A former employee of Red Rock Hyundai in Grand Junction who quit as an act of conscience last year previously gave an interview in which he told how Red Rock financing and insurance (F&I) employees had been fleecing people and submitting false information to financial institutions on the sales side. The same person also worked in the service department at Red Rock Hyundai, so I contacted him again to talk about how service is billed at these dealerships. The conversation ranged into a discussion of other service practices as well.
The former employee revealed some disturbing practices he’d witnessed in the service department at Red Rock Hyundai. These, combined with what he had seen happening on the sales side weighed heavily on his conscience and led up to his resignation. Some of what he said he had seen included:
- Techs putting metal shavings into dollops of oil taken from cars, then showing customers the oil with the shavings in it to convince them their cars needed more work, up to and including a new engine.
- Techs being told to drain the oil out of vehicles that were still under the manufacturer’s warranty, then drive the vehicles around without the oil in them, then bring them back and fill them back up with oil before returning them to the customer. The intent was to burn up the engine so the dealership would be able to put a new engine in under the manufacturer’s warranty, since they make more money when the manufacturer pays for repairs than when customers pay out of pocket for the same job.
- Red Rock selling their own proprietary Portfolio-brand of extended warranties to customers buying brand new cars with manufacturer’s warranties on them. They did this doubling up of warranties because Red Rock owns the Portfolio extended warranty company, and if anything breaks down on the vehicle while it’s still under the manufacturer’s warranty, the manufacturer will have to pay for the repair, meaning Red Rock gets to pocket the thousands of extra dollars they charge customers for these additional, duplicative extended warranties.
- The former Red Rock employee urged customers who take their cars for service at Red Rock to check on the prices they will be charged for parts, for example by calling Napa Auto Parts to compare prices, since Red Rock commonly overcharges for parts by a wide margin.
Following is the conversation I had with the former employee, who now works at a different new car dealership in town. His answers are denoted with the symbol ♣. The conversation was lightly edited to help readers who are a little less familiar with this subject matter better understand what was being discussed. I had contacted the employee and he had a short delay before he was able to call me back.
♣: Hey Anne, long time no talk, sorry about that.
A: Yeah, no problem, thanks for giving me a little time to explain this to me. [How service department billing works.]
♣: So, the way it works here at G.J. Subaru, or any manufacturer, like Ford, Dodge, Chrysler — all those manufacturers — when your car is brand new and you have your 3-year, 36,000 mile bumper to bumper warranty… Say the engine goes bad and it’s covered under warranty…Like all of these manufacturers set up a system [that] says, so, “due to 1,000 technicians doing this job, it takes an average of like 6.6 hours to do this engine,” so all the manufacturers set up their own [system] of what they’ll pay for a warranty repair. So there’s a website — that is the most common thing in automotive, it’s called AllData — in which you can look up labor times. Extended warranties have access to list prices of parts and labor, so I consider them like any other warranty. They’ll pay more than what manufacturer labor is, but you can’t just tell them on an extended warranty, like “Hey, I need 12 hour for this engine.” They can look it up and still see what labor times are suggested for that job. When it gets to customer(s) pay(ing), though, that’s when its tricky, because most people are, unfortunately, just like in the buying process, unaware. So when you bring your car in and drop it off, let’s say at Red Rock Hyundai, you bring in your Elantra and [the clock is] ticking. So they diagnose it. You pay for an hour of diagnosis. I don’t know what the labor rate now is. It was $160/hour when I left [Hyundai]. Then they’ll get an estimate. The Red Rock Auto Group Parts Matrix is ridiculous. They mark things so above cost that if you were to look it up… We had complaints from customers when I worked there all the time. They were like “Oh, I called Hyundai out of Denver and it was like $80 cheaper.” So Red Rock does not get a lot of wholesale business. They don’t have a lot of shops calling for their parts because they mark it up so high, even to local businesses. So a lot of the shops that I called around town — because when I was working there, they wanted me to try to gain that business back — and they were like “No, your markup is ridiculous.” So like [****] is the parts manager at Hyundai, she tells the other parts minions to get this matrix. She sets it up, and so they charge whatever, like if they spent $20 on a part at Napa, they’ll sell it for $120 and make $100.
A: Wow, that’s huge.
♣: Yup, and so…like…so yeah, that’s a big thing, and when it comes to customer pay, too, since the customer is paying out of pocket, if they want to get it fixed, and depending on the issue, they’re going to have to say “yes,” like if they come in and they need a new engine and the technician says “I want 15 hours of labor” and then the service writer quotes it. You know, there’s not a uniformity of how many hours this technician can quote. Two of the exact same cars [can] come in, and two different technicians can quote two different times, so, like the company can make more money off of one technician because he quoted three extra hours, when the other one quoted less, because he knows he can get it done.
