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Letter to the Editor
This article originally appeared in the June 2001 Issue of INSIGHT
©2001 Collision Repair Industry INSIGHT All Rights Reserved
Caliber Collision Centers Opens Two Facilities in San Antonio Market
Bridgestone/Firestone Ends 100-Year Relationship with Ford
AAI Claims Victory for Insurers in Another Diminished Value Case
Jim Keller Named ASA Chairman for 2001
PPG Automotive OEM Glass Named a GM Supplier of Year for 2000
I-CAR Working with Industry Training Alliance
FinishMaster Announces Q1 Financial Results and Acquisition
Copart Acquires Third Facility in Louisiana
Insurance Auto Auctions Announces Q4 Results
INDUSTRY UPDATE
Caliber Collision Centers has announced the opening of two locations in San Antonio, Texas: a newly constructed state-of-the-art advanced production greenfield facility and a new Caliber Express center that specializes in the repair of light to moderately damaged vehicles. Caliber is now the largest collision repair provider in San Antonio, with six centers operating in the area.
According to Caliber's president and chief operations officer, Bill Lawrence, the new 32,000 square-foot greenfield facility was designed to achieve the highest level of productivity and customer satisfaction. "We are very excited to announce the completion of this extraordinary repair facility," said Lawrence. "This center has been designed, equipped and staffed to reduce the cost and time associated with quality collision repair. The workflow of the IH-10 production plant and our rapid repair process facilitate the triaging of damaged vehicles based on repair complexity. This enables us to direct a damaged vehicle to the repair department best staffed, skilled and equipped for the job at hand, resulting in the high-quality repair and on-time delivery that exceeds our clients' and customers' expectations."
"The opening of the Caliber Express Center underscores our commitment to being responsive to our insurance partners' desire to improve service while controlling cost," said Doug Boazman, Caliber's senior vice president of operations. "We will continue to develop locations and open high-quality centers throughout Texas to meet the specific needs of our clients as they seek to improve the claim and collision repair processes for their customers."
The new Caliber Express center is designed, equipped and staffed for the high-quality, rapid repair of light to moderately damaged vehicles. It features 20,000 square feet, with an optimal linear workflow and specialized equipment. The center's opening is anticipated to increase Caliber's annual revenues to more than $180 million.
Founded in 1991, Caliber currently owns and operates 58 facilities in California and Texas and plans to continue acquiring high-volume collision repair centers and building new facilities.
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On May 21, John Lampe, Bridgestone/Firestone Inc.'s chief executive, president and chairman, sent the following letter to Jacques Nasser, chief executive of Ford Motor Co., severing the century-long business relationship between the companies:
Today, I am informing you that Bridgestone/Firestone Inc. is ending its tire supply relationship with the Ford Motor Company. While we will honor our existing contractual obligations to you, we will not enter into any new tire sales agreements in the Americas with Ford beginning today.
Business relationships, like personal ones, are built upon trust and mutual respect. We have come to the conclusion that we can no longer supply tires to Ford since the basic foundation of our relationship has been seriously eroded. This is not a decision we make lightly after almost 100 years of history. But we must look to the future and the best interests of our company, our employees and our other customers.
Our analysis suggests that there are significant safety issues with a substantial segment of Ford Explorers. We have made your staff aware of our concerns. They have steadfastly refused to acknowledge those issues.
We have always said that in order to insure the safety of the driving public, it is crucial that there be a true sharing of information concerning the vehicle as well as the tires. You simply are not willing to do that. We believe you are attempting to divert scrutiny of your vehicle by casting doubt on the quality of Firestone tires. These tires are safe, and as we have said before, when we have a problem, we will acknowledge that problem and fix it. We expect you to do the same.
I wish you and the Ford Motor Company continued success and regret that we cannot continue our relationship going forward.
Ford immediately retaliated with an announcement that it will replace up to 13 million more Firestone tires not included in last August's massive recall linked to U.S. deaths and injuries in rollover crashes.
A recent decision by a Florida appellate courtis the latest in a series of decisions to favor insurers on the issue of diminished value, according to the Alliance of American Insurers.
In the case of Siegle v. Progressive Consumers Insurance Co. the Florida District Court of Appeal, Fourth District, affirmed a lower court's ruling that neither the insurance contract nor Florida law obligates an insurer to compensate for lost market value. The plaintiff's attorney originally had filed a class-action suit claiming that automobiles repaired following traffic accidents suffer a reduction in market value. The alleged reduction of value is known as diminished value.
The appeals court decision stated: "We hold that having restored Siegle's vehicle to its pre-accident level of performance, appearance and function, and having completed a top-notch repair, Progressive is not required to also compensate its insured for any remaining inherent diminution of value."
Several class action suits have been filed throughout the country based upon the theory that once an automobile is repaired, the value of the vehicle is diminished. The lawsuits seek compensation for the alleged loss in value.
"The Siegle case is just the most recent victory earned by insurers on this issue," said Kirk Hansen, Alliance director of claims. "The insurance industry has been successful in defending class-action litigation for alleged diminished value in Delaware, Florida, Illinois, Louisiana, Massachusetts, Pennsylvania, Rhode Island and Washington.
Hansen noted that there is a great deal of evidence that proper vehicle repairs do not adversely affect the resale value of automobiles.
"Though there are well over 60 million automobiles in the country that have been repaired as a result of accidents, none of the price appraisal guides, such as the NADA Official Used Car Guide or Kelley's Blue Book, consider prior accidents when publishing the value of used cars," Hansen said.
The Alliance of American Insurers, based in Downers Grove, Illinois, is a national trade association representing 326 property/casualty insurance companies.
CCC Information Services Group Inc. has announced the results for the first quarter of 2001 and reported strong profitability in CCC U.S.
"We are pleased to report that CCC U.S., our core tools business, reported earnings ahead of expectations for the quarter with operating profits of $9.7 million, up 18.2 percent from last year," said Githesh Ramamurthy, Chairman and CEO of CCC Information Services Inc. "This is just one example of how focused we are on successfully leveraging our core competencies and assets. I am also pleased to announce the progress we are making at DriveLogic as we prepare to launch three products during the third quarter of 2001. With auto repair costs on the rise, continuing profit pressures on insurance companies, and pressure increasing from consumers to provide the best service at lower costs, our customers are increasingly looking for solutions that provide efficiency and better service for consumers. It is this need that DriveLogic is positioned to fill. We are very encouraged from the activity over the last few months of its ability to fill this need."
Revenues for the quarter from continuing operations totaled $47.4 million, including CCC U.S. revenues of $46.4 million (up 3.2 percent). Operating income from continuing operations totaled $1.8 million, including CCC U.S. operating income of $9.7 million (up 18.2 percent), DriveLogic losses of $7.5 million, and CCC International losses of $0.5 million. Total net losses for the quarter of $9.8 million, or $0.45 per share, included a loss from discontinued operations of $7.0 million, or $0.32 per share, related to the exit of CCC Consumer Services Inc., a U.S. subsidiary handling claims administration and policy fulfillment outsourcing to private passenger auto insurance businesses.
"This is another step toward exiting the claims outsourcing market, which we initiated in the fourth quarter of 2000, with the closure of D.W. Norris, our U.K.-based claims outsourcing business. These actions will allow us to focus our efforts and resources solely on our core technology strengths to maintain our market share in our tools business and capture new growth opportunities," said Ramamurthy.
As part of the exit, CCC will begin to wind down the Value-added Claim Services suite of products, including: ACCESS Shop Network (audit of appraisals generated by a nationwide network of repair facilities), ACCESS Quality Audit Services (audit of appraisals generated by CCC and non CCC collision estimating systems), Total Loss Complete (a total loss claims resolution service), and CARS Direct (a rental car reservation service). In addition, CCC is actively working with potential buyers for the Claims Administration and Policy Fulfillment businesses that administer claims and assist consumers directly with policy changes. "This move confirms CCC's commitment to build upon a solid core business comprised of strong cash flows and customer relationships, improving margins and future growth prospects," said Reid Simpson, Executive Vice President and Chief Financial Officer of CCC Information Services Inc.
CCC anticipates the full wind down of this subsidiary, which employs 365 people, will take approximately six to nine months. In 2000, CSI reported $25.1 million in revenue and operating losses of $5.4 million.
