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This article originally appeared in the March 2002 Issue of INSIGHT
©2002 Collision Repair Industry INSIGHT All Rights Reserved
CAPA versus MQVP - CAPA Releases Comparative Report While MQVP Grows
Keystone Automotive Reports Big Net Income Rise in 3Q; Announces Acquisitions
Gross Domestic Product Rises in Q4
Eagle Automotive Declares Bankruptcy
FinishMaster Acquires 2 A.R.T. Locations
OEConnection Introduces D2DLink Parts Locator
Copart Expands Detroit and Minneapolis Facilities
ABRA Auto Body & Glass Announces Wisconsin Acquisition
M2 Launches M2 Online University
Insurance Auto Auctions Enters into New $20 Million Credit Facility
Allstate Profits Fall Sharply on Restructuring, Claims
Genuine Parts Q4 Earnings Drop 76 Percent
DuPont Q4 Earnings Drop 75 Percent
CCC Releases Updated ClaimScope Navigator
Sherwin-Williams Automotive Finishes Segment Sales Down 5.9 Percent
INDUSTRY UPDATE
The Certified Automotive Parts Association (CAPA) has released a report that outlines what it sees as the differences between its part quality certification program and the recently introduced MQVP (Manufacturer's Qualification and Validation Program).
The report outlines what CAPA sees as the key differences between the two programs, including:
- CAPA certifies (after specific and considerable testing) the actual quality of the parts themselves, whereas MQVP(tm) is a systems based program
- Many parts approved by MQVP do not meet CAPA stan-dards or have not been certified by CAPA
- CAPA parts and packaging are clearly identified in the marketplace
- CAPA part information is publicly available and widely distributed to the industry at no charge
- As an independent certifying entity, CAPA plays no role in the marketing, distribution or pricing of parts.
The report explains the differences between an individual part quality certification program and one that accepts any part produced under a certain system. Included is a snapshot of how parts approved under the MQVP process stack up against the CAPA status of the same parts.
"By insisting on a rigid set of standards and tests for each part, one of our goals is to keep collision repairers from becoming product testers," said Jack Gillis, Executive Director of CAPA.
CAPA prepared the report in order to answer the many questions it has received regarding the MQVP program and how it compares to CAPA. The information in the report is based on publicly available information regarding the MQVP Program.
"The purpose of the report is to differentiate CAPA's program from MQVP in order to avoid confusion in the market," said Gillis. "The bottom line is that there's a big difference between the two programs and people need to make informed decisions."
The report is available from CAPA at its website.
Collision Repairer Bob Anderson Elected CAPA Board President
CAPA has elected collision repair shop owner Bob Anderson President of its Board of Directors. This marks the first time that a collision repairer has held this position.
"I am delighted with Bob's election," said Butch Viccellio, CAPA's out-going President of the Board. "A principal thrust of CAPA's efforts in the year ahead will be to build aware-ness and support throughout the collision repair industry, and I can think of no individual better qualified to lead the association in that direction."
Anderson is the owner of Anderson's Automotive Service in Sheffield, Ohio and has been in the collision repair industry since 1968. He is past ASA National Chairman of the Board and has served on the ASA Executive Board and Collision Division Operations Committee. He twice served as the chairman of the National Autobody Congress and Exposition (NACE). In 1994, he received the Body Shop Business Executive of the Year Award.
"CAPA represents the future in providing competition and quality standards for the parts available to the collision repair industry," said Anderson. "I wouldn't take on this role unless I was absolutely sure CAPA is moving in the right direction."
"I have always said that if these parts don't work for the repair industry, then we are not doing our job," said Jack Gillis, Executive Director of CAPA. "Bob's leadership on the board will go a long way to insuring that commitment."
Viccellio, who served as CAPA's Board President from January 2000 to January 31, 2002, cited his need to focus on his principal duties as President of USAA's Property and Casualty Insurance Group.
CAPA also announced additional changes to the Board. Ron Brown, State Farm's Vice President of Claims, was elected to replace the position vacated by Tom L'Hote, who recently retired from State Farm. Carl Hartman of Keystone Auto-motive will fill the position vacated by Kim Wood of Keystone. Bill Breslin, USAA's Senior Vice President of Claims will fill the Board position vacated by Butch Viccellio.
