Mitch Schneider: At Any Rate...
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Mitch Schneider: At Any Rate…

I was out of the shop all day Thursday and most of Friday. Realistically, coming in just before three on a Friday afternoon didn’t seem to make much sense, but there was a “big job” that just “had to go out” – a project car with lots of hours. It seems like there is always a big job with lots of hours that just has to go out. So, let’s just say that going back to the shop on a Friday afternoon after being gone for a day-and-a-half wasn’t a first-choice option! Nevertheless, I found myself sitting at my desk at a quarter to three, drowning in a sea of unopened mail.

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I was out of the shop all day Thursday and most of Friday. Realistically, coming in just before three on a Friday afternoon didn’t seem to make much sense, but there was a “big job” that just “had to go out” — a project car with lots of hours. It seems like there is always a big job with lots of hours that just has to go out.

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So, let’s just say that going back to the shop on a Friday afternoon after being gone for a day-and-a-half wasn’t a first-choice option! Nevertheless, I found myself sitting at my desk at a quarter to three, drowning in a sea of unopened mail.

The first letter I opened set the tone for the next four-and-a-half hours. It was from the daughter of a long-time client who is a long-time client herself. She was in high school when she first came in with her father and now has high school-age daughter herself.  

The letter was difficult to read. Not because it was poorly written. It was as clearly written as can be. (Generally, I do my best to capture the interchange that takes place across the service counter and that’s almost always more than adequate. This time, I think I’ll let the client do the talking because I’m not sure I could express the frustration — the anxiety — that we don’t always “feel.” Nor, is it likely that I could do a better job of demonstrating how little some customers know about what we do or how things actually work [or don’t] in this industry.)

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So, here is what she had to say, followed by my response.

Dear Mitch,

I have wanted to speak with you about an important matter that has me very confused. I would have preferred to speak with you in person, but my work schedule prevents it. I will describe the concern that I have in this letter, and then I would very much like to speak with you on the phone.

The last time I brought my vehicle to you was in February 2009. You repaired the instrument cluster. As I scanned through the invoice, I found that we had been charged $143.97 for the labor to determine the problem, and then another $205.14 and $51.29 for the labor to fix the car. The labor rate for the first charge was different than the labor rate for fixing the car (Feb. 4, 2010 – Inv. #13775).

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This is confusing to me. In my many years of taking vehicles to auto shops and dealerships for repair, I don’t ever recall paying two charges like you have here. In fact, a few months later, I had another problem with the vehicle and took it to the dealership.

I asked them about this (without revealing your name) and asked what their policy is. They told me that the only time they charge for determining the problem is if we don’t have them fix the car. At that point, they’d charge us for the diagnostic labor. But, if we have them fix the vehicle, we don’t pay the two labor charges, just the charge to fix the car. This has always been my experience in the past. I don’t ever recall being charged twice before.

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So, I went through old invoices from you. The previous invoice for the GMC dated Aug. 17, 2009 – Inv. #12833 had the same billing where I was charged: $143.97 for the diagnostic and $153.86 for the labor to fix the car.

For our other vehicle, there was different billing for the same time period as well: Jan. 21, 2010 – Inv. #13692 – one labor charge; Aug. 3, 2009 – Inv. #12750 – one labor charge for overheating evaluation, one labor charge for the clutch fix; and Aug. 4, 2009 – Inv. #12763 – one labor charge.

I also spoke with my father and asked him what his experience was with your billing. He told me he’s never been billed for diagnostic labor and then the labor to fix the problem. (This was from his memory. I didn’t sit down with him and any of his old invoices.)

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So Mitch, what I am left to conclude is that I am seeing different charging practices from you, and one practice is different than any other I’ve ever encountered in the automotive repair industry. This confuses and concerns me. I’m left feeling like I’ve been taken advantage of.

