DETROIT — Spending a Saturday afternoon at the typical car dealership is not exactly pampering yourself. Drab floors, battered furniture, weak coffee in a paper cup. And that’s before the salesman abandons you for half an hour to “check with my manager.”
But Detroit automakers are finally st
able after their brush with death, and most dealers can afford to spend a little money to spruce up the showroom. So they’re adding leather chairs, rich oak walls, theatrical lighting — even hair salons.
The improvements can cost from $200,000 to $15 million. But dealers say it’s worth it because people expect a more memorable, luxurious experience these days as they make one of the biggest purchases of their lives.
“If we don’t meet that expectation, we will not compete,” says Richard Bazzy, who plans to spend more than $1 million each to renovate his two Ford dealerships in the Pittsburgh suburbs.
Whether it helps sales is up for debate in the industry. Nicer surroundings may draw people in, but they also raise costs and let dealers with shabbier buildings sell for less.
Bazzy says he’ll pay for the upgrades without help from Ford, but sometimes automakers will kick in. Some dealers have spent millions on their own, while others were forced to by automakers.
General Motors, Ford and Chrysler have been trying for years to get dealers to spiff up, but they’re pushing harder now. Honda and Toyota have similar programs. Dealerships that sell luxury cars have been one-upping each other for years, but the contest is moving into everyday brands. Some dealers say it’s getting out of hand and the customer will wind up absorbing the additional cost.
After all, who really needs a putting green when they’re sizing up a new ride?
“There’s a point here where I think it’s excessive,” says Gary Dilts, a former Chrysler sales chief who now runs a consulting business.
Detroit automakers can afford to turn their attention to modernizing dealerships because the existential crisis of 2009, when GM and Chrysler went bankrupt, is behind them. All three Detroit automakers are profitable again for the first time in nearly seven years.
The dealerships could use the attention. Many have buildings that date to Detroit’s boom years in the 1950s and ’60s — and it shows. Detroit tried to get its dealerships, which operate as independent franchises, to spruce up in the 1990s and 2000s. Some did; others couldn’t afford to. Then came the financial crisis of 2008.
All told, the Detroit carmakers shed more than a quarter of their dealers between 2008 and the start of this year, when they had about 10,000, according to the trade publication Automotive News. Since the survivors are selling more cars, the companies want them to invest.
The average U.S. dealership has been in the same place for almost 28 years, and nearly half the buildings haven’t been renovated in more than five years, the National Automobile Dealers Association found in a survey.
Although automakers often say they aren’t requiring the upgrades, they can take steps such as withholding hot-selling models to force improvements, said Dilts, the ex-Chrysler sales chief. The dealers association worries that dealerships could start struggling again if they have to borrow too much money for a makeover.
But for others, upgrades are good business. Ryan LaFontaine, whose family-owned group spent $15 million two years ago to build a sparkling Cadillac-Buick-GMC dealer with a hair salon and restaurant, said he covers the costs by selling more cars than other dealers north of Detroit. He ranked second in the nation last year in Buick and GMC sales.
“We’re getting customers into our building that maybe we wouldn’t have gotten an opportunity to talk to or wow,” he says.
The race for fancy buildings has spawned a backlash from dealers who advertise lower prices because they don’t spring for frills.
Bob Shuman, co-owner of a Chrysler-Dodge-Jeep-Ram dealer near Detroit, says he rebuilt his showroom in 2008 on land his family owned. He brews the coffee and mows the lawn himself. There’s a soft drink machine, but no restaurant or theater.
“I don’t get it,” Shuman says. “I don’t understand why customers don’t ask themselves, ‘Who’s paying for all of this?'”
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