API Sheet Metal Accepted into MQVP
Parkson Jong, Vice President of API and Chairman of TABPA, has announced that API has been accepted into the Manufacturers' Qualification and Validation Program (MQVP).
API has submitted about 500 part numbers for final review and acceptance. Global Validators, Inc. of Troy, Michigan administers MQVP.
"We have spent a significant amount of time comparing our processes with MQVP quality requirements and are confident these select API parts meet the standards set by the worldwide OEM automotive industry. The parts submitted for MQVP endorsement will be fully traceable and warranted through the GOCERTS system," said Parkson.
Rich Brinton, VP of Asia Operations for Global Vali-dators, Inc., indicated that the API organization is a leading supplier for aftermarket metal parts. "We commend API for the effort put forth to date," said Brinton. Tremendous work has been completed in the areas of engineering and design responsibility and MQVP compliance."
Increasing pressure for quality aftermarket parts by the worldwide collision repair and insurance industries have required API to become design responsible within their QS-9000 registration. "Under the requirement of design responsibility within MQVP, we follow the same design and engineering processes established for OEM suppliers," said Parkson. "During production, the parts are permanently identified and traced through GOCERTS(tm)(Global On-line Certification System). When the body shop receives an API part accompanied by a GOCERTS(tm) certificate, they can be assured it fits and performs just like an OE part."
"There is a revolution taking place among the manufacturers of aftermarket parts," said Ron Ritchie, President of Global Validators, Inc. "With a little encouragement provided by MQVP, aftermarket manufacturers are implementing all aspects of QS-9000 quality standards. Remember, these standards are developed by the OEM's and are required of every OE supplier around the world. You cannot manufacture a part to OE quality standards unless you follow the standards established by the OE. No other standard is applicable."
"The collision repair industry should be very excited about the trends we see in aftermarket manufacturing quality," said Jim Bender, Vice President of Global Validators, Inc. "The quality of engineering, design and tooling development is skyrocketing. Produc-tion techniques are better than ever. And this trend is spreading. We have received several inquiries from hard part manufacturers who want to join the quality trend established by MQVP."
API is a manufacturer of aftermarket sheet metal parts. The company has completed a Due Diligence Review conducted by Global Validators, Inc. and has been approved as an MQVP manufacturer. Approximately 300 API parts will be available for purchase, along with a GOCERTS traceability file, from participating distributors within 60 to 90 days.
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ADP Claims Services Group, a provider of information services for the insurance, collision repair and automotive recycling industries, has announced two new client service initiatives
The first is the creation of a comprehensive client service call center supported by over 350 people. The second is the completion of a multi-million dollar technology enhancement to the call center.
"ADP took this significant step because our clients are the lifeblood of our business. We must address every client contact quickly, efficiently, and correctly," said Robert Gray, vice president of client services.
The new comprehensive call center combines business units that serve insurance companies, collision repairers, and auto recyclers to ensure more people are available at any given time.
The contact centers, each capable of delivering full service on their own, are now capable of providing support from more than 350 associates spanning four time zones in five locations.
The recent multi-million dollar investment in call center technology provides faster access to qualified technical support representatives, information, increased capability to handle larger call volumes, and the ability for clients to utilize web chat and other functions. Complete redundancy and disaster recovery capabilities are also in place to ensure support availability.
These two latest initiatives are part of ADP's long-range vision to offer industry-integrated products and services that aim to allow business partners in the automotive recycling, collision repair and insurance industries to work together seamlessly.
"We see these initiatives as important steps to continue in our promise to 'connect the dots' among insurers, collision repairers and auto recyclers," says Gary Nixon, senior vice president of automotive claims services. "We are committed to our clients in each of these industries; and these efforts are evidence of how important our clients are to us."
Keystone Automotive Industries, Inc. has reported results for its third quarter ended December 28, 2001, reflecting continued momentum in its insurance related aftermarket collision parts business.
