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INSIGHT Inside this month's issue...

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Letter to the Editor

Articles

Non-OE Parts Lawsuits Filed in Canada

Copart Announces Two for One Stock Split

Allstate Announces Closing of Japanese Operation

No Major Industry Y2K Problems Reported

NABC Partners with Habitat for Humanity for the House that Pride Built

CarStation.com Completes $32 Million Financing Led by Goldman Sachs

State Farm asks Illinois Supreme Court to Immediately Consider Non-OE Parts Case

CarParts.com Completes $42 Million Financing Deal

John Sullivan, Director of PPG Distributor Programs, Dies

Ford Forms Automotive Consumer Services Grou

INDUSTRY UPDATE

Insurance companies in Canada are starting to feel the impact of the U.S. aftermarket parts class action trial that ended October 8th in Illinois with a $1.18 billion award against State Farm.

Some recent Canadian events:

• A class action style lawsuit has been filed in Quebec against Groupe Desjardins, ING Canada (the second largest auto insurer in Canada) and AXA Canada (seventh largest) relating to their use of non-OE parts.
• The Insurance Bureau of Canada (IBC) has asked its Ontario claims committee to look at their current practices with respect to aftermarket parts and develop a sound position on the issue.
• The Automotive Industries Association of Canada (AlA), representing automotive manufacturers and suppliers in Canada, is urging full disclosure to consumers of the aftermarket status of any collision repair part, and worries that all aftermarket manufacturers will be tarred with the same brush.

  Ray Datt, AlA president said "We worry about insurers dictating to body shops on price rather than proper fit. In some cases an aftermarket part is fine; in other cases it isn’t."

• Both State Farm and Liberty Mutual Insurance have announced a prohibition on using some or all non-OE crash parts on vehicles repaired in Ontario. Liberty Mutual Insurance is one of nine insurers named in aftermarket parts class action suits in the United States.
• Transport Canada is being requested by a trade association in Alberta to prohibit importation of possibly unsafe aftermarket parts and to stop them from entering Canada.

A group in Ontario is demanding that Transport Canada provide for recalls of unsafe structural aftermarket parts in the same fashion that OEM parts are recalled. Aftermarket mechanical parts manufactured by such brand name companies as Monroe and Moog Canada have previously been subject to Transport Canada recall.    o

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Copart announced in late-December a 2-for-1 forward stock split of the company’s common stock together with a proportional split of the company’s authorized common stock effective as of January 6, 2000.

Copart shareholders of record at the close of the market on January 6, 2000 will receive one additional share for every share of Copart common stock held. The distribution date for such additional stock certificates will be January 24, 2000.

"The Board’s action is designed to facilitate improved trading liquidity and broaden stock ownership," said Willis J. Johnson, Copart’s chief executive officer.

The company announced January 21 that they would begin Electronic Video Auctions (EVA). With EVA, buyers are able to stay indoors and bid on vehicles. EVA utilizes large TV monitors to display digital images and details of the vehicle while the auctioneer conducts the sale.

Buyers can also bid at the live auction on the Internet at Copart.com. The EVA system is being rolled out first to facilities in extreme climates. The first installation was at their South Boston facility in early December.

Additionally, Copart announced the opening of a new 40-acre facility to serve the New York City/Long Island area. The new facility is located near Islip Airport and replaces a 13-acre site located at the end of Long Island in South Hampton.

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Allstate announced January 10 that it is closing its Japanese auto insurance operation.

The decision was based on Allstate’s recent assessment of its overall business strategy. In making its decision, the company is committed to continue serving its current Japanese customers as it moves out of the marketplace. Allstate will be working with and under the guidance of the Financial Supervisory Agency in Japan to ensure that the transition process continues to meet customer needs and is in compliance with Japanese regulations.

Allstate continues to believe there is long term opportunity in the Japanese market. However, as a result of reviewing its overall business strategy, the company believes it is prudent to focus its resources on other growth initiatives.

Press reports in late January speculated that Zurich Financial was in discussions with Allstate regarding a potential sale of the operation.    o

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Y2K preparations appear to have paid off for the industry. On Monday, January 3, INSIGHT sent out several hundred emails requesting information about Y2K problems around the industry. Specifically, we asked if anyone had experienced, or knew of anyone who experienced, Y2K problems. In response, we received over 40 responses and not a single major Y2K issue was reported.

Minor problems were reported with some older 486 hardware that had date related BIOS issues. Other than those, no problems have been reported with installed software billed as Y2K-compliant.   o

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The National Auto Body Council (NABC) has partnered with the Kansas City chapter of Habitat for Humanity to erect the first House that Pride Built in Kansas City, MO during the week of April 1-6, 2000. The NABC is requesting the assistance of individuals within the collision repair industry to support the effort.

Habitat for Humanity is an internationally recognized 501c6 charitable organization whose goal is to provide affordable housing for the underprivileged. In short, the group sponsors projects to build homes for deserving families throughout the world.

The NABC is organizing an inter-industry, cooperative effort that seeks to display the best of the collision industry.

The NABC has committed to raising a minimum of $50,000 for materials and will provide a significant portion of the labor, which will be supervised by Habitat representatives.

As of mid-January, over 20 percent of the funding goal, roughly $12,000 had been received or committed to the project.

The NABC is establishing ties to the Kansas City community, state and local collision repair associations and businesses to get the project moving and to foster the NABC’s goal of enhancing the industry’s image. They hope this event will be a collective showing of good will and community support, while providing a ‘new face’ for the collision repair industry in the public’s perception.

The House that Pride Built event coincides with a number of industry events, including the Collision Industry Conference and the Collision Concepts trade show and exposition.

(Editor’s Note: For more information on the House that Pride Built project or to donate money or your time to the project, contact: Mark Claypool, NABC executive director by phone at: (888)66-PRIDE, (888)667-7433, or (630)762-0614.)   o

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CarStation.com announced January 13 that it has secured an additional $32 million in venture financing, led by investors Goldman Sachs Group, Inc. and Insight Capital Research.

(Editor’s Note: There is no relationship between Insight Capital Research and Collision Repair Industry INSIGHT.)

All of CarStation’s original investors also participated in this latest round of financing, following investments totaling more than $12 million in 1999.

According to Charlie Moore, president of Carstation, "In addition to being delighted by the overwhelmingly positive response we received from the collision repair industry in 1999, we at CarStation.com are extremely excited to have the strong support of Goldman Sachs, Insight Capital and our other investors. CarStation.com will use the capital we've raised to dramatically increase our already robust development staff, leading to faster time to market for our e-commerce solutions."

Given the fast-paced nature of the evolving automotive parts e-commerce market, Carstation’s additional financing was an absolutely necessary step to implement their business plan.

(Editor’s Note: See Carparts.com article below.)   o

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 State Farm has filed a motion with the Illinois Supreme Court asking for an expedited appeal of the verdict in Avery vs. State Farm Mutual Automobile Insurance Company, which concerns State Farm’s specification of new, non-OE crash parts in repair estimates.

The company said it is seeking an expedited appeal for three reasons: because the judgment will have a drastic effect on insurance consumers, it infringes upon state insurance regulation, and it will invite excessive and unwarranted litigation in Illinois. State Farm and other concerned organizations are asking the Supreme Court to act now "rather than at the end of the ordinary appeal process" to remedy the already-apparent negative consequences of the verdict.

State Farm explained that it is already seeing the effects of not quoting non-OE crash parts on auto repair estimates: parts costs were $4.8 million more than expected in the first full month since the company’s suspension of their use. These higher repair costs inevitably lead to higher insurance premiums for all consumers, the company said.

Second, State Farm indicated that the expedited appeal is necessary because the Avery verdict overrides the rights of individual states to regulate insurance, allowing a single state’s judge and jury in Marion, IL, to dictate policy for the entire insurance-buying public nationwide. The court’s action disregards the facts that insurance regulators across the United States have examined the use of non-OE auto parts and that the laws in every state allow insurance companies to specify them for repairs.

Finally, State Farm said it is asking the court for an expedited appeal because the extraordinary billion-dollar verdict in this case will act like a magnet, attracting lawyers from all over the country to file "nationwide" class actions in what they perceive to be a plaintiff-friendly forum in southern Illinois. State Farm said the Illinois Supreme Court needs to provide critical guidance to the lower courts on when massive, multistate class actions are appropriate for a state court.

State Farm on Dec. 17 filed an appeal to the 5th District Appellate Court in Mount Vernon, IL. The motion before the Supreme Court effectively asks the court to bypass the usual appeals process and consider the appeal directly.   o

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