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Letter to the Editor
This article originally appeared in the November 2000 Issue of INSIGHT
©2000 Collision Repair Industry INSIGHT All Rights Reserved
Non-OEM Parts Fare Well in Latest CIC Test Fit
INSIGHT and Conning & Company Announce Licensing Agreement
ADP Collision Repair Services Announces Release of Shopling for Windows 6.2
Competition Among Leading Auto Insurers Heats Up
GM OnStar and Sun Announce Collaboration on New Open In-Vehicle Software Solution
BASF Automotive Refinish Group Offers Advanced Internet-Based Business Analysis
CARSTAR USA and CARSTAR Canada Announce Acquisitions
INDUSTRY UPDATE
For the second time since the Collision Industry Conference (CIC) began conducting test fits of replacement parts two years ago, non-OEM sheet metal parts fared better than OEM.
During the October CIC held in Nashville, two sets of parts were installed on a 1998 Honda Civic. CIC participants, not knowing which were OEM or non-OEM, were asked to rate the parts for fit, finish and overall acceptability.
A non-OEM hood, manufactured by Cobra King and certified by the Certified Automotive Parts Association (CAPA), was given average ratings of 4.22 (out of 5) for fit, and 4.5 for finish, and was rated as acceptable by 91 percent of those participating; the OEM hood received ratings of 3.39 for fit and 3.63 for finish, and was acceptable to only 69 percent of those rating the parts.
A CAPA-certified Da Juane fender also received slightly higher marks than its OEM counterpart, although both were deemed acceptable to more than 90 percent of participants.
A headlamp manufactured by TYC received virtually identical ratings as the OEM. The OEM bumper cover was acceptable to everyone rating the parts, and outscored a non-CAPA-certified bumper cover (manufactured by Tong Yang) that was acceptable to 77 percent of participants.
Although open to all CIC attendees, only about 20 people completed the parts rating surveys.
The latest parts test fit results came during a meeting at which the Taiwan Auto Body Parts Association (TABPA) reported improvements that its members – manufacturers of non-OEM parts – are making in producing and packaging parts.
"Your messages are conveyed and have been heard loud and clear," Karen Fierst, TABPA’s U.S. representative, said of the repair industry’s efforts in the last three years to communicate more directly with parts makers. "The manufacturers would like CIC to know that the parts test fits are closely followed by TABPA members. The large manufacturers, in particular, analyze the data from the CIC tests to determine if changes in the manufacturing process can be made to avoid future problems."
As an example, Fierst cited problems found with a non-OEM hood in a CIC test fit in 1998 that "resulted in a manufacturer adopting an enhanced checking fixture for hoods, which addresses hood latch concerns."
In another CIC test fit, a non-OEM headlamp was rated poorly because its housing was a different color from the OEM.
"Manufacturers had not fully understood the concept that the difference in color could make a major difference in the perception of the repair and the resale value of the car," Fierst said. "Manufacturers are looking at this issue, and I believe the CAPA technical committee discussed this issue just two weeks ago. So some action regarding that will certainly be addressed by individual manufacturers. Again, without the CIC parts test fit, that concept wouldn’t have come to the attention of the manufacturers."
Fierst said the non-OEM parts industry is also working to address the "economic disincentive" for shops to use non-OEM parts.
"The manufacturers have commissioned a market research study regarding the concept of a manufacturer’s suggested retail price being implemented in a legal way," Fierst said. "The goal would be to ensure that in the entire channel of distribution, every party that is touched by that product is able to make a fair and equitable profit."
Fighting misuse of ‘blend formulas’
Also at CIC in Nashville, all of the estimating system providers confirmed they are making changes to help eliminate "improper use of blend times."
"Mitchell [International] and the others have made it clear that ‘blend’ is only to be used on an undamaged adjacent panel," Bob Matejzel, chairman of the CIC Write It Right Committee, said.
In addition to clarifying this in their procedure pages and estimating guides, the computerized estimating system providers plan to make changes to their software.
"In the next version of both ShopLink and PenPro, we’re building in automated capability so if you select ‘panel replacement’ and ‘blend’ on that panel, the system will have a pop-up message that says, ‘Blend does not apply to that operation,’" said ADP’s Rick Tuuri. "Or if you repair a panel and then select ‘blend,’ you will get a pop-up that says, ‘Blend does not apply to repaired panels.’"
Representatives of Mitchell and CCC Information Services said new versions of their software due out next year would similarly prevent users from applying blend formulas to repaired panels.
On tap at next CIC
The next CIC takes place December 6 in Orlando, Florida, just prior to the opening of the International Autobody Congress and Exposition (NACE) being held there. Plans for the meeting include an Anti-Fraud Committee panel discussion on third party claims administration services; an Electronic Commerce Committee panel discussion on web-based claims processing companies; and finalization of CIC’s "best practice guidelines for the use of used parts." More information can be found on the CIC website (ciclink.com). o
Two major insurers, Farmers and Nationwide, are reported to be "testing the waters" in terms of writing aftermarket parts, both with their field adjusters and with their DRP shops. The Nationwide program reportedly started mid-October; roll-out date of Farmers’ program is unknown.
Farmers reportedly is writing only CAPA-certified parts and is not writing hoods or bumper reinforcements.
Nationwide, in Pennsylvania and North Carolina, is writing only bumper covers manufactured by AutoLign and plastic lighting components by TYC.
“Lifting the suspensions,” said a Nationwide spokesperson, “marks the ?? of our new non-OEM crash parts program.”
Both AutoLign and TYC are ISO9000 certified, and the product they turn out meets Nationwide’s criteria for quality.
Only two distributors will be part of the Nationwide program to start with: Keystone and Eagle. Both companies have met Nationwide’s warranty and insurance requirements among other criteria. Other distributors will be added at a later date.
Reportedly, the program will specify only parts manufactured by select MQVP- registered manufacturers. MQVP (Manufacturers Quality and Validation Program) establishes quality management expectations and guidelines for non-OE part manufacturers and distributors. These guidelines adopt the principles of ISO9000, the international quality manufacturing standard, and also the automotive QS9000.
MQVP provides a methodology to assist in selection, qualification, and endorsement of branded non-OEM parts. This is accomplished by defining the expectations for quality and the performance tracking to assure satisfaction throughout the supply chain. MQVP was developed and will be administered by Global Validators, Inc. All non-OEM crash parts specified in a Nationwide Blue Ribbon Repair Shop appraisal will be backed by the Nationwide Blue Ribbon Repair Service Guarantee, which guarantees the part for as long as the customer owns or leases the vehicle.
"We are extremely excited to have earned the right to participate in this pro-active action on the part of the insurance industry," said Phil Storm, president and CEO of MQVP. "The MQVP program should be a vehicle that returns cost-effective alternative aftermarket parts and good, clean competition to the collision repair industry."
It is our take here at INSIGHT that both insurers are moving cautiously to bring aftermarket parts back into the repair process, and they are being very careful to avoid any potential quality problems of the sort that repeatedly plagued State Farm when it came to their lawsuit.
As we reported last month, all insurers have been faced with increased severity costs on a Year-to-Date basis, and the renewed writing of aftermarket is one way that they feel they can effectively address this issue.
At the time this is written, we have neither confirmation of the programs by Farmers or Nationwide, nor do we have any information relating to Global Validators and what its potential relationship with CAPA might be.
From a repairer’s standpoint, if the parts are in fact of a quality level that is acceptable to the shop and its customer, the vehicle owner, and this reduces the overall cost of repair, the shop, to remain competitive, will be using the parts.
In related news, the AfterMarket Quality Association (AMQA) has been formed to service the needs of the various stakeholders in the Non-OEM collision parts industry who wish to pursue quality management excellence and continuous improvement goals.
Conning & Company, the research firm headquartered in Hartford, Connecticut, has become INSIGHT’s latest licensee. The multi-year licensing agreement was retroactive to include information provided by Conning in its Strategic Study Series.
Charles Baker, publisher of INSIGHT, commented, "We are pleased to have this agreement in place. The Collision Repair Industry as a whole benefits when solid statistics and dependable data can be shared."
Conning & Company’s Insurance Research and Publications Division relied heavily on INSIGHT material in its publication, The Managed Auto Repair Initiative: Raising the Bar and Focusing on the Customer 2000, published earlier this year.
ADP Collision Repair Services has announced the commercial release of Shoplink(TM) for Windows® 6.2, providing body shops a new level of estimating and management efficiencies to improve profitability and productivity.
Significant among its new and innovative enhancements, Shoplink 6.2 features additional refinish calculations that automatically compute the time required for three-stage, two-tone, blend and chipguard refinishes. In addition, Shoplink 6.2 calculates any possible combination of these operations, further reducing manual calculating times and insurance re-inspections.
"We're very happy to offer completely interactive refinish features in our new release," said Mondo Jacobs, Shoplink product manager for ADP Collision Repair Services. "With about 95 percent of today's repair jobs requiring refinishing in multiple-stage painting, we expect this time-saving and revenue-sustaining function to be a huge benefit to our users."
Shoplink 6.2 also offers significant shop management and productivity-assessment functions. The new Repair Order Assignment and Tracking capability enables users to easily convert estimates to repair orders and post payments to the repairs. Users can also easily track the status of jobs by using the newly developed "Work in Progress" reports. Additionally, shops can use the "RO Closing" report to identify each estimator's proficiency in converting estimates to repairs - a useful tool for tracking productivity.
The latest version of Shoplink 6.2 also provides a host of features designed to increase estimating efficiencies, including:
- Air Bag Matrix/Zone: simplifies estimate writing by providing I-CAR replacement guidelines, an industry first, and grouping airbag components and associated parts in a single convenient screen display.
- Scheduled/Unattended Communications feature: allows automatic transmission of estimates to insurers without the users having to manually invoke these sessions.
- Return Customer Database: automatically allows information on repeat customers to be pulled into a new estimate, avoiding wasted time over redundant data collection and entry. The feature can also be used to do merge mailings for thank-you letters, greeting cards and other personalized marketing functions.
- "Find Part" utility: eliminates the need to scan graphics and text to find even the most elusive parts, quickly loading them from partial descriptions or the OEM part numbers.
- Interactive Zoom: allows estimator to "zoom in" for a closer look at ADP's high quality graphics and enter damages into the estimate by simply clicking on the image of the desired part while still in the "zoomed" view.
- CIECA EMS Interface for Stellix users: allows tighter interface between ADP estimating and management systems. Part price reconciliations can be sent from Stellix to Shoplink, eliminating the traditional redundant entry when there are part price changes.
"We're excited to offer these new Shoplink functions that bring more important management capabilities into the estimating system," said Jacobs.
Shoplink 6.2 is an automated collision estimating system designed specifically to enable collision repair operations to quickly produce more accurate, thorough and reliable estimates. The backbone of the system, the ADP Collision Estimating Database, has proven itself over the last 20 years as the accepted source of electronic repair information for estimate preparation.
ADP Collision Repair Services is a strategic business unit of ADP Claims Solutions Group (CSG).
The battle for market share in the auto insurance industry is heating up, according to A.M. Best. Fast-moving Progressive and GEICO have established a foothold and continue to gain ground, capturing chunks of the market from industry giant State Farm.
The top three auto insurers--State Farm, Allstate and Farmers--have lost market share over the past three years, while Number Four Progressive and Number Six GEICO, part of Berkshire Hathaway Inc., have doubled the number of policies each has written, according to A.M. Best Co. data. State Farm, the Number One writer of private-passenger auto in the United States, has seen its slice of business--21.6 percent in 1995--drop to 18.9 percent in 1999. In comparison, Progressive grew from 2.6 percent of the market in 1995 to 4.8 percent in 1999, and GEICO has grown from 2.5 percent in 1995 to 4.1 percent last year.
Progressive and GEICO have been using direct-selling channels, such as toll-free phone numbers. Consumers are comparison shopping and buying direct, by phone or on the Internet. Online insurance sites, such as Quotesmith.com, and company websites that provide quotes are letting consumers opt for lower prices over brand loyalty. Nowadays many consumers obtain multiple quotes rather than just automatically renewing their policies.
Companies using direct marketing to sell auto insurance are experiencing sales increases of 10 to 12 percent, while those using traditional distribution lines, such as agents, have seen only nominal growth. Consumers rank price of their auto policy as the most important factor to consider. (Editor’s Note: This is making a difference in insurer market share, despite the results of a recent AAA survey that indicated that the majority of consumers do not yet bother to comparison shop for auto insurance!)
The top two private-passenger auto writers are approaching direct selling differently. Allstate--ranked second in direct premiums written--shifted its focus to direct selling last November when it announced its new web-based personal computer network business model--the Good Hands Network, and increased advertising expenditures significantly. The strategy blends the Internet and toll-free-number service with Allstate's agent force. Allstate has four new call centers in three states, and its redesigned website can issue quotes and sell policies 24 hours a day. The call centers help to sell policies, service existing policies and respond to online customers who request more information through the Allstate Web site.
State Farm, on the other hand, continues to rely on its network of agents. Call centers are available for policyholders to file claims after hours, and consumers in 42 states can receive rate quotes for auto insurance online.
In addition to giving consumers method-of-purchase choices, insurers also are offering added-value services such as access to car loans or discounts on policies to boost customer retention. For example, Farmers Auto Buying Service provides policyholders with prices on new and used cars and has established prearranged pricing at more than 5,000 dealers nationwide. The Los Angeles-based insurer also makes auto loans available and even markets vacation packages. Erie Insurance Group is offering targeted rate decreases for preferred drivers. Its Pioneer Experience Rating Credit is a discount that rewards long-term policyholders for their safe driving records.
Balancing market share and profits will be a problem for the major players into 2001. While State Farm cut rates in California, the largest auto insurance marketplace in the United States, other insurers had already announced rate hikes. Progressive raised rates 6.5 percent in the first six months of 2000 in the 48 states in which it conducts business. Farmers so far claims the insurer will refuse to participate in any rates war, while GEICO has increased its advertising budget by 45 percent to about $350 million--an unprecedented amount in the insurance world - aimed at increased brand recognition and greater market share.
Because the personal-lines insurance market is so concentrated--60 percent of the market is controlled by the top 10 companies--any major moves by the top companies affect all the others in the auto insurance marketplace.
OnStar, a subsidiary of General Motors Corp., and Sun Microsystems, Inc. have announced they will collaborate to bring new personalized services to OnStar subscribers using Java technology.
Under the agreement, Sun and OnStar will build a new, open software layer based on Java 2 Platform Micro Edition technology. To ensure that the software solution is "open," OnStar and Sun will solicit input from the entire industry and release the resulting specifications to the automotive industry and standards bodies.
This will provide OnStar's OEM partners with a wide choice of competitive, as well as interchangeable, in-vehicle hardware and operating systems. In addition, this will enable OnStar to significantly extend its current leadership position in providing in-vehicle customer services.
"OnStar is the benchmark in delivering safety, convenience and information services, and this announcement is a natural extension of our intent to maintain leadership in this space," said OnStar President Chet Huber. "OnStar will be on a million vehicles by the end of this year, and that number will quadruple by 2003."
"What we're doing in effect is expanding the market for mobile devices for the 2.5 million Java technology developers worldwide, giving them the ability to leverage their existing services and create new ones," said Patricia C. Sueltz, executive vice president, Software Systems Group, Sun Microsystems.
Sun Microsystems CEO Scott McNealy referred to the announcement during his keynote address at Convergence 2000 International Congress on Transportation Electronics.
Specific timing and services will be announced at a later date.
OnStar, a wholly owned subsidiary of General Motors, is a leading provider of in-vehicle safety, security and information services. Using the Global Positioning System (GPS) satellite network and wireless technology, OnStar links the driver and vehicle to the OnStar Center, where advisors are available to offer real-time, personalized service 24 hours a day, 365 days a year. OnStar services include automatic notification of air bag deployment, stolen vehicle tracking, emergency services, roadside assistance with location, remote door unlock, remote diagnostics, route support, concierge services, and convenience services locator.
New services include Personal Calling, which allows drivers to make and receive hands-free, voice-activated calls from their vehicles and Virtual Advisor, which will deliver to the vehicle personalized Internet-based information such as news headlines, sports scores, stock quotes, weather conditions and e-mail through a hands-free, voice-activated, audio interface.
OnStar, featured on 32 of GM's 54 2001 model year vehicles, will be on about a million GM vehicles by the end of this year.
Winterman pointed out that the new set of tools is part of BASF's VisionPLUS® portfolio of value-added service products. "We've incorporated the best practices of hundreds of successful collision-repair businesses, as well as the creativity and knowledge of our Business Development Managers," said Winterman. "The finished product was two years in the making, and we feel it is truly unique. In fact, the project has been granted patent-pending status."
The Internet analytical tools will be introduced at NACE in early December, and launched during the first quarter of 2001. Rich Leenstra, Sales Director for the BASF Automotive Refinish group, said, "The project is a significant advance in our e-commerce strategy that will benefit our distribution network as well as end-users. The addition of business analysis tools, in a convenient format for our customers, represents the next step into the future of relationship marketing." Leenstra cited the new cycle time analysis tools and facility models, including interactive financial models, as examples of the variety and value of BASF's new Web-enabled tools.
CARSTAR has acquired Metcalf Auto Body in Overland Park, Kansas, a 23,000 sq ft, three-year-old facility. The acquisition increases CARSTAR's company-owned locations to eleven stores, located in Kansas, Missouri, and Nebraska, with Metcalf's located in CARSTAR headquarters' hometown.
"We are very pleased to add this facility to the CARSTAR family," said George Hansen, CARSTAR President and CEO. "I am confident that CARSTAR's systems will build upon Metcalf Auto Body's outstanding record in customer satisfaction and high-quality repairs to deliver superior service to consumers and to the insurance community."
CARSTAR has over 250 locations in the North American market, including its eleven company-owned stores and franchises, with total annual revenues in excess of $300 million. CARSTAR's work is backed by a nationwide five-year warranty.
CARSTAR Automotive Canada has announced the acquisition of Canco Collision in Markham, Ontario.
The previous owner, Doug Cole, has developed an excellent reputation and successful business over the last twenty years. "I have been in the industry for a long time, and now that it is time for me to move on, I trust CARSTAR with the future of my business. I truly believe that they are the market leaders, and will continue to grow something I spent many years in building," Cole said.
"Under the leadership of Les Bergerson, Canco CARSTAR will continue to provide the excellence in service and repair quality that the clientele have experienced over the years. As an organization, we have made a commitment to continuously improve both the business systems and the facility so that we can serve Markham consumes and insurers more effectively," commented Larry Jefferies, CARSTAR Automotive Canada's Executive Vice President of Operations.
Started in Hamilton, Ontario in 1995, CARSTAR Automotive Canada presently operates 86 locations, both owned and licensed, through seven provinces across Canada.c
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