Fed Reports on Financial Services, Employment and Prices in December Beige Book
The Federal Reserve reported on the state of the US economy in local markets across the country in the December edition of the Beige Book. The Beige Book, published eight times a year, provides commentary on a host of economic issues including employment, lending, etc. The sections on Financial Services and Credit, Employment and Wages and Prices are exerpted below.
Exerpt of Beige Book. Prepared at the Federal Reserve Bank of Philadelphia based on information collected before November 23, 1996. This document summarizes comments received from businesses and other contacts outside the Federal Reserve and is not a commentary on the views of Federal Reserve officials.
Financial Services and Credit
Credit demand varied among Districts. Only Cleveland and San Francisco indicated growth in overall bank lending. In other districts, lending was mixed. Competition for new lending was characterized as aggressive for business loans in Philadelphia and St. Louis, for consumer loans in Richmond, and in general in Cleveland.
In New York, Philadelphia, Cleveland, Atlanta, and San Francisco, banks reported deterioration in credit quality, especially for consumers. Tightening of credit standards was mentioned in New York, Philadelphia, Chicago, St. Louis, and Kansas City. No Districts reported easing credit standards.
Employment and Wages
Labor markets were characterized as tight in a majority of districts. Districtwide labor market tightness persisted in Richmond, Chicago, Minneapolis, St. Louis, and Kansas City. Atlanta and Cleveland said labor markets were tight in many parts of their districts. In most districts employers said skilled trades workers and specialized technical workers were in particularly short supply. Boston reported that "demand for highly skilled temporary workers continues to outpace supply." Richmond, Chicago, and San Francisco also noted strong demand for skilled construction workers. Chicago and Minneapolis said retailers were having difficulty hiring temporary help for the holiday season.
Reports from district banks do not indicate a generalized acceleration in wage increases despite growing reports of labor shortages. Cleveland, for example, said that its contacts see "few signs of any significant rise" in wages, and Atlanta said "reports of increasing wages are infrequent in the region." Minneapolis reported that "many employers say there is no generalized upward pressure on compensation."
Nonetheless, there appear to be more instances of stepped-up compensation, especially for highly skilled technical workers. Boston reports that in the area around that city "compensation packages to attract key technical employees are said to be escalating rapidly." Richmond contacts reported more pronounced wage pressures in October than in September. A large temporary help agency reported to Chicago that wages in the Midwest were rising. Also in the Midwest, Kansas City noted "continued evidence of wage pressures," especially in manufacturing.
Prices
District reports on prices suggest there has been virtually no change in trends recently. Boston contacts said "prices remain generally stable." New York indicated "there has been little change in price pressures." Cleveland and Richmond characterized price increases as "modest." Chicago reported that "price pressures remained largely in check." Minneapolis received "few reports of price increases for raw materials, consumer goods, or services."
Most manufacturers in Philadelphia and Cleveland indicated that both input costs and output prices were steady. Manufacturers in Chicago said their input costs were flat, and firms in St. Louis said the cost of materials were "stable to up somewhat."
Exceptions to the relatively steady price picture are petroleum products and fuels, whose prices rebounded after falling in early November. Also, there were more reports of rising industrial prices in recent surveys in Richmond and Atlanta. Kansas City observed rising costs of "some manufacturing and construction materials," and Dallas noted that "several industries reported a general firming in prices."
Nationwide and Progressive Choose CCC
Both Nationwide and Progressive have selected CCC as their primary provider for estimating and total loss valuation services for their field staff and communications with collision repair facilities.
Nationwide will use CCC’s Total Loss service to help settle the 120,000 total loss claims it processes annually. CCC’s Pathways collision estimating system, including Recycled Parts Valuation and Location, will equip Nationwide’s 1,250 field appraisers and 400 supervisors. Also selected was CCC’s new claims decision support tool, GuidePost, which enables claims managers to compare data and track performance, resulting in improved decision-making.
Using CCC’s EZNet communication system, Nationwide will connect with its repair referral network of more than 400 Blue Ribbon collision repair facilities who use CCC’s software to electronically send and receive repair assignments and claims information.
According to Jack Billington, vice president of material damage/property at Nationwide, "For more than 3.6 million auto policyholders, communicating electronically with our Blue Ribbon shop network means better, more efficient customer service. That reinforces our corporate vision of Nationwide existing to serve its customers."
Progressive’s field representatives will be equipped with CCC’s Pathways workflow platform, including automated collision estimating and total loss settlement services. The rollout began in October and will be completed in mid-1997.
Earl Scheib, Inc. Announces Financial Results
While most in the collision repair industry consider Earl Scheib, Inc. "downscale" and not a factor in collision damage repair, they do continue to survive as vehicle painters filling a niche market, competing with MAACO, One Day, and other production paint shops.
In 1995 - 96, Scheib has embarked on a roll-out of the company’s New Earl Scheib Shop format for its paint and body shops, new product offerings, increased advertising, and improvements in shop operations and product quality.
They are also optimistic about their new EUROPAINT, that has begun to be distributed to their shops as well as other changes aimed at improving overall product quality.
While the company’s gross profit was approximately the same as last year’s second quarter, operating income (which excludes interest income, gains and losses from the sale of fixed assets and income tax expense) for the quarter decreased 76.3 percent from $1,035,000 in the first quarter of fiscal 1995 to $245,000 for the same quarter in 1996.
