Servassist Blog

"Equillibriance"

The time value of money (i.e. that a dollar today is worth more than the promise of the same dollar at some point in the future) is one of the most important and fundamental principles of economics. As a society, however, North America has recently been re-introduced to TVM’s kissing cousin, depreciation, which has provided an even more painful lesson indeed.

Homeowners, renters, and squatters alike are, by this point, well aware of what it means to possess a depreciating asset. Should they have borrowed some of the money (financed) to pay for said asset, then the subsequent hardship that followed may have even been enough for them to explore the fine print surrounding the “total loss due to fire clause” of their subsequent insurance policies, but that is another story.

Like homes, automobiles are typically one of the largest purchases someone will make, meaning they often will be financed. Unlike a car, however, homes generally don’t lose 15% of their value the very first time you walk in the door and turn on the lights. And while it is theoretically possible to purchase a vehicle that actually increases in value over time, (think hyper-exotic, limited production collectibles, and/or those owned by Puff Daddy, Pete Rose or Richard Simmons – depending on what turns your wheels) the number of such vehicles is so small that it almost doesn’t warrant mention.

Whether you call it being “upside down,” “backwards,” or “under water,” owing more money on your trade than it is worth is such a terribly disappointing scenario, that Adam Smith himself would’ve, no doubt, called it buzz-kill. Like an IRS audit, foot faults, and acid reflux, this is one of those annoying consequences designed to both keep us honest and punish most those who get greedy, like those of us who just have to have a new ride every year or two.

And once the cycle starts, for many there is really is no end in sight. It isn’t as if you are simply “doubling-down” with some sort of shot at having things magically turnaround. With every trade, you get deeper in the hole and just when you thought it couldn’t possibly get any worse, the bottom drops out quicker than Eliot Spitzer’s career or a credit score in default.

I have a theory that ecommerce itself may be somewhat responsible for the reckless attitude where people feel like debt doesn’t matter any more than a criminal charge against a pop-star. When the payment on that new Subaru WRX is just another line item on your monthly bank statement and it all starts to feel like monopoly money, anyway, than you may already be in the fast lane headed for a sure “finaccident.”

My suggestion on putting some reference back into the equation is stop all that online banking and start using cash, for everything. Start by paying all your largest bills with $100s, and if this doesn’t do it, move down to $50’s and so on until you are regularly at your bank taking out wads of singles. My bet is that counting out all of this paper money, in physical form, will make you think twice about how much we tend to throw away on high interest rates and items we may not actually be able to afford.

The next thing to do is pledge to never again let the dealer bury your leftover debt into another car purchase.

That magical short-lived period, maybe even only a day, at the intersection of equity, equilibrium, and finance where you owe precisely the same amount as your trade is worth, should become your new nirvana. Any utility you can get out of the car after that, even if only to maintain four brown patches of grass in your side yard, should feel like pure gravy. And provided your last dealer didn’t convince you that a loan term stretching across two presidencies was a good idea, you might even be able to make it.

If they did, you might want to check out “total loss by natural disaster.”

Horse(power) Wars

By any measure, animals and roadways have never had a particularly good relationship. Aside from breaking up their natural habitats and delivering hordes of gun-toting hunters directly to their doorstep, the highway has become an outright death-trap to many a critter, both literally and figuratively.

While good records do not seem to exist, some studies have been completed in the past to try and gauge the extent of road kill carnage or “flat meat” as some people have dubbed it. For example, according to Wikipedia (for whatever that’s worth) an evaluation was completed in New England in 1993 that surveyed the remains of some 1,900 or so “incidents.”

Based solely on those results, data for the rest of the country was extrapolated (we can only hope that they took into account variables such as the fact that the Arizona desert does not in any way, shape, or form resemble the jagged granite mountains around parts of New Hampshire and that the population of different concrete-prone fauna may differ commensurately.)

In any case, the annual “breakdown” was as follows:
41 million squirrels
26 million cats 22 million rats
19 million opossums
15 million raccoons
6 million dogs
350,000 deer

All joking aside, these are horrific numbers and represent a very tragic flaw in our society’s freedom of mobility. Add to this the loss of human life and the economic impact and it is very apparent that we have not done a good job at all of managing the proverbial intersection of nature and vehicular activity.

Several incidents over the past week or so made this problem painfully apparent including the Turkish Grand Prix where a stray dog very unfortunately wandered out onto the circuit at the absolute worst of times. This is regrettably not an isolated scene as it has happened upon occasion throughout, not just F1, but all racing history.

