A View of the Mechanical Sector For sure, these are changing times. And we must change too! by Robbie Addison "Take time to gather up the past so that you will be able to draw from your experiences and invest in the future." - from "The Treasury of Quotes" by Jim Rohn. This is an excellent quote and is just as timely today as when it was first written. Change continues to be the word of the day. Every aspect of our lives has been changed by the electronic universe and continually evolving technology. What we did last year is outdated. What we do today will be outdated by this time next year. But combining the past with the present can build a foundation for the future. In 2009-2010, repair facilities embraced some changes that were needed in order to operate a more efficient business. These changes included computer-generated work orders, establishing a business website, using electronic communications and marketing to multigenerational customers. It is safe to say as 2010 draws closer to 2011 that there will be other changes. Some may not directly affect us, but some could greatly impact automotive repair facilities. In recent articles in "Aftermarket Insight," Jim Lang, president of Lang Marketing Resources Inc., has had some interesting predictions: • Between 2010 and 2020, more aftermarket change will occur than took place over the preceding 100 years. Most aftermarket changes will be driven by the changing vehicle population. • Service stations and shops nationwide will double their repair of foreign cars and light trucks over the next eight years. Two contributing factors: increase in foreign repair share and rapid growth of the overall foreign aftermarket. • Currently, half of the service stations and repair shops average less than 20 percent foreign vehicle repair business. By 2018, foreign cars and light trucks (imports and transplants) will represent more than 35 percent of service station and shop volume, as foreign vehicles top 45 percent of total car and light truck aftermarket product sales. • Over the next eight years, the service market for foreign cars and light trucks will increase at an annual pace six times faster than domestic vehicle repair and will generate more than 90 percent of total car and light truck service market product growth. Based on the above information, there should be some huge opportunities ahead for automotive repair facilities, but preparation must begin now. Businesses must do their homework and be willing to make the investment in themselves and their employees to acquire the education, training, tools and equipment to be ready to face the future. A good place to begin is to view ASA's 2010 "How's Your Business?" survey results on the following pages. Thanks to all who responded to the survey, and I wish everyone a successful 2011. Robbie Addison is the Mechanical Division manager for the Automotive Service Association. She can be reached at robbiea@asashop.org.

For 2010, there are an estimated 80,050 independent general mechanical service businesses in the United States. These independent businesses employ an estimated 332,200 individuals who provide service and repair, administrative support and leadership to keep more than 248 million motor vehicles operational. It is estimated that 70 percent (173 million) of out-of-warranty vehicles are repaired at independent shops.

The average age of cars in the United States was 10.6 years in 2009. The average odometer reading for mechanical repairs in June 2009 was 110,668 miles, according to Mitchell 1.

Traffic volume trends, based on preliminary reports from the state highway agencies, during June 2010 on all roads and streets were up 1.3 percent from June 2009. The total includes 91 billion miles on rural roads and 173 billion miles on urban roads and streets for a cumulative total of 264 billion vehicle miles.

ASA projects total sales for general mechanical repair facilities in 2010 to be $39.9 billion, based on U.S. Census Bureau figures for general mechanical repair. Adding in specialty repair facilities, oil change facilities and transmission shops, the estimated total sales moves closer to $57 billion.

The figures do not include the approximately 17,900 auto dealerships with service facilities that took in approximately $28 billion ($16 billion in labor and $12 billion in parts) in 2009, according to the National Automobile Dealership Association. Dealership closures have reduced the number of bays, down 17 percent between 2008 and 2009. The average customer-paid repair was $217.

With the sharp decline of new vehicle sales that appeared a couple of years ago - down 21 percent from 2008 to 2009 - independent shops are eager to serve the consumer whose dealership may have closed its doors.

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Business Profile

The majority of independent mechanical service shops continue to be family-owned (94 percent), independent (99 percent) businesses that have been in operation an average of 25 years. Bay count has averaged seven per shop for the past 10 years, fluctuating only marginally.

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Participant Demographics

Various staff levels participated in the survey. Among survey respondents were owners (81 percent), managers (22 percent) and technicians (9 percent). Many owners currently serve in all aspects of the shop including service writer, technician and office staff. According to survey results, the average participant is 51 and has 30 years of experience.

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Staff Profile

The 2010 HYB? survey strives to present an accurate picture of the staff population within the independent mechanical repair business. The survey determined the number of employees per facility by job type along with the percentage of facilities having various types of employees. ASA members average seven employees on the payroll.

There are various types of technicians employed at mechanical shops. An apprentice technician has one year of experience or less, an entry-level technician has two to four years of experience, and the most common employee is the experienced technician with five or more years of experience. The Bureau of Labor Statistics reports employment of automotive service technicians and mechanics is expected to increase slower than average at 5 percent between 2008 and 2018, compared to 10 percent for all occupations. For 2009, there were 226,170 automotive service technicians and mechanics, who earned an average of $16.74 per hour.

Sixty-five percent indicated staffing one apprentice technician and of those, the annual salary ranged from $15K to $25K annually. Entry-level technicians, on average, earn $25K to $35K annually, according to 63 percent of members reporting staffing one entry-level technician with two to four years experience. All survey participants said they staff experienced technicians, with the largest responses showing they staff one (23 percent) or two (30 percent) experienced technicians, who each earn an average annual salary of $45K to $55K.

Service writers are the point of sale for most businesses and generally benefit from ongoing technical and customer service training. Fifty-six percent of mechanical members staff one or two (22 percent) service writers who earn $45K to $55K annually.

Technician movement in the business is vital to the health of the industry. Fifty-seven percent hired one or more experienced technicians, 26 percent promoted one experienced technician and 59 percent report one or more technicians left their business. Twenty-three percent of survey respondents promoted an average of one apprentice technician, and 14 percent of respondents said one entry-level tech saw advancement within the company.

Of all positions in the mechanical establishments that were left vacant this year, 63 percent indicated the vacancies were due to termination.

Because independent facilities perform service and repairs on approximately 70 percent of off-warranty vehicles, technicians and other mechanical staffers benefit from incorporating training into their schedules. Eighty-two percent include training in their annual budget and 35 percent use assessment tools to determine who requires training. Of the 99 percent of mechanical members who said they offer training for experienced technicians, the average training hours are 10 to 15 hours annually, and $250 to $500 is spent on training per technician.

ASE offers a variety of certifications for automotive service technicians. ASA members normally staff two experienced technicians and one service writer with ASE certifications.

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Sales Profile

To reach new and repeat customers, members use a variety of resources. Of the 98 percent who advertise, the average advertising budget for collision members ranges from $1K to $5K annually (reported by 20 percent), with 16 percent saying they spend more than $30K annually.

Businesses were asked to select areas where a sales increase occurred. Sixty percent noted an increase in profit, another 59 percent said they saw growth in their customer base, and 51 percent had an increase in monthly repair orders compared to last year.

Decreases in profits were experienced by 27 percent. Nineteen percent of participants also cited a decrease in customers, and 25 percent experienced a decrease in the number of monthly repair orders between 2008 and 2009. Collectively, 20 percent said they saw no change in customers, profits or repair orders in contrast to 2009.

The average number of vehicles serviced per month, so far in 2010, topped 200 with an average of $200 to $300 per ticket. Members report that most tickets are for repair (57 percent), followed by maintenance (38 percent) and other services (12 percent).

Based on the current economic conditions, participants were asked about customer trends. Seventy-one percent believe their clients are regularly maintaining their vehicles, and 89 percent said clients are purchasing major repairs for their current vehicles. Eighty percent of members believe their customers are content with their current vehicles and are not shopping for new vehicles.

So far in 2010, 62 percent of participants said they have seen at least a 10 percent increase in sales compared to 2009. For those reporting a sales increase in 2010 over 2009, it is attributed to customer service (76 percent), marketing and advertising efforts (52 percent), and economic conditions (49 percent).

Fourteen percent said sales have settled and they expect no change in 2010 sales, down 2 percent from last year. For the 24 percent citing a decrease in sales of more than 10 percent, it is largely attributed to economic conditions (98 percent).

Nearly one quarter of respondents report 2009 sales between $250K to $500K, and another 21 percent of members cite figures ranging from $500K to $750K.

As of the third quarter of 2010, the outlook for sales in 2011 was projected to be positive, according to 79 percent of survey respondents. New car dealerships have seen a decline in sales of 21 percent between 2008 and 2009. Let's compare optimisms (see adjacent graphs).

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Parts Profile

Based on survey results, ASA mechanical members are geared toward the aftermarket side of parts and tend to shift a bit toward dealerships for electronic components.

Regarding parts quality, 94 percent of survey participants said they want to know the manufacturer of private label parts, and 95 percent are interested when a manufacturer line item has changed. Additionally, 95 percent of mechanical members who participated in the survey said they would support a uniform quality rating system to assist in determining part quality "in the box."

Customer Profile

Independent mechanical business customers are a loyal group. Survey respondents said 70 percent to 80 percent of their mechanical business patrons are repeat customers. On average, 51 percent of members said their customers travel up to 15 miles for service and repairs.

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