Net income for the third quarter rose almost four-fold to $2.8 million from $716,000 a year ago. Operating income for the same period climbed sharply to $4.4 million compared with $1.1 million a year earlier. Net sales for the third quarter increased 10.2 percent to $94.1 million versus $85.5 million last year.
For the nine months, net sales increased 7.7 percent to $274.4 million from $254.9 million a year ago. Net income was unchanged on a comparative basis as a result of a non-recurring charge of $6.8 million related to the write down of its investment in an enterprise-wide software conversion. Operating income, before the non-recurring charge, for the same period was $10.4 million, compared with $3.9 million a year earlier.
Charles J. Hogarty, president and chief executive officer, said, "Sales for the third quarter reflect continued momentum in our aftermarket collision parts business, including increased insurance company participation and growing market acceptance of Keystone's Platinum Plus private label products."
Same-store sales for the third quarter and nine-month period increased approximately 9.5 percent and 7.0 percent, respectively, compared with a year ago. Gross margins for the third quarter improved to approximately 43 percent, as a result of better product mix and improved pricing.
Hogarty stressed Keystone's ongoing strategy to strengthen its distribution capabilities, citing its recent purchases of the aftermarket collision parts distribution businesses of P-G Products Inc., based in Cincinnati, Ohio; Indiana Distributors Inc., based in Elkhart, Indiana; and the wheel cover distribution business of I.W.C. International, Inc., based in Tampa, Florida.
Keystone recently opened a distribution facility in Okla-homa City and anticipates it will open a new distribution facility in Portland, Oregon during the fourth quarter of fiscal 2002. A greenfield operation in Raleigh, North Carolina is expected to open later in the year.
Keystone appears to be bouncing back from the bleak aftermath of the State Farm court ruling over a year ago, a decision that ultimately led to the bankruptcy filing of rival aftermarket parts distributor Eagle Automotive in February.
Keystone has acquired the aftermarket collision parts distribution business of P-G Products Inc., based in Cincinnati, Ohio. P-G Products has annualized revenues of approximately $6.0 million.
In addition, Keystone has acquired Indiana Distributors, Inc., an aftermarket collision parts business based in Elkhart, Indiana, with annualized revenues of approximately $400,000. Terms of both transactions were not disclosed.
"The acquisition of P-G Products, a well-respected distributor with a 40-year history in the region, greatly strengthens Keystone's distribution business in the Cincinnati area. It also enables the company to merge its existing 30,000 square foot distribution facility in northern Cincinnati into P-G Products operations," said Hogarty.
Keystone now has 114 distribution facilities, of which 21 serve as regional hubs.
Gross domestic product rose at a 0.2 percent annual rate in the fourth quarter, pushed higher by record car sales and confounding widespread expectations for further contraction. The gain followed a 1.3 percent decline in the third quarter.
The unemployment rate fell to 5.6 percent in January from 5.8 percent in December, the first drop since May and a possible signal the ailing labor market is starting to rebound.
Nonfarm business payrolls declined by 89,000 jobs in January following a revised decline of 130,000 jobs in December.
Non-OEM parts distributor Eagle Automotive has filed for bankruptcy, closing its 18 U.S. locations after 20 years in the aftermarket crash parts business.
Current owners Buck Haddock, Gary Brown, and Bob Chew bought Eagle Automotive from founder Don Vestal in 2000 shortly after the State Farm $1.2 billion judgment.
FinishMaster, Inc. has entered into an agreement to acquire two locations previously owned and operated by BASF-associated Automotive Refinish Technologies, Inc., located in Charlotte, North Carolina, and Columbia, South Carolina.
"We're excited about our increased opportunities in these markets," stated Wes Dearbaugh, President.
"This acquisition represents yet another step to further strengthen our national distribution network across the U.S.," said Andre B. Lacy, Chairman and Chief Executive Officer.
FinishMaster, headquartered in Indianapolis, operates three major distribution centers with 159 branches in 25 of the 35 largest metropolitan areas in the country.
OEConnection, LLC has announced the release of its second product designed to improve the productivity and performance of automotive dealerships' genuine parts business. This new product, D2DLink, is a parts sourcing and order management tool that aims to allow dealerships to quickly locate parts available at other dealerships and to simplify the process of managing dealer-to-dealer sales transactions.