With the exception of the couple few race weekends a year, Le Circuit Gilles-Villeneuve in Montreal is open to the public to use as they wish for picnicking, swimming, gambling and hiking/biking. Ask any of the people who frequent île Notre-Dame and they will tell you that the island has a large population of groundhogs and that the grounds crew must go through the herculean task of somehow isolating them from the track surface for the obvious safety of everyone involved come green flag.

2007 was a particularly difficult year as groundhogs made their presence known on more than one occasion, interrupting a Ralph Schumacher practice round as well as outright sabotaging Anthony Davidson’s race, who was running in third at the time, mind you. (This incident was particularly egregious as it sparked a bit of a controversy after Davidson’s team charged that the vermin in question had specifically targeted Anthony’s car and had the gall to masquerade as a beaver during the whole event.)

Another season that also happens to be currently underway is that of Thoroughbred Racing, which recently suffered a heartbreaking loss in the death of Kentucky Derby runner-up, Eight Belles. The horrific scene that unfolded with the collapsed Eight Belles being euthanized mere feet away from the celebration of winner Big Brown is a bad as the sport has ever seen and has put the whole sport under the microscope. This on the obviously fragile heels of 2006 derby winner, Barbaro.

One thing that at least the press seems to agree on is that pure greed powers the sport at this point and that horses have been super bred into a fragile state and pumped with all types of drugs, which is a practice that is illegal in all other countries.

To be fair, to read the headlines today, one would find stories about how UPS is throwing gobs of money at the Big Brown’s owners in an effort to be associated with him and that these same owners have turned away multiple offers of $60 million for the horse saying they are holding out for $100 mil.

Greed, drugs and abuse in horse racing aside, I couldn't help but think that I had heard the terms "horsepower," "high-strung," and "catastrophic failure" all in the same sentence at once.
Then it came to me.

The E46 BMW M3's engine was clearly a race-bred power plant repurposed for the street and even when combined with the newly introduced SMG-II transmission, was just begging for over-revving. Yes, BMW sorted out the issues by mid 2003 (post May '03 builds) if memory serves me right, but the parallels in philosophy driving a mechanical component and a racing-bred animal are palpable.   

Comparisons must stop there, as we are talking about a hunk of metal and a living, breathing, feeling being, but we can take at least take solace in the fact that Eight Belles was doing what it liked to do best when all things went wrong.

The constant push for bragging rights, even in the face of historically high fuel prices, road congestion, and broken roadways has clouded many a vision in automotive design. Unfortunately this same attitude extends well beyond cars and into things that actually matter including people and, yes, animals. When is enough, enough?

Who knows, but if horses are collapsing M3's are exploding and olympic hopefuls are ending up in asylums, is it possible we have passed that point?

People's Service for the People's Car

Volkswagen has recently announced that they will begin offering a free scheduled service program starting with their upcoming Tiguan model. The program is not limited to just their new pint-sized SUV however, and will apply to all of the 2009 models and beyond.

Sure we have seen this before from Audi, BMW and Land Rover, for example, but what is noteworthy about this development is that Volkswagen becomes the first non-luxury brand to offer service. Curiously, it is predominantly the German brands (luxury or otherwise) that have decided to go down the service-inclusive route.

Now, the VW program is slightly different in that it covers service through 3 years or 36K miles (vs. the luxury standard 4 years, 50K miles), which is the factory warranty term. More specifically, the program includes a check-up visit at 6,000 miles as well as regular service (oil changes really) at 10K, 20K, and 30K. With the upcoming VW/Chrysler Routan minivan, the service interval is every 6K miles through 36K. Whereas VW consents that service is no longer needed every 5K, apparently Chrysler isn't quite as confident in their product.

So, at the end of the day, it is a nice gesture, but when you consider that we are really only talking about some oil & filters and that many dealers (of all brands) even throw that in occasionally anyway, it loses a little luster. Having said that, VW is somewhat notorious for offering a less than pleasant experience in their service lane, so for these new owners specifically, the fact that they don't have to pay for the privilege of mediocre service is at least a step in the right direction.

Who will be the next non-luxury brand to follow?

Ding...You are now free to move about the cashier's office

For anyone who has experienced it, the new boarding process at Southwest airlines seems more like a bizarre study in sociology than the time-saving seat selection protocol it was no-doubt designed to be. What was likely perceived as a clever way to use an alphanumeric system to facilitate a quick turn-around, in practice has less structure than the letters & numbers found in the next bowl of alphabet soup, especially for those of you not organized enough to check-in the night before.

Picture the scenario, your heart sinks in the cab upon realization that you are merely an hour away from boarding though you don't yet possess the coveted "A" tagged pass, so you leap past competitors in the ticketing line in a last ditch effort to score a late "B," with hope fading fast. It isn't until your late "C" number is finally called and the last of the token "today's flight will be a completely full" announcement fades that you consider the gravity of your error in not checking that roller-bag, which incidentally just seemed to swell by ten pounds and a couple of inches.

The early pandemonium you encounter on the actual plane through the single digit seats and teens is not a good sign of things to come. With center seats already filled, latches on the bulging overhead bins hanging on for dear life and the once jovial flight attendants strategizing as they sharpen their elbows, you begin your walk down the plank into one of the most uncomfortable feelings in current consumer life.

A weak and muffled "Oh, shit" is all you can manage to muster.

Facing this very situation on a recent flight back to Midway from BWI recently, I began searching my mental archives for similar capitalist situations where I was both, a paying-customer and yet so hating life. Some truly horrific images flashed by, including a sun-drenched two hour line waiting to get onto the "It's a Small World" ride at Disney in mid-July, or counting the hours near the women's dressing rooms on the third floor of Bloomingdale's because you thought it would be "fun" to re-do your wife's entire wardrobe a week before Christmas in New York City. Ah, Good Times.

Shortly thereafter it popped in there. The question of where in the automotive world do you all at once, have a pocket fun of cash and find yourself staring down at the twitching trigger finger of an old-school gunslinger on the other side of the desk. This was an unwelcome reality not long ago after the battery in our beloved car went and gave up the ghost after close to five years of dependent service. After a short exchange with our local AAA crew, I was actually feeling good about something I spend $$ on every year, though never use. The meeting with service advisor at the local dealership a couple hours later would bring me right back to reality, however.

Now, I am not sure what type of reverse psychology he was going for, but he tried to gloss over and make me feel better about the fact that our particular vehicle used a battery that would cost over $200 to replace by explaining that they had "fortunately" turned up some other unforeseen issues during a routine check.

Thank goodness we came to you!

The total of those general maintenance items, $984 and change. (Read: Thank you sir, may I have another.) For effect, they showed our car through the window on the hoist with a mountain of greasy parts littering the ground underneath. Second opinions an impossibility, and options dwindling, I begin to curse that damn battery that moments before was a savior.

Now, I consider myself a student of all things automotive and have an obvious affinity for fixed operations (who doesn't?), yet even after forcing them to go through the trash to physically show me the torn CV boot and all other line items on the bill, I didn't have a leg to stand on. Of course, there may be instances on the sales side of the store that can also catch you off guard (as there are in a thousand other emporiums of corporate America in action) I couldn't help but find a significant similarity in the way I felt when I finally reached the back of the plane, sweaty, swearing with suitcase still in hand as I did in that garage holding what I thought looked, felt and smelled like a perfectly operable spark plug.

So, the lessons to be learned. Check-in early and if that isn't possible, suck it up and check your bag. And if you happen to find yourself squaring off with someone who sees dead batteries everyday for a living, tell them to skip the extra stuff because you have a plane to catch.

    * The average Soutwest Boeing 737 has 40 "center" seats.       
    * The Company’s fleet has an average age of about 9 years.    
    * The average aircraft trip length is 633 miles with an average duration of one hour and 48 minutes.    
    * Southwest aircraft fly an average of seven flights per day, or 13 hours per day.    
    * Southwest was the launch customer for the Boeing 737-700 in 1997. Southwest was also a launch customer for the Boeing 737-500 and -300 series aircraft.    
    * Southwest has almost completed updating its traditional gold, red and orange paint scheme by adding canyon blue. All new aircraft will have the updated colors and interior. Existing aircraft are being retrofitted.    
    * Performance-enhancing Blended Winglets have been added to our fleet of 737-700s, and all new 737-700 aircraft arrive from Boeing with Blended Winglets installed. Additionally, Southwest began installation of Blended Winglets on some of our 737-300 aircraft in early 2007.    
    * Southwest received 284,827 resumes and hired 3,363 new Employees in 2006.    
    * In 2006 Southwest served 61.5 million cans of soda, juices, and water; 10.9 million alcoholic beverages; 5 million bags of pretzels; 93.8 million bags of peanuts; 16 million snackpacks; and 35.4 million other snacks.    
    * Southwest consumed 1.6 billion gallons of jet fuel in 2006.    
    * In 2006 Southwest moved 265 million pounds of cargo and mail.    
    * The shortest daily Southwest flight is between Ft. Myers (RSW) and Orlando (MCO) (133 miles). The longest daily Southwest flight is between Philadelphia (PHL) and Oakland (OAK) (2,510 miles).    
    * Southwest has 1,133 married couples. In other words, 2,266 Southwest Employees have spouses who also work for the Company.

