August 2002 INSIGHT Industry Update

Farmers Insurance Exchange and Truck Insurance Exchange has served summons and complaints upon a Contra Costa County body shop and its owners, accusing them of taking part in a large scale scheme designed to defraud the companies' policyholders.

Using a statute that the California Legislature passed specifically to help combat insurance fraud, Farmers' effort represents a continuation of its efforts to combat fraud.

The suit details how the shop allegedly billed Farmers for services that were never rendered, inflated repair costs and submitted phony repair invoices.

"We are determined to take the profit out of fraud. It is unfair for honest individuals to pay for the actions of a few dishonest people. Farmers is committed to fighting fraud and controlling the cost of insurance for our customers," said Doug Ashbridge, Director of Special Investigations at Farmers.

The Contra Costa County action seeks over one million dollars based upon an investigation that began in April of 2002. The investigation revealed that the shop inflated invoices up to three times the actual services rendered and billed for services never provided.

The suit served is similar to other successful cases pursued by Farmers against body shops and are part of Farmers' nationwide commitment to protect its customers from added expense directly linked to insurance fraud.

Farmers is represented by Dennis B. Kass of Manning & Marder, Kass, Ellrod, Ramirez, LLP.

Farmers Insurance Group of Companies includes the nation's third-largest group of home and auto insurers.

ADP Claims Services Names Stephen E. Applebaum Vice President, Claims Gateway

Stephen E. Applebaum has joined the ADP Claims Services Group in the newly created position of Vice President, Claims Gateway, to oversee the successful development and implementation of ADP's web-based claims management system.

"Stephen has joined ADP during a pivotal time in our industry's history," said Peter Op de Beeck, president of the Claims Services Group. "In this position he will bring to the industry a truly open, modular, and accessible solution that could provide several billion dollars in annual savings to the automotive claims business," continued Op de Beeck. "This important addition to our corporate team clearly conveys ADP's solid commitment to building a total online claims management solution."

Applebaum brings to ADP extensive experience in claims products and services, including his most recent work as Senior Vice President of Business Development with CCC Information Services Inc. in Chicago.

At CCC, Applebaum was responsible for the creation, development and market introduction of numerous new claims products and services.

Prior to relocating to the company's headquarters in Chicago, Applebaum was a founder and President of CCC of Canada Ltd., based in Toronto, where he led the company's successful entry into the Canadian marketplace.

Applebaum has a 25-year track record of leading new business initiatives in a variety of industries, including extensive automotive claims management experience. He has also held management positions in venture capital, magazine publishing, entertainment, multi-level and direct marketing and automotive parts manufacturing and distribution.

CAPA Says GM Reports Fail to Establish Real Differences between OEM and CAPA Parts

In response to a request from the National Conference of Insurance Legislators (NCOIL), CAPA has prepared a detailed report refuting allegations made in two reports General Motors presented to NCOIL dated November 2001 and February 2002.

Following is CAPA's statement:

In their November 2001 presentation to NCOIL, GM outlined alleged problems with two CAPA parts. When asked for detailed information, GM could not confirm to CAPA or NCOIL that the parts tested were, in fact, CAPA certified.

Regarding GM's February 2002 report on ten CAPA parts, GM failed to establish any significant differences between their parts and CAPA parts. In a detailed evaluation of the report for NCOIL representatives, CAPA uncovered several problems with GM's report, including:

The report implies that all of GM's 1999-2001 Grand Am parts are made the same way. That is not true. Review of data from independently tested GM Grand Am parts shows the following:
- 71 percent variation in the number of welds among Grand Am parts
- 129 percent variation in minimum weld size among Grand Am parts and even on the same part
The report implies that the CAPA parts are inferior be-cause they did not match the specific GM parts or specifications referenced in their report, yet an analysis of Pontiac Grand Am hoods in the market found:
- 55 percent variation in number of adhesive patches on Grand Am parts
- 105 percent variation in total surface area covered by adhesive on Grand Am parts

Absent from GM's report was any indication if the GM parts, in fact, met their own standards. Because CAPA regularly tests car company parts, significant data on GM parts has been accumulated in the normal course of certification.

Overall, 65 percent of 467 GM parts vehicle test fit failed to meet CAPA's fit and appearance requirements.

At the recent NCOIL meeting in Boston, CAPA displayed a variety of problem parts, including GM's Grand Am hood with fewer welds than GM reported were necessary for the hood.

"Due to the implementation of our Vehicle Test Fit process, in which parts submitted for CAPA certification are actually mounted on vehicles and then compared to both the car company original part and service part, CAPA has several years of part data available," said Jack Gillis, Executive Director.

"This data shows that there are significant problems with car company brand parts. More importantly, however, because of CAPA standards, CAPA parts are equivalent to or better than their car company counterparts. We were surprised that GM chose to release such a report to the nation's state legislators," said Gillis.

CAPA Decertifies Tacoma Hood; Recommends Recall

CAPA recently completed its investigation of JLH-13900, a hood for the 1995-2001 Toyota Tacoma produced by Jui Li. CAPA's investigation was prompted by a report that a replacement hood on a 1997 Toyota Tacoma pickup flew up during a test drive by a repair technician.

Nine business days after receiving notice, CAPA decertified the Jui Li part pending completion of its full investigation and notified the National Highway Traffic Safety Admin-istration of the potential defect. CAPA has completed its investigation, verified a nonconformance in the Jui Li part and the decertification of JLH-13900 stands. The part must pass a complete dimensional inspection and vehicle test fit before returning to the program.

As a result of this complaint investigation, CAPA has updated the hood checking fixture requirements to increase measurement checks of secondary latches in multiple directions. In addition, CAPA has reinspected all hoods with primary and secondary striker configurations in factory inventories.

CAPA will check those not currently in inventory upon completion of the next production run and is in the process of reinspecting all hoods.

"CAPA, like all standard setting organizations and product certifiers, is continually improving its standards and program requirements and this investigation enabled us to yet further improve our process. Anything less than continued improvement would simply not be in keeping with CAPA's philosophy," said Jack Gillis, Executive Director.

"By implementing these changes and increasing its product oversight, CAPA is demonstrating the importance of an independent, third party standard setting organization in the market," said CAPA's Board President, Bob Anderson, of Anderson's Automotive.

Tim Dawe Named DuPont Industry Relations Manager

Tim Dawe, a veteran of 24 years with DuPont Automotive Finishes, has been named industry relations manager for DuPont Performance Coatings.

In his new position, Dawe will be responsible for developing DPC relationships with insurance companies, collision industry associations, and automotive original equipment manufacturers.

For the past four years, he has been manager of the Chicago sales district. Prior to that he was manager of the New Jersey/New York sales district for six years. Dawe joined DuPont Automotive Finishes in 1978 and served as a sales representative in New York City, Detroit, Norfolk/Virginia Beach, Virginia, and Chicago.

He will relocate to DPC headquarters in Wilmington, Delaware.

CIECA Appoints Fred Iantorno New Executive Director

The CIECA Executive Committee has announced that Executive Director Roger Cadaret will be leaving the end of July, 2002, and be succeeded by Fred Iantorno.

Mr. Cadaret was retained as consultant to the founders of CIECA in 1993, and has been under contract to serve as Executive Director since the founding. Earlier this year Mr. Cadaret advised CIECA that he would not seek a new contract when his current term expired.

When asked of his plans, Mr. Cadaret said, "Well, it has been a long time, nearly ten years, and I have decided it is time for a change. CIECA has grown and become a significant influence in the collision industry, and even though there is a lot to be pleased with, and still a lot to do, I am ready to do something different. I plan to do more varied things in the field of electronic commerce consulting, and hopefully some of that will be in the collision repair industry."

Iantorno brings a wealth of knowledge to CIECA as he has been involved with standards setting organizations since early 1988. In addition to being one of the founding members of CIECA, Fred's accomplishments include; founding member of the Property & Casualty Insurance group which establishes EDI standards under ANSI (American National Standards Institute), two terms as the Vice Chair of X12N Insurance Subcommittee, a member of the DISA (Data Interchange Standards Association) Board of Directors for eight years and numerous other industry-related organizations.

Upon accepting the position of Executive Director, Fred Iantorno commented, "Over the past eight years, CIECA has compiled a long list of accomplishments that its members should be very proud of. The current business environment presents a new set of challenges to the industry and to CIECA and its members. I look forward to leading CIECA to meet these challenges and to the next level of accomplishment."

CIECA assists all segments of the Collision Repair Industry in the effective use of electronic commerce and the National Information Superhighway.

CIECA's membership comprise all segments of collision repair: insurers, body and glass repair facilities, parts & materials suppliers, information and software providers, and related general services.

CIECA has developed processes for identifying and prioritizing industry issues, establishing Action Teams to design solutions, and then working these solutions through the broadest base of acceptance mechanisms possible, such as ANSI.

PPG and Penn College Form Educational Industry Partnership

The Pennsylvania College of Technology (Penn College) and PPG Industries have joined together to form a partnership designed to benefit the refinish industry.

Penn College is a special mission affiliate to Pennsylvania State University, committed to applied technology education. Penn College, located in Williamsport, Pennsyl-vania, is a fully accredited member of the Middle States Association of Colleges and Secondary Schools. The school offers numerous associate degrees in such areas as construