Despite recall, GM dealers get new business, customers

Written by Reuters | Fox Lake, Illinois | Updated: Jul 26 2014, 05:30am hrs
The news about deadly crashes linked to a faulty ignition switch, followed by wave upon wave of recalls, did not bode well for General Motors dealers earlier this year.

It conjured visions of worried, frustrated drivers pouring onto lots like Raymond Chevrolet, outside of Chicago.

But according to Robbie Long, service director for the dealer and nearby Ray Chevrolet, what looked like great adversity has turned into an opportunity.

The hundreds of customers bringing old cars into the family-owned dealerships leave in clean cars with a bucket of goodies. Some drive home a newly purchased car. And the repairs, paid for by GM, are modestly profitable, dealers say, helping to pay general expenses as well as bringing in customers who might have been lost.

In many cases, these are customers we havent been seen in a long time or have never met before, said Long. Although the script is not what the dealership would have written, GM is delivering sales and service prospects to her door.

Certainly, there are dangers if the dealer doesnt give good service or if parts are backed up. Some cars are being called in for more than one problem, and Long says her dealers are careful to schedule only one visit per car. People just dont want to see us that often, she said.

But as of early July, the two dealerships run by brothers Ray and Mark Scarpelli are humming. Rays sales were up 13% on the year and Marks were up 20%. GM as a whole posted a 2.5% increase in sales in the first half of the year, just a step behind the industry average of 4.3%.

Interviews by Reuters with dealers across the nation found similar attitudes, for GM, Chrysler and other brands, several of which have now announced multi-million car recalls.

Don Lee, president of Lee Auto Malls in Maine which has 14 new-vehicle stores, mostly Chrysler and various Japanese brands, as well as GMC, said recalls provide an opportunity to look over the customers car at no cost to them, which often leads to more repair business.

More importantly, he said, recalls lead to more sales: he estimates that 15% of new car sales at his Chrysler stores come via the service department. GM this week said it had sold 6,600 cars to customers who traded in vehicles with defective ignition switches. Aside from the bad publicity, which is never fun, we welcome recalls, Lee said.

The General Motors recall offers at least four opportunities for business: fixing the recalled part, a roughly $250 cost for the Chevrolet Cobalt ignition switch fix which led the recall wave; other service and repair work; selling new cars; and, for those dealers with loaner car fleets, providing transportation to some waiting customers, paid for by GM.

Several factors have combined to turn what started off as a pure public relations disaster into a strong sales year for some GM dealers.

Dealers say GM has responded well to the crisis, with chief executive Mary Barra publicly apologising for failures and distancing the New GM, which emerged from bankruptcy in 2009, from the Old GM which made many of the recalled cars. The automaker has also benefited from a growing economy, and the highest profile recalls, for ignition switches, mostly affect discontinued models.

And last but not least, auto recalls have become so common with 29 million cars called in globally by GM and millions more by other brands, that consumers are suffering from recall fatigue and are not paying attention, dealers say. I think perhaps people worry less about the recalls than the newspapers do, said Herb Chambers, CEO of Herb Chambers, the 14th largest US auto dealership group with dealerships

covering several brands in greater Boston.