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Letter to the Editor
This article originally appeared in the April 2002 Issue of INSIGHT
©2002 Collision Repair Industry INSIGHT All Rights Reserved
CIC Turns Attention to Used Parts
Industry Debates Variety of Issues at Collision Concepts
ICI Autocolor Is Now Nexa Autocolor
OEConnection Creates Parts Order Import Feature between CollisionLink and Mitchell's ABS System
Georgia Verdict: State Farm to Assess Future Claims for Diminished Value
ASA President Walter Trapp to Step Down
California Autobody Association Sponsors Bill to Make Insurer-Owned Repair Shops Illegal
Charles E. Bunch Named PPG's President and COO
MQVP Responds to CAPA Report: Says CAPA Missed the Point
S&P Concerned over State Farm's $5 Billion Loss in 2001
NABC Calls for PRIDE Award Nominations
Consumer Reports: Government Should Expand and Improve Crash-Testing Program
INDUSTRY UPDATE
Used or "recyclable" parts were the focus of discussion during a number of other presentations at the Collision Industry Conference (CIC) held in mid-March in Nashville, Tenn.
Chris Dameron, director of the Automotive Service Association (ASA) Collision Division, reminded CIC participants that ASA has developed a reference chart for estimators of "non-included operations when installing a recycled part." He said that while this is a useful tool, ASA would like to see a longer-term solution included in the electronic estimating systems. The association has submitted a request to the primary estimating system providers asking them "to make this non-included information more easily accessible."
"What we're suggesting is that a 'drop-down box' appear [on the computer screen] whenever a recyclable part is selected," Dameron said. "It will serve to remind the user of some of the more commonly missed procedures. Six of the major insurers have given us their written support to encourage the information providers to enhance their products with these drop-down boxes."
Nearly two hours of the CIC meeting in Nashville were devoted to a panel discussion of the "recycled parts supply chain." Some of the points raised:
- The Automotive Recyclers Association estimates that only about 30 percent of total loss vehicles are purchased for recycling; the majority is purchased for rebuilding or shipment out of the country. This drives up the return insurers receive for salvage, but also reduces the amount and quantity of quality used parts available on the market, which in turn drives up used parts prices, parts theft, and the number of vehicles being totaled.
- Inconsistency of titling laws from state to state contributes to the problem. Florida, for example, is one of the few states that declares some total loss vehicles as non-repairable, issuing a "certificate of destruction" for such vehicles; but a state of Kentucky memo to its vehicle titling employees states that a "Florida certificate of destruction can be upgraded to a Kentucky salvage title."
- Some solutions proposed by the panel - which included representatives of insurers, auto recyclers and repair shops - included creation of a business model that demonstrates to insurers why changes that may result in lower prices paid for salvage could be beneficial to them overall; an industry-accepted definition of a non-repairable vehicle; and national titling legislation that supports that definition.
Participants at CIC in Nashville looked at three Ford Taurus left front door assemblies, ordered and brought to the meeting by a Nashville shop for the CIC Parts and Airbags Committee. Jeanne Silver, co chair of the committee, said the shop was asked to order the door from three used parts suppliers that the shop regularly does business with, without revealing the parts were part of a CIC project.
To avoid anti-trust issues, the committee did not reveal repair times the parts suppliers used to describe the condition of the part, but said only that Door A was described as having "light damage," Door B was described as having "slight dings," and that Door C "shows no damage."
"Both the repairer who ordered the parts and I felt they were in different condition than as described," Silver agreed. "If you look at Door C, I would venture to say that any repairer would return that door. Yet 'shows no damage' is the exact description [the seller provided]."
CIC participant Herb Lieberman of Lakenor LKQ Auto Salvage in Santa Fe Springs, Calif., said inaccurate descriptions of parts condition is all too common a problem in his industry.
"The fact is, on Door C, the majority of the industry would quote that door to an insurance estimator as being a clean door, with the full knowledge in their mind that when they deliver that door to the repairer, they'll have to negotiate the repairs on it," Lieberman said. "They know very well that if they tell the insurance estimator or body shop estimator that they have a door that [needs] three hours worth of repair and may have been a repaint, that estimator is going to hang up the phone and call another recycler. The next recycler may not be as honorable, and he's going to say, 'Yes I have a perfect door.' Then when the repairer orders the door, and when it arrives, the repairer has a surprise."