Income for the first six months of their fiscal year was also down from 68 cents per share to 40 cents based on a first half ‘96 net income of $1,915,000, while at the same time comparable shop sales increased by 17 percent for the same time period.
Scheib operates 157 locations nationwide in 137 cities, with total sales estimated to be just under $60 million per year.
The company’s stock has not exactly been a winner in this year’s market. It now (December 18) sells at $6.75, down from a year’s high in September of $8.75 per share.
Check out Earl Scheib Paint and Body’s World-Wide Web site at www.earlscheib.com, and actually hear Earl tell about the industry’s first patented automated estimating system, the Est-O-Meter.
Message from Erick Bickett, 1997 Industry Conference Chairman
The collision repair industry has changed dramatically in the last five years. In the next five years, I believe change is going to come even more rapidly, catching many of us off guard and unprepared. One thing, however, remains the same: we serve a common customer, and we must never lose sight of the importance of our primary objective to deliver to our common customer service of the highest quality, integrity, efficiency and value.
Because the repairer has most of the interaction with the consumer during the claims process, poorly-implemented processes, policies and procedures between the repairer and insurer will result in less-than-desirable service to the consumer at a higher-than-necessary cost. Because of this insurer-consumer-repairer triangle, and the rapidly changing claims solutions, it is more important than ever that the insurer and repairer have an open, effective forum in which to communicate.
To the consumer, the insurer and repairer should be a virtual claims solution that is efficient and seamless. The most efficient programs are those that have been developed and implemented by the insurer and repairer working together. The internal politics of large organizations and associations can cause poorly-thought-out policies. If these policies are implemented, there must be a method for all sides to communicate and work together on solutions. In addition, all sides need to be held accountable.
The Collision Industry Conference (CIC) is the only forum available to facilitate this type of exchange. Many progressive changes have come from work done through the CIC. CIC has been, is and will be even more so in the future, recognized as a credible body to bring collision-related issues to the country. Our plan for 1997 and years to come is to include related industries in our communications. It will be important for all proactive members of this industry to participate in molding the future for their company and their customers by attending and participating in the meetings. With this in mind, I have developed a three-phased approach for the CIC in 1997.
Increased Insurer Participation
We need better insurer participation. The best idea that has come up so far is to empower a committee to meet with insurers at all levels. We may not be able to get an insurer representative to travel across the country for all the meetings, but the thought here is that we can get the regional people to show up if the insurer decision-makers allow it and the regional people know about the meetings in advance.
Enhance The Content Of The Meetings
- Special Presentations: Don Long, Walnut Valley Auto Body & Towing, has volunteered to coordinate special presentations addressing key industry issues. These presentations will be dynamic, informative and pertinent. He plans to have a theme for each meeting, centering around the industry’s most pressing topics. We are in the process of sending out a fax survey that will tell us what these issues are, then we will pick the top four.
- Committee Activities: I will be working with the committee chairmen to establish a protocol for the work being done in committee. Since the best work gets done off-line, I would like to reserve the meeting time for reports on progress and to receive feedback as to the direction and work that has been done, and questions from the audience to spur the interaction.
- Conduct: I will be meeting with the past committee chairmen to discuss the appropriate protocol to control the conduct of the meeting. Along with issues of antitrust, we walk a fine line between providing an open forum and receiving damaging, unprofessional comments directed toward one segment of the collision industry. This will cause the targeted segment to not want to participate in the meetings, and does not accomplish any goal.
Communicate To The World
- Public Relations: We have prepared a public relations plan that will help us communicate all of the CIC activities to the world at large. We want to get plugged into all press networks, related industry groups and legislators to provide access to the CIC work product.
- CIC Web Site: Don Feeley, City Body & Frame, has volunteered to develop a CIC Web site that will post all documents that have been prepared by CIC in the past, meeting information, Gold Pin names and e-mail addresses, meeting minutes and a forum for posting issues and concerns. This Web site will be in place by mid-January.
By achieving these goals in 1997, we will help all segments of the industry work better together to provide a virtual claims solution to our common customer the consumer.
EPA to Launch One-Time Industry Survey
The Automobile Refinishing Solvent Use Survey (ARSUS) will be a one-time voluntary survey to support research by the United States Environmental Protection Agency’s (EPA) Office of Research and Development. The research effort will track (VOC) emissions from the automobile refinishing industry through an understanding of solvent usage.
The one time survey will support the development of new methods to estimate solvent usage for automobile refinishing. Respondents will be requested to complete a survey which seeks information on their facility, such as their solvent usage, application equipment, and solvent recovery equipment.
This voluntary one-time activity includes a pilot survey of Baltimore, MD and Los Angeles, CA, followed by a national survey of collision repair shops that includes local-area intensive surveys of six high-population areas, where the survey data will be divided into two independent sets. One set is used to develop the solvent-estimation method and the second set will be used to evaluate the efficacy of the methods.
Data will be collected using a combined mail and telephone survey approach. The telephone survey will prompt non-respondents and clarify survey responses. Surveys will be sent to approximately 300 shops in the pilot survey and 6,000 shops in the full survey.
The information collected will be summarized for use in reporting the results of the survey. This study will not be used for setting new regulations, but rather, for furthering the EPA’s understanding of the industry.
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