The debate rages over the announcement in June of the investment by Ford Motor Company in Collision Team of America of Indianapolis, IN. The commentary, both published and private, that has surfaced since this announcement echoes the thoughts I presented in last month’s Editor’s Page. Shops, associations, insurers and other auto manufacturers are all concerned about the potential impact Ford’s increased involvement will have on the industry.
For those of you who have been around a while, this commentary might seem reminiscent of Don Randall, the long-time lobbyist for ASA, and his often made presentation concerning Allstate and Sears controlling the automobile repair industry. It was back in the mid-80s when I first saw his presentation. He charted the relationships between the consumer and Allstate and Allstate’s parent company, Sears & Roebuck. His contention at the time, very far-sighted indeed, was that Allstate sold insurance and Sears had auto repair centers and glass installation subsidiaries. His question, "How long would it be before they made an investment in collision repair?"
While Randall definitely got the premise of integrated services correctly, it never came to be for Allstate and Sears. I could easily imagine the flowcharts he would have on the Ford-CTA deal.
Sure, Ford builds the cars, they finance and lease the cars. Through the recently launched FRNs they sell and service the cars. With the CTA investment and the FRNs they can provide collision repair service - All that is left is a serious insurance operation to compete against the top tier of insurers. With the cash that Ford Motor Company has in its coffers, it could easily come to fruition.
But, before we jump too far ahead, we need to ask if this scenario truly works. Certainly, where Ford has an ownership interest, more so on leased vehicles than those simply financed, they can exert pressure on their customers to bring these vehicles to Ford authorized facilities for collision repair. Certainly, Ford can guarantee the repairs and that no loss will occur to the residual value of the vehicle. Notice Ford’s policy change towards aftermarket parts usage on leased vehicles.
To control the customer to this level, though, will require an intense marketing effort on the part of Ford or any other entity that pushes authorized repair facilities. Witness DRP and the many consumers who continue to use their preferred repairer instead of the insurer’s. However, PPO auto insurance policies may change this dynamic - the major reason independent repair facilities fight PPO tooth and nail.
The remainder of 1998 will prove a turning point for the collision repair industry.
Reprinted from the August 1998 Issue of Collision Repair Industry INSIGHT.
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