Auto repair shops thrive during poor economy

For decades, automotive repair has been seen as a grease-stained poor relation of the dollar-laden sales segment in the auto industry.

Not now.

As new-car sales have plunged along with consumer confidence, more people are spending to keep their current cars running. Auto service and repair arguably have become the lifeblood of the industry.

Dealership service/repair operations, independent auto shops and businesses that cater to do-it-yourself mechanics all are doing well. At most local dealerships, service/repair operations are now the primary money-makers.

"Our service and parts departments are among the most important, consistently profitable departments," said Rick Niello, president of the Sacramento, Calif.-based Niello Co., which operates 13 mostly high-end foreign dealerships in Northern California. "I would say service and parts probably account for 75 percent of our profitability. ... In past years, it was less than 50 percent."

Niello said the company's dealerships serviced about 100,000 cars in each of the past two years, five times what they were doing in 2001.

The Niello Collision Center, behind the company's Volkswagen dealership, is a 4,500-square-foot operation that works on cars of all brands. Niello said the small center does about $400,000 a month in body work. When the economy improves he wants to open a 40,000-square-foot facility nearby.

Mel Rapton Honda also leans heavily on service. The department has 54 state-of-the-art bays in a cavernous building. Katina Rapton, president and general manager, said service covers more than 85 percent of the dealership's expenses.

"The industry average is less than 50 percent, so that shows you how important it has become," she said.

Independent auto service shops also are reporting a steady stream of customers.

Richard Hale, owner of Walt's Auto Service in Citrus Heights, Calif., said "we're staying steady. I just ran the numbers, and we're almost exactly where we were in January and February of last year.

"If you can keep your business at 2007 and 2008 numbers in this economy, you're doing pretty well."

Hale said current customers are more willing to opt for comparatively expensive service, like an engine overhaul or replacement, "instead of going out and buying a new car. They just don't want to go out and spend $30,000 or $40,000 right now for a new car."