OEM Facility Upgrade Programs Continue Strong

August 17, 2016
steve@automotive.ventures

Automotive News reports that GM’s facility upgrade program for their dealers continues to be supported strongly by the parent company.

Each quarter since late 2009, General Motors has pumped money into its dealers – more than $5 billion in all – to help them revitalize their stores.

GM has decided to continue the programfor any of its Chevrolet, Buick and GMC dealers who jump through the necessary hoops under the brand standards program called Essential Brand Elements, or EBE. Instead of going toward ripping out walls and laying new tile, the cash will be an incentive for dealers to keep those stores modern with new video displays, for example. It will also help them elevate the customer experience through free loaner vehicles, online service scheduling and other touches.

The continuation of EBE is a relief for the many GM dealers who have come to rely on it as a vital revenue stream. It can pay around $100,000 for a dealership selling a few hundred cars annually to more than $2 million a year for big stores. While that money ostensibly was for renovations, many dealers simply financed their store projects and rolled the EBE money into their operations.

“Over the years it’s become an integral part of our business plans and forecasting,” says Sam Pilato, a partner at Dimmitt Chevrolet in Clearwater, Fla. “We’d have been sent scurrying had it gone away.”

The continuation of EBE also preserves a built-in incentive for dealers to take cars from the factory. Under the new program, dealers will continue to earn a per-vehicle stipend of around $550 on average for every vehicle shipped to them.

Dimmitt’s experience with the EBE program is typical of many GM dealerships. The extra money was used to fund a $2 million store renovation in 2011, Pilato said. GM estimates that dealerships representing more than 80 percent of its volume overhauled their stores under EBE.

Now that most dealerships won’t have the heavy expense of major renovations, GM is adding other elements to EBE, such as requirements to operate a business-development center, according to a slide presentation from a webcast last week detailing the new program.

Dealers also will have to prove they’re maintaining the sleek, airy look and feel of their stores. A third-party vendor will visit stores and take photos to ensure dealerships still have appropriate furniture and signage, for example. There will be new required investments too, including new signs in the service lanes and large graphics panels for service reception areas.

Dealers have until Sept. 9 to sign up for the new program, which starts Oct. 1 and covers Chevy, Buick and GMC dealerships. Cadillac stores will migrate to a new dealer-incentive program, Project Pinnacle, on Jan. 1.

Unlike the seven-year program that ends next month, EBE 2.0 will run for only five quarters – through 2017 – before GM decides whether to continue it. There’s a new fee to participate: $10,000, to be paid in quarterly installments.

In a statement to Automotive News, GM said EBE has been “a big part” of the gains that Chevy, Buick and GMC have made in retail market share, dealer profitability and J.D. Power and Associates’ annual sales and service satisfaction rankings.

The revamped EBE program was developed with “a great deal of input” from GM’s national dealer councils and “are designed to consolidate and build on our momentum by making us even more customer focused,” GM said.

Even though many dealers are relieved the program will live on, it has been controversial. High-volume stores reap much more EBE money than smaller ones, and can use that advantage to offer better deals, some dealers say. Dealerships that don’t participate are at an even bigger disadvantage. Some dealers say the EBE revenue has become a core part of their new-vehicle profits.

“I’m not sure GM could have figured out how to get the dealers off this heroin fix if they wanted to,” said one Chevy dealer in the Northeast. “A whole bunch of us would suffer greatly without this money.”