CIC Meeting Addresses Diminished Value; Estimating Issues
The latest Collision Industry Conference (CIC), held April 17-18 in Chicago, IL, initiated new format changes and launched a number of significant discussions and projects affecting all aspects of the collision repair industry.
Write it Right
The Write it Right Committee formed a subcommittee to look at establishing a Dispute Resolution Board to which insurers and repairers could take issues related to the proper writing of an estimate or damage report. The board would be composed of two insurers, two repairers and a fifth member from a consumer advocate position.
The committee also presented a number of recommended steps they felt were necessary for the insurance and collision industries to take in order to move closer to the intended goal. It’s the mission of the committee to deliver recommended practices and methodologies that if implemented and adhered to, will provide mechanisms for payee compensation that motivate and deliver a cost-effective, top quality product or service.
Two of the steps mentioned include making a pledge (in writing) to not participate in the "illegal, unethical, and unfair practices of cost shifting" and to begin entering judgment times in terms of time as it is defined by the data base providers. In other words, the data base providers have determined that an hour doesn’t just include the actual time worked on the vehicle, but also includes time for non-productive activities such as coffee breaks, visits to the bathroom, etc. The committee believes that the times written for judgment items should also reflect the same parameters.
Diminished Value
This issue has come forward as one of interest and concern for the industries involved for various reasons. In order to throw some light on the issue from a legal standpoint, the Regulatory Committee (John Junk, PARNET, and Randy Stabler, Pride Autobody, Calif.) is sending out letters to all state insurance commissioners to determine how each state views diminished value. The written responses will be presented at the next CIC meeting.
"Diminished value presents a lot of complexities for everybody," said Stabler. "Taken to its logical extreme, if these cars are worth less, why ever fix them at all? This is coming right off the heels of some landmark decisions with respect to re-repair of brand new cars from GM and BMW, that were damaged in shipping and repaired, and are now considered of less value. It’s going to be a topic that affects all of us."
As Junk explained, "We’re going to be looking at a number of issues including definitions. If we sat down in groups of five, I doubt we’d find anyone who would give the same explanation of diminution of value."
Here are other diminished value issues that were posed during the meeting that may come up again either in this committee or another:
- A new car driven off a dealership lot immediately depreciates in value without being in an accident. Should it be depreciated at all?
- If there is diminution of value after a repair, is the insurance company going to insure the car at that diminished value on which a DV claim was paid?
- If a car is devalued from $10,000 to $6,000 because it’s been in an accident, and premiums are calculated at that level, what happens when the vehicle is in a subsequent accident? Will this lower the threshold for totaling the car?
- How will consumers react to claims that repairs devalue their car?
- Should repair shops be in the business of calculating diminished value liability claims?
Guidelines for Parts
The Parts & Airbags Committee is preparing a survey in order to establish guidelines for parts quality, availability, delivery, and purchase. Once these guidelines are established, they will be presented to the insurance and collision repair industry, parts recyclers, and OE and non-OE parts manufacturers and suppliers. It will be up to each individual entity to follow these guidelines and encourage others to do the same. Some of the questions to be asked in the survey are:
- Quality
- What is an "approved" part? A "certified" part? What recourse is there for poor quality? Do all parts in the data base meet DOT and other federal standards when required? What is an appropriate warranty?
- Availability
- What is the mechanism to determine parts availability? How many sources should be used to find a suitable part? Should there be parameters such as mileage distance from the collision repair shop, etc.?
- Delivery
- What is a reasonable delivery time? What is the best process to handle damaged or wrong parts? Is any one delivery method better than another?
- Purchase
- What are "fair" credit practices? Should a shop have to pay COD? What is a "fair" return policy? Should there be a policy for labor reimbursement? When is that appropriate? How many times should a shop try to find a part?
The survey will be sent out in the next few weeks to industry trade publications for the various segments involved - insurer, collision repair, parts manufacturers/suppliers, recyclers, adjusters, etc., and to everyone on the CIC mailing list. Additionally, an electronic version will be on the CIC website, http://www.ciclink.com.
Other Projects:
The Definitions Committee is defining the different positions - technical and office - found in collision repair shops, independent appraisal companies, and insurance company claims handling departments; and the recommended training, experience and certification for each position, etc. Contact Cheryl Boyd, Boyd Market Development, at 206-868-3610 or e-mail, bmd@w-link.net.
The Anti-fraud Committee is editing and rewriting the Guide To Fraud Awareness and preparing a tri-fold brochure for the vehicle owners. Contact Bob Smith, Storm Appraisal, at 816-254-1764 or e-mail, stormappraisal@worldnet.att.net.
The next CIC meeting is scheduled for July 9 just prior to the I-CAR Annual Meeting in Pittsburgh, PA. Hotel reservations should be made through I-CAR. For information on the CIC, or to address comments on CIC activities, call Jeff Hendler at 509-547-3810, or visit the CIC website at http://www.ciclink.com.
S.M.A.R.T. Production Receives ASAMI Accreditation
S.M.A.R.T. Production has become the third DuPont shop management seminar to receive approval from the Automotive Service Association Management Institute (ASAMI).
Approval means that students who complete the eight-hour course will receive 16 credits toward the Accredited Automotive Manager (AAM) designation by ASAMI. Students need a total of 120 credits to achieve the designation.
ASAMI previously approved DuPont seminars on marketing (S.M.A.R.T.-1) and financial skills (S.M.A.R.T.-Money).
S.M.A.R.T. Production focuses on shop productivity, addressing such subjects as internal communication, personnel roles and relationships, estimate formats, tracking systems, parts and paint management, shop layout, job cost analysis, performance incentives, and shop mission and standards.
Instructors are Hank Nunn and Chuck Sulkala, shop owners who are well known in the auto body industry. Both have taught previous S.M.A.R.T. courses.
Eddie Cheskis, president of Carter & Carter’s North American Division, announced the appointment of Chris Pannent to the position of vice-president of sales and marketing. According to Cheskis, "I am excited to welcome Chris into our organization. His extensive knowledge and experience of collision repair and refinish industry issues in the U.S. will be a benefit to our customers and help Carter & Carter grow our business in North America."
Prior to joining Carter & Carter, Pannent held a variety of sales and marketing positions with Sherwin-Williams Automotive Finishes, most recently as Director of Distribution Sales covering all WD and jobber sales.
In addition to Cheskis and Pannent, the Carter & Carter team also includes Sean Carey, vice-president of operations. Carey pioneered the entry of C&C in North America 18 months ago after a successful career at Nissan.
CCC Launches Management Seminar Series
CCC Information Services, Inc., has launched a new collision repair facility management seminar series- The Success Forum. The series, developed by Carter & Carter, consists of seven, one and two-day courses covering all aspects of collision repair shop operations. Topic areas covered by the seminars include:
- Building Profitable Partnerships within the Claims Industry
- Performance Management
- Scheduling to Improve Productivity and CSI
- Recruiting and Retaining Quality Employees
- Customer Service
- Business Development and Effective Selling
- Integrated Strategies for Profitable Growth.
Specifically tailored to address issues facing U.S. collision repair facility managers, the Success Forum seminars have recently been piloted in select markets and full classes are now forming.
For info, call the Success Forum at: (800)621-8851.
FinishMaster Reports Improved Q1 Earnings; Announces Reorganization and Acquisitions
FinishMaster, Inc. announced April 17 sharply higher operating profits and improved net income for the first quarter ended March 31, 1997. The Kentwood, Michigan based distributor of automotive paints and related accessories reported net income of $406,000, or $0.07 per share, on net sales of $29.2 million for the 1997 first quarter, compared with net income of $2,000 on net sales of $30.0 million for the quarter ended March 31, 1996. Sales decreased from the comparable period last year as a result of lower same-outlet sales.
"We are pleased with the progress we made in the first quarter," said Thomas U. Young, President and Chief Operating Officer of FinishMaster. "Our improved profitability can be attributed to several factors, including new programs to manage costs and enhance productivity. Additionally, we have made several important structural changes aimed at yielding an increase in same-outlet sales and continued performance improvements in the future."
FinishMaster announced it has reorganized the Company’s sales outlets into four regional divisions. Effective April 30, 1997, the following individuals will be appointed as Vice President, General Manager for the newly reorganized regions: Steven Arndt, Midwest Division; Michael Siereveld, Central Division; and Stephen Howard, Southwest Division. A fourth individual is being recruited to manage the Company’s Eastern Division.
Commenting on the change, Young said, "Our recent reorganization into regional divisions is bringing greater accountability for the operation and fiscal management of our sales outlets. In addition, the new structure is helping us rebuild the localized nature of our outlets as part of our effort to expand market share, improve margins and maximize profitability."
Gross profit margin as a percentage of sales increased to 36.3% during the 1997 first-quarter, versus 34.4% during the comparable period last year. FinishMaster improved first-quarter gross margin primarily by maximizing volume incentive and other purchasing programs.
Operating income increased to $1.1 million, a 151% increase over the comparable period last year, due primarily to cost-improvement measures. FinishMaster reduced operating, selling, general and administrative expenses by approximately $749,000 from the comparable period last year, reflecting the Company’s renewed focus on cost-improvement.
FinishMaster also announced it has entered agreements, to acquire two companies located in its Eastern Division. Terms were not available at press time.
With operating expenses in better shape, expect FinishMaster to start back on the acquisition trail. According to Young, "Our focus since I came on board last summer has been on improving our operating efficiency and managing our growth. This will continue to be our focus through 1997, but acquisitions will occur on a selective basis to add to our market share."
Thompson PBE Inc. announced April 15 that it has appointed Michael O’Donovan as chief financial officer. O’Donovan succeeds Charles Barrantes, who left the company to pursue another business opportunity.
O’Donovan, 38, has served the company as vice president, corporate controller since December 1994. O’Donovan’s most recent position prior to his employment with the company was as director of accounting for Retix, a multinational computer hardware and software manufacturer. From 1985 to 1991, O’Donovan was employed by Price Waterhouse, and from 1979 to 1985 he held senior executive positions with two other companies.
Mortimer Kline, chief executive officer of the company, commented, "Michael has the skills and orientation that Thompson needs for the challenges and opportunities facing the company. This is an opportune time for him to take over the position of CFO."
Thompson PBE operates more than 100 distribution sites located in Alabama, Arizona, California, Colorado, Connecticut, Florida, Georgia, Massachusetts, North Carolina, South Carolina and Virginia.
I-CAR Announces Release of UPCR
I-CAR Executive Vice President Tom Mack and Technical Director Tom McGee made a special appearance at the Collision Industry Conference, April 18, to announce the release of the Uniform Procedures for Collision Repair (UPCR) and to clear up some questions regarding the product.
The UPCR was released April 1 on CD-ROM with 66 different procedures in 20 separate content areas. The procedures that were most often used because of frequency of accidents (the left front side of the vehicle) were the first ones tackled by the UPCR Committee.
The UPCR is being sold on an annual subscription basis ($425 U.S., $535 Canada), with disks coming out every quarter with updated information and 10-25 new procedures per disk during the first year. Special prices are being offered to Gold Class Professionals and associations.
"The UPCR is an industry effort," said Mack. "It’s got I-CAR’s name on it, but it was developed by the canvass method from all aspects of the industry. Right from the ‘get-go’ the idea has been that these would be industry voluntarily accepted procedures, so for it to be effective it has to be used by the industry and in a widespread method. If it’s not used then we can’t say that they are ‘generally accepted’ industry standards."
In answer to criticisms about the price for the UPCR, Mack commented, "We are not for profit. There’s not going to be any money made from this. The more that we can get out into the industry, the more people who are using it, the more liberal we can be with the pricing of it. A lot of money has been spent on it over the last three years."
Audience members wondered if the UPCR would be valuable in dealing with diminished value issues and in terms of getting paid for all necessary procedures. "If we’re dealing with diminished value," said McGee, "there is a section in each UPCR that deals with reinspection of each part after the repairs. If we can identify what the specification should be as an industry, I have no problem documenting anything in UPCR. I’m not sure I-CAR can go into labor times, but to identify the steps is the intent. If there are specifications, then we need to talk, together as an industry, so they can be developed and expanded for the purpose of UPCR."
McGee added that all four information providers have been heavily involved in the UPCR canvass process.
The ADP Claims Solutions Group brought together its information systems customers as well as its strategic partners for a conference in Scottsdale, Ariz., April 9-12. Among the featured speakers were Chuck Martin, author of The Digital Estate, and Alfred Berkeley III, the president of NASDAQ.
A returning favorite was Robert Pike, senior vice president and general counsel to Allstate Insurance Companies. Unfortunately, Pike’s time at the podium was less than what the audience would have liked, but during that time Pike made predictions and outlined the many external factors that will influence the business of insurance and ultimately, collision repair.
Among Pike’s political predictions were that the next presidential race will be between Democrat Richard Gephardt (Gore will be out because of the fund-raising scandal) and Republican Fred Thompson, a veteran actor and current Senator from Tennessee. He also predicts if there is a return to a Democratic Party control of Congress that we will see a revisit of the McCarran-Ferguson Act.
Along the line of governmental influences, Pike pointed to the following:
- The Dept. of Transportation and the National Highway Transportation and Safety Administration (NHTSA)
- These agencies decide issues on airbags and vehicle damageability. "Sixty people may have died (from airbag deployment) because they were not positioned or belted appropriately," said Pike, "and NHTSA is now talking about deactivating a system that can potentially save tens of thousands of lives."
- The Dept. of Justice
- The Automobile Anti-Theft Act, is a well-intended Act, Pike commented, but one which will become very financially burdensome in terms of how insurers handle total losses.
- State Insurance Depts.
- Although Pike felt that state control of insurance issues was a necessary thing, he added that passing regulations regarding insurance is a very inexpensive and visible way for politicians to appear consumer-oriented (votes), so look for more of these.
Within the insurance industry itself, Pike predicted that the days of the re-engineering phase and the consensus-oriented manager are over in the industry. "I think that the day of the manager, the leader that consults and decides, is upon us because shared responsibility is no responsibility."
He also commented on the rise in value expectations. No longer is there going to be an "either/or" answer to your questions, said Pike. Today, insurers can no longer offer consumers a choice between "service" or "price" - they have to provide both. Insurers have to provide a high level of service, but in a cost-effective manner. Look for a continued drive toward greater efficiency.
Pike also addressed how insurers are beginning to narrow their focus to those lines that they excel at, as well as those markets in which they want to specialize - urban markets, Hispanic markets, and so on - with the right product for the right price.
Of course technology issues are very prevalent in the industry right now, including the costs of keeping up to date. However, Pike stated that insurance company CEOs are feeling that they have turned over too much control of their businesses to the technocrats and no longer have confidence in their technology investments. He believes they are going to identify that point at which technology has enabled them to provide the level of service and economies they desire, the point where additional costs have no additional benefits, and they are going to say, "Enough is enough."
Keystone Automotive Industries Appoints Palumbo CFO
Keystone Automotive Industries, Inc. announced April 23 the appointment of John M. Palumbo, 41, to the position of Chief Financial Officer, a newly established position.
Mr. Palumbo joined Keystone Automotive in 1996 as Vice President and Treasurer. Prior to that, he served as Chief Financial Officer and Corporate Secretary at American United Global, Inc., a public company engaged in the manufacture of automotive parts. He has been a Certified Public Accountant for ten years and holds an EMBA from The Peter F. Drucker Claremont Graduate University. Mr. Palumbo also holds a B.S. degree in finance from Canisius College in New York.
Charles J. Hogarty, President of Keystone Automotive, said "We are particularly pleased to make this appointment, as John Palumbo was instrumental in our initial public offering when he arrived at Keystone a year ago and similarly so in our recent acquisition of North Star Plating, as well as our four other acquisitions during the past year. His financial capabilities and his understanding of the operations of a public company from the financial community to the regulatory agencies are superb and his contributions to the Keystone team have been invaluable. We look forward to his continued contribution as a member of the Keystone senior management team."
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