad news for dealerships. Due to older vehicles in the market for a longer time, shop capacity is maxed out. Service departments are working overtime to service their customers while also reconditioning used inventory as quickly as possible to ready these vehicles for sale. Walk into any service department today and you’re going to witness the frantic pace technicians have to operate in. While on pace for another year of record-breaking revenue, service department staff are overwhelmed, which can lead to pushing open recalls to the back of the pile with a disclosure and promise to fix.

Off-brand dealers are in a harder spot as they have to rely on a competing dealership to fix any recalls, which results in a disclosure to the buyer and instructions to take their newly purchased vehicle to the branded dealership to get the recall fixed. It's not the best introduction to a new customer, but vehicle safety comes first and it's the right thing to do. It's also the smartest thing to do, as your dealership is still legally liable under state product liability laws for selling any new or used car with an open recall. Recall disclosures only protect your dealership from state lemon laws, not product liability laws.

While it’s good news that recall completion percentages increased last year, the problem is an increasing number of recalls are announced daily. And the crux of the matter is that, as of right now, no law prohibits the sale of a used vehicle with an open safety recall.

Well, that could be about to change: Enter Jason Levine. Levine once held the position of executive director at the Center for Auto Safety. He left to become the acting director of the Office of Communications at the U.S. Consumer Product Safety Commission. He is an active voice in support of banning the sale of used cars with open safety recalls to consumers. His new position allows him even further authority and a voice in motivating the government to make this happen.

NBC News out of Washington reports that even the U.S. Government currently sells hundreds of vehicles with open safety recalls to a mostly uninformed public. The General Services Administration (GSA) has auction houses across the country where consumers can purchase cars directly. According to the NBC report, the GSA is simply offering disclosure to buyers. This appears to be in opposition to the recall compliance efforts manufacturers and dealers and currently encouraged to execute to ensure vehicles are safe to drive. Jason Levine was interviewed and stated, “Disclosure doesn’t fix the danger … generally speaking, when the government is selling you something, even if they’re disclosing it, there’s a general perception that it can’t be too dangerous.”

NBC News further reported that auction houses are selling hundreds of vehicles with serious open safety recalls which place drivers at risk. The National Highway Traffic Safety Administration (NHTSA) and the GSA are both government agencies. The former is charged with issuing safety recall notices and pushing manufacturers and dealers to increase recall compliance, while the latter is responsible for selling vehicles that are out of commission. It would seem that their current actions are at odds with their stated mission. Levine even called the GSA's action of selling used vehicles with open safety recalls hypocritical.

Dealers are currently stuck between a rock and a hard place. There isn’t enough new inventory to sell at the moment. They have to sell used vehicles to keep the lights on. Used car inventory needs to turnover fast and dealers may not have the luxury of waiting for an open safety recall repair. That assumes “safety” is a “luxury”, which it is not. If our industry uses the current lack of inventory as an excuse to sell dangerous vehicles to consumers, then expect consumer backlash when inventory levels are restored.

That being said, legislation is floating around that will prevent the sale of used cars with open safety recalls. With proponents of this legislation now elevated into offices that directly influence policy, my guess is that we’re going to see this legislation move at a much faster pace. And dealers will have to figure out a way to adapt while still maintaining profitability.

There is certainly no love lost between franchise dealers, independents, and Carvana. Carvana has been outbidding these two for used cars at auction for quite a while. And, as we all know, new cars are far and few between, so dealers are increasingly reliant on the acquisition of used vehicles through trade-ins and auctions. This explains why marketing messages have shifted from purely selling vehicles to, “we’ll buy your car, even if you don’t buy ours.”

Not only is Carvana outbidding dealers for used cars at auction, but they also bid against themselves! It’s hard to believe this isn’t a play for them to corner the used car market at auction while also having more inventory available and gaining market share. Carvana isn't doing anything wrong. You might argue that they are driving shareholder value and providing consumers with more competition amongst retailers.  

Recently, Carvana acquired ADESA for $2.2 Billion! ADESA is the second largest auction company, after Cox’s Manheim. Why would they do that? Well, one possibility is that they now have “pick of the litter.” The second is that it lowers their reconditioning costs. And last, but not least, it gives them a larger inventory to sell to their customers.

Franchise and independent dealers are already talking about shifting away from ADESA and towards Manheim for used car inventory acquisition for the simple reason that they do not want to support Carvana and choose to auction their vehicles elsewhere.

Franchise dealers already have a lack of new or used vehicles to sell. And independents are competing for the used cars because they ONLY sell them. Taking half of the used car inventory (potentially) and shifting it to Manheim, will make it more competitive for used car acquisition and more expensive per unit.

If the current inventory challenges aren’t enough, we’re now facing fallout from the war in Ukraine. The situation in Russia versus Ukraine will only hurt new car manufacturing as Ukraine produces many of the chips for new cars using Russian fuel. That, in and of itself, will drive the prices of used vehicles at auction even higher.

The biggest factor is that if Carvana is utilizing ADESA to increase its reconditioning abilities, while fewer of these used cars are purchased by franchise dealers, that can only result in consumers buying more vehicles with unrepaired recalls. That’s always been the case with anyone selling off-brand vehicles. Let’s not pretend that most franchise dealers are not doing the same with their off-brand inventory. The only difference is that Carvana has just made a move to acquire a larger segment of that used car inventory. While our industry is facing inventory shortages, the ability to remedy recalls requires efficiency. Franchise, independent, or Carvana, let's not kid ourselves – inventory is gone faster than the ability to acquire it. 

At the very minimum, brands tend to favor their own brand at auction. Why? Because then they can certify them through the manufacturer and sell them for more. The fight for used vehicles is only going to increase. As Carvana's inventory increases, franchise and independent inventory decreases. Used car prices as a whole have increased exponentially. But a franchise dealer who can offer a certified vehicle would be able to command even more.

Unless Carvana buys them all.

When it comes to vehicle manufacturing, there is an implied responsibility for the safety of the vehicles produced. That’s the exact reason manufacturers issue service bulletins and notices for the smallest of items --even if they aren't safety-related. While these defects are typically voluntary, they can also become government-mandated safety recalls issued by the NHTSA. That's exactly how the process was intended to play out, stemming from an agreement between the federal regulators and manufacturers more than a half-century ago. In rare instances, the Federal government has had to step in to ensure consumer safety when the defect presents a grave and immediate threat. Take the Takata airbag recall as an example.

But something has caused lawmakers to question whether the system is providing all the safeguards that consumers require. Whether due to the complexity of today’s high-tech vehicles, or the dipping volume of NHTSA campaigns, local government oversight is applying more pressure on manufacturers to safeguard their constituents. What happens when auto manufacturers make decisions on a state-by-state basis? Well, there was a time when the emissions levels were different from state to state. Manufacturers were producing vehicles designed for different states. That, however, got dicey for consumers and inefficient for manufacturers. For example, a consumer brought a car in Oklahoma and then decided to move to California. If standards for emissions in California differed, the consumer could not register their vehicle in California nor pass any inspection. On the manufacturer’s side, it was a logistics nightmare keeping track of where to ship certain vehicles. As a result, manufacturers decided to make all vehicles meet the standards of the strictest state (which was California).

A push to serve in the best interest of the consumer is now taking shape in the automotive industry via Right to Repair laws. These laws were passed in states such as Massachusetts, forcing automakers to provide access to vehicle data ports, repair manuals, and more. This is nothing new, as similar laws have been passed in other countries. At first glance, it's hard to argue against laws that allow consumers greater access to repair options, parts, and product information. However, upon close inspection, the laws challenge modern manufacturing and overlook the technological complexity of today’s vehicles.

According to an article on Wired, in 2020 voters in Massachusetts passed a law stating that automakers had to provide access to a vehicle’s computer systems. These days, modern vehicles are computers with four wheels The law, which went into effect earlier this year, triggered Subaru and Kia to disable telematics systems in vehicles sold in Massachusetts. First Subaru, then Kia followed suit. Which manufacturers are next?

What does that mean for consumers buying vehicles in Massachusetts? It means their vehicles no longer have features including remote start, emergency assistance, or automated messages when tires are low, or the vehicle needs an oil change. To me, these all seem like safety issues for those owners. Imagine being stuck in the snow in the middle of nowhere and unable to use the vehicle’s manufacturer-provided emergency system.

The article outlines an example whereby a couple bought a Subaru and only later figured out that these features were disabled. Had they purchased the vehicle in a state just 1-mile away, they wouldn’t have had this issue. Automakers argue that simply providing access to the underlying technology presents a safety concern. According to a spokesman from Subaru, “This was not to comply with the law – compliance with the law at this time is impossible – but rather to avoid violating it.”

Now everyone is suing everyone. Automakers argue that the federal government should have jurisdiction over these matters, not the states. Consumers and independent shops are arguing that Subaru and Kia are misleading consumers with features that are not readily accessible to individuals in certain states. In Massachusetts, at least, dealerships are also paying the price as consumers are buying fewer vehicles because of this spat and legal action.

Regardless of the outcome, all vehicles should be safe to drive. It seems to me that federal and state legislators never bothered to consult Subaru, Kia, or any other automotive industry professional before taking this dramatic course of action. The response – disabling certain features – could also mean that vehicles are less safe for consumers to drive. In addition, manufacturers are also threatening their brand integrity by not providing drivers with the features they believed were included with the vehicle purchase. I would certainly be interested in seeing an actual sticker for a new vehicle on a dealership in Massachusetts lot to see if it actually informs these would-be car buyers that the telematics system has been disabled.

Time will tell what the final outcome will be as these lawsuits wade their way through state and federal courts. Until then, we can only hope that nothing happens to these car buyers that causes them harm due to this untenable situation, as that will simply lead to even more lawsuits.

The U.S. Department of Transportation is headlining a new national strategy aimed at significantly reducing crashes and injuries on all U.S. roadways. This comes as part of President Joe Biden's bipartisan 1 trillion dollar infrastructure bill passed in November 2022. Some question whether the broader “Build Back Better” has any chance of ever passing. But it's clear that vehicle safety is up front and center for the Biden Administration. U.S. traffic deaths were up 18% in the beginning half of 2021, compared to the first half of 2020, and the U.S. Government believes that a “bold paradigm shift” enacted by their action plan could bring roadway fatalities and injuries down to almost zero.

Department of Transportation Secretary Pete Buttigieg scrutinized the lack of vehicle safety. “We're going to count on technology and auto companies to work with us…”, Buttigieg declared at a department event last month. "But it's also clear that technology alone will not save us." 

And it appears that legislators and other vehicle safety advocates agree. Jason Levine, the previous head of the Center for Auto Safety (CAS), departed his role at the agency for a government position as director of the Office of Communications at the U.S. Consumer Product Safety Commission. At CAS, which was founded in 1970 by recall pioneer Ralph Nader, Levine railed against the auto industry for unsafe practices, including the sale of used cars with open recalls. His government appointment could not come at a more opportune time.

It's not just a coincidence that legislators are now focusing on the transportation and automotive industry. The new funding from the infrastructure bill is shifting the focus on recalls from prevention and education to action. In May 2021, US Senator Richard Blumenthal (D-CT) introduced S. 1835, a bill to prohibit the sale of used cars with an open recall. As the administration bolsters resources that can effectively lobby for increased safety guidelines, Blumenthal's bill looks to be gaining steam. Consumer groups are also onboard.

Rosemary Shahan, president of Consumers for Auto Reliability and Safety (CARS), recently wrote to Automotive News, stating that the bill "would set an industrywide standard requiring all dealers to ensure that safety recall defects are repaired before the sale of used vehicles at retail, while allowing dealers to sell unprepared recalled vehicles at wholesale."

While similar legislative efforts have fallen short in the past, the current political climate and political weight of a Democratic Congress may set our industry on a course where recall compliance is no longer an option. Dealerships that proactively manage and repair recalls will not only meet these new laws but will also have a competitive edge over dealers that have largely ignored recalls on their pre-owned inventory.

All the indicators suggest that the days of selling used cars with open recalls are ending, at least for dealerships. It's always been a risky exercise for any dealer that wants to avoid potential liabilities but soon could also carry hefty NHTSA fines. A lot can happen and will need to happen before the storm clouds are overhead. What's important for dealers to know is that comprehensive recall management is available to all dealers. 

It begins with monitoring the new and pre-owned inventory on your lot and extends to vehicles that you may consider taking in at trade-in. This is especially critical for off-brand makes, where STOP SALE notices or the lack of a remedy/parts are not readily visible to dealers. The knowledge gap not only poses a risk for unsuspecting shoppers but could also be detrimental to the store’s financial health. Consumers are scanning VINs online and performing their own recall checks. If your team isn’t transparent about recalls, expect savvy customers to question your integrity.

Whatever legislative actions should come forth is not within your dealership’s immediate control. What is within a dealer’s grasp is the commitment to monitor its inventory regularly for dangerous recalls.

An interesting “Catch-22” currently exists in the automotive technology space, as covered in a recent article in the New York Times. It’s been known for a while that a controversy exists regarding Tesla’s self/automotive driving feature. There have been deaths and more than a few accidents, along with several lawsuits. Technology is cool. I get it. And this feature is novel – and convenient. But these cars are driving on public roads next to vehicles and drivers that don’t have these features while Tesla drivers get more comfortable and, presumably, pay less attention to the road.

According to the New York Times, in June, the National Highway Traffic and Safety Administration (NHTSA) issued an order mandating that all accidents involving vehicles with self/autonomous vehicles must be reported. Most people assumed this was only directed at Tesla. The truth is the order named 108 carmakers and technology companies currently offering autonomous driving features! This order is much more expansive than the average consumer could possibly imagine!

Thus, the dilemma posed in the article: “Does regulation make us safer, or will it slow the adoption of technology that makes us safer?”

On the one side, the argument is that regulations applied to self/autonomous cars ensure that owners of the vehicles are safer while driving, along with others sharing the road. Drivers (even bad ones) are much better at conducting regular driving-related activities such as paying attention to their surroundings, knowing when it’s safe to pass a vehicle, or when to apply the brakes and gas back and forth for heavy traffic or a traffic light. We can intuitively assess bad situations and react more appropriately than an engineered mixture of algorithms, computer chips, and programming.

On the other side is the argument that the evolution of technology will make vehicles inherently safer for everyone. By stifling creativity and technological advances, heavy regulation will handcuff manufacturers and technology companies, resulting in further delays. To effectively experiment with new technologies, vehicles need to be tested in real-world conditions. This requires that they are on the road with other vehicles. Of course, according to the article, there will always be a human in these vehicles with "experimental" features to observe, notate any hiccups and, ultimately, take control of the vehicle if necessary. Kind of like a student driver. The driving instructor's vehicle typically has a steering wheel, gas pedal, and brake on both the driver's AND the passenger's side in case the instructor needs to take over.

Which do you think would be safer? More regulation that requires these technology-filled vehicles to pass certain tests before going on the road?

OR

Allow the manufacturers and technology companies the freedom to test and experiment with new features in real-life driving situations on public roads along with drivers and passengers in regular vehicles for the sake of science, technological evolution, and improved safety?

I’d be interested in knowing which YOU agree with.

For decades, dealerships have followed a specific formula when dealing with car shoppers. Why? Because, for the most part, it worked and led to a sale. Not only did it lead to a sale but, by following the steps, typically it meant that the transaction would ultimately result in higher profit. It didn't matter what the customer "wanted" as long the result favored the dealership. The salespeople were trained to interact with customers in a specific way and, in some cases, if their manager found out that a step was missed (such as a test drive, for instance), they would call in another salesperson to take over the interaction with the customer. This took away half of any commission the original salesperson would have made.

With the rise of digital retailing and market changes due to COVID, dealerships can no longer force a customer into a rigid set of steps. Depending on the dealership, some will tailor the steps in various ways in the name of convenience to the customer, like delivering the car to the consumer for a test drive. No longer does, “Just get them in!” work.

An article in Automotive News illustrates this phenomenon perfectly and what one dealership has done to change the old rules… by treating customers as humans. Sounds logical, right? Who DOESN'T want to be treated like a human? Germain Toyota threw the “old way” out with the trash. They stopped using a rigid process and allowed salespeople to talk to customers in an organic and unscripted way. While some store traditionalists may have been skeptical, the staff decided to embrace this new conversational service-focused style. And it has paid off. Customers are happier. Employees are happier. Company culture is better. And profits have increased to the tune of $600 per car on the front-end. In the F&I department, Germain Toyota promoted two salespeople who embraced this new approach and they quickly became the dealership’s top F&I employees averaging between $2,400 and $2,800 per vehicle. Seeing this quick success, “old-school” F&I managers soon became interested in learning how to follow suit.

Consumers have become more tech-savvy, used to doing things how they want them done, and are much more comfortable with online transactions. I don’t believe that a dealership will ultimately have the option of going back to “business as usual,” simply because consumers won’t let them. There are too many alternative options that better suit how consumers prefer to buy. The consumers will decide to do business with a dealership that WILL accommodate them in the way that they wish to proceed.

Consumers aren’t dollar signs. They are human. Dealerships who recognize this (finally) and don’t restrict their salespeople from following a certain road to the sale, but rather follow the customer’s lead and let the conversation (and transaction) develop organically, may just experience the same results as Germain Toyota. Is it time to ditch the road to the sale and let customers tell you what they want? As the General Manager of Germain Toyota stated, “We just roll with them.” What do you think?

