On 10/15/2011 7:49 PM, Mike Marlow wrote:
Leon wrote:


That is not right either. The dealer makes more money if he turns the
rotors than he does if he sells new ones. Labor and parts sale price
would be about the same however the parts cost to the dealer is much
higher than the labor cost. AND in most GM dealerships the service
departments pays a mark up price to the parts department thus lowering
the service department GP even more on parts. Basically the rotor
has x amount of GP which the parts department and service department
share. The separate departments in dealerships very much operate like
separate businesses with in the same building.

It does not matter how the money is spilt withing the dealership Leon - the
dealership still realized the same amount of money, regardless of any
internal splits.


Actually it does matter how the money is split. Department managers are
most often paid on GP for that department. For example if the parts
department passes the cost of the part along to the service with no mark
up the counter guys would make less commission and the manager would
make less commission. The service department manager gets a commission
on the parts that his department sold but not on the total GP that the
dealership made. Same goes for the parts department as their GP is made
on the internal sale to the service department. Counter sales GP to
businesses and walk in customers completely belongs to the parts
department. Service labor sales goes completely to the service
department. The parts department can have many different internal sales
to any and all departments including wholesale and retain walk in business.

So, to more easily keep up with what department gets credit for how much
GP the departments operate as separate businesses with in a business.

Now while the total GP made on a part sale might seem to be a logical
fixed amount, that is not art all true. A part sold over the counter to
a walk in customer will generally have the same GP in the end when it is
sold to the service department. That is generally not so when the parts
department sells a part to the new or used car department. Often
flashy add ons to close the car sale are absorbed by the new or used car
department.

So where am I going with this? ;~) The dealer will net more or less
depending on which department the part is sold internally too. And keep
in mind that department managers and employees typically have very
different pay plans. So in many cases the dealer will net more from
selling labor than he will from selling a part and labor to accomplish
the same thing because of different commissions paid to department
employees. The more hands the parts travel through the less the "net"
profit for the dealership.

The only profit that the dealer is really interested in is the net
profit but he has to keep his department managers happy and they have to
keep their department employees happy. So a part sold in a dealership
to a customer for "x" amount of dollars will net the dealer more or less
depending on who all is involved with the transaction.

Automobile dealerships cash flow operate very differently than most
other businesses.