ADP Settles FTC Charges on AutoInfo Acquisition - Must Divest Acquired Business
Automatic Data Processing, Inc. has agreed to settle Federal Trade Commission charges that its 1995 acquisition of AutoInfo, Inc. assets resulted in a monopoly and substantially lessened competition. ADP has agreed to divest the computer systems and automobile salvage-yard parts trading network it illegally acquired from AutoInfo. The settlement, announced June 18, would reestablish a competitor to ADP by requiring a quick divestiture. ADP would have to divest the AutoInfo assets as an ongoing business, so that the new competitor could immediately service AutoInfo’s former customers and compete to gain new customers for its automobile salvage yard information services, the FTC said.
The FTC had alleged in its November 1996 administrative complaint that ADP’s acquisition of AutoInfo assets was part of a plan to acquire monopoly power and raise prices in five distinct markets within the salvage yard information management industry. A trial before an administrative law judge had been set to begin on July 15. Under today’s settlement, ADP would be required to quickly divest the former AutoInfo assets, and to grant the acquirer an unrestricted license to the Hollander Interchange, now the industry standard for the cross-indexed numbering system for parts that is used to identify groups of parts that are interchangeable.
ADP’s overall plan to monopolize the industry, which culminated with the AutoInfo asset acquisition, included its 1992 acquisition of Hollander, Inc., which provided salvage yard information services and had the largest customer base, the FTC alleged.
After the acquisition, the complaint charged, "ADP now owns the principal and, in some cases, the only products in the relevant markets." The result, the FTC alleged, was that ADP could increase prices and reduce innovation in the relevant markets. Moreover, the FTC said, since the acquisition, ADP has not updated the former AutoInfo Interchange and has switched former AutoInfo yard management system customers from the AutoInfo Interchange to a revised version of the Hollander Interchange.
The proposed consent agreement would require ADP to divest, within 150 days from initial acceptance of the order for comment or within 60 days after the order is final, the former AutoInfo assets, which include AutoInfo’s yard management systems and electronic communications systems, the AutoInfo Interchange, and the AutoInfo Parts Locator, a computerized on-line telephone service offered to the auto casualty insurance industry. Included in the divestiture of the yard management and communication systems are the customer bases for each of the products.
If the divestiture is not completed on time, the order would allow the FTC to appoint a trustee to divest, in addition to the those assets, Compass - a group of telephone voice line networks used to trade auto salvage parts - and, if necessary to accomplish the divestiture, additional ancillary assets.
The order would require ADP to grant the acquirer a paid-up, perpetual, non-exclusive license to the Hollander Interchange, and to provide updates to the Interchange for at least three years. This would allow the acquirer and its customers and licensees to use the identical Hollander Interchange as ADP for a period of time until it can create its own updates, and then differentiate and improve the Hollander Interchange. The acquirer also would have the right to sublicense the Hollander Interchange.
"By divesting the former AutoInfo products with the AutoInfo customer network and rights to the Hollander Interchange, the remedy is designed to allow the businesses to be immediately competitive," Baer explained.
Further, the order would require ADP, for one year after the divestiture, to allow its customers who entered into a contract for ADP’s yard management or electronic communications systems (when they did not have the choice to buy an AutoInfo product) to switch to the acquirer’s systems without penalty. It also would prohibit ADP from restricting its employees from accepting employment with the acquirer and, for one year, from trying to hire any of the acquirer’s personnel; and require ADP, for one year, to allow the acquirer to draw on ADP’s technical assistance.
In addition, for 10 years, the order would prohibit ADP from restricting its customers’ ability to connect to and receive or transmit inventory data through the acquirer’s products and would require ADP to provide information necessary for the acquirer or its licensees to create interfaces with ADP’s products. Finally, for 10 years, the order would require ADP to obtain FTC approval before reacquiring any AutoInfo assets; and require it to notify the Commission before acquiring other assets used in yard management systems or communications systems for salvage yards.
