Danger to the workshop?

Danger to the workshop?

Complaining is common practice among traders. But at the moment the domestic automotive industry is nothing to envy. Not only have new registrations fallen (by 3.8 percent compared to the previous year), the money-making aftersales business has also fallen by four percent. If you consider that many car dealerships only make any profit through aftersales business and work with a return on sales of less than one percent, then you have to say: Now it's time to get down to business. Because if this financially necessary foundation is lost for medium-sized companies, things will quickly become dark in the local workshops. Is panic now called for or is there just exaggerated pessimism? 

Who is affected?

First, we want to find out which companies are most likely to be affected. Andreas Westermeyer, managing director of the Federal Guild of Automotive Technicians, knows the answer: "Smaller companies with up to seven employees are currently operating very successfully. The relatively high equity ratio and the sense of family help here." The large companies are also solidly positioned and do not need to panic. “The medium-sized businesses in which the boss is still lying under the car and working on things are the most difficult,” says Westermeyer. The problem: Such companies have already reached a certain size, which means a corresponding administrative effort. However, if the managing director is busy with mechanical work and can hardly take care of the big picture, the company runs the risk of spiraling downwards. Because without proper accounting, strategically important decisions at the right time and possibly tough measures (keyword: termination), the slight plus threatens to quickly turn into a fat red minus. The crux of the matter: your own financial strength. While small companies can operate quite independently, medium-sized companies are increasingly finding themselves in a headlock with banks, manufacturers and suppliers. If cash flow collapses unexpectedly and over several weeks, bankruptcy becomes threateningly close.

Is bungling an issue?

Are local workshops doing so badly because of the numerous botches? There is great agreement here: No, the botch is far too small-scale and disorganized for that. Federal Guild Master Friedrich Nagl: "Unfortunately there are no official figures on botching. But we estimate that botching is developing roughly parallel to general business." The reasons for this are manifold, as Vienna State Guild Master Werner Fessl knows: "The botch may be cheaper, but the cars are becoming more and more complex and complicated. Without highly specialized, expensive equipment and the associated specialist knowledge, it is almost impossible to repair modern cars. This limits the amount of botch." In addition, as Martin Gertl, Tyrolean state guild master of automotive technicians, notes, the bungling is to a certain extent also very regional: "Here in the valleys and on the mountains, where there is sometimes no real workshop anywhere, yes, there is inevitably bungling. And it is practically impossible to report all the bunglers." Werner Fessl confirms this: "In Vienna, bungling is of course also an issue, but in urban areas it is more noticeable and would be reported sooner or later. Therefore, in my opinion, bungling will concentrate on peripheral transactions such as accidents or older vehicles." In summary, one can say: Yes, the botch is certainly not conducive to good workshop business, but it is not currently threatening the existence of the automotive industry. 

Yield variable weather?

Bad weather is good for business. Severe winters, wet, snowy or even icy roads are more likely to lead to accidents and sheet metal damage than bright summer days. Mild winters are pure poison for sales, especially in Austria. "If the transition periods are so long and mild, then people wait longer to change tires and cause less sheet metal damage because the roads are clear and have good grip. The entire industry is missing these sales," notes Nagl. The same applies to hail. If this doesn't happen, the dent pushers and many body builders will be out of work.
But what does the automotive industry have to prepare for when it comes to weather? Ingmar Höbarth, Managing Director of the Climate Fund, has answers based on the Austrian status report on climate change 2014, on which over 240 local climate researchers worked: "The extreme weather events are increasing. There will be more precipitation north of the main Alpine ridge, while Carinthia will be drier. The winters will generally be milder. Instead of snow, more rain will fall due to the higher temperatures." In addition, Austria is particularly hard hit by climate change. There was a global temperature increase of 0.85 degrees. However, the temperature across Austria has risen by a full two degrees since 1880. Why is that so? "This has to do with the local topography: the mountains warm up faster when they are not covered by snow and glaciers. However, since the glaciers are receding sharply and the snow is melting more quickly, it is getting warmer than average," says Höbarth.