A: That seems arbitrary. So it’s based on the technician’s skill and what they think it will take them, depending on their skill level?
♣: Yes, because obviously when you’re flat rate, they get paid [the] flat rate. So if they quote a job at 13 hours and they get it done in 5, they get paid for all 13 hours. But if they quote a job for 5 and it takes them 13, then they lose 8 hours of pay, if that makes sense.
A. I see, so like [the repair techs are] kind of like in business for themselves that way.
♣: Yes, exactly. And so, getting paid for diagnosis is always a big thing, and that’s pretty uniform at any shop in town. Depending on the technician, there’s definitely a lot of dishonest mechanics that will add a bunch of hours onto jobs, just, you know, as long as they can get away with it.
A: And diagnosis was charged at a flat rate per hour, like $160, when you left?
♣: Yup, yup.
A: And this grid system [for labor billing] that came and went after a few years, was in vogue for a while and is not used any more?
♣: When I was a mechanic at Berthod Motors in Glenwood, we never used it. I’ve heard about that system from older mechanics, who were like my mentors. Like, they talked about grid mechanics for labor rates and stuff like that, but I’ve never seen a shop do that. But I do know that when I took my ex-wife’s Hyundai Sonata in there [to Red Rock Hyundai], the new service manager that actually came from sales, his name was Jeremy, he’s a great guy, he told me that they’re hurting badly. Like this was a couple of months ago, they lost a million dollars. Like they went from selling 150 cars a month down to they’re barely selling 50. I don’t know if it’s better now or not, that was a few months ago. That same month one year prior they sold 190 cars, and they only sold 50 that month at the Hyundai dealership. I don’t know [if that’s the case at] all the other stores], but that store is now hemorrhaging money.
A: I bet the most recent article in the newspaper didn’t help that, either.
♣: Yeah, of course not. Now that [Red Rock employees] are getting arrested everything is coming to light. ….I know everything is busy and Hyundai’s been trying to get me to go back and I’m like “Yeah, no, I’m not going back there. No thank you, I’ll stay here with Subaru, thank you very much.”
A: How did they contact you?
♣: They call me. Jeremy is one of my close friends. He’s one of the honest salespeople over there and he’s a good guy, and he didn’t know about the things that were going on…Well, they were hurting for a service manager because they demoted the one, and they moved [him] down to GMC. They hired another guy, [and then] they fired HIM because HE was doing shady stuff, and they got caught. Like, it’s just like your articles say. They don’t fire people for doing the shady stuff, they fire the people for getting caught for doing the shady stuff. And so they fired him, and this was after all the managers left [Red Rock] and went to Grand Valley [Auto]. So now that service manager works at Grand Valley as the service manager. Like, it’s just, I don’t even know, it’s getting bad all over.
A: So they [Red Rock] have not become more honest, they’re just burying the misdeeds?
♣: I think now that people are getting arrested, I definitely think they’d try to be more honest. Like they stopped doing the markups, because they were lying about markups.
A: Do you think [former state auto industry investigator who was hired by Red Rock as a “compliance officer”] Dale Sundeen is making any difference?
♣: No. I think that Dale Sundeen was a press stunt. I think they offered him a nice cozy salary, like a six figure-plus salary, to keep him quiet.
A: I think that was probably the intent as well.
♣: My thought process is, because [Sundeen] was probably tired of hearing about all these [Red Rock] dealerships and having to come down and investigate every one of them, especially at Hyundai. I had seem him like five times in three months for different people. I think that he got tired of it, and took the bribe. I think that Bryan Knight offered him … like the Dahles offered him, a significant salary for a do-nothing job. And he was close to retiring anyway. That’s my honest opinion.
A: So what’s happening over at your dealership (Subaru)? Have you seen an uptick in business because of all this?
M: Oh yeah, oh yeah. We’ve seen a ton of people come in with cars they’ve bought from [Red Rock]. We’ve been helping a lot of people out in the community that have bought lemons from them that we fix. Like, we had a Subaru come in last week that they bought from Red Rock Nissan and they [Red Rock] had put thicker oil in it to mask an engine issue, and we called Subaru and Subaru is paying for 3/4 of the engine, and we’re eating the other 1/4 of it because we know of all the stuff that’s been going on.
A: So [Red Rock Nissan] put in oil that was too thick, and it damaged the engine?
♣: No, no, they put thicker oil in it because it had engine noise, and when you put thicker oil in it, it quiets down the engine noise.
A: Oh, like a rattle…
A: And so, it was going to need a new engine anyway, and they just thought they would quiet it down for a while, to like put in a patch and not fix the problem?
A: I see. I actually heard of that from another person who worked in service, her name was *****. Have you heard of her?
♣: Yes, I used to work with her, too, yup.
