Just recently we spent a few pleasant moments over lunch with a good friend of ours from NAFA. The story on General Motors' recent decision to lock in the prep charge on their cars had just broken. We discussed the program, the effect it would have on fleet business, dealer-fleet administrator relations, and the condition of prepped new cars from GM dealers in the future.
Both of us agreed that the corporation had made a smart tactical move in throwing the responsibility for prepping back on the dealer. In the past dealers have had an "out" when a poorly prepped car was returned to them by on irate customer, inasmuch as they could point out that they were not adequately reimbursed for pre-conditioning their new cars. Consequently, prepping sometimes consisted of little more than putting the aerial on and washing the car.
The new practice of GM to reimburse their dealers for make-ready service will obviously put an end to such disputes. Dealers will no longer be able to pass the buck onto their manufacturer for failure to properly service a new car. (Of course, there is still the question of how much the dealer will e reimbursed for this work, so we may see a new round of dealer-manufacturer squabbles in the future.)
It is interesting that Ford and Chrysler have evidently opted for a different approach to this problem. Both of these companies have begun a program of prepping centers in crucial areas of the county. Ford, for example already has such facilities in the east and northwest and will be adding another in the Los Angeles area. Chrysler, who has two such facilities which are operated by independent contractors, is also talking about opening another one near New York City. In the meantime, in view of the GM approach, both Chrysler and Ford are said to be studying dealer reimbursement for prepping. If this does take place one might see a tremendous amount of fleet business going to these centers, especially in large metropolitan areas where storage space and service facilities are at a premium. It would seem to make sense that a large metropolitan fleet dealer who is being reimbursed anyway for his prepping would avail himself of such a facility.
Hopefully, both the GM approach and the prep-center approach (if they ever do take hold with Ford and Chrysler dealers in the fleet market) will result in much better make-ready quality. This would be a boon to the entire industry and solve one of the knottiest problems that hangs-up the optimum relationship between dealers and fleet buyers.
But a word of caution on all this was raised by our good fried as he finished his lunch. If the GM dealers are going to be reimbursed for make-ready service, this should reduce the price of the vehicle to the fleet buyer. In other words, if the dealer is being paid by his manufacturer for prepping, why should the fleet buyer pay him again?
However, there is also the question of GM's raising its list prices on its'71 models to make up for the money lost due to its prep-reimbursement program. According to Purchasing Week, the list price of the models will be raised on the average of about $20 or more per vehicle. So this means that part of the $40 or $50 that the fleet buyer has been paying for prepping will be added to the basic price of the cars.
Consequently, the fleet buyers will not realize a full profit from no longer paying for make-ready. But even if the savings are only $25 per car, there's a lot to be said for any price reduction in these inflationary days.