Enlow said his committee is working on one possible solution for the problem: service level agreements in which there are cash payments or other repercussions if the parts supplier doesn't provide the service level agreed to. The committee hopes to present a draft of the service level agreement proposal when CIC meets in Salt Lake City, Utah, in July.
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Training, shop tours and open discussion of industry issues highlighted the fourth annual Collision Concepts, the Society of Collision Repair Specialists (SCRS) event held this year in Nashville, Tenn.
Organizers abandoned the trade show format tried in past years, and instead put the emphasis on attracting industry leaders to interact with one another and to participate in panel discussions that included shop owners, insurers and industry vendors.
The three days kicked off with the SCRS-sponsored National Industry Issues Forum, which is designed to give collision repairers an opportunity to discuss issues and draft "position statements" based on those discussions.
About 80 people, including shop owners and representatives of SCRS state affiliate associations, attended the event, and voiced support for four "resolutions" created during the meeting. The liveliest discussion of the event surrounded what repairers view as the inconsistent use or "recognition" of the estimating procedure pages.
"I see it as P-page theft, because all it does is deduct, when there's 50 pages of 'adds' that half our industry doesn't know are there and that our trading partners don't recognize 90 percent of," Georgia shop owner Gene Hamilton said. "If it's in the book, it's in there for a reason and it needs to be recognized. I'd like to see [insurers] stand up and say, 'We're going to recognize whatever the P-pages say rather than recognizing what I feel like recognizing.' Either use all of the estimating system or none of it. Right now, the systems only deduct, and you have to go find what you can add, and that doesn't mean when you do that it will be recognized."
"It's like trying to buy a loaded Camry at a base price, trying to establish that you have a right to buy that Camry at base price after you've added $5,000 worth of options," said Ric Pugmire of Auto Body World in Phoenix, Ariz. "The truth is those options are there. It's part of the whole cost of the car. When it says you get 12 hours to replace a quarter panel, that's base price. You can't just ignore the unstated 'adds' and look at the 12 hours and say that's it." A resulting resolution called on insurers to "present their position with regard to recognizing the procedure pages" in order that "a standard can be established throughout that company and throughout the country."
SCRS also held its annual meeting during Collision Concepts, electing its new officers and board of directors for the coming year. Joel Lofton of Barnett's Body Shop in Ridgeland, Miss., was elected chairman of SCRS, succeeding Pennsylvania shop owner Don Keenan. Farzam Afshar of California was elected vice chairman, Marco Grossi of Michigan treasurer and Gary Wano of Oklahoma secretary. Elected as "national directors" for SCRS were Ed Dahm of Oregon, Lou DiLisio of Illinois, Bob Smith of Missouri, Chad Sulkala of Massachusetts, Ed Dollar of Washington, and Tom Moreland of Georgia.
Also at Collision Concepts:
- The SCRS board of directors announced a pledge to raise $100,000 toward the National Auto Body Council (NABC)'s effort to raise $500,000 for a medical facility - to be named in honor of the collision industry - at Camp Mak-a-Dream, a Montana camp for children and young adults actively battling cancer.
- The NABC also presented its "President's Award" to Bob and Margo Smith of Storm Appraisal & Management Service in Missouri, honoring the couple for their many efforts on behalf of the NABC, including coordinating much of the NABC's project in 2000 to build a Habitat for Humanity house in Kansas City.
- A 14-member panel that included representatives of insurance companies, auto-makers, paint manufacturers, and estimating system pro-viders and others tackled a variety of questions from attendees. Not unexpectedly, insurer ownership of shops was discussed.
"Legislating investment is not a spark you want to ignite," Keith Manich of Tech-Cor said regarding the proposed California bill that would outlaw insurer ownership of shops.
ICI Autocolor, one of the global brands of the PPG refinish offering group, is beginning the process of altering its name and visual identity, in order to complete the natural separation from ICI after the acquisition that took place in 1999.
Nexa Autocolor™ is to be the new name for one of the world's leading refinish brands. The new name and visual identity is to be introduced gradually such that in two to three years time, the changeover will be complete.
Gianni Cossar, International Brand Development Manager, said, "The new identity will reflect a brand that meets the needs of our global customers. World-class products such as 2K, management tools such as Shopwatch Paint Management, and excellent services will continue to be the very essence of the brand. In a fast- changing industry, it is important that the new identity is recognized as being the brand our customers have loved for years, whilst also clearly looking to the future."