Toyota (Service) Woes?

We have spent considerable time and space discussing how difficult it has been over the last several years to be in automotive repair. Between cars lasting longer, the difficulty in repairing the newest, technology-intensive (proprietary) systems (independents) and the struggle to find qualified techs, opening a new shop today is about as appealing and sound an investment as getting into the distribution of pay phones.

On the franchise side it hasn't been much prettier. Even with lower new cars sales nationwide (if the can't buy new ones, fix the old ones?) there is more pressure than ever to keep the store afloat and offset those meager profits on new vehicles with a steady stream of basic, and more importantly, customer-pay service work. With the increased pressure however, independents and national chains have gotten even more creative and continue to steal further dealer share of wrench time.

Now I wouldn't quite go as far to say as there is a silver lining to this dark and ominous cloud a brewing, but one OEM has been particularly "put out" by the trends in service, and in a good way.

The number of Toyotas on the road, with all of their complex (but very robust) trickery and gadgets, has increased from some 15 million to 22 million since the year 2000. What hasn't increased is the number of dealers, which has held steady at something north of 1,200. As bullet-proof as the cars tend to be, these numbers don't quite jibe and it has since put considerable strain on the service lane at said dealers. Whereas the light service (i.e. lube & filter) for most OEMs is a nice chunk of the bottom line and something that they furthermore depend on, for Toyota, the sheer volume of quick service vehicles has become somewhat of a nuisance.

In all fairness Toyota isn't the only one, Ford has fairly recently expanded their standalone quick service center strategy, but for them it is as much a marketing attraction as anything, while for Toyota, it is now a necessity.

In response, the company has allowed dealers that have no available room to expand (in terms of space/real estate), to create satellite service centers. The off premises centers have faired well with similar revenues and CSI scores as the in-store variety. In addition, stores have added dedicated express lanes to handle only the 70% of service lane traffic that requires light service, some more than doubling their daily capacity. And this is typically on top of doing overnight and expanded shifts.

At the end of the day, Toyota stores have seen a considerable increase in retention with stores involved in the testing and implementation of their satellite service and express service services from something at or even below the national average of 59% to over 70%. And while service pays for the dealers profits, it helps Toyota sell more cars. (The average dealer -- all brands-- generates some 12% of revenue through fixed operations, but nearly 50% of the stores profit).

Toyota gets it. It may be the job of the salesman to sell someone their first Toyota, but it is the job of the service lane to sell them their 2nd, 3rd, 4th, etc.

Most creative repair?

Our friends over at Jalopnik started a thread recently soliciting the accounts of the most creative auto repair jobs and has since logged well north of 100 responses including everything from your basic hold the rearview mirror on with gum to a roadside replacement of bad bearing with a piece of leather belt.

As always, it isn't the blog itself but the responses that make it worthwhile.

Have a look see here.

Service News -- Week of January 27th, 2008

There are several, recent service-related developments of interest to talk about here.

California Emissions Regulations

California continues to set its own course with regard to regulatory oversight of their statewide auto industry and has recently implemented new regulation concerning tailpipe emissions. An April Supreme Court ruling allows the EPA to govern vehicle emissions under the Clean Air Act, the same Act that allow CA to have its own emissions rules.

The entity that “deals” with manufacturers on emission-related recalls and campaigns is the California Air Resources Board and their tool-box just got a bit heftier as the new rules allow the board to much easier force OEMs to fix problem parts (even in the absence of a recall) as well as extend vehicle warranties.

This decision may lead to considerable warranty extensions (not to mention millions of dollars to OEMs) as some 20 million vehicles have been the source of emissions recalls in the past decade, 2.1 million alone during the first 9 months of 2007.

So, if you are in CA and are having emissions-related, be sure to check with your dealer if you are still covered. We can only guess what this might mean for the trickle effect and other states that tend to adopt CA’s rules.

An Argument Against Aftermarket Service Contracts

Service contract provider Ultimate Warranty, based in Ohio, stopped answering their phones back in December, which in the industry can be considered code for several things including, “game over.” While circling the drain, Ultimate racked up some $44 million in claims, that are now the responsibility of the South Carolina Department of Insurance, which is pulling apart the books of the company’s underwriter, Capital Assurance Risk Retention Group.

At the heart of the investigation is a claim that the company had a loss reserve fund of $48 million smackers, when, in fact, there was about $15K. Ouch. So, the good news, if you have a claim for service work on your contract with the now defunct Ultimate Warranty, you may see some of your promised money. The bad news, under the DOI plan, claims will be paid out over the next 10 years.