A: [She] told me they did that. She told me a couple came in with a newborn baby, and the service people were told to put thicker oil in [the car the couple wanted to test drive] for the purpose of selling it, for the same reason, to quiet an engine rattle, and she said she was offended by that idea. So they’re still doing that kind of thing, then?
♣: Oh, well yeah, they’re like… I know Nissan maybe stopped doing it, but they have like a thing of metal shavings that they would put in customers’ oil to make them feel like they were in need of an engine, that they could submit to their extended warranty, so they could make money off it it…
A: Wait a minute, wait a minute…go back. They were intentionally putting metal shavings into oil?
♣: Like not in the oil, but when they were draining the oil [out] for an oil change, they would take some of [the oil they had taken out] and put metal shavings in there, yeah.
A: Oh, to show it to the customer and say “Look what I found in your oil! Metal shavings! So you’re going to need something else…,” right?
A: And then, what do they try to sell [the customers] because of that? Like, a whole engine?
♣: Yeah, a whole engine, yeah.
♣: Yeah. And they got away with it. They definitely got away with it. And that was part of the reason why I quit, because they wanted me to do, like, they wanted me to do stuff like that, like they wanted me to drain the oil out of cars, and have me drive the cars around so Hyundai of America would pay for it.
A: Like, to burn it up?
♣: Yeah, to burn it up. And then fill it back up with oil, because, like Hyundais are trash cars. Like every Hyundai in existence has an engine recall on that thing, so, yeah, they would do that so that Hyundai would pay for a new engine, because they make more money on parts from manufacturer-pay than from customer-pay. So it depends. You know, I’m not the warranty administrator, so I don’t know all the information on how they negotiate that, but like, for example, Hyundai, like Subaru, pays more if a transmission goes bad [than if a customer pays out of pocket]. Like the cost of a transmission for you, if you had a Subaru, it would be $6,000. Well, [the] Subaru [Corporation] pays a dealer $8,500 [to repair] that [same] transmission, and I don’t know if it’s just because…again, I’m not the warranty administrator or anything else, so I don’t know how all the negotiation works, or how they do it. But yes, [the dealer] makes more money from the manufacturers paying for the repair than from you, as a cash-paying customer.
A: So they would ruin the engine of a customer’s car that’s still under [the manufacturer’s] warranty, so they could get a repair that will pay them more money?
A: And this was at Nissan?
♣: No, Hyundai. And they would screw the customer over [by doing this] because we didn’t have a lot of loaner cars, so they would be on their own.
A: Oh, this is so terrible.
♣: Yeah, like I said, all of the Red Rock dealerships do that stuff. And they definitely promote adding extra labor hours, like you know what I mean, like, they’re all about adding services.
A: Well, thank you for telling me about that. It really just hurts to hear of that kind of stuff is being done to people.
♣: Yup. Oh yeah. And I could go on and on. I could tell tell you hours of stuff that’s being done to people, and again, that’s why I left. That’s why I didn’t put my two weeks in, that’s why I just up and quit. That’s why I gave my key to Jesse when he was manager and I just said “Look, I can’t do this any more. My conscience is just too good to continue doing this, so you need to find another person.”
A: Was that Jesse Kirstatter?
A. Interesting. I had another former employee of Tim Dahle contact me and say he’d like to talk to me. His name is Brad Gillespie. Have you ever heard of him?
♣: Yeah, I’ve actually met him twice. He probably doesn’t remember me, but yeah, I met him twice. He’s a good dude. And that’s what they do to people there. Like honest people like us, they’re trying to make a good living from writing service, because I mean being a service writer is very profitable, as long as you’re honest with your customers, you know what I mean?
♣: And they, like Tim Dahle, with all of their sales practices, their shady practices start at the top and go all the way down to the bottom, sales, service, parts, all of it. Like, please warn people to check their parts pricing and call other dealerships if it seems like you’re getting ripped off, ‘cause they probably are. I know they are, actually.
A: Okay, I see. This seems to be isolated to Tim Dahle and their associated dealerships, I mean the Tim Dahle and Red Rock chains, since they are like sister corporations. It’s almost like they evolved in a different ecosystem than other dealerships.
♣: I’ve met a couple of the Dahles once, I think. And I have learned, it’s like that typical saying, “Once you make money, you figure out how to keep making money, and you’ll do whatever you can to make money.” I think that’s why they started Portfolio. Because they literally, when they do Portfolio claims, they’re not losing any money. It’s not money laundering, because you’re still getting a service, but it’s almost like money laundering because they sell all these Portfolio contracts and they pay out very little, so they get to keep the money not used on these contracts, and so then whatever they sell …so yes… they’re making money at the back end of the dealership because they still get their money from the parts and service sold. So it’s like a big circle of money moving around, so essentially they’re not losing money because they make money off the [extended warranty] contracts and finance, they’re making money [when] they sell those longer [extended warranty] contracts on cars, like Hyundais come with a ten year, 100,000 mile warranty on the power train, so then they’ll sell you a Portfolio 10-year, 100,000 mile powertrain [warranty]. They did that to me and my ex-wife. And so I’m still fighting them over that…
A: So these two warrantees [the manufacturer’s warranty and the Portfolio Extended Warrantees], they run concurrently?