Ford to Announce Refinish Paint Approval Program
Ford Motor Company’s Customer Service Division is preparing to announce their list of approved refinish paint systems for use on warranty paint repairs. Systems that make the list, which INSIGHT anticipates will be released before the end of the summer, will have passed a battery of tests that detail product performance comparable to those specified for OE paint systems.
INSIGHT believes that products from three paint suppliers will not be included in the list of approved systems- heating up an already competitive environment for refinish products.
Ford’s announcement will come just a few months after General Motors announcement of a similar specification for their dealership repair facilities.
(Editor’s Note: INSIGHT will provide a detailed review of Ford’s refinish paint system approval program in an upcoming issue of INSIGHT. For more information on the GM Refinish Paint Certification program see the feature article in the February 1997 issue of INSIGHT.)
Bickett and Halopoff Form ACR - Acquire Buena Park Auto Body
Erick Bickett and Rick Halopoff have formed a new venture and acquired their first collision repair facility. The new corporation, Association of Collision Repairers, Inc. (ACR), is a joint venture between Bickett, owner of four Auto Center Auto Body collision repair facilities in Orange County and the Inland Empire area of California, and Halopoff, owner of Little John’s Collision Center in Downey, CA.
ACR also announced their first acquisition, Buena Park Auto Body, a 13,000 sq. ft. collision repair facility in Buena Park, CA. The facility will be renamed FIX Auto Buena Park and will be managed by Jimmy Contreras. Contreras was president of the Orange County Chapter of the California Autobody Association for two years and is currently the Chapter’s board representative on the state level.
According to Bickett, "Rick and I have been looking at ways we could work together given the industry’s trend towards consolidation. Buena Park Auto Body was the perfect opportunity. The local market is prime for growth and is situated between our existing operations."
Rollie Benjamin, President and CEO of ABRA Auto Body and Glass, announced June 19, that General Electric Capital Corporation has made a significant investment in ABRA. "This infusion of capital from GE represents," says Benjamin, "the next step in our growth strategy, paving the way for timely acquisitions and market expansions."
Privately held, ABRA Auto Body and Glass directs the operations of 55 company owned and franchised collision repair facilities in 12 states.
"We see ABRA as the leader in their industry, well established in the markets they serve and with the infrastructure required for market expansion," says Michael Pfeffer, Vice President of GE Capital Services.
The collision repair industry is emerging as a growth opportunity for companies that recognize the value of its market dynamics. Based on the principle that "as long as people drive cars, there will be accidents," the collision repair industry represents a stable market resistant to the economic fluctuations of the nation’s economy. Currently undergoing market consolidation driven by rapidly changing repair technologies and the needs of insurance company sponsored Direct Repair Programs, the collision repair industry is faced with the challenge of meeting ever increasing customer expectations.
According to Tim Adelmann, executive vice president and COO of ABRA, "While our market is ever changing and we are always upgrading our facilities and technologies, there is one constant associated with our success - customer confidence. ABRA customers, vehicle owners and their insurance companies, know that they can count on ABRA to always put their interests first."
"While there has been much attention paid to consolidation in our industry," Adelmann comments, "ABRA’s growth strategy is one of inclusion. We want to expand our presence in new and existing markets by identifying other body shop owners who share our business philosophy and see the advantages of partnering with ABRA to realize their maximum potential."
Describing the investment by GE as a strategic alliance, Benjamin goes on to explain, "We are now prepared to execute our business plan for expansion by seeking acquisition and conversion opportunities in our target markets. With GE as a strategic partner, we have gained access to support systems and technologies that will allow us to accept a larger role in simplifying the claims process for our customers and their insurance companies. We are confident that we will be able to lead positive change in our industry and accelerate the growth of ABRA Auto Body & Glass."
ABRA expects to be able to announce some acquisitions in the near future, based upon its new relationship with GE Capital.
CARA Collision and Auto Glass Acquiring Facilities
Last year, when his partners at ABRA bought out Randy McPherson, many probably thought they had seen the last of the ABRA co-founder in the collision repair industry. The saying "Lightning doesn’t strike in the same place twice" seemed appropriate at the time.
