Pub. 4 Issue 4

11 Issue 4 2018  EARLY AUTO RETAILING IN LA — continued on page 12 MANUFACTURERS BUILT THE CARS, BUT LOCAL DEALERS WERE BETTER POSITIONED TO SELL AND SERVICE THE CARS. CARMAKERS NEEDED THE DEALERS AND VICE VERSA. (GMAC) in 1919 offering credit to dealers to carry inven- tories and to consumers to purchase new cars. Henry Ford held a more conservative attitude toward credit and Ford waited until 1928 to form a credit agency. Despite the ef- forts made to reduce defaults, risks remained. Small local dealerships that were not well capitalized but chased sales with liberal installment plans could be pushed into bank- ruptcy by multiple defaults and repossessions of cars that had lost most of their original value. Moreover, the reces- sion of 1920 took a heavy toll on all dealerships, regardless of their financing policies. Nevertheless, the evolution from early dealer-sponsored credit programs to auto finance companies offered a workable balance of interests among the manufacturers, dealers, banks, and customers. Providing Service and Repairs Early car manufacturers did not concern themselves with handling repairs. Most of these cars were merely assembled from componentsmade by suppliers without standardized, interchange- able parts. Mechanics often had to take apart the car, remove multiple parts and modify them to try to make the repair and this made it difficult to estimate the cost of repairs. Car owners took their cars to local mechanical shops where the quality of work variedwidely. Customer complaints were commonplace. Gradu- ally dealers began to provide service to their new car customers, but this required more capital outlays for larger facilities, parts inventories, new equipment, storage space for “dead” cars and others waiting to be retrieved, and hiring and trainingmechanics. Since the manufacturers offered very limited warranties, (usually 60 days for parts made by the manufacturer at a time when most parts were made by outside suppliers and no compensation for labor costs) dealers began to offer more generous warranties for repairs and service. Ford’s success in selling thousands of Model T’s was offset by the dissatisfaction buyers expressed regarding repairs and service. This led company executives to explore ways to improve the repair proves. Flushed with the success of its assembly-line production system and improvements in standardized parts, Ford began to apply time-and-motion studies, which hadworkedwell in a factory environment, to Ford branches at the local level. As sales contin- ued to grow, Ford increased its investment in large new service facilities in major cities and in more training and recruitment of mechanics for its branches. But the Ford service branches were soon overwhelmed with work and, worse, Ford soon learned that customers expected and demanded much more free services and repairs from a factory-run branch than from a local dealer. Fear- ing that this inability to resolve service complaints damaged the reputation of the brand and affected new car sales, Ford decided in August 1916 to abandon direct sales and service through Ford branches and instead turned to independent distributors and deal- ers to handle sales and service repairs. Ford sought to apply production techniques, based on time- and-motion studies that hadworkedwell in assembly-line produc- tion inDetroit, to local branch auto repair shops. Ford introduced an elaborate piece-rate or “flat rate” compensation system for mechanics based on the average hours and minutes required to complete a specific repair. But the new compensation systemmet with resistance especially from smaller dealers who wanted to make their own decisions on how to pay and considered every day work too varied for such a rigid system. Mechanics complained that too often more time was needed to complete the repair and resistedwith “work-to- rule” tactics that limited their work strictly to what was required and nothing more. Some dealers used the flat rate system to determine howmany hours to compensate amechanic for a job, but paid different hourly flat rates to mechanics based on their skill level. Thus, an aver- age mechanic might complete 80 flat-rate hours in a two-week period and be paid $.50 per hour (or $40) while a more highly