Lower mileage?

It is also interesting that all of our contacts have identified the trend towards slightly lower mileage and longer stopping times. Erik Papinski, Federal Guild Master of Body Builders: "Customers drive their cars longer, sometimes see it as an investment and have certain damage or details repaired. The only question is when." And here everyone agreed: even minor repairs are delayed as long as possible. Martin Gertl is not surprised: "The car no longer has the same importance today as it did in my youth. A little damage here and there doesn't really bother us today. The car has lost too much of its positive image. And: Even corporate customers have become more economical when it comes to repair orders." In addition, as Papinski believes, fewer and fewer people are traveling long distances in their private cars, for example on holiday trips across Europe. Werner Fessl from Vienna agrees and adds: "Even in an urban environment, we lack customers' kilometers. Thanks to well-developed public transport and car sharing models, we can be like the ski industry: As soon as rental skis came along, there was a slump in ski sales."

Fessl also sees too many excessive environmental protection measures in the automotive industry: "For example, air conditioning service. There are crazy requirements about who, how and with which device you can change the coolant, but in the event of an accident the air conditioning cooler is quickly damaged and the coolant escapes unhindered." If you look across our national borders, you can ask yourself why there is such a big fuss at local companies and why oils and other toxins are blatantly dripping into the ground a few kilometers away. Cross-border, European measures and guidelines look different. Therefore, says Fessl: "Many local jobs depend on the automotive industry and also a lot of money that is used to finance environmental protection. If that disappears, we will probably no longer be able to afford environmental protection."

Is there no money? 

Money is a good keyword. Are repairs too expensive for customers and/or do they lack the money? In none of our questions was there as much agreement as here: Yes, there is simply no money in the customer exchange.
The poor economy is contributing to this: many jobs are insecure due to the pessimistic economic outlook. The small increase in income is eaten up almost immediately by the cold progression and the cost of living rises steadily. Erik Papinski says frankly: "There is simply not enough money. People wait and don't spend it. Just look at the hourly rates: around 120 euros for an hour of work in the workshop is simply too much for people." There's really nothing more to add, but we don't want to let the topic end on such a pessimistic note. That's why we started looking for solutions. But the answers weren't very encouraging. “If we had a clear solution proposal, we would implement it immediately,” says Martin Gertl. Erik Papinski brings another component into play: "The crisis has finally reached the end consumer. Politicians are trying to help - but only on an occasion-related basis. Here, more attention should be paid to the local SMEs than to the few large industrial companies that we have." Because – and this may also be a bit strange – we hear and read all too often that an economics minister, for example, never tires of emphasizing that SMEs are the backbone of the local economy. It's just strange that this backbone of all things hardly receives the support it actually needs.

Some food for thought from Erik Papinski: Perhaps companies should be given more personal responsibility again and fewer regulations should be issued, which mean enormous financial burdens for many companies. To do this, streamline the administrative apparatus and help those who really ensure the country's revenue-generating consumption on a daily basis: the employees. If Ms. Müller has more money in her wallet at the end of the month, she can also afford the annual car service.

Survey & expert commentary Sebastian Huchler, GfK

Last month we asked how the industry assessed the development of new registrations for 2015. After a clear result with predominantly negative assessments, according to which only 21% expect an upswing, we now wanted to know how dealers and workshops assess the near future in the workshop business: The industry tends to be somewhat more optimistic when it comes to workshop business than when it comes to new registrations, with at least 28% expecting an upswing, while 71% have a (rather) negative assessment for the coming year. The proportion of “real” pessimists is not that large: only 13% are sure that things will not go uphill. With 28% optimists, one cannot of course speak of a rosy outlook for 2015, but one can only hope that things will soon start to look up again after this persistent dry spell. (Survey period: November 17-24, 2014, number of respondents: 342 companies)