Your Source for Up-To-Date News and Research on the Collision Repair Industry
click here to subscribe to the FREE INSIGHT Editor's Desk News Alert Email
SUBSCRIBERS-ONLY
Today's News
Industry Stocks
INSIGHT This Month
INSIGHT Archives
Survey Center
Letter to the Editor
Business Tools
Subscription Information
CSI Reporting
Financial Analysis
IRS Audit Guide
Management/
Technical Info
Market Watch Rates
INSIGHT Inside this month's issue...
Feedback
Letter to the Editor
This article originally appeared in the January 2002 Issue of INSIGHT
©2002 Collision Repair Industry INSIGHT All Rights Reserved
NACE2001 Report: Attendance Up at Annual Show
CIC Roundup: ASA Denounces Insurer Ownership, Investment in Collision Repair Facilities
Industry Awards Presented at NACE
Sterling Sells Lake Villa Shop Back to Previous Owners
PPG Appoints Garry A. Goudy Vice President, Automotive Refinish
Copart Announces 3-for-2 Forward Stock Split
ADP Claims Services Group to Acquire AutoVista
eAutoclaims and Enterprise Logistics Complete CIECA X12 Open Standards Trial
Doug Kelly Joins Fix Auto as President and COO
Diminished Value May Be Big News for 2002
INDUSTRY UPDATE
Many people - show organizers, exhibitors and attendees - wondered what impact last fall's terrorist attacks would have on the International Autobody Congress and Exposition (NACE), held last month in Las Vegas. Attendance, as reported by show organizers, was up significantly - by about 5,000 - from last year's 30,750, but still down from its peak of 41,000 in 1997, the last time NACE was held in Las Vegas. Attendance from outside the U.S. dropped from about 14 percent of total attendees to about nine percent.
The trade show itself also was about 25,000 square-feet smaller than last year with 560 exhibiting companies, forty fewer than last year. But most exhibitors seemed pleased with the turn-out, with a number commenting that perhaps more than most years, those who attended were there to buy, not just to party.
They also apparently came to hear about Allstate's acquisition of the Sterling Collision Centers chain. Friday morning's general session, which included a presentation by Allstate's Chuck Paul, attracted 3,500 people.
Paul, vice president of Allstate Insurance Company's claims strategy group, said the insurer hopes to address several needs through its acquisition of Sterling, which operates 40 shops in eight markets.
First, he said, competition from other insurers is forcing Allstate to find ways to control premiums and make its claims service better than before and better than other companies'. Consumer's heightened expectations of insurers include "restoration," not just "indemnification." Paul said he believes that, through Sterling, Allstate can offer a more consistently positive claims experience for car-owners than it could through 3,500 independently-owned direct repair shops. The acquisition model also will be more difficult for other insurers to replicate than Allstate's DRP which, in his opinion, other insurers have "cloned."
Six months into the Allstate-Sterling relationship, Paul said, there have been ups and downs, but customers have been very accepting of it, and Sterling shops have seen some impressive improvements in "through-put." But, he said, the acquisition is not the end of Allstate's relationship with its direct repair shops. "Sterling does not and will not reach all markets," Paul said.
The following day at NACE, Brian Sullivan returned to again offer his unique perspective on the insurer-shop relationship. As he did the preceding year at NACE, Sullivan, editor of several insurance industry publications, cautioned shops against becoming too closely linked with insurers.
"The insurance industry is not your friend," he said. "The insurance industry is not your partner. They aren't happiest when you make a lot of money. But the next point is even more important: You have to deal with them. You have to understand where they are going. You have to sympathize with their problems. Because what will flow from that is their decision-making, and their decision-making is what's going to make you happy or miserable."
Even more than squeezing repair costs, he said, insurers are interested in improving the customer's experience and decreasing their loss adjusting costs (what they spend managing claims). Allstate's acquisition of Sterling, he said, is evidence of a trend toward insurers seeking control of the customer relationship. "It's not good for you, but it is the reality that I think you have to deal with and something you have to figure out how to change," he said.
A year earlier, he admitted, he did not foresee insurers owning shops. But he still doesn't think it is something other insurers will be able to do, and that Sterling will probably be limited to market areas with high concentrations of Allstate customers. Other insurers, however, may make investments in repair chains in order to ensure they have access to repairers in key markets.
The NACE opening session also included time for Chris Dameron, an executive of the True2Form repair chain and 2001 chairman of NACE, to offer his "state of the industry" views. Dameron said perhaps some of the best news of the year was the industry's success in convincing the information providers not to encrypt data, improving a shop's options for transmitting estimate and other data electronically to insurers or vendors.
He criticized Nationwide's deal with NAPA, saying that by requiring its direct repair shops to purchase hard parts through NAPA at an agreed-upon mark-up is another example of insurers meddling in the business relationships of a shop and its vendors.
Dameron criticized Progressive's "Concierge" program, saying it's another attempt to "micro-manage" shops, and that the insurer will make the shop the "scapegoat" when something goes wrong. He also criticized Allstate's purchase of Sterling, calling it a conflict of interest and saying repairers don't sell insurance and insurers shouldn't repair cars.
INSIGHT publisher Charles Baker presented an overview of the U.S. collision repair market while participating in the international roundtable, Global Issues - The World of Collision Repair, moderated by Russ Verona, CEO of East Rockford Collision Center. Collision repair professionals from near and far, including Great Britain, Australia, Japan, Canada, and others, shared their perspectives on the industry.
Overall, NACE2001 was a success. The paring down of expensive parties and get-togethers we have seen happening over the last few years has apparently been for the best. NACE2001 was focused on business and information-sharing, with just the right amount of fun thrown in to make attendees want to do it all again in 2002.
o
ASA isn't pulling any punches when it comes to its view of insurers owning collision repair shops.
Chris Dameron, chairman of the Collision Division of the Automotive Service Association (ASA), announced the association's newly-developed position statement on the issue at the Collision Industry Conference (CIC) held in Las Vegas in late November.
"ASA ardently supports consumers' unequivocal right to choose their collision repair facilities," Dameron said. "ASA has grave concerns with controlling ownership of collision repair facilities by insurance companies. We are uncertain that the economic interests or the safety requirements of the American driving public can best be served by this type of vertical relationship. Indepen-dent business men and women of the collision repair industry have proven to be the best advocates for the consumer's safety and protecting their personal financial interest.
"Just as our country was founded with separation of branches of government to ensure a system of checks and balances, this industry needs to continue a similar system of checks and balances that can only be achieved through an independent provider of services," Dameron said.
The announcement came during the largest CIC meeting in its 18-year history. Despite the terrorist attacks three months earlier, more than 500 people attended the November 28 meeting.
ADP embraces "open systems"
As one CIC participant in Las Vegas put it, what a difference a year - and lots of backlash from the collision industry - can make.
Almost exactly 12 months after ADP drew fire for its plans to use encryption to protect data - limiting how that data could flow between shops, insurers and vendors - the company announced its support for (and entry into) the "open systems" market.
Just the day prior to CIC in Las Vegas, ADP announced its acquisition of the AutoVista assets of ComputerLogic. Then at CIC, ADP's Rick Tuuri announced that the company would use those assets to offer the industry something encryption would have limited: namely, a communication link that allows a shop and insurer, for example, to electronically exchange assignment and estimate data no matter which of the "Big Three" estimating systems either is using.
ADP's goal, Tuuri said, is to create "an open environment where people have the freedom of choice to purchase any system they want to run their business."
"It's been sort of a 360-degree turn since NACE of last year," said Frank Terlep, co-chair of CIC's Electronic Com-merce Committee and one of the most outspoken critics of the encryption plans. "It's nice to see things have a way of working themselves out," he said.
Other CIC news
In other news and discussion at CIC in Las Vegas:
- A committee of former CIC chairmen announced that industry consultant Lou DiLisio will serve a second year as CIC Chairman in 2002.
- The National Auto Body Council (NABC) announced that it is 15 percent of the way toward its goal of raising $500,000 for a medical facility - to be named in honor of the collision industry - at Camp Mak-a-Dream. The Montana camp provides a free week of activities for children actively battling cancer, and the medical facility will allow it to become one of only two such camps in the country to accommodate children while they are receiving treatment. About 1,500 children from 38 states have spent a week at Camp Mak-a-Dream in its first seven years.
NABC's Chuck Sulkala said the Kansas City/Topeka Chapter of SCRS recently donated the $10,000 it raised through a golf tournament, and a Sherwin-Williams 20 group "passed the hat" at a recent meeting and raised $650.
- The CIC Parts and Airbags Committee said it would discuss at CIC's January planning meeting whether and how to continue the parts test fits it has conducted at CIC meetings over the past several years. The committee also is considering "tests" of used parts, "anonymously" ordering similar assemblies from several different auto recyclers to allow CIC participants to see differences in how such parts are provided.
CIC's Gold Pin planning meeting will be held January 10 - 11 in Phoenix.
Dozens of industry awards were presented by companies and organizations in Las Vegas last month, coinciding with the International Autobody Congress and Exposition (NACE).
Among the awards presented:
- Lou DiLisio, chairman of the Collision Industry Confer-ence (CIC), presented the first-ever CIC Chairman's Award to Massachusetts shop owner Chuck Sulkala for "serving as a leader of about every organization in the industry, unselfishly giving his time to all of us one way or another, while raising a family and running his own business."
DiLisio said that while many people have had an impact on the industry, he knows of "no one who has served the industry longer and in more ways" than Sulkala.
In accepting the award, Sulkala said, "The greatest people I ever met are in this industry... I swore that if I had the opportunity to get involved in this industry, I would do what I could to help. And you, my family, have made that possible, along with my family at home, and I thank you so very much."
- BodyShop Business magazine presented its annual "Collision Repair Executive of the Year" award to Missouri shop owner Ben Steinman. Denise Lloyd, publisher of the magazine, said Steinman embodies what the award represents: dedication to running an excellent business while also helping the industry.
- Auto Body Repair News presented its "Industry Leadership Award" to Georgia shop owner Gene Hamilton.
- The Automotive Service Association (ASA) and the Society of Collision Repair Specialists (SCRS) jointly awarded an "Outstanding Achievement Award," designed to honor those who made the greatest positive impact in the industry in the past year.
Receiving the award was the "Data Issues Task Force," led by State Farm's Jim Laning, that helped turn around plans by information providers to "encrypt data."
- Four members of the industry were named 2001 inductees into the "Hall of Eagles," a who's who of industry leaders.
The latest to join this elite group of honorees were industry consultant and past CIC chairman Dale Delmege; active SCRS member March Taylor of Autobody Hawaii; Tom McGee, manager of I-CAR's Tech center in Appleton, Wisc.; and Sharon Merwin, manager of ASA's Collision Division.
- Akzo Nobel added seven more women to its list of "Most Influential Women in the Collision Repair Industry."
Honored for 2001 were: Jan Anderson of Anderson's Automotive Service Center in Sheffield, Ohio; Rachell Breault of Crown Collision Center in Pawtucket, Rhode Island; Laurie Carlson of Lukas Auto Painting and Repair in Portland, Ore.; Michelle Franklin of Sports & Imports in Atlanta; Natalie Kessler of Masters Autobody School of Management in Santa Barbara, Calif.; Margaret Knell of I-CAR; and Debby Pryor of Mike's Auto Body in Concord, Calif.
- The National Auto Body Council (NABC) presented a second set of PRIDE Award winners for 2001, recognizing individuals or businesses for charitable and humanitarian contributions outside of their normal job duties.
Rob Quillen of ADP was among the winners. On a flight on September 10, Quillen met a United Airlines pilot who, like Quillen, was a fan of NASCAR and racer Jeff Gordon. Quillen invited the pilot, Jason Dahl, and his son to an upcoming NASCAR race, but the following day, Dahl was the pilot of United Flight 93 that crashed in Pennsylvania.
Quillen, however, made sure Dahl's son was later able to meet Jeff Gordon and attend a race that Gordon went on to win and dedicate to the boy.
Other PRIDE award winners announced last month were: Dave and Alex Carney of Tualatin Auto Body in Oregon, who are very active in their community; Salvatore 'Silvie' Licitra, who has had a lifelong involvement in the industry and in education; Mitchell International, which has launched the Mitchell Cares Program to link its employees with volunteer causes; and Jeff Hendler for his volunteer fund-raising efforts for various non-profit causes.
Sterling Autobody Centers has announced the divestiture of a single store location, selling the Lake Villa, Illinois store back to its former owners, Greg and Gordon Bockwinkel.
When Allstate acquired Sterling in May, the insurer announced plans to expand the Sterling network.
To date, the Sterling acquisition has performed better than expected, according to a company statement, and the expansion is proceeding as planned.
In the company’s announcement, while expansion has been the focus of Sterling activities, the company had anticipated that an existing store location might not match Sterling's strategic footprint, claim volume, or the location of Allstate's customers.
"We have decided to divest the Lake Villa location due to a couple of key factors," said Sterling CEO Jon McNeill. "First was the size of the shop -- a 72,000 square foot shop doesn't fit our operating model, nor did it fit Allstate's claim footprint. The rest of our shops in Chicago do. In addition there was a clear difference in operating style and that led us to make the decision that it would be better to part ways.
"We wish the Bockwinkels the best," continued McNeill. "The Sterling team looks forward to a very exciting 2002 with multiple store openings in process."
PPG Industries has announced four new management assignments:
- Garry A. Goudy, vice president, automotive replacement glass, has been elected vice president, automotive refinish;
- David E. Sharick, vice president, corporate development, has been elected vice president, automotive replacement glass;
- Maurice V. Peconi, vice president, electronic commerce and insurance services, has been elected vice president, corporate development;
- Douglas C. Hepper, vice president, automotive refinish, has been elected vice president, market initiatives, for PPG's coatings businesses.
Goudy joined subsidiary PPG Canada Inc. in 1970 as a sales and marketing trainee in Toronto and held sales and management assignments of increasing responsibility in Canada.
He moved to PPG's headquarters in 1988 and progressed through a series of general management positions in flat glass before being named general manager of auto replacement glass in 1994. He was named vice president, automotive replacement glass, in 1997.
Sharick joined PPG as internal audit manager in 1985, served as director of corporate development in mid-2000 and was named vice president late that year.
Peconi joined PPG in 1972 as a programmer analyst and was elected vice president, electronic commerce, in early 2000, and will retain responsibility for this function in his new position.
Hepper joined PPG in 1973 as a chemist. In 1994 he became international managing director of automotive refinishes in Paris in1996. He returned to Pittsburgh as general manager of automotive refinish in 1997 and was elected vice president in 1999.
The Board of Directors of Copart, Inc. has declared a 3-for-2 forward split of the company's common stock.
Copart shareholders will receive one new additional share for every two shares of Copart common stock held on the record date. The Company will pay in cash the fair market value of any fractional shares created by reason of the stock split.
The distribution date for the stock split will be January 21, 2002, to shareholders of record as of the close of the market on January 4, 2002.
"The Board's action is designed to improve trading liquidity and broaden ownership," said Willis J. Johnson, Copart's Chief Executive Officer.
Copart, founded in 1982, provides vehicle suppliers, primarily insurance companies, with a full range of services to process and sell salvage vehicles through auctions, principally to licensed vehicle dismantlers, rebuilders, repair licensees and used vehicle dealers. The company operates 88 facilities in 39 states.
ADP Claims Services Group has signed a definitive agreement to purchase substantially all of the assets of ComputerLogic's AutoVista(TM) claims line of business. The AutoVista assets will be combined with ADP's Claims Gateway(TM).
Claims Gateway is a group of services that provides a communication link among all parties in the automotive claims process, including insurance companies, independent appraisers, collision repairers, automotive recyclers, and their vendors.
Open information exchange will be the first introduction resulting from ADP's acquisition of AutoVista(TM). This feature provides the infrastructure for the communication link, enabling users to send assignments, estimates, and notifications to all concerned parties regardless of the estimating system used.
"Our vision is to act as a catalyst for a technology innovation in the automotive claims process," said Gary Nixon, senior vice president of ADP's automotive claims services. "The acquisition of AutoVista takes us one step closer to our vision by accelerating our Claims Gateway initiative."
AutoVista provides an Internet-based claims processing solution to insurance companies, collision repair facilities, and independent appraisers. It translates estimates and images into an insurance company's preferred format, and uses secure Internet connections to transfer them to appropriate parties. Several key AutoVista associates will join ADP Claims Services Group as a result of the acquisition.
"We're very excited about this acquisition," said Rick Palmer, CEO of Computer Logic. "Like ADP, Computer Logic has a long history of serving this industry. We've been in business over 20 years and it was important for us to identify a company that shares our values and our vision. ADP is clearly that company."
Over the past year, ADP has devoted significant strategic and financial resources to developing Claims Gateway. It is currently in pilot with several ADP clients.
"To stay competitive in today's unpredictable economy, businesses are seeking strategic technology partners to provide both innovation and real-world practicality," said Hinda Chalew, ADP's vice president of product management.
ADP’s new open information exchange technology, featured in ADP's Claims Gateway suite of services, will revolutionize the automotive claims process, according to an ADP press release, by allowing a truly connected, open-standards environment for the first time.
"We're doing more than just embracing open standards," said Gary Nixon, senior vice president of ADP's automotive claims services. "Open standards aren't the point -- the point is to use open standards to actively facilitate the connection of all these parties."
Said Hinda Chalew, vice president of product management, "We envision an accessible, end-to-end system that streamlines the claims process for everyone including, ultimately, the consumer who files an automotive claim."
Open information exchange will be the first introduction resulting from ADP's acquisition of AutoVista(TM). This feature provides the infrastructure for the communication link, enabling users to send assignments, estimates, and notifications to all concerned parties regardless of the estimating system used.
Industry partners will be expected to agree to security and other licensing requirements. ADP anticipates release to the market late in the second quarter of 2002.
The open information exchange feature of Claims Gateway will benefit all parties in the claims process, according to ADP, in several ways:
- Collision repairers not only can select a single estimating system of their choice, they also can create claim files with images and estimates.
- Insurers can consolidate information from all Direct Repair Program (DRP) participants for comprehensive reporting and auditing, and support DRP partners' desire for a single estimating platform.
- Business partners -- auto recyclers, towing and rental companies, glass companies and others -- can actively connect to each other during the resolution of a claim, leading to improved cycle time.
- Consumers benefit from shortened repair time.
Added Nixon, "This is clearly what the industry wants and we are committed to providing it. Our financial strength makes us well positioned to execute our strategy. And ... we are confident we can win in the marketplace by providing true end-to-end solutions for our clients."
eAutoclaims has announced the successful completion of the first real world external trial of CIECA X12, the open electronic transaction standards for the automotive collision industry.
The Collision Industry Elec-tronic Commerce Association (CIECA) has established universal electronic transaction standards that are designed to promote the interconnection of data across insurance companies, claims processors, and body shops that utilize a range of claims handling systems, databases, and estimating software programs.
As part of this trial, eAutoclaims and Enterprise Logistics, in a joint effort with Comp-Est, developed the implementation of the technology.
Participants in the three-way trial included Royal & SunAlliance as the initiator of the auto body repair assignment, eAutoclaims as the online system's provider of the claim and Greg's Collision Center as the participating body shop.
Using the CIECA standard format, Greg's Collision Center received the claim, created the auto body repair estimate using Comp-Est's estimating system and transmitted the estimate back to eAutoclaims along with a series of encapsulated digital images. The participants successfully received the data into their different computer systems and eliminated the need for any re-keying of data.
"We are proud to have been a part of a cooperative effort between industry leaders which strives to continually provide the claims management and auto repair industry with innovative technology to eliminate the necessity for human intervention of entering Administrative Data into the estimate," remarked Dave Mattingly, VP of Information Technology of eAutoclaims.