Well, less than a year later, McPherson is back.
Last September, McPherson formed Collision Automotive Repair of America (CARA) with partner and and long-time associate Dan Gutt. In just 10 months, CARA now owns eight locations with projected annual revenues of $15 million for these stores. Seven facilities are located in the Minneapolis-St. Paul region, with the eighth location in the Milwaukee area.
According to McPherson, "I am extremely pleased with our success to-date. In just 90 days, we acquired eight repair facilities, and began the process of systematizing and building CARA’s business. Within five months we were turning a profit and showing strong sales growth."
CARA is focusing on intensive customer and insurance company marketing to build volume at the recently acquired stores. The company offers free pick-up and delivery of customer vehicles, free towing to their facility, up to seven days of free replacement rental coverage and a lifetime limited warranty on the work performed in CARA’s facilities.
Continued expansion plans are aggressive. McPherson plans to acquire eight additional facilities by year’s end, the most recent to occur by early July. "Acquisitions are a key method in our growth plans. We are actively pursuing quality repair facilities to add and upgrade to the standards of CARA," stated McPherson.
Sherwin Williams Automotive Appoints New President
Michael A. Galasso has been named President and General Manager, Sherwin Williams Company Automotive Division, effective June 1. Galasso has served as Vice President - Operations for the Automotive Division with overall responsibility for all manufacturing and technical functions.
Galasso joined the company in 1971 and has spent his entire career in the Automotive business.
Galasso replaces Joe Scaminace, who takes the position of President and General Manager of the Coatings Division of the Sherwin Williams Company.
Keystone Reports Record Sales and Earnings
Keystone Automotive Industries, Inc. reported May 28 record net income of $6,789,000, or $0.72 per share, on record revenues of $194,321,000, for the fiscal year ended March 28, 1997, up 57 percent from the previous year.
The results for the fiscal year ended March 28, 1997 include the operations of North Star Plating, which was merged with Keystone in a transaction accounted for as a pooling of interests.
Keystone also announced that Virgil K. Benton II, 40, has resigned his positions as chairman, chief executive officer and a director of Keystone, effective May 23, 1997, to pursue other opportunities.
Charles Hogarty, 56, was elected chief executive officer. Mr. Hogarty has served as president, chief operating officer and a director of Keystone since 1987. He joined Keystone in 1960 and has held a range of positions including salesman, sales manager, general manager and regional manager. He has also served as a Director of the Automotive Body Parts Association from 1984 to 1993, President in 1989 and Chairman of that organization in 1990.
GMAC and Integon Sign Merger Agreement
GMAC and Integon announced June 23 that they have signed a definitive agreement providing for Integon’s merger with the Motors Insurance Corporation (MIC) subsidiary of GMAC. The merger will provide Integon’s common stockholders with $26 cash per share, including the holders of common stock to be issued upon conversion of Integon’s $3.875 Convertible Preferred Stock (convertible at $19.05 per share), or an aggregate of approximately $550 million.
"The proposed merger with Integon results from seeking attractive growth alternatives and represents a major step in our efforts to expand our reach in the financial services industry," said John Rines, GMAC president. "We’re extremely pleased to have the opportunity for Integon to become an important member of our organization, and we plan to leverage their expertise to create new opportunities inside and outside GMAC."
The transaction is subject to approval by Integon’s common stockholders. Integon is a nonstandard automobile insurance company based in Winston-Salem, NC. Nonstandard automobile insurance is offered to consumers who do not qualify for standard rates due to various risk factors such as driving record.
The merger of Integon with GMAC will strategically complement the direct response preferred and standard personal lines insurance business written by GMAC’s MIC subsidiary. With the addition of Integon, GMAC’s combined insurance operations will reach a broader base of auto insurance customers.
Collision Repair Volume Declines in May
Early research conducted by Collision Repair Industry INSIGHT showed a slight decline in the average number of repair orders written by the largest collision repair facilities. The average number of repair orders written by repair facilities contacted for the most recent INSIGHT TrendLine Survey showed a decline of approximately eight percent in May 1997 versus the same period in 1996. The April 1997 repair order levels were even compared to 1996.
Initial indications for the first quarter, based upon insurance claims statistics showed a decline of roughly five-to-seven percent in the first quarter of 1997 versus 1996.
INSIGHT began compiling repair order experience from TrendLine Survey shops in April 1996 in an effort to provide collision repairers with a quick guide to the health of the collision repair business on a month to month basis, ahead of insurance company statistics that suffer from a three-month time lag. To participate in INSIGHT TrendLine Surveys, visit the INSIGHT web site at or call INSIGHT at (800)860-2744 and ask to be included in the TrendLine fax database.
ASA Michigan Panel Discusses Consolidation
The Automotive Service Association of Michigan held a panel discussion on the impact of industry consolidation at a meeting held June 6. The panel featured a lively discussion on the present and future trends surrounding consolidation and the impact these trends will have on differing parts of the industry.
The panel included 15 people from all segments of the industry. Panelists included: Michael York, president and CEO of Carnet/Parnet, an insurer; Mike Condon of Allstate Insurance; Randy McPherson of CARA Collision Repair Centers, Rex Dunn of True2Form Collision Repair, John Sullivan of PPG Refinish, Guy Bargnes of BASF, John Gagliano of Collex Collision, Steve Arndt of FinishMaster, Larry Edwards a management consultant; Brad Thacher, supervisor of the GM Service Technology Group Collision Repair Technology Center; Rick Tuuri, of ADP; Mike Davis, of the First National Bank of Detroit; Dave Biggers of SH Color Systems; Rudy Ashbrenner of Painters Supply and Jim Dickens of CCC Information Services.
The panel was moderated by Charlie Baker, publisher of INSIGHT.
Baker led off the discussion with a short slide presentation highlighting the trends of industry consolidation. Following this presentation, panel members were questioned regarding their specific activities and their views towards consolidation.
York outlined Carnet/Parnet’s plans to move into the Detroit market with a major training and repair facility to provide service to their insureds. Carnet/Parnet currently serves automotive insurance customers in inner city areas of southern California and is looking to offer similar services in other communities including Florida.
Condon of Allstate stated during the discussion that Allstate hoped that consolidation would bring greater consistency to the industry. The issue of consistent performance from store to store would be a major challenge to potential consolidators. Condon also explained that Allstate was studying changes to the PRO direct repair program to take it to the next level of performance. Allstate popularized direct repair as a competitive advantage. Now that other insurers have jumped on board, Allstate wants to again set the pace and provide themselves with an advantage over competitors.
Shop consolidators talked about the driving forces behind their efforts to consolidate competitors. Rex Dunn stated his view that "Pressures on operating margins are the reason they are taking their business to the next level by reengineering the repair process to drive costs out of the business."
Baker, the moderator, comments, "There was a tremendous amount of interaction and a suprising lack of antagonism between shops, insurers and data providers. The attention of the audience was tightly focused on the impact of consolidation upon the industry with very little blame being placed by one segment on the other. It was very refreshing."
(Editor’s Note: To receive a printout of the overheads used by Charlie Baker in this presentation, contact INSIGHT at (800)860-2744.)
NABC Seeks Nominations for 3rd Annual PRIDE Awards
The National Auto Body Council (NABC) is seeking nominations for the 3rd Annual PRIDE Awards. The PRIDE Award program was designed to recognize businesses, individuals, and groups of individuals who distinguish themselves and the industry by performing humanitarian and/or community service deeds outside of their normal job responsibilities.
In the last two years, eight companies and individuals have been honored for their charitable work.
To be eligible, the individual, group of individuals, or business must be employed in some aspect of the collision repair industry.
All nominations are due by October 3, 1997. The award winners will be chosen by an independent panel of judges representing a cross section of the industry. The 1997 National PRIDE Award winners will be recognized at the Collision Industry Conference meeting held December 3, 1997 in Las Vegas. To obtain a nomination form, contact the NABC at (888)66PRIDE.
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