Sunday, September 20, 2009

Corporate auto mechanics, or lack thereof

I've been looking into auto mechanics because I'm worried about the clutch in my car. I felt some shuddering the other day. I think I tend to ride the clutch. I'm a bit worried about taking my car to the shop. I'm not rich. The last time it seemed like the small-town mechanics kept my car for a couple weeks and charged me what seemed like a lot for essentially just an inspection.

After doing some research I've learned that I should be looking for ASE (Automotive Service Excellence) certified mechanics. I've been looking for a corporate auto mechanic. People who know me might find that strange, but I've had a favorable view of corporations for a long time. As a gluten-intolerant person, the businesses which have are organized in their response to gluten are usually corporations (PF Changs and Red Robin come to mind). I used to have my oil changed by Jiffy Lube. Corporations have professional managers who are looking at the global scale. The services they provide are fairly predictable from location to location (eg McDonalds food). They often allow the customer to have an account with past history (my Jiffy Lube account) which can be pulled up anywhere.

I found an excellent analysis by Fulcrum Inquiry of the auto repair industry which confirmed my suspicions: the industry is highly fragmented with few to zero corporate giants; The Pep Boys (NSYE:PBY) and Monro Muffler Brake (NASDAQ:MNRO) are the only ones worth mentioning, and they're both basically small caps. I find this surprising. Corporate auto repair shops would have the following advantages:
  • More oversight to keep the mechanics "honest".
  • Organized customer account records showing the parts repaired, overview of issues, ect. This would be one of the biggest draws for me. The data could later be sold if the ownership changes.
  • Market power in buying equipment, which could be passed on to customers.
  • Systematic tracking of the reliability of parts, to locate the best deals.
  • Prioritization of the training on common auto issues.
Although I recognize the advantages of corporations, I don't like corporate governance. Dispersing ownership among countless small owners and putting all the power in a professional manager with relatively little ownership doesn't make sense. The ideal system is a few medium-sized owners, each of whom has a representative on the board. I don't really like leveraged buyouts as an alternative to our flawed corporate governance system, either. But that's a discussion for another post.

1 comment:

auto mechanics said...

To find a good mechanic you should never choose your mechanic based on price alone. A low cost job does not mean a good job so always try to look for quality first. Price certainly does matter but if you want your car fixed right, you may have to be flexible on that issue.