Jim Keller, AAM, owner of Motorcar Collision in Milwaukee, was named chairman of ASA's board of directors for 2001-02. Keller succeeds Howard Lewis, AAM, owner of L & B Auto Repair in Snohomish, Wash. Lewis moves to the past chairman's seat on the board of directors for one year.
In addition to Keller and Lewis, other members of the 2001-02 ASA board are Dan Frohlich, AAM, chairman-elect, A.R.S. Automotive, Pittsburgh, Pa.; and Kevin Caldwell, AAM, secretary/treasurer, Autobody by Caldwell, Inc., Laguna Hills, Calif.
Serving as general directors are: Earl Dohner, AAM, E & E's Garage, Brookville, Ohio; Geralynn Kottschade, AAM, Jerry's Body Shop, Inc., Mankato, Minn.; and Rick Bigham, AAM, Bigham Automotive & Electric Co., Lubbock, Texas.
Serving as affiliate directors are: Reggie Denney, AAM, Reggie Denney Auto Repair, Eden, N.C.; Dale Bright, AAM, Dale Bright's Auto Service, Chino, Calif.; and Denny Kahler, AAM, Kahler's Werkstatt, Dublin, Calif. The final two seats are held by the Collision and Mechanical Division directors, Chris Dameron, AAM, True2Form Collision Repair Centers, Inc., Raleigh, N.C.; and William (Bill) Filley, AAM, Meade & Greenlee, Inc., Salem, Ore.
Walter Trapp, ASA president and chief staff executive, also serves on the ASA board of directors in an ex officio capacity. Members of the 2001-02 ASA Executive Committee are Keller, Lewis, Frohlich, Caldwell, and Kottschade.
In other news from ASA's April Annual Convention in Maui, Hawaii, Denny Kahler, AAM, owner of Kahler's Werkstatt in Dublin, Calif., received the Automotive Service Association (ASA) 2001 Mechanical Division Alpha Award. The award recognizes Kahler's commitment to the automotive service industry and his business and community involvement.
Kahler is an ASE certified master technician. He represented ASA's mechanical division as a participant in an information availability demonstration held in May 2000 for the U. S. House Commerce Committee in Washington, D.C. He is currently on ASA's national board of directors.
In his community Kahler has been involved in local little league, the sheriff's association, chamber of commerce, and a women and children's shelter. Tom Prescott, AAM, owner of The Bodywerks in Holly Hills, Fla., received the Automotive Service Association (ASA) 2001 Collision Division Phoenix Award. Prescott has served as chairman of the ASA Refinish Subcommittee and has represented ASA at NACE seminars.
PPG Industries' automotive glass original equipment (OEM) products business was named a Supplier of the Year by General Motors (GM) for its superior performance in quality, service, technology and value in 2000 during ceremonies April 28 in Washington, D.C. The PPG automotive glass OEM business also earned the GM honor in 1995.
"PPG represents the best of the best, and it has set an example during the past year for other companies to follow," said Bo Andersson, executive in charge, GM Worldwide Purchasing. "PPG is a role model, and it is an honor to work with a company so committed to supporting our priorities for quality, launch and a balance between current and future business."
Representing PPG at the award ceremonies was Ernest A. Hahn, vice president of automotive glass, who said he accepted the trophy on behalf of the thousands of PPG employees whose hard work resulted in the honor.
"To each and every PPG employee whose dedication resulted in our being selected by General Motors as a Supplier of the Year, I would like to say thank you," Hahn said. "We have a value focus to develop and manufacture high-quality glass products for GM and provide the best service. Receiving this honor validates our efforts, which will continue as we strive to uphold the values for which we have been recognized."
GM's Supplier of the Year award began as a global program in 1992. Winners are selected by a global team of executives from purchasing, engineering, manufacturing and logistics who base their decisions on supplier performance in quality, service, technology and price. This year, General Motors honored 165 suppliers in 19 countries for their excellence throughout 2000.
PPG, North America's largest manufacturer of original equipment automotive glass and a global supplier, produces flat glass for automotive applications at Meadville, Pa.; Mount Zion, Ill.; Wichita Falls, Texas, and Owen Sound, Ontario, Canada.
I-CAR has recently joined with other collision industry technical trainers to form the Industry Training Alliance. I-CAR Gold Class points can now be awarded to students who have taken Alliance training programs. The Alliance has greatly strengthened the Gold Class Professionals and Platinum Individual programs by increasing the number of training sites and reducing the time and expense to attain Gold Class or Platinum status.