Most dealerships already find it difficult to recruit technicians. With the influx of warranty and safety recall repairs expected to increase, and as manufacturers pump out more electric vehicles, the need for experienced techs will explode. Some dealerships have found creative ways to recruit technicians – mostly for quick service – because they can be trained on the job. Strategies such as placing recruiting messages on oil and air filters have garnered some success because, when customers take their vehicle in for an oil change at some retail lube-only express facility, it’s usually the quick service technician who is removing the oil filter. And, so these techs see a message like, “Do you want to make more money? If so, call us!”

While this could be a clever way to find those quick service technicians who can be trained to handle more complicated repairs on the job, what if there were no master technicians, or even experienced ones, to do this training?

According to a recent article in Automotive News, some experienced techs – including those with lots of experience – are leaving the dealership environment to work for companies such as YourMechanic, where the future of vehicle servicing is taking shape. These experienced technicians feel they are at a ceiling in their dealerships as far as making more money, flexible schedules, and the wear and tear on their bodies from working in a dealership environment.

This type of work could be viewed as similar to an Uber driver (for an easy analogy). Because the technician can choose their own schedule and control their income while lacking any pressure to handle the heavy load and fast pace of a dealership. And they are not expected to continuously upsell services to customers.

Some dealers offer similar services, such as small jobs akin to quick service at a customer's home or office. This, however, can be costly and, from what I've seen, not that many dealerships currently offer this level of service.

If these services are indeed thriving, it may be worth your time to investigate and consider incorporating convenience into your offerings, if you don’t already do this. Assuming that these services can provide increased pay, flexibility of schedule, and decreased pressure for your technicians, while, at the same time, providing the “convenience” factor for your customers, technicians may start flocking to your dealership.

Fewer students are choosing the career path of automotive technicians, and many dealerships are forced to be increasingly competitive to attract the experienced technicians already out there. As these new companies keep popping up, it will create an even larger void for dealership service departments. It's obvious that these new servicing models not only appeal to consumers, but they're also luring technicians out of your service bays. If our industry doesn't adapt, the talent pool will slowly drain from our service departments.

And that will not bode well for service revenue, manufacturers, and customers.

A recent news story, published by Reuters, shares how Mexico is moving to allow unregistered used cars brought into Mexico illegally to be registered for a whopping $124. According to the article, Baja, California has as many as 500,000 unregistered vehicles alone. Many of these vehicles were brought into Mexico from the United States either to sell them illegally or for use in criminal activities. Overall, Mexico seems to want to use America as an inventory acquisition avenue. And this has fired up U.S. automakers.

According to the Washington Post, as many as 18 million vehicles have been illegally imported into Mexico since 1990, accounting for about a third of all vehicles in the country.

A used vehicle purchased in the U.S. doesn’t legally require that open recalls be repaired before sale. Hypothetically, a vehicle could be purchased in the United States, imported to Mexico, and, for USD 124, be legally registered in Mexico. At that point, it could be legally driven back into the United States. And on the roads, once again, threatening the safety of drivers and passengers.

The problem then becomes three-fold:

1.    Recalls –No legislation currently requires the repair of recalls in used vehicles before sale. If the majority of the vehicles imported to Mexico are older cars, chances are many of them have outstanding recalls. This not only presents a danger to the citizens of Mexico when they are resold, but it also means that, due to the lack of manufacturer facilities to fix them, many will go unrepaired for an undefined amount of time. If they do get reintroduced into the United States and are once again driving alongside U.S. citizens, those vehicles present a danger to other drivers.

2.    Information and Identification – We already have issues identifying and notifying second and third generations of vehicle owners with open safety recalls. This new policy would further complicate the matter. A vehicle purchased in the U.S., imported into Mexico and registered, then reintroduced into the U.S. roadways would make it even harder to identify and notify the owners.

3.    Inventory Acquisition – Car sales is a business. We can all agree on that. If Mexican car dealers are finding that it’s more profitable to purchase vehicles in the United States through dealers, auctions, wholesalers, or other avenues, and then sell them in Mexico and make a heftier profit (which has already been happening but now would be legal) that only introduces another competitor for inventory.

I’m not arguing that this new Mexican legislation is right or wrong. I’m simply saying that it further complicates our mission of making the roads safer for everyone. We’ll definitely stay on top of this and further work to protect all drivers.

An interesting idea published in Automotive News shares how some Texas dealers are gaining more technicians while helping people in need, namely military veterans. These Texas dealers created a 500-hour training program titled "Ford's Technicians of Tomorrow,” that launched in the Fall of 2020. It trains these military veterans in shop safety, warranty fundamentals, technical writing, and express service. The training results in certification as a chassis master by Ford and each graduate also receives tools valued at $4,000. 

