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RE: Catering to used-car buyers?
As a practical consequence of advocating low parts prices, it seems to me
that we need to specify how they can be achieved. If we are advocating
lower parts prices, don't we have a responsibility to show _how_ the cost
of parts can be reduced?
>So, lets start at the dealer level where they support a parts man and his
family ($50,000 including benefits) and about 1000 square feet of heated
and cooled real estate, plus maybe $100,000 of depreciating capital
investment in actual shelf parts. I'm guessing. Could be more than that.
>That's got to at least pay for itself. The initial capital outlay of
$100,000 should return at least 8% a year, which is $8,000, plus the salary
and benefit cost of the parts man, $50,000. And about $2,000 a year for
heating and cooling and telephone, and about $2,000 for insurance on the
site and contents and worker.
>So far, I'm up to about $63,000 a year just to keep the parts department
there and breaking even. That amount has to be generated by the sale of
parts. It amounts to a 75% markup if you consider that they have to pay
taxes on the profit, including inventory taxes locally.
>And all of the above is guesswork and speculation. I am not affiliated in
any way with that dealership, except as a walk-in customer now and then.
>I figure the parts department should be dually supported by direct
customer sales and by in-house delivery of parts to the employed mechanics,
and I split the costs 50-50. Those are my assumptions.
>So far, I don't see where the flexibility exists to reduce the cost of
parts. If it isn't at the dealer level, it must be in distribution and
manufacturing. That leaves AOA and whoever supplies them.
So, they raise the original cost of the car, to defray the reduction of
cost of replacement parts, which is passed along to the dealer who passes
it along to the buyer at the counter. The big costs so far are labor, at
the dealer level. The same is probably true at levels above the dealer. So,
we are advocating greater productivity and reduced staffing, probably.
Which means more automation.....in addition to higher new car prices.
>That is one scenario. Anybody got any other ideas? This problem needs all
the bright light it can get.
>86 4kcsq and soon-to-be 87 5kcstq
>At 06:59 AM 12/30/97 EDT, you wrote:
>>I agree totally Paul. Audi could make no better move than
>>to cut parts prices in half, or even lower them to cost plus
>>shipping & handling & a small profit for the dealer/stocker.
>>Dealer parts are a necessary evil and should not be a profit
>>center in and of themselves. This would build intense
>>loyalty and awesome resale value for the customer. The Audi
>>advantage lasts only 3 years, low parts prices are forever.....