"After striving to become Gold Class for so long, I am happy to say that I am sending in my Gold Class application tomorrow with confidence that I'll pass," said Mark Hunt, manager of The Body Shop in Kingsport, Tennessee. "I have five employees that may have been a little short on Gold Class points. Because of the Industry Training Alliance, the training they've received from Sherwin Williams and Chief has put us over the top."
The Body Shop is one of many businesses incorporating the Industry Training Alliance into their training plan. Businesses who complete technical training other than I-CAR courses to improve their skills and knowledge of the industry may not have been eligible for the Gold Class program in the past. However, these businesses now have another option to help them reach their goal of becoming Gold Class Professionals.
"The Alliance is a great program, and it won't stop us from taking I-CAR courses," Hunt stated. "It just provides a great way to organize all our training in one place." I-CAR maintains a student database, which includes all Alliance training programs. Once I-CAR receives documentation from the Alliance member that a student has completed a training course, that student can apply to I-CAR for Gold Class credit. The student's I-CAR transcript will list all courses taken from I-CAR and Alliance members.
I-CAR expects that within one year virtually all quality technical training organizations and vocational-technical schools will be members of the Alliance. As of this date, Sherwin Williams, Martin Senour, Chief Automotive, PPG and BASF are Alliance members.
I-CAR is now offering its Enhanced Delivery curriculum to vocational-technical schools for the first time. Over 70 technical training programs will be marketed to the schools by the I-CAR Education Foundation. Additionally, schools can purchase any props, simulators, and student consumable materials used during I-CAR classes.
"I-CAR's Enhanced Delivery curriculum is the most comprehensive in the collision industry," stated Rod Kohlhepp, program director and instructor for Madison Area Technical College. "Because it is continuously updated to reflect the latest technology, our students will always be equipped with the most current technical material available."
Introduced in January 2000, Enhanced Delivery courses feature knowledge and performance-based training, with an emphasis on hands-on exercises. The schools may also choose to purchase and provide each student with a CD-ROM, which includes the textbook, instructor audio track, and video demonstrations of the classroom exercises, for later review and reference. The student CD-ROM may also be used to support a self-paced learning environment.
“By offering the I-CAR curriculum, we can help reverse the trend of closing vocational-technical school programs, improve the quality of training and ultimately increase the number of qualified entry-level technicians in the industry," said Executive Director Ron Ray of the I-CAR Education Foundation.
Schools who use I-CAR's Enhanced Delivery curriculum and whose instructors are I-CAR qualified are also eligible to join the Industry Training Alliance.
Vocational-technical schools that would like more information on I-CAR's Enhanced Delivery curriculum or the Industry Training Alliance can find it at www.i-car.com. Schools who wish to purchase the curriculum may call 888.722.3787, X283.
I-CAR continues to introduce new Enhanced Delivery training programs and is on track to replace all traditional courses with Enhanced Delivery by the beginning of 2003.
The Enhanced Delivery curriculum is a series of individual, modularized training programs that offer in-depth coverage of traditional and new subject areas. This allows students to choose only the segments that best fit their training needs. Enhanced Delivery programs feature knowledge and performance-based training, with an increased emphasis on hands-on exercises. Students also receive a CD-ROM, which includes the textbook, instructor audio track, and video demonstrations of the classroom exercises for later review and reference.
FinishMaster, Inc. has reported that net income for the quarter ended March 31, 2001 was $839,000 on net sales of $83,235,000, compared to net income of $904,000 on net sales of $84,670,000 in the prior year. Earnings per share were $0.11 compared to $0.12 in the prior year.
The company also announced that on March 29, 2001 it had entered into a new five year $100 million senior secured credit facility with a syndicate of banks and a new six year $20 million senior subordinated term credit facility with LDI, Ltd.
The soft automotive paint aftermarket in the United States had an impact on net sales, which declined 1.7 percent compared to the first quarter of 2000. Several factors contributing to this softening in demand included slower overall economic conditions; weather conditions in the Northeastern United States; ongoing drought conditions in Florida; and continued productivity improvements in the use of automotive paint by our customers. A reduction in vendor supported marketing programs used to attract and retain customers also impacted sales.
"Based upon discussions with vendors and other distributors, the company believes the weak market for automotive paint has affected the entire industry," said Wes Dearbaugh, President and Chief Operating Officer. "Sales growth is a key area of focus for us in 2001."
Despite the weakness in sales, net income before extraordinary loss improved 47.6 percent as a result of strong gross margins and lower interest expense. Gross margins as a percentage of net sales were 36.5 percent versus 35.4 percent in the prior year period. This improvement was primarily the result of large inventory purchases made prior to manufacturers' price increases. Lower overall debt levels were the major contributor to the decrease in interest expense.
In other news, FinishMaster has announced the acquisition of Badger Paint Plus, Inc. Headquartered in Fridley, Minnesota, Badger consists of six locations in three states. The three locations in Minnesota will provide a new hub for future growth, while the two locations in Chicago and one in Milwaukee will increase FinishMaster market share in these existing markets. With annual revenues of approximately $10 million, Badger Paint Plus, Inc. is FinishMaster's largest acquisition since 1998.
"We're excited about the increased opportunities the Badger acquisition will provide," stated Wes Dearbaugh, President and Chief Operating Officer. "This acquisition provides a new hub for growth and increases our presence in existing markets. In addition, Bruce Carson, the former owner of Badger, will join FinishMaster, Inc. as Vice President and will be responsible for the Minnesota hub. Bruce brings the experience of managing a well-run company, and he provides excellent leadership ability to FinishMaster."
"Seeking acquisitions has always been a part of our strategy," said Andre B. Lacy, Chairman and Chief Executive Officer. "Bringing Badger into FinishMaster reflects our commitment to the Collision Repair Industry. I look forward to Bruce Carson playing a leading role in FinishMaster thinking nationally and acting locally."
FinishMaster is a national independent distributor of automotive paints, coatings, and related accessories to the automotive collision repair industry. FinishMaster is headquartered in Indianapolis, Indiana and operates three major distribution centers and 162 branches in 25 of the 35 largest metropolitan areas in the country.
Copart, Inc. has announced that it has acquired the assets of Twin City Salvage Pool, Inc. of Shreveport, Louisiana. The 30-acre facility was acquired for Copart stock and is Copart's 80th location in the US and the third facility in Louisiana.
"We are very pleased that the Twin City facility is joining Copart," said Willis J. Johnson, Copart's Chief Executive Officer. "They operate along the busy Interstate 20 corridor and serve the entire width of Louisiana from Texas to the Mississippi borders."
Since March 2000, Copart has added 10 locations including sites in Boise, ID; Pasco, WA; West Palm Beach, FL; Abilene, TX; San Antonio, TX; Albuquerque, NM; Harrisburg, PA; Chatham, VA; Chicago Heights, IL and Shreveport, LA.
Founded in 1982, Copart provides vehicle suppliers -- primarily insurance companies -- with a full menu of services to process and sell salvage vehicles through auctions, principally to licensed dismantlers, rebuilders and used vehicle dealers. Operating 80 facilities in 36 states, Copart also provides services to other geographic areas through its national network of independent salvage vehicle suppliers.
Insurance Auto Auctions, Inc. has reported increased revenues and lower net earnings for the fourth quarter ended December 31, 2000. The company recorded a net loss, including special charges of $1.2 million, or $0.11 per diluted share, versus net income of $3.4 million, or $0.29 per share, for the same quarter a year ago.
The net loss amount for the fourth quarter reflects special charges of $4.8 million. The largest component of the charge, in the amount of $3.0 million, is associated with the abandonment or disposal of computer hardware and software. The second major component of the charge relates to the February 2000 plane crash that damaged the company's facility in Rancho Cordova, California. The company increased reserves by $1.2 million related to costs incurred to clean up and repair the site.
Net sales for the quarter increased 4.9 percent to $81.8 million compared with $78.0 million in the fourth quarter of 1999. Gross profit for the quarter increased 1.2 percent to $20.5 million, up from $20.3 million for the same quarter a year ago. The loss from operations for the quarter totaled $2.1 million, compared to income from operations of $5.6 million for the same quarter a year ago.
"We are encouraged by our top line performance in light of a difficult operating environment during the fourth quarter," said Tom O'Brien, chief executive officer.
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