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, according to an Associated Press report, Detroit automakers are finally stable 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, including brushed-aluminum exteriors and mahogany and maple furniture.
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. There are specifications for uniform signs, paint colors and furniture as automakers try to make dealers look alike and create a unified image for their brands.
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. “How much cappuccino are you willing to pay for?”
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. Competitors came along in the ’70s, the time of the Arab oil embargo and long lines for gasoline, when Americans began shifting to more fuel-efficient foreign cars. Toyota and Honda dealers blossomed with shiny buildings, especially in the suburbs.
In the ’80s and ’90s, Detroit’s market share sank further, and it ended up with too many dealerships in more rundown neighborhoods, all fighting over fewer sales. Cheap desks and fake plants had to do.
Detroit tried to get its dealerships, which operate as independent franchises, to spruce up in the 1990s and 2000s. Some did; others wouldn’t or couldn’t afford to. Then came the financial crisis of 2008.
Many dealers who made it through were targeted by Detroit companies for closure. GM and Chrysler cut dealers during their 2009 bankruptcies while Ford was easing dealers out, all with the idea of selling more cars with less competition.
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.
While automakers are pressing mainstream-brand dealers to spruce up, the pressure is even more intense on luxury dealers, especially Cadillac and Lincoln.
Many of those dealerships are worn out compared with Lexus and BMW.
GM is pushing Cadillac dealers to separate showrooms and service entrances from other GM brands, and it expects wooden walls, leather furniture, and fancy tile and carpet. Ford’s struggling Lincoln brand has a similar program, prodding dealers to spend at least $1 million each.
At Suburban Cadillac-Chevrolet near Ann Arbor, Mich., the first dealership renovated under a new GM program, both sides of the 41-year-old building were upgraded this year. The luxury side got the best amenities, but Chevy got attention, too.
There’s a cappuccino machine in the Cadillac waiting area and coffee on the Chevy side. The Chevy walls are a freshly painted bright yellow, while they’re English oak on the luxury side. Cadillac salesmen have separate office space; Chevy salesmen share new cubicles.
Renovation of the once-dingy building cost around $4 million, and Mike Mosser, the general manager, said it’s now nicer than the Lexus store down the street.
Even with the upgrade, Mosser would have a hard time out-classing Performance Lexus, a dealer in Cincinnati’s upscale suburbs. It has a fitness center, a white grand piano and a lounge with a home theater. It’s worth $9 million, according to tax records.
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?'”