Participating dealers sponsor these students who agree to work at one of the sponsoring dealerships to further their training and knowledge while employed in a full-time position, which inevitably leads to increased shop capacity. The sponsorships are also seeded by participating dealerships, Ford Motor Company, and the Texas Workforce Solutions of Central Texas.

This model could be an amazing opportunity for dealerships in other states to gain technicians and incorporate them into their company culture while increasing their capacity to service customers. Warranty work is typically less desirable than customer pay (CP) opportunities. Dealerships need revenue and the service department is held accountable for its department’s profit so many dealerships choose more lucrative ROs over warranty and recall work. This explains why some dealers are turning to recalls, which are considered warranty work, but consistently match in CP revenue. In addition, 49 states have passed legislation that mandates OEMs reimburse at the full retail rate for parts and service, as long as the dealership applies for the adjustment.

This program in Texas brings in technicians that have been trained thoroughly before joining the team, so dealerships also gain a technician certified by the OEM. And it provides an opportunity to help our former military service personnel in the process.

I also thought this was a great point made by Sam Pack, who owns four dealerships that participate in the program. In the article, he stated, "They're more mature candidates. They generally have families, are very punctual and very disciplined." Who doesn’t want a technician like that, much less an employee in general?

Technicians are getting increasingly hard to find and dealerships are up against their competitors trying to “outbid” each other and recruit at a higher cost. Why not gain trained technicians and do a good deed for those who have served our country at the same time? It creates a whole new pool of automotive technicians. And now you don’t have to rely so much on future generations to enter the automotive technician job pool. Consider forming a similar opportunity in your state. It’s working for Texas dealers. Why can’t it work for your state?

At the end of July 2021, a new law passed in Illinois requiring dealerships to pay retail rates to technicians for the actual time and labor it takes to repair vehicles that are under warranty. The justification being that technicians are highly trained workers and should be paid wages that mirror the high-tech compensation of other industries. This could be both good and bad for dealerships if this trend spreads to other states in the nation.

1.    Dealerships in states that have passed legislation requiring manufacturers to pay retail rates for warranty and service repairs won’t be affected IF they also passed that labor rate increase to their technicians. Dealerships that have NOT passed the increase to their technicians will need to. As such, dealerships will see a drop in their net service revenue or risk losing some technicians to competitors.

2.    Dealerships in states that have NOT passed legislation requiring manufacturers to pay retail labor rates for warranty and recall repairs will be forced to pay their technicians retail labor rates while the dealership continues to receive manufacturer-mandated rates. This will REALLY hurt dealerships since they may end up having to pay more to the technicians than what they are receiving from the manufacturer or, at the very least, get close to breaking even.

This Illinois legislation should ultimately force Automobile Dealers Associations in states that have NOT passed similar legislation to do so, as dealers will be seeing a decrease in service penetration. Most dealers are surprised when they learn that a factory submission isn't their only choice. In fact, 49 states have some type of legislation in place that allows dealers to perform a statutory labor rate submission. The purpose of a statutory submission is for a dealer to achieve warranty labor compensation at its retail rate, which is a market-driven rate based on its warranty-like customer-pay repair transactions. Any dealer who is submitting for a labor rate increase should be evaluating its factory protocol and its statutory protocol to determine which is most advantageous.

Technicians are in high demand. Increasing their wages based on the work they perform rather than what the manufacturer will pay should benefit dealers by attracting more technicians, thus alleviating some of the demand versus supply issue.

In addition, it could encourage young individuals to choose to train to be an automotive technician. This then increases the available workforce, increases supply, and makes it easier for the dealerships to find new technicians. This, of course, is a long-term result. It won’t be instantaneous for the younger workforce to join the labor pool and discover that being an automotive technician is a lucrative position.

 Keep in mind that software and electronics recalls were the largest category of recalls, affecting 7,541,325 vehicles from 77 NHTSA recall campaigns. These are exactly the types of recalls that more tech-savvy technicians – many of whom can be new to our industry – can tackle without years as a master technician. This is how we’re going to resolve a technician shortage while also generating more revenue.

Remember, the consumer probably has little knowledge of or interest in any of this. They simply want the dealership to fix their vehicle and ensure it is safe, regardless of whether it's routine maintenance, customer-pay, warranty or recall repairs.

It is likely to be quite a balancing act. What are your thoughts on what this will mean for the future of service departments and technicians?