♣: Yup. And yeah, that’s how it works. So like, for example Hyundais have the longest warranty, so instead of 3 years and 36,000 miles, they have 5 years and 60,000 miles. So they day you buy the car, the [Portfolio extended warranty they sell you] probably takes about 2 weeks to show up in Portfolio’s system, and the [two warranties] run concurrently. So [if a repair is needed], Portfolio will tell you “No, we’re not going to pay for that because it should be covered under the manufacturer’s warranty,” so then [Red Rock] gets out of paying for stuff. So then when the [manufacturer’s] warranty is up, that $5,000 or whatever that they charged [the customer] for their extended warranty, they’ve lost none of that money because the manufacturer ate all the cost of the repairs. So then Red Rock has
profited from all of that $5,000. That was all profit.
A: And so they try to sell these Portfolio warranties on all of the lower-mileage used cars, too, right?
♣: Yup, yup.
A: And if it’s a higher mileage car, they’ll sell [the customer] one of the other [brands of] extended warranties, like Endurance?
♣: Yes, they’ll sell Endurance or [another one] at an extremely extravagant rate, and they’ll sell very limited coverage. So they’ll sell you Portfolio coverage that only covers power train and so, they’re banking on, you know, if it has 50,000 miles on it, they’re banking on that in 7 years or 90,000 miles that the engine doesn’t blow up or the tranny doesn’t blow up, so like, it’s all calculated risk.
A: So there was another guy [I talked to] who worked in Finance & Insurance [at Red Rock] who was selling other brands of warranties that he thought were better, and he said [the platform manager] Brantley Reade threatened him with his job for that. He said Brantley told him something like, “Do you know why we sell Portfolio warranties?” and the guy says back “Because we are a reinsurer of them?” And Brantley says, “It’s not just that. It’s because that’s where we make all the money to keep the lights on and buy all these new dealerships, that’s where we make all our money.”
♣: Well yes, exactly. Like I said, if they sell a Portfolio warranty, the Dahle’s are not losing money in any aspect, because even if for example, if you break down like, 50 miles from your purchasing dealership, it’s in the contract that you HAVE to go to your purchasing dealership if you break down within 50 miles. Like I said, the Dahles have been in this industry for so long that they know what they’re doing. I think the whole finance thing — I don’t know if the Dahles are necessarily involved in telling, or training their finance [employees] to screw people over. I’ve never met them on that personal of a level. But I definitely know that general managers, and all of these general managers from Utah and everything else, like, they definitely have a certain style of living, and they will do whatever it takes to get that style of living. Because like, when I read your article about Tiffany [Miller, the former Red Rock Finance Manager who was arrested in August for forgery, criminal impersonation and Identity theft], like Tiffany was one of the worst finance managers. Like she did so much illegal stuff it was ridiculous. Like, all of these finance managers that have been leaving the company, like I said, I hope they go after Tony [Calvillo], because they made Tony… like I guess they told Tony to do stuff, but at the same time, like Tony actively made that decision, like to have Kaete [forge a signature] for a $10,000 [extended] warranty on [Jesus Acevedo’s] truck, like, they’re actively making that decision. Because the Dahles strangle…like again, I was never a finance person, but, like the finance people were struggling to make money. The Dahles definitely run their dealerships in a way that is not conducive to their finance people making a lot of money. They should be making just as much or more than the salespeople, essentially, but they don’t.
A: I hear in Houston the commissions are like twice what Red Rock pays.
♣: Oh, oh, oh yeah, even like here at Subaru even our salespeople, there’s a guy, his name is *****, he’s the top salesman here, and he made $400,000/year, like he’s averaged about $400,000/year selling cars here. The finance guy, like I think he told me he made like $230,000, and all of our stuff is honest. We sell Subaru extended warranties, like Gold Plans and whatever else, that will cover other vehicles. Like, we’re selling legitimately good stuff here.
A: Wow, that is a lot of money.
♣: Yes, yes, and there’s a lot of opportunity. Like we used to be independently owned, but Sonic Automotive bought us out, but even working for a corporation, like this corporation has so much integrity, like they already have cameras in financial managers’ offices, you know what I mean? And you have to go through a whole four week program to become and [finance and insurance] officer for one of their dealerships. Like they do so much.
A: Sounds like they’re pretty professional and by the book.
♣: Yes, and it’s been nice to work for that, instead of for Red Rock.