More Material Thoughts

This month, we’ve followed up on last month’s discussion surrounding alternative refinish materials reimbursement methods by asking shops about the issue in our monthly TrendLine Survey. As you will read on page 10, we received some remarkable results and some that confirmed our opinions about the concerns repairers have over the state of materials reimbursment.

First, it is not suprising to see that fully 81 percent of our respondents are making a profit on refinish materials. Just three percent report a loss, with 16 percent reporting they break even. Much of the attention that is focused on the issue of materials reimbursement is brought to the front by this vocal minority. They cannot be blamed for their voiciferous displeasure. If the money they were losing was coming out of your pocket, you would feel much the same, and certainly make your feelings known.

What can be considered suprising is the large number of repairers who feel that a change in the method of computing refinish materials is necessary. Forty-seven percent of the respondents feel that an alternative, such as INSIGHT’s proposed surface area based calculation, would be preferrable to the current method. Another 23.1 percent would like insurers to accept the price suggested by Mitchell’s Material Estimating Guide. Taken together, just over 70 percent of the respondents want to get away from multiplying the total number of refinish hours in their estimates by the materials allowance they have negotiated.

You would think that repairers who are making a profit would be far more complacent than the results of the TrendLine Survey suggest. Of the 81 percent that reported a profit, their average profit turned in at 23 percent. Undoubtedly, they have seen an erosion of their refinish materials profit in recent years as refinish labor declines as a percentage of the overall estimate and with the recent increase in the use of refinish materials thresholds by insurers. Those that have seen declines in their profit, coupled with the 19 percent who either break even or actually lose money, want to see a change in the method used to calculate their reimbursement.

How a possible change will impact the profit picture for repairers, however, is not a certainty. Careful negotiation with insurers, coupled with wise purchasing decisions and reductions in rework and waste will certainly play as big a role in making money on materials as they do today- no matter how the reimbursement calculation is determined.

Russell Thrall III, Editor

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Reprinted from the March 1998 Issue of Collision Repair Industry INSIGHT.

© 1998 Collision Repair Industry INSIGHT. All Rights Reserved

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