My husband and I recently purchased my father’s 2000 Volvo. I know that you and my father have put many years of sweat and frustration into this car and no one knows it like you do. I want to continue to bring it to you because I believe you would take care of it the best. In fact, we are having a problem with it right now. Before I can do that, I need to be able to get this billing situation straightened out.

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At this moment, I’m not comfortable bringing it to you until we speak.
Would you please take a look at the invoices and give me a call so we can straighten this issue out?

Thank you.

 

Explanation of Charges
Diagnostic time…the time it takes to understand, inspect, test, analyze and evaluate. This is time that you and I have given away for decades, perhaps the entire history of our industry.

It is time that too many of us still gift wrap and deliver every day. Time that we have allowed our customers to believe is theirs: an integral part of the repair itself, no different than turning a wrench or scraping a gasket.

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There may have been a time when that was true, when it was accurate. Although, I would argue there is never any justification for giving away the essence of what you do and who you are — your skill, ability, expertise and knowledge.

But, that time no longer exists if it ever existed at all.

We don’t call the inspection and testing required to determine what is wrong with a vehicle “diagnostic time” any more.

Nor, do we talk about diagnoses. Clients generally don’t understand where a diagnosis comes in the process of examining a vehicle. Sadly, neither do the vast majority of shop owners I know or know of. And, that is precisely what I tried to address in my response.

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From the Desk of
MITCH SCHNEIDER


I’m sorry you are unable to come down so we could discuss this in person. Doing it this way can sometimes prove just as frustrating and inadequate as the problem that prompted your concern.

Having said that, I’ll do whatever I can to help you understand what have become normative practices with regard to pricing in the automotive service industry. Based upon the number of years I have been speaking and writing to the industry, I think I may be uniquely qualified to do that.

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Like most businesses, there are many different ways a charge for products and services can be presented. As you already know through your experience as a medical professional, a “diagnosis” is the fourth or fifth step in a process that begins with the harvesting of information and then proceeds to Inspection & Testing (you guys call it an “Exam”), Analysis & Evaluation (understanding the pathology of the “Illness”) and, then, ultimately to a Diagnosis.

Each of the preceding elements is critical to an accurate Diagnosis and an effective Diagnosis is critical to an accurate Estimate, effective treatment and an effective repair (Cure).

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Sometimes, the inspection, testing, evaluation and analysis take place in an instant. Something is obvious: visibly broken or unmistakably dangerous, and those elements are not a separate part of the charges involved in the service or the repair.

Sometimes, the initial inspection requires disassembly (surgery) to inspect or observe, and the cost of inspection is part of what the normal charge to remove and/or replace the defective component would be. There are times, however, when the charge for inspection cannot be included in the actual repair and will appear as a separate charge: “This is what it took to find out what was wrong with your vehicle (the exam) and this is what it will take to fix it (the surgery itself).”

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There are some service providers who “wrap” these charges inside the repair so they are not discernable. There are others who hide them in other ways. We’ve always felt it was better to be honest and open and show each component of the process for what it is. That way, you as a consumer know exactly what you are paying for.

With regard to the difference in labor rates you mention, I will try to use the example you used.

On that invoice there was a charge for Inspection & Testing associated with the Service Engine Soon malfunction indicator lamp that was illuminated (Check Engine Lamp).

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Those charges were for the initial scan, plus the inspection and testing necessary to identify the problem and isolate the cause: the tools, time, technology and the technician. It was charged out at a higher labor rate because there are no parts sales associated with pure diagnostic work and, for better or worse, parts sales and profit are a natural part of our business. There are formulas and metrics for our industry as well as yours or any other.

Each hour’s revenue generally comes from the sale of both labor and parts — and both have costs associated with them. And, hopefully, both have profit associated with them or we couldn’t stay here for very long.

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When there is no profit from the sale of parts associated with the time spent working on the vehicle, that balance is disturbed, part of the equation is missing. When that happens, a minor addition to the labor charge per hour is made to compensate. This kind of work demands a higher level of skill, ability and education, as well as a host of specialized tools and sophisticated equipment, all of which are reflected in a higher hourly rate.