When it rains, it pours...

Very extensive, yet interesting article here on the high incidence and trouble with identifying vehicles that may a bit of a damp past.

Excerpt:

If you are in the market for a used car, beware of previously flooded cars. They could be from Hurricane Katrina or numerous other floods from Florida to Texas and Oklahoma. Many of these cars have been deemed a total loss by the respective insurance companies, but many more never get reported. These cars then get cleaned up, professionally detailed, and then end up for sale on a car dealers lot, Ebay or some curbstoners favorite spot on the side of a busy road or highway. The problem with a flooded car is that they can be a hazard waiting to happen and should be avoided. This article will provide you with some great tips on what to watch out for so you don’t end up with a flood vehicle from an automotive expert with over 25 years experience in the automotive business.

Please forgive me for (and ignore) any solicitations.

Service Outlook 2008

So what is the upcoming year going to look like in the automotive service & parts industry?

Hmm, interesting question. On the one hand, new vehicle sales are very likely going to continue to trend down on average to the tune of well under 16 million vehicles. But maybe that means used vehicle sales will make up the difference? Well, the short answer is no. The systemic pressure on new car sales is unfortunately industry or rather, economy-wide and will affect all big-ticket spending. So, alas, used car sales will be down as well.

Ok, strike one against, but that is vehicle sales, not necessarily service. True, when we tighten the collective belt, we typically shelf any ideas of getting that new ride and at the same time try to care a bit more for our current steeds, which might lead to a bit of an uptick in general service & maintenance.

The rub is, all vehicles are still improving in both the quality and reliability departments while stretching the typical service interval to longer periods. Thanks to improvements in technology, namely synthetic oils and even cleaner operating engines, 7,500 miles has become the new 3,000 miles in the world of oil changes with some manufacturers going even double that distance between lubes. This effectively cuts basic service shop traffic by half or more as the average owner can often get away with less than two (mileage-driven) visits to the shop per year.

That one ends up being a wash (cancel each other out, not the owner brings the car in for detailing) at best.

So what other factors may enter the equation and push visits one way or another? Well, there is still a strong movement toward armchair environmentalism where the proverbial seed has been planted in the typical consumer's ear at least bringing the green question to some part of the subconscious. That could theoretically spark a few brakes jobs or transmission flushes, but won't likely have a major push on the needle.

And that is about it I'm afraid. We won't likely see any ground-breaking developments on the Right to Repair initiative, nor will we see much difference in the current trend of small independent shops that hang up their wrenches in favor of twinkies. Could be better, but could be worse.

If you are the proprietor of said type of store, or even a factory-backed franchise one, let's keep those creative ideas for driving traffic coming.

Year end clearance...

Well, the holiday season is officially upon us. This is the time of year when people are thinking about travel plans, trendy gifts and dropping temperatures. One thing noticeably off that list is the purchase of a new (or used) vehicle, even with all of the fanfare for end of year and holiday sales events. There is just too much else going on to think about dealing with the typical automotive purchase, which inevitably brings to close a year that a sports team might consider a “rebuilding” one. That’s just the way it is.

A quick scan of daily industry news turns up several items that really shouldn’t shock anyone and serve as a fairly appropriate snapshot of the entire year. Ford is recalling 1.2 million vehicles, and trucks no less, a diesel from VW is running circles around the Prius and the House of Representatives has approved an energy bill destined not for the president’s desk, but rather the oval bin underneath it.

So what’s new?

Rather than just dwell on the low sales volumes or other negatives, we should be looking at the bright spots in the industry, no matter how difficult they may seem to find. After all, this was a pretty incredible year one way or another. Each of the domestics had their own victories in a successful divorce (Chrysler), and major about face (Ford, which lost $12.6 billion in 2006 and has earned +$90 million so far this year) and GM, that has been receiving pretty good reviews on new vehicles. Never mind that pesky $39 billion dollar 3rd quarter tax charge, the company has signed a new labor agreement as well, which really could pave the way to a brighter future.

Across the pond, Porsche has clubbed its date (VW/Audi) over the head and is dragging her back to the cave, while BMW has raised the bar once again with the industry best new 3-Series and Mercedes-Benz is quickly climbing back up the reliability ratings. Similar things can be said with most of the other brands, meaning pretty much wherever you look, there is a silver lining.

And even though we have seen enormous change, some things just tend to stay the same.

MotorTrend car of the Year: Toyota Camry

Bring on 2008!