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INSIGHT Inside this month's issue...

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Letter to the Editor

Articles

CIC Gold Pin Planning Meeting Report

Ford Puts Collision Team of America Up For Sale

PPG to Cut Jobs, Close Plants after 4Q Earnings Fall

BASF Coating Research Center Now ISO 17025 Certified

INDUSTRY UPDATE

Collision Industry Conference (CIC) leaders and participants several years ago decided that diminished value (DV) - the issue of whether a vehicle's value is decreased after it has been wrecked and repaired - was not a topic that would benefit from dissection and discussion at CIC meetings. But at CIC's annual planning meeting in January, just days after State Farm announced a $250 million settlement of a class action DV lawsuit it lost in Georgia, DV was being assigned to several CIC committees.

"We did bury it a couple years back, but the discussion has been to put it into several committees so we can get several perspectives," CIC Chairman Lou DiLisio said. "I think the fire has died down a little bit from where it was a couple years ago, so now we wouldn't just be adding fuel to that fire but addressing a very real issue." p>A significant portion of the March CIC meeting in Nashville, Tenn., has been set aside for discussion of DV, from which a CIC task force on the issue may be established.

(Editor’s note: Get an in-depth look at DV in this month's special feature on page 6.)

Also after much debate at the Phoenix meeting, CIC participants narrowly voted to suspend the vehicle test fits of OEM and non-OEM parts that have been held at most CIC meetings over the past three years.

The test fits have allowed CIC participants to rate the fit, finish and overall acceptability of OEM and non-OEM replacement parts - not knowing which were which - that were installed on a vehicle during the meeting.

DiLisio was among those calling for a halt to the test fits primarily because of what he called the "misuse of the information gathered by the parts test fits." As an example, DiLisio cited a press released issued last fall by the Alliance of American Insurers that stated, "Generic certified parts more often than not have received higher ratings than car company parts in blind parts demonstrations at CIC meetings."

DiLisio said only six of the 16 certifiable non-OEM parts used in CIC test fits over the past three years were rated higher than the OEM version (and in one case there was a tie). He said OEM parts had an acceptability rate of 78 percent compared with 55 percent for the non-OEM parts.

"For them to make a statement that more often than not the [non-OEM] parts perform better, I have a problem with that," DiLisio said. "We started these test for one reason only: To emulate what a collision repairer goes through every day, calling up on the phone to order certified parts to see what comes and to put these parts on a vehicle to see whether they fit, what the finish was like, etc. We've done that numerous times. We've given feedback to the distributors. We've given feedback to the OEMs. We've given feedback to the Taiwanese. Many changes have been made. There's no question in my mind that these test fits have proven to be positive. The question I raise: What are we going to gain out of them in the next 12 months?"

Rod Enlow, co-chairman of the Parts and Airbag Committee, said DiLisio had raised some valid points, and concurred with others who said the time and effort the test fits required was keeping the committee from addressing other parts-related issues. He also voiced concern that too few CIC participants actually participated in some evaluations. But he said, the tests have had positive impacts.

"We hope that because of the test fit program that the OEMs and the aftermarket industry are building better parts today than they built two years ago, and I think it's easy to say they are," Enlow said.

Massachusetts shop owner Chuck Sulkala was among those who proposed and has supported the continuation of test fits.

"We had to be able to show, 'This is what is wrong with this part,' and that is what the test fits have done," Sulkala said. "As a result, we now have CAPA changing the way they are doing things and are now doing vehicle test fits. We've had the Taiwanese come over to see what we've done. And we've also found that not every OEM part is perfect as I and many other repairers thought they were. As a result, we got the attention of the OEMs as well. It's unfortunate that people decide to take information and twist it and turn it, and they ought to be called on the carpet...but my vote would be that we continue the effort. I'm not sure that our work is completed yet."

Sulkala, however, was one of only three CIC participants who voiced support for continuing the test fits at nearly every meeting, and although two dozen supported holding test fits twice a year, a slightly larger majority voted to suspend the test fits altogether.

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Ford Motor Company has made it clear that they intend to sell or dispose of Kwik-Fit, its European maintenance and light repair business, and two U.S.- based businesses: Collision Team of America, the chain of collision repair centers, and GreenLeaf LLC, a chain of automotive recycling centers. Ford has engaged Goldman Sachs to assist with this evaluation.

On Jan. 11, Ford Motor Company announced that it was pursuing the sale of non-core assets and businesses as part of its Ford Revitalization Plan. Ford expects to realize more than $1 billion of cash from these and other potential divestitures in 2002. "We believe Kwik-Fit, Collision Team of America and Green-Leaf LLC are good companies with strong futures," said Nick Scheele, president and chief operating officer of Ford Motor Company. "However, we are focusing our efforts and attention on our core business - developing great cars and trucks and providing outstanding service to our customers."

Kwik-Fit, Europe's largest maintenance and light repair operation, was purchased by Ford in 1999 and has 2,400 service centers and more than 11,500 employees.

Collision Team of America operates 32 collision shops in four states (conducting business under various names) and has about 850 employees. Ford purchased a minority stake in Collision Team of America in 1998 and acquired the remaining shares in 2001.

GreenLeaf LLC acquired its first recycling center in 1999. Today it operates 31 sites in 14 states and two Canadian provinces and employs about 1,200 people.

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PPG Industries Inc. announced it would cut jobs and close plants in 2002, as fourth-quarter earnings fell 34 percent due to weakness in auto and industrial markets.

PPG did not say how many jobs would be eliminated or which plants closed because the company is still in the planning stages and not prepared to provide details, said company spokesman Jeff Worden.

Pittsburgh-based PPG, the world's largest maker of car and airplane paints, reported fourth-quarter net income of $83 million, or 49 cents a share, on sales of $1.91 billion. This compares with fourth-quarter 2000 net income of $126 million, or 75 cents a share, on sales of $2.1 billion.

For all of 2001, PPG's net income was $387 million, or $2.29 a share, including a $101 million pretax restructuring charge in the first quarter. Sales were $8.2 billion.

PPG company shares rose 11.7 percent, outperforming the Standard & Poor's 500 Index, which fell 13 percent.

Net income for all of 2000 was $620 million, or $3.57 a share.

"We anticipated a difficult year by accelerating actions to cut costs and conserve capital. Our financial discipline and continuous drive to improve efficiency have not reduced our commitment to technology and service," said Chairman and Chief Executive Officer Ray-mond W. LeBoeuf. "Despite a decrease in net earnings of $233 million, we increased cash flow from operations by about $200 million and reduced capital spending by $375 million, enabling us to reduce debt by about twenty percent. This strengthening of our balance sheet amid the recession improves our ability to generate earnings growth when economic expansion resumes.

"One of PPG's fundamental strengths is the continuous improvement of business processes, which is particularly important in times such as these, when market conditions are weak and the timing of the recovery is uncertain. Follow-ing the restructuring and work force reductions begun last year, we're developing plans to take additional restructuring actions in the first quarter of 2002, in the range of $60 to $90 million before taxes. These actions will include work force reductions and the closing of facilities or portions of facilities no longer needed as a result of improved business processes."

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