OEConnection used extensive customer surveys, focus groups, and field-testing during the development of D2DLink. "OEConnection's objective with D2DLink is to provide dealerships with access to the most detailed, accurate, and timely parts inventory data possible, and at the same time facilitate the complete end-to-end order process," stated Chuck Rotuno, President & CEO of OEConnection.
"D2DLink is the parts locator I have been looking for. Daily parts updates will ensure a high degree of accuracy, and the online capabilities will help save time," commented Ray Cerni, Parts Manager for Crossroads Lincoln Mercury in Independence, Ohio.
Like OEConnection's first product, CollisionLink, the new D2DLink offering will first be available for dealerships of its founding partners: Ford Motor Company, General Motors, and DaimlerChrysler.
OEConnection will make D2DLink available to dealerships franchised by other automakers in the future.
D2DLink is built on the same transaction platform that powers CollisionLink. These two OEConnection products form a comprehensive set of software tools to improve the parts sales and procurement processes for both a dealership's collision shop customers and its dealer-to-dealer business.
OEConnection is the venture created by Daimler-Chrysler, Ford Motor Company, General Motors and Bell & Howell that provides automotive dealerships and their wholesale parts customers with online products and services for their parts and service information needs.
Copart, Inc. has announced that it has recently relocated and expanded its Detroit and Minneapolis facilities.
During January, Copart's Minneapolis and Detroit salvage locations moved to larger facilities to accommodate recent market share gains.
In Minneapolis, Copart moved from a 10-acre site to a new 28-acre site twenty miles north of downtown Minnea-polis.
In Detroit, Copart moved from a 30-acre site to a new 77-acre site 15 miles south of the Detroit airport. Copart's original Detroit location was both a 30-acre salvage auction and a 13-acre Motors Auction Group (MAG) public auction.
"We moved the Detroit and Minneapolis facilities to accommodate our growth and meet the needs of our suppliers and buyers," said Willis J. Johnson, Copart's Chief Executive Officer. "We've made important gains in these markets thanks to our competitive products and services. In addition, at each of these sites we have developed office space and inspection sites for our suppliers. I'm also pleased that our MAG public auction in Detroit will have room to keep growing with their expanded 43-acre site."
Copart operates 88 facilities in 39 states. It also provides services in other locations through its national network of independent salvage vehicle processors.
ABRA Auto Body & Glass has acquired Mark's Auto Body in Delafield, Wisconsin, bringing the total number of ABRA Auto Body & Glass repair centers in Wisconsin to eight.
Owner Mark Lien commented, "I recognized a need for additional support in order to achieve operational and employee growth. ABRA brings a wealth of experience, technological expertise, and insurance relationships to our center that will clearly make us the leader in our geographic area. Our current and future team members will greatly benefit by being members of the ABRA team." Mr. Lien will remain with ABRA Auto Body & Glass as General Manager of this center.
"ABRA is embarking on an extensive three-year growth strategy, which includes expansion in our existing markets," stated Tim Adelmann, ABRA's Chief Operating Officer. "We consider Mark's Auto Body and its employees a tremendous step forward in our growth, and we look forward to a mutually beneficial sharing of knowledge among all parties."
ABRA now has 68 repair centers, 51 of which are corporate-owned, along with seventeen franchise locations.
M2 Collision Care Centers has launched the M2 Online University. This venue now makes computer based training available system-wide throughout M2's 31 facilities spread across California.
"We are keenly aware how important effective training is to meet the needs of our strategic insurance partners," states Jeff Weil, Chief Marketing Officer for M2 Collision Care Centers. "Whether it has to do with our insurance customers' policies and procedures, learning their values and corporate culture, CRM requirements or quality estimates and repairs, our goal is to push this information to our employees where it will directly affect our mutual customers."
The M2 Online University is a distributed learning environment that is managed via a Virtual Private Network over broadband and satellite connections to M2 facilities.
Employees are able to view a course menu and make selections from their location. All programs are custom designed interactive multimedia computer based training applications. When required, the programs are supplemented with on-site classroom facilitation.
Currently the learning library has five completed programs with seven more in the works. Programs range from collision specific training to insurance partner requirements.
Founded in 1996, M2 Automotive is a collision industry consolidator operating 31 service locations in California. M2 employs over 800 professionals and is a private company headquartered in Santa Monica, California.
Insurance Auto Auctions, Inc., a provider of automotive salvage and claims processing services in the United States, has entered into a new five-year $20 million credit facility expandable to $30 million upon syndication. This replaces a $20 million private placement that matured in February.
The new credit facility expands the company's existing relationship with its primary bank partner, LaSalle Bank N.A., which is a member of the ABN AMRO group. The facility is a one-year revolver that converts to a four-year term loan.
The company has also entered into an interest rate swap agreement covering borrowings under the new facility, which is designed to lock in a favorable five-year rate and to serve as a hedge against future rate increases.
"We are pleased to have this credit facility in place. This new facility provides us sufficient borrowing capacity over the next five years to execute our business plan," said Scott Pettit, Chief Financial Officer. "We consider the terms of the new credit facility and swap agreements to be favorable given current market conditions."
Insurance Auto Auctions, Inc., founded in 1982, currently has 62 sites across the United States.
Non-Quarterly profits fell sharply for Allstate Corp. to $264 million, or 37 cents a share. That compares with $547 million, or 74 cents a share, in the year-earlier quarter. The No. 2 U.S. car and home insurer blamed the decline on a big restructuring charge for trimming operations and also on a rise in the cost of claims. Revenues rose 2 percent, to $7.4 billion.
"We are not pleased with our financial results in what was an uneven quarter." Allstate Chief Executive Edward Liddy said in a statement.
The insurer -- second only to mutual State Farm in U.S. car and home insurance -- had its numbers crushed by $107 million in restructuring charges, as the firm chopped back on its claims operations, one of the last stages of a two and a half year overhaul at the firm. It announced the charges in January.
Allstate was also hit by higher claims and costs, including large bills for toxic mold in Texas, settling a lawsuit with policyholders in Georgia and paying into state guaranty funds after the failure of rival Reliance Insurance Co.
Looking forward, Allstate said it was raising premium rates in its troubled homeowners' line, but that would not benefit the bottom line soon.
"Many of the pricing and underwriting actions we have been taking must work through a full renewal cycle, so the improvement in our results will not begin to emerge until the latter part of 2002," Liddy said.
"We saw an encouraging 9.5 percent growth of written premium for the Allstate brand standard auto line in the quarter over the prior year fourth quarter,” continued Liddy. “We also saw some pressure on Allstate standard auto frequency during the quarter, and have already responded to the frequency trends with increased rate activity and targeted underwriting programs in specific states. In this line, we finished the year with a loss ratio of approximately 75 percent and with these actions expect to improve that ratio over the course of 2002."
Liddy forecast operating profits of $2.50 to $2.70 per share for this year, broadly in line with analysts' estimates.
Excluding realized investments and restructuring charges, Allstate reported fourth-quarter operating profits of 53 cents a share, compared with 80 cents a year before.
Allstate's shares fell about 23 percent last year, underperforming the Standard & Poor's 500 index, which fell about 13 percent.
Genuine Parts Co., a distributor of automotive replacement parts, has reported that fourth-quarter earnings dropped 76 percent as revenues slid.
The Atlanta-based company reported a net profit of $25.0 million, or 14 cents per share, including a $107.8 million pretax charge for consolidations, severance and other costs.
Excluding the charge of 37 cents per share, Genuine Parts earned 51 cents per share. The company posted a net profit of $105.3 million, or 61 cents per share, a year ago.
Revenue slid 3.5 percent to $1.95 billion from $2.02 billion a year earlier.
DuPont has reported a 75 percent drop in fourth-quarter earnings before one-time items, blaming weaker demand and prices for its chemicals and plastics.
Fourth quarter 2001 earnings excluding one-time items were $.12 per share, consistent with expectations but below fourth quarter 2000 earnings of $.47 per share. Full-year earnings per share excluding one-time items were $1.19 in 2001 versus $2.73 for the year 2000.