The charges for removing and replacing the instrument cluster are charged out at our base labor rate and reflect the time it took to accomplish whatever task we were confronted with. They also reflect the combination of parts sales and labor sales referred to above.

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We could charge a single labor rate that included some kind of calculation to reflect diagnostic time — the time associated with Inspection & Testing — but it would have to be higher to compensate.

Doing that would mean that those individuals who were not having any inspection and testing done — possibly you and your husband, or your father under different circumstances — would be paying a higher hourly rate overall, subsidizing someone else’s more difficult and demanding intermittent driveability problem.

There are also companies that use what is called a “Labor Matrix,” most popular among dealers. A matrix increases the labor rate per hour dependent upon the number of hours the vehicle is in the shop. The more labor, the higher the labor rate.

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The rational is that the “big” jobs are less profitable and have the highest risk of expensive comebacks while the smaller, faster maintenance and service jobs are quicker, demand a lower skill level and are consequently, more profitable. We don’t believe in that formula, although it would boost profits significantly.

Your other example would be the same. There is a charge for Inspection & Testing that includes the fuel pump pressure test and the additional time to clean the threads and connectors on the oxygen sensor. I suppose we could have documented only one charge of $195.26 and either omitted the hours altogether or put down a bogus time of 1.9 hours, when, in fact, it didn’t take that long.

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However, I’m quite sure I would not be comfortable with either.

The cooling system and clutch problems were distinctly different. However, the block test, which is a chemical test to ensure engine integrity, was an important test to perform for just that reason. No one wants to fix a clutch problem only to find out that the vehicle has a blown head gasket — a catastrophic engine failure. In this particular case, and just as reference, both were accomplished at the same labor rate.

Labor rates are funny things anyway. What is posted on the door really has nothing to do with the actual charge for service. Most shops and shop management systems give the operator the freedom to adjust the hours and the rate to come out to anything they want it to.

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We don’t do that either. We have always tried to be as fair — and generous — with our clients as we are able and still provide the quality of service we are committed to delivering every day to every one of our clients.

I would love to discuss this further with you at your convenience. Just let me know where and when.

Thank you for giving me the opportunity to respond,

Mitch

 

In Conclusion…
I finished the letter before I left the shop Friday night and dropped it off at the post office before heading home. It’s Tuesday and she should have received my letter by now. Hopefully, she will call soon and I’ll know whether or not my words were adequate, whether or not my explanation was clear enough, compelling enough to answer her questions and fully address her anxiety and concerns.

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I hope it was, for a number of reasons, not the least of which is the fact that we will not change. We will not change our practice of charging for the Inspection & Testing necessary to isolate a problem or determine a course of repair any more than the doctors this young lady works with or for are likely to stop charging for exams, expensive (and, sometimes unnecessary) tests, medication, consultations or diagnosis.

We are not going to stop because we can’t. And, we can’t for all the reasons I offered above, and more.
You see, time is perhaps the most precious of all commodities because it is the most finite of all commodities, there is only so much afforded each of us, any of us, and no one can “buy” more. It is an unrecoverable asset and more than half of everything we sell.

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So, while I hope this particular client understood what I was trying so hard to explain, my real concern centers on whether or not the majority of you will understand.

She may come back to us more educated and enlightened. Or, she may not. She may search endlessly for someone else who is willing to give her what she wants, or someone able to conjure up that illusion.

You and I have a different problem. You and I must remain profitable — viable — in order to serve our customers, in order to take care of our clients.

So, while her answer will determine our relationship: hers and mine, your answer will determine your future and, perhaps, more important, it just may help determine the future of our industry.

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Not just at any rate. But, at the right rate, the appropriate rate, the necessary rate for success — not just mine, but also ours. 

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