Latest / Mechonomist Podcast / Why the automotive repair industry sucks for everyone but shop owners

Transcript

Why the automotive repair industry sucks for everyone but shop owners · Mechonomist Podcast

• 0:00
  SPEAKER_01: Good afternoon, everyone.
• 0:02
  SPEAKER_01: I don't know if I'm going to have a good internet connection.
• 0:06
  SPEAKER_01: I'm at Mount Cheehaw outside of Aniston in Alabama.
• 0:11
  SPEAKER_01: It's a nice state park.
• 0:13
  SPEAKER_01: Alabama has one of the best state park systems in the country.
• 0:16
  SPEAKER_01: It's a nice state park.
• 0:17
  SPEAKER_01: It's the highest peak in Alabama at 2,700 feet.
• 0:21
  SPEAKER_01: And so I don't know how good my stream is going to be,
• 0:23
  SPEAKER_01: but I did want to talk a little bit about the automotive industry,
• 0:26
  SPEAKER_01: which I've been thinking about a lot lately.
• 0:28
  SPEAKER_01: And it's really not good for anybody but shop owners.
• 0:34
  One of the reasons is that automotive technicians are one of
• 0:37
  the lowest paid trades
• 0:40
  SPEAKER_01: out of all the trades.
• 0:42
  And the result of that is that you can't find qualified people
• 0:46
  to work on vehicles.
• 0:48
  Now that's compounded by the fact that vehicles are so
• 0:52
  complicated now that it
• 0:53
  SPEAKER_01: takes a multiple PhD level of
• 0:58
  knowledge base to even begin to be able to diagnose correctly
• 1:02
  and what you end up
• 1:03
  getting is people who just guess they go to um they when
• 1:08
  somebody goes when
• 1:09
  somebody takes a car to the shop and it has a drivability
• 1:11
  problem or check-ins and
• 1:12
  lights some sort of electronic problem most people and it
• 1:24
  starts to add and it
• 1:25
  SPEAKER_01: becomes really expensive
• 1:32
  hours an hour i wouldn't want to all of the skills necessary to
• 1:37
  adequately and
• 1:38
  SPEAKER_01: accurately test these complicated machines either um
• 1:44
  SPEAKER_01: But shop owners are making bank because they make money off the tires.
• 1:47
  SPEAKER_01: They make money off the brake jobs.
• 1:49
  SPEAKER_01: They make money off the oil changes.
• 1:51
  You know,
• 1:51
  they make a lot of money off of this stuff and shop owners are
• 1:54
  doing fine.
• 1:55
  SPEAKER_01: You know, and I say this as a shop owner myself.
• 1:57
  SPEAKER_01: I don't have employees that I've hired.
• 1:59
  SPEAKER_01: And if I do have employees, I will pay them $35 an hour at least.
• 2:04
  SPEAKER_01: But,
• 2:05
  SPEAKER_01: you know,
• 2:06
  it's not good for customers because customers can't get
• 2:10
  qualified people to work
• 2:11
  SPEAKER_01: on.
• 2:13
  And it's not good for technicians because the industry does not
• 2:19
  draw talented
• 2:20
  SPEAKER_01: people because of how low paid it is.
• 2:23
  SPEAKER_01: Some shops even put people on 1099s.
• 2:27
  SPEAKER_01: You know,
• 2:28
  SPEAKER_01: if you take your car to the dealer these days,
• 2:30
  SPEAKER_01: the dealer doesn't want to do anything but warranty and use cars.
• 2:36
  SPEAKER_01: Most dealers have checked their labor rates up to $192 an hour.
• 2:42
  general look out and they're trying to just make easy money uh
• 2:46
  if you look at the
• 2:47
  technicians the dealer now it used to be a lot of old school
• 2:51
  salty old guys now
• 2:52
  it's just a bunch of young dudes who are just more or less part
• 2:55
  swappers and if you
• 2:57
  go to an independent shop you got those salty old guys that
• 3:00
  have been doing it for
• 3:01
  years and years and years who are really really good at what
• 3:03
  they do you know the
• 3:04
  ones that are left the ones that haven't moved to industrial
• 3:07
  maintenance or fleet
• 3:09
  SPEAKER_01: vehicles or heavy heavy equipment
• 3:12
  SPEAKER_01: The ones that are left are in independent shops,
• 3:15
  SPEAKER_01: and they're so burnt out that they don't do anything.
• 3:19
  SPEAKER_01: So it's really a bad situation,
• 3:21
  SPEAKER_01: and it's bad for the customer,
• 3:22
  SPEAKER_01: it's bad for the technicians,
• 3:23
  and really the only people making any money and doing good are
• 3:26
  the shop owners.
• 3:27
  SPEAKER_01: And I'm a shop owner.
• 3:28
  SPEAKER_01: You know, I'm telling you this as a shop owner.
• 3:30
  SPEAKER_01: So,
• 3:31
  SPEAKER_01: you know,
• 3:32
  SPEAKER_01: when you...
• 3:34
  Next time you go to the automotive shop and you got a problem
• 3:39
  with your vehicle,
• 3:39
  SPEAKER_01: and they tell you it's going to be three days or whatever,
• 3:42
  SPEAKER_01: Just realize that that technician back there,
• 3:44
  SPEAKER_01: you're paying $120,
• 3:45
  SPEAKER_01: $140 an hour,
• 3:46
  SPEAKER_01: and that technician back there is making $20.
• 3:51
  SPEAKER_01: So just remember that,
• 3:53
  that the person actually fixing your vehicle is making not much
• 3:56
  more than somebody
• 3:57
  SPEAKER_01: working at Chick-fil-A would make.
• 3:59
  SPEAKER_01: And they have to have PhD-level knowledge to be able to do that.
• 4:04
  I think one of the solutions that a lot of technicians have
• 4:07
  done is to go mobile
• 4:08
  SPEAKER_01: mechanic,
• 4:08
  SPEAKER_01: which is what I did.
• 4:10
  um it's a low overhead to get him get to get into it you
• 4:13
  already have the tools you
• 4:15
  have to buy a little bit of equipment i think i've had to
• 4:18
  purchase i don't know
• 4:22
  maybe five thousand dollars worth of equipment to get where i
• 4:24
  need to be to be able
• 4:26
  to do diagnostics and programming and a lot of technicians are
• 4:30
  going mobile
• 4:30
  especially out west and a lot of them are doing really well and
• 4:33
  i think customers
• 4:34
  are more pleased with their mobile techs than they are with
• 4:37
  going to independent
• 4:38
  SPEAKER_01: shops with
• 4:39
  SPEAKER_01: $40,000 worth of lifts, $200,000 worth of equipment in their shop.
• 4:40
  SPEAKER_01: It's not a good situation for auto repair.
• 4:42
  SPEAKER_01: In the 80s, we hit a tech wall when everything changed from carbureted to
• 5:06
  SPEAKER_01: fuel-injected,
• 5:07
  SPEAKER_01: and we lost a lot of old-school,
• 5:09
  SPEAKER_01: long-term techs because they couldn't work on fuel-injected vehicles.
• 5:12
  SPEAKER_01: Now we're about to hit a tech wall with EVs,
• 5:15
  SPEAKER_01: and really,
• 5:15
  there's just not going to be people who are going to be able to
• 5:18
  work on your cars.
• 5:20
  SPEAKER_01: In the next five to ten years,
• 5:22
  SPEAKER_01: if you're driving an EV and you have an issue with that EV,
• 5:26
  SPEAKER_01: you're going to be waiting six,
• 5:27
  eight weeks at least to be able to get service on that vehicle
• 5:31
  at the dealer
• 5:32
  SPEAKER_01: because they're not going to have the techs to do it.
• 5:34
  SPEAKER_01: And why would you make it $20 an hour?
• 5:36
  SPEAKER_01: Why would you learn a new skill, a whole new skill for $20 an hour?
• 5:42
  SPEAKER_01: So the shops are going to have to value techs more.
• 5:45
  SPEAKER_01: The real, the key to it all is, is valuing the techs more.
• 5:50
  SPEAKER_01: You know,
• 5:50
  if a tech can go to industrial maintenance and make 40 bucks an
• 5:53
  hour for making 20
• 5:54
  SPEAKER_01: bucks an hour at a,
• 5:56
  SPEAKER_01: at an independent shop,
• 5:58
  SPEAKER_01: why wouldn't he?
• 5:59
  SPEAKER_01: And you got good techs doing that all the time.
• 6:01
  SPEAKER_01: So it,
• 6:04
  the key to solving this sort of issue and nobody likes going to
• 6:09
  the auto shop anymore.
• 6:10
  SPEAKER_01: You know, it's going to be a long wait.
• 6:14
  SPEAKER_01: Maybe they get it right.
• 6:15
  SPEAKER_01: Maybe they don't get it right.
• 6:18
  SPEAKER_01: Um,
• 6:19
  you take it to multiple shops trying to chase down some problem
• 6:22
  that nobody can
• 6:22
  SPEAKER_01: figure out and you have to pay every single shop every single time.
• 6:26
  And it's just,
• 6:27
  it's not,
• 6:28
  it's not a,
• 6:29
  it's not a,
• 6:29
  it's not a good industry to be in.
• 6:31
  SPEAKER_01: And as I was saying earlier,
• 6:33
  the problem is that it doesn't draw talented technicians to the
• 6:41
  industry because it
• 6:42
  SPEAKER_01: pays so low.
• 6:43
  SPEAKER_01: It's one of the lowest paid, skilled labor jobs ever.
• 6:51
  SPEAKER_01: in the United States being an auto technician is.
• 6:54
  SPEAKER_01: And if you go to the dealer,
• 6:56
  SPEAKER_01: the dealer is jacked their labor rates up to $190,
• 6:58
  SPEAKER_01: $200 an hour and only wants to do warranty work and use cars now.
• 7:05
  SPEAKER_01: They want to keep the general public out as much as possible.
• 7:08
  SPEAKER_01: They don't really want to do repairs.
• 7:10
  SPEAKER_01: And independent shops are paying $20 an hour for technicians.
• 7:14
  SPEAKER_01: And you can just about make $20 an hour at Chick-fil-A.
• 7:19
  So there's no incentive for people with talent to get into the
• 7:24
  automotive repair
• 7:25
  industry because it is definitely no incentive to learn all the
• 7:30
  stuff you need to
• 7:30
  SPEAKER_01: learn to be able to be an effective auto technician,
• 7:34
  SPEAKER_01: which is,
• 7:34
  SPEAKER_01: you know,
• 7:35
  SPEAKER_01: multiple PhD level knowledge.
• 7:38
  You definitely have no incentive to do that if you're only
• 7:40
  going to get paid $20 an hour.
• 7:43
  SPEAKER_01: I mean,
• 7:43
  SPEAKER_01: there are eight ASC tests to get a master certification,
• 7:48
  SPEAKER_01: and possibly each one of those tests is equivalent to having one PhD.
• 7:54
  The experience and knowledge base you need to be able to pass
• 7:57
  one of those tests is
• 7:57
  SPEAKER_01: about the equivalent of having one PhD.
• 7:59
  SPEAKER_01: I have five.
• 8:00
  SPEAKER_01: I'm about to take my HVAC in October, which will give me six.
• 8:04
  SPEAKER_01: I'm trying to get to be a master.
• 8:06
  SPEAKER_01: But unless this...
• 8:10
  name matches this name which is the shop name matches the
• 8:13
  personal name there's no
• 8:15
  real money in being an auto technician and there's a lot of
• 8:18
  hassle a lot of unhappy
• 8:20
  customers and it's a really difficult industry and shop owners
• 8:27
  are making off like
• 8:28
  bandits most of them and technicians are struggling and
• 8:33
  customers are not happy
• 8:34
  SPEAKER_01: with the type of service that they're getting
• 8:37
  And really the key thing is we need more talented people to
• 8:41
  join the automotive
• 8:42
  SPEAKER_01: industry as technicians.
• 8:45
  SPEAKER_01: And the way to do that is to pay more.
• 8:46
  SPEAKER_01: It's real simple.
• 8:50
  SPEAKER_01: You know,
• 8:50
  SPEAKER_01: and like I was saying earlier,
• 8:51
  a lot of auto technicians have left independent shops and
• 8:56
  dealership shops and
• 8:57
  SPEAKER_01: started doing mobile mechanic work,
• 8:58
  SPEAKER_01: which is what I'm doing.
• 8:59
  SPEAKER_01: I do mobile diagnostics and programming.
• 9:02
  SPEAKER_01: And, you know, I'm kind of real specialized.
• 9:04
  SPEAKER_01: I don't do general auto repair.
• 9:06
  SPEAKER_01: I just
• 9:07
  SPEAKER_01: sort of go in, hired gun type guy and do all the electronic work.
• 9:12
  SPEAKER_01: But,
• 9:13
  SPEAKER_01: you know,
• 9:14
  it's a tough industry and this is why people are unhappy with
• 9:19
  it and don't trust
• 9:19
  auto technicians is because auto technicians are not paid
• 9:24
  enough to attract the
• 9:26
  talent needed to be able to do adequate or effective job being
• 9:33
  an auto technician.
• 9:35
  SPEAKER_01: So, you know,
• 9:37
  SPEAKER_01: An auto technician union will go a long way these days,
• 9:39
  SPEAKER_01: but auto technicians are a unique brand of people.
• 9:43
  SPEAKER_01: They're real intelligent.
• 9:45
  SPEAKER_01: They're real savvy.
• 9:46
  SPEAKER_01: They work really hard, but they're also real independent.
• 9:51
  And many auto technicians don't see any point in having a union
• 9:54
  because they think,
• 9:55
  SPEAKER_01: because of their independent mind.
• 9:58
  SPEAKER_01: There are automotive technician unions in other places in the country,
• 10:01
  SPEAKER_01: but there's not any in the South that I know of.
• 10:04
  SPEAKER_01: Anyway.
• 10:05
  SPEAKER_01: That's my blog for today.
• 10:08
  SPEAKER_01: I'm real excited about...
• 10:09
  SPEAKER_01: I think...
• 10:21
  SPEAKER_01: The question is,
• 10:21
  what price point do you think would keep a tech in the
• 10:24
  independent shop if it would
• 10:29
  SPEAKER_01: be a fair wage?
• 10:31
  SPEAKER_01: I think that...
• 10:36
  SPEAKER_01: If you're on flat rate,
• 10:38
  SPEAKER_01: which if you understand what flat rate is,
• 10:39
  SPEAKER_01: you get paid by the job,
• 10:40
  SPEAKER_01: I think $35 to $40 an hour would be good.
• 10:42
  And if you're on salary or hourly,
• 10:43
  I think $25 to $30 an hour would be good.
• 10:56
  SPEAKER_01: The reason that is this flat rate is real hit and miss.
• 10:58
  SPEAKER_01: Depends on how much work you have.
• 11:00
  If you get stuck on a job that pays two hours and takes you
• 11:03
  eight hours to do it.
• 11:05
  SPEAKER_01: You know, flat rate, you're basically running your own business.
• 11:08
  SPEAKER_01: But, you know, salary or hourly would be a more stable paycheck.
• 11:18
  SPEAKER_01: But you should get paid less.
• 11:20
  You should have the potential to get paid more on flat rate
• 11:23
  than on salary or hourly.
• 11:28
  SPEAKER_01: And that's in Alabama.
• 11:33
  SPEAKER_00: I think the California or New York State,
• 11:39
  SPEAKER_00: New York City,
• 11:41
  SPEAKER_00: San Francisco,
• 11:43
  SPEAKER_00: California,
• 11:43
  SPEAKER_00: Michigan,
• 11:44
  SPEAKER_00: New York City,
• 11:45
  SPEAKER_00: New York,
• 11:45
  SPEAKER_00: Michigan.
• 11:47
  I think you can look it up a different type of pay rate than
• 11:53
  you would in Alabama.
• 11:54
  SPEAKER_00: But I talked to a shop, good shop.
• 11:58
  shop does good work i know they do work and they were hiring a
• 12:00
  technician and they
• 12:02
  they i said how much you know they said twenty dollars an hour
• 12:07
  and i almost laughed
• 12:08
  SPEAKER_01: in their face i'm like man i'm not getting