Fourth quarter after-tax earnings were reduced by about $370 million due to lower volumes and selling prices, partly offset by an estimated $120 million after-tax benefit from lower energy and related raw material costs.
"In 2001, we restructured to meet current and future challenges; we focused capital and research expenditures on growth; and we sold the Pharmaceuticals and selected Polyester businesses. These actions helped us come out of a difficult year with exceptional financial strength," said Charles O. Holliday, Jr., DuPont chairman and chief executive officer. "Clearly more remains to be done for us to deliver competitively superior earnings performance - which we will do."
For the quarter, segment sales were down 12 percent.
Fourth quarter income excluding one-time items was $124 million versus $494 million in 2000. Full-year segment sales were $27.7 billion, down ten percent after adjusting for divestitures. Underlying segment after-tax operating income (ATOI) of $1,859 million was 49 percent below last year, reflecting significantly lower earnings in all segments, principally due to lower worldwide sales volume and margins.
Worldwide sales declined 17 percent and U.S. fourth quarter sales volume was down 14 percent, reflecting ongoing weakness in major U.S. industrial markets. Performance Coatings & Polymers sales were 9 percent lower reflecting 10 percent lower volume. Fourth quarter sales reflect lower vehicle builds, weaker demand from electronics and high technology industries, lower global refinish volume, and inventory reductions by ink customers.
DuPont expects 2002 underlying earnings per share to exceed those of 2001, despite continual recessionary pressures through at least the first quarter 2002. The company expects that its first quarter 2002 underlying earnings per share will be substantially above fourth quarter 2001, though below first quarter 2001, and the second half of 2002 to be stronger than the first half. Margin benefit from lower energy and raw materials prices will likely be constrained by lower selling prices through much of 2002.
The company believes that restructuring and portfolio actions taken by DuPont in should result in reduction of fixed costs, improvement in pharmaceutical segment results, fewer shares outstanding, and lower interest expense for DuPont.
"We recognize that there is more rough water ahead for manufacturers, at least through the first half of 2002," Holliday said. "But the actions we took last year position us to grow earnings per share in 2002, and we will continue to take the steps necessary to meet our longer term growth targets."
CCC Information Services has launched ClaimScope Navigator 2.0, the latest version of CCC's web-based management information and reporting tool. An enhanced user interface and the addition of total loss data into ClaimScope Navigator 2.0 offers insurers a faster, more complete look at the claims process.
Mary Jo Prigge, president of CCC U.S. sales and service, commented, "We are excited about the implementation of this new architecture and pleased to deliver an improved tool to offer insurers a snapshot into their business performance."
The software allows users access to standard reports that incorporate collision estimating information and total loss information from CCC's data warehouse and benchmarke them against the software's state and national industry data.
Sherwin-Williams financial results for the fourth quarter and year 2001 show consolidated net sales were down 1.3 percent to $1.13 billion in the fourth quarter and 2.8 percent to $5.07 billion for the year.
During the fourth quarter, cost reduction programs and moderating raw material prices helped improve margins although lower sales and production volumes still adversely impacted profits. For the year, excluding the asset impairment charge in 2000, net income declined 15 percent to $263.2 million. Net income was impacted by the shortfall in sales and production volume and, in the first half of the year, high raw material costs.
The Automotive Finishes Segment's net sales decreased 6.6 percent to $108.5 million for the fourth quarter and 5.9 percent to $464.2 million for the year. Higher collision repair sales throughout the year were not enough to offset the soft domestic economy that continues to negatively impact car and truck production, curtailing OEM sales. Operating profit of this segment improved in the fourth quarter to $12.0 million compared to $8.8 million in last year's fourth quarter. Operating profits for the year decreased to $51.2 million from $61.3 million in 2000.
Christopher M. Connor, Chairman and Chief Executive Officer said, "The improvement in operating income in the fourth quarter confirms that our cost reduction programs are working. We expect that 2002 will continue to be challenging... We anticipate that sales during the first quarter of 2002 will be flat to down slightly from last year's level and expect our annual sales results will be flat to up slightly over 2001."
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