The name Nexa Autocolor has been chosen to combine the internationally recognized Autocolor brand name with Nexa, reflecting the brand's commitment to innovation and next-generation solutions.
Bill Shaw, North American Marketing Manager, said, "For our customers this change in identity means no change; Nexa Autocolor will continue to develop products and services that seek to improve customer profitability. The Autocolor brand has already established a strong platform. I now look forward to Nexa Autocolor growing our business further, based on giving customers what they want - excellent, innovative products that drive repair processes."
Jim Latch, General Manager for PPG Refinish North America, said, "The new identity is important to help us look to the future for Autocolor and show PPG's commitment to all customers of the brand. We recognize that there will be those who are sad to see the familiar ICI roundel disappearing. However, we are confident that our investment in Nexa Autocolor will develop further the brand's reputation and deliver even greater benefits to our customers."
Thomas C. McGee, Jr. was named I-CAR's Executive Vice President and CEO during its Annual Planning Meeting recently held in Santa Barbara, California.
Prior to this promotion, McGee held the position of Technical Director for the I-CAR Tech Centre. Based in Appleton, Wisconsin, the Tech Centre is responsible for developing all of I-CAR's technical training programs and services.
Joining I-CAR as a Technical Writer in 1990, McGee has steadily advanced to positions of Technical Supervisor, Tech Centre Manager and his current position as Technical Director.
Prior to joining I-CAR, McGee was training manager for an automotive education center, an auto collision repair instructor, and a collision repair technician, all in or around the Detroit, Michigan area. He began his association with I-CAR as a volunteer, moving into instructing I-CAR courses in the Detroit area.
"Tom's extensive background in automotive technical education, his dedication to I-CAR and to the collision industry, and the respect he commands from the industry and staff are great assets to our organization," said Roger Foss, Chairman of the I-CAR International Board of Directors. "His work in developing Enhanced Delivery, I-CAR's CD-ROM based training programs, has ignited a resurgence in training that clearly is meeting the needs of today's collision industry. We are excited to have him take the helm."
McGee will succeed Tom Mack, I-CAR's Executive Vice President and CEO since 1996.
Foss said, "Mack's legacy will be the financial, organizational and technological strength he has created within I-CAR. We're grateful for his support, insight and direction, and wish him well in his future endeavors."
OEConnection, LLC, the venture created by Daimler Chrysler, Ford Motor Company, General Motors and Bell & Howell, has announced that it will create an import feature between CollisionLinkSM, its online collision parts application, and Mitchell's ABS™ Body Shop Management System, making parts ordering for CollisionLink customers who use the Mitchell ABS system quicker, easier, and more accurate.
CollisionLink's import feature will take advantage of new functionality available in Mitchell's recently released ABS Version 7.1.
Users will generate parts orders in ABS, just as they did in previous versions, but will be able to use a new ABS feature enabling them to create an electronic export file of the parts order. CollisionLink will be able to import the ABS exported parts order and allow the user to send that order to their parts supplying OE dealership, streamlining the parts ordering process by eliminating multiple estimating system extracts.
This functionality will be included in OEConnection's upcoming version of Collision Link, to be available soon.
CollisionLink verifies collision parts information for accuracy and completeness, aiming to enable dealerships to respond more quickly and comprehensively in providing parts for collision repairs.
OEConnection also recently announced its D2DLink product - an online parts locator for dealer-to-dealer parts transactions.
ClaimCoach, www.claimcoach.com, an online automotive insurance claims service, provided expert testimony in a Georgia suit compelling State Farm Insurance to pay on a vehicle's loss in value after an accident regardless of the quality of repair, diminished value, in automotive insurance claims. This precedent setting lawsuit may force insurance companies to pay on the diminished value of a car after an accident.
Following the verdict, State Farm, the nation's largest insurer, agreed to assess all future claims for diminished value and to pay $100 million covering first party claims dating back to December 1993. They project to pay another $100 million over the next six years beginning on December 1, 2001.
"Insurers have always quietly acknowledged the existence of diminished value, but now they will have to assess it on all claims,'' said Bill Geen, President of ClaimCoach. "This case now forms the basis for dozens of other cases and should set a precedent for recognizing diminished value nationally."
The ClaimCoach system, now one of the three methods approved by Georgia's Superior Court, has been used by insurers for years and is now available to consumers involved in the claims process. The company believes it to be the most comprehensive method available to calculate diminished value.
"On our site, consumers can use their repair estimate to create a free report that shows a range of diminished value for their car," commented Geen. "Then, if they feel that they are being under compensated in their settlement, they can purchase our detailed report ($59) to present to their insurance company for consideration."
According to Geen, Claim Coach reports help 75 to 80 percent of their customers to realize an average of $1,200 more on their car insurance settlement.
According to a ClaimCoach press release, Allstate Insurance Company also expects to pay $59 million for past Georgia claims and Progressive Insurance will pay approximately $20 million.
Other suits are pending in Georgia while similar class action suits have been filed in dozens of states nationally.
Walter Trapp, president and chief staff executive of the Automotive Service Association (ASA), has announced he has decided not to seek a renewal of his contract when it expires Dec. 31, 2002.
"Walter has provided, and continues to provide, excellent leadership to ASA. He is highly intelligent and a respected, effective administrator," said ASA Chairman Jim Keller. "Walter's legacy will be the financial strength of the association. ASA members can appreciate his integrity, his diligence and his stewardship."
Trapp came to ASA in 1994 as its executive vice president and general counsel. In January 1999, he ascended to the position of president and chief staff executive. Prior to his coming to ASA, Trapp was vice president and treasurer of Mary Kay Cosmetics.
"Working with ASA and, especially, getting to know its members is a rewarding experience," Trapp said. "ASA members truly represent the best of the best. It's an honor to work with and for entrepreneurs who care about this industry and who elevate its image by providing great service one customer at a time, every single day.
"There comes a time, though, when it's right to make a change. For me, that time is approaching. ASA is financially strong and it has great leadership on the board," Trapp said. "I wanted to make this decision early in the year to allow the board sufficient time to name a successor so a smooth transition can be implemented."
To identify potential successors, the ASA board has retained Chicago-based Tuft and Associates Inc., a firm specializing in association executive searches.
"ASA is a national association and this will be a national search," Keller said. "The automotive aftermarket is advancing rapidly. There are a host of opportunities ASA is developing with automobile manufacturers, through legislation and elsewhere. Our members and this industry deserve the best. This is true anytime, but even more so today.
"Our members and the industry at large can be certain the board of directors is committed to finding that person whom we know will lead ASA through the years ahead; years which hold great challenges and even greater promises for our industry," Keller said.
Senator Jackie Speier has introduced SB 1648 at the request of the California Autobody Association.
SB 1648 would make it unlawful for an insurer to acquire an ownership interest in an auto body repair shop in the state of California.
The bill would allow the insurer that has a current interest in a shop to divest itself within three years of the effective date. The bill would also make it unlawful for an insurer to offer an incentive or provide compensation to any person for the purpose of rewarding that person for referring an insured to an auto body shop that the insurer maintains an ownership interest in.
The recent purchases by Allstate Insurance in the Sterling collision facilities and the Auto Club of California in the Caliber Collision Repair Centers was one of the primary reasons that Senator Speier and the CAA took such action.
"The CAA recently surveyed its member shops and it was overwhelming that they felt this was a conflict of interest for insurance companies to own auto body repair shops," stated Executive Director David McClune. "Everyone we discuss this issue with, consumers, manufacturers, suppliers, say the same thing: 'Shouldn't that be illegal? It's similar to having insurance companies owning the doctors in the medical profession.' CAA believes that insurance ownership in repair shops is clearly not in the best interests of consumers."
The California Autobody Association is a not-for-profit organization comprised of approximately 800 collision repair businesses and associated professionals belonging to the collision repair industry.
PPG Industries has announced that Frank A. Archinaco, executive vice president, will retire July 1 and Charles E. (Chuck) Bunch, executive vice president, has been elected president and chief operating officer, effective the same day.
"Throughout his 37 years with PPG, Frank has represented the company with great distinction," said Raymond W. LeBoeuf, PPG chairman and chief executive officer. "...Quite simply, Frank's impact on us and our company will continue long after his last day on the job. I appreciate the opportunity to announce Frank's decision now so we can manage the transition effectively."
LeBoeuf said he is looking forward to working with Bunch in the new role he will assume at midyear.
"Chuck is well-suited for his new position having served in a variety of key operating and staff roles in the United States and Europe throughout his 23 years with PPG," LeBoeuf said. "He has experience in our glass, fiber glass and coatings businesses, and has been a key player in our efforts to build a better mix of businesses. At the strategic business unit and executive levels, he has demonstrated leadership in the implementation of business strategies with an ongoing commitment to improving our overall performance."
Archinaco joined PPG's former glass contract and supply department in 1965 as a management trainee. He became director of marketing and development for automotive and aircraft glass in 1979, general manager of auto replacement glass products in 1981, and general manager of European glass operations in 1984.
Archinaco returned to Pittsburgh as vice president of automotive original equipment glass products in 1986. He was named vice president of automotive and aircraft glass in 1991; vice president, glass, in 1994; and senior vice president, glass, in 1995. Archinaco was elected corporate executive vice president in 1997.
Bunch joined PPG in 1979 as an assistant to the corporate controller, and then held a series of accounting and financial analyst positions before being named manager of European flat glass and commercial products in 1985. The following year he became managing director of PPG's Italian glass subsidiary.
Bunch returned to Pittsburgh in 1987 as corporate director of distribution and then assumed additional responsibility for purchasing. He was named general manager of architectural coatings in 1992, vice president of that unit in 1994, and vice president, fiber glass, in 1995. Bunch was elected senior vice president of strategic planning and corporate services in 1997 and to his current post in early 2000.
MQVP has responded to CAPA's recently released comparative study. The following is from MQVP’s press release:
A recent report by Jack Gillis compares CAPA to the Manufacturers' Qualification and Validation Program (MQVP). However, nowhere in this 9-page report is the core issue ever identified.
MQVP requires manufacturers to follow the "science of quality" required of all OEM suppliers. Conversely, CAPA requires manufacturers to meet a customized standard written by CAPA. The applicability of these standards is the core issue in the comparison of these programs.
The only quality standard defensible in today's marketplace is that embraced by the OEMs. Any other standard (such as CAPA) is, by definition, a "customized" standard. In fact, Mr. Gillis has repeatedly stated that CAPA's standards are "not like OEM". When a manufacturer begins with a standard that is "not like OEM", the finished product will be "not like OEM".
Insurance companies, distributors and manufacturers will struggle to defend CAPA parts as having the same quality as OEM when challenged in the next class action lawsuit. Use of parts, certified by CAPA to be "not like OEM", can only accumulate liabilities for those parties involved.
MQVP endorses only OEM quality standards and requires the manufacturer to demonstrate, document and warrant its achievement.
No organization can write a single standard to address the engineering issues of the twelve major car companies. The quality requirements for a Ford Escort fender have little to do with a Honda or Chrysler fender. In addition, OEM standards change with every new model, revision or engineering change. This is precisely why MQVP does not write quality standards and endorses only the OEM's standard of quality.
In the world of OE supply it is widely known that quality cannot be inspected into a product. That is why QS-9000, TS 16949 and other quality system standards are critical to OE supply chain management. It is also why MQVP requires design responsible QS-9000 registration, Statistical Process Control and Advanced Product Quality Planning as well as part inspections and vehicle test fits.
During a recent presentation of this report at the Hershey, Pennsylvania ABPA convention, prominent members of the Association publicly warned Mr. Gillis of inaccuracies in the report. Regardless, he continues to repeat himself, such as:
- The report inaccurately claims MQVP approved parts include fenders and hoods that have been "decertified" by CAPA. These part categories are not today, and have never been, approved by MQVP.
- The report inaccurately claims MQVP is involved in pricing, marketing and distributing MQVP parts. MQVP is not involved in these practices and has no influence on the selling price of parts among the manufacturer, distributor or body shop.
- The report issued by Mr. Gillis comparing MQVP and CAPA completely missed the most fundamental point of comparison: MQVP embraces OEM standards while CAPA writes their own customized standards. The most profound statement in this CAPA report is that "its accuracy with regard to the MQVP program cannot be guaranteed."
(Editor’s note: To be continued...I suspect we’ll be hearing more debate and rebuttal from both CAPA and MQVP.)
Standard & Poor's indicated that State Farm Property/ Casualty Insurance Group's $5 billion after-tax net loss in 2001, including $9.3 billion of property/casualty underwriting losses, would not affect the ratings on the company at this time, but it does heighten concern about the long-term financial strength ratings accorded members of the group.
Nevertheless, State Farm's overall net loss, while very large even for a group of this size, was within the upper range of Standard & Poor's expectations for the company's operating results.
State Farm's auto business represents about 70 percent of the property-casualty business written by the group. Earned premiums were $25.6 billion, an increase of seven percent from 2000. The incurred claims and loss expenses were $25.3 billion. The underwriting loss was $5.6 billion.
Nominations for the NABC 2002 PRIDE Award, to recognize businesses, individuals, and groups, employed in some aspect of the collision repair industry, who distinguish themselves and the industry by performing humanitarian and/ or service deeds outside of their normal job responsibilities are requested by the National Auto Body Council.
The 2002 National PRIDE Award winners will be formally recognized at NACE 2002 in Dallas.
"Following a year of tragedy and uncertainty it is an honor to recognize those great people from our industry that take time from their families and businesses to help many deserving causes said Stacy Bartnik of Carter & Carter International, Chairman of the PRIDE awards committee.
Obtain nomination forms at the NABC website, or by calling 888-667-7433.
Consumer Reports, published by Consumers Union, an independent, non-profit organization for consumers, says that, while clearly crash tests conducted by the National Highway Traffic Safety Administration (NHTSA) and the Insurance Institute for Highway Safety (IIHS) have had a dramatic impact on improving vehicle safety, it is time for the government to set new safety benchmarks and expand its crash-testing program.
A CR analysis also found that not all vehicles earn comparable scores in both IIHS and government tests. In fact, 13 cars, trucks, and minivans that have current ratings of four or five stars in NHTSA's full-frontal tests received a Poor rating in the IIHS offset frontal test. Safety experts agree that both types of frontal test are critical.
But, with two separate entities conducting the tests, manufacturers are able to tout a positive rating without mentioning a negative one in their ads. Consumers Union (CU), the non-profit publisher of Consumer Reports, strongly believes that the government should conduct both test programs, placing all such safety testing under one federal agency and all the results in one place.
"There's no question that the National Highway Traffic Safety Administration's crash-testing program has led to safer cars on the road," says R. David Pittle, Senior Vice-President for Technical Policy at Consumers Union. "In 1985, just 30 percent of the 94 vehicles rated received high frontal-crash scores. In 2001, that number jumped dramatically - 90 percent of the 138 new vehicles rated were awarded four or five stars, the top ratings. Clearly, NHTSA's making these test results public has produced a strong incentive for automakers to improve how well their vehicles protect in a crash. But the limitations we've found with current crash tests indicate that it's time for the government to set new safety benchmarks. By improving and expanding its crash-testing program, NHTSA will provide consumers with the critical safety information they need to make more informed choices."
Currently, NHTSA performs side-impact and full-frontal crash tests and makes the test results available free to the public through its New Car Assessment Program (NCAP). The results are reported using a five-star rating system with five stars being the best.
The IIHS, an organization supported by the insurance industry, performs an offset-frontal crash test at 40 mph. The IIHS rating scale is Good, Acceptable, Marginal, and Poor.
Consumers Union believes that an improved, more comprehensive NHTSA New Car Assessment Program should be developed and implemented by:
- Conducting offset crashes similar to those used in the IIHS tests. The government should take on the long-term responsibility of consistently providing broad safety and crash-protection information to consumers on all vehicles available for purchase.
- Being more inclusive by adding more injury data, including neck-injury results. Also, use crash dummies like those required in automakers' compliance crash tests.
- Incorporating actual rollover testing (already mandated to do by November 1, 2002).
- Addressing crash protection in rear impacts.
- Having the money to expand testing. NHTSA's crash-test budget of $4 million equates to just 25 cents for each vehicle sold in the U.S. annually.
- Raising testing speed back to 30 mph for automakers’ crash-tests with unbelted dummies from the new lower 25 mph speed required in NHTSA recently overhauled minimum performance standards that cars must meet before they hit the market, starting next year for 2004 models.
The April Auto Issue article titled "Crash Course" will be available free on the Consumer Reports website and includes a sidebar on seatbelts, their latest technology, and current legislation to increase usage.
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