"This is a very exciting time for the industry. Open standardized communication based on CIECA X12 implementations will fundamentally change the way industry partners do business by increasing in the operating efficiency, lowering the cost of processing claims and minimizing the possibility of entering incorrect information into the system," stated Brian Hemker, General Manager, Enterprise Logistics.
"The technology will definitely be used to move the industries forward to better serve our customers and insurance partners," commented Dale Napier, General Manager of Greg's Collision Center.
Roger Cadaret, Executive Director of CIECA, said, "Enterprise Logistics and eAutoclaims embraced the idea of demonstrating the soon-to-be-final industry standard electronic estimate. They also used the recently finalized assignment standard, sending it from an insurer via eAutoclaims to a shop via the communications tool for the Comp-Est estimating system (Enterprise Logistics). They then sent the estimate in the CIECA standard via the Enterprise Logistics communication tool to the insurer via eAutoclaims.
"This not only was a highly successful demonstration of the transmission of both new standards, but also a demonstration of the inter-connecting of two e-commerce vendors, which is going to be critical to the future of the industry."
Douglas M. Kelly has joined Fix Auto as president and chief operating officer. Kelly will be responsible for overall business development and establishing operations throughout the U.S.
Kelly will begin to expand the network to major metro-politan markets across the country. He brings more than 15 years of experience in the automotive and technology industries. He has served as director of sales for Ventro Corp. and vice president of professional services for Industrial Solutions. Previously, he spent 13 years with the DuPont Performance Coatings business, where his responsibilities included leadership of the global marketing team.
"Doug is a terrific addition to our team," said Erick Bickett, chief executive officer of Fix Auto. "He has professional relationships with repairers, insurers and suppliers throughout North America that will help Fix reach its goal of becoming the nation's largest network of Class A independent repair centers."
Fix Auto is a network of independent collision repair centers currently concentrated in Southern California. Launched in 1997, the company has network revenues of more than $110 million annually.
Diminished value is quickly becoming an extremely controversial subject in the collision repair industry. With two of the major insurance companies, Allstate and State Farm, involved in national class action lawsuits, the topic is sure to heat up even more.
Both suits, Sims v. Allstate and Peterson v. State Farm, originated in Illinois. Although all states have not been included, Sims v. Allstate covers 33 jurisdictions and Peterson v. State Farm covers the same 33 with the addition of Massachusetts, bringing this suit's total to 34 jurisdictions.
Most attempts to explain inherent diminished value describe scenarios along the lines of this: You want to buy a car. After having looked at two cars - same make, model, year, price, and color - you discover one has been in an accident. Which car do you consider the better value and buy?
Although this is a fairly accurate explanation of inherent diminished value, it does not address the most important issue at hand. Are insurance companies obligated to pay additional money to their policyholders as a result of diminished value?
Plaintiffs in Sims v. Allstate and Peterson v. State Farm say yes. Most insurers say no based on the way their policies have been written. However, the outcome of these lawsuits depends on the interpretations of the courts.
In the past, lawsuits of similar nature have had different rulings. A judge ruling in the case of Delledonne v. State Farm in Delaware on May 4, 1992, interpreted that State Farm's policy promises included payment for "diminution in value."
However, the 14th Circuit Court of Appeals in Houston, in the case of Dennis Carlton v. Trinity Universal Insurance Company, interpreted that this insurer was not responsible for payment of diminished value. According to this court, a proper repair keeps the insurer's promise of restoring a car to its pre-accident condition.
Despite the variety of rulings in diminished value suits, Sims v. Allstate and Peterson v. State Farm were certified by the Court on December 21, 2000, and plaintiffs' class counsel are moving to recruit those involved. Both counsels have set up web sites with information such as court orders, documents, and questions and answers to common questions involving the cases.
As consumer awareness grows in the area of diminished value, there will inevitably be more lawsuits, settlements, appeals, and policy rewrites. However, who will benefit and how the collision repair industry will be affected is still yet to be seen. The odds are that it won't be good for either insurer or for shops that may themselves get sued for diminished value.
Feedback
Have a comment about this article? Send Email to Editor, INSIGHT's Editor
©2002 Collision Repair Industry INSIGHT
All Rights Reserved
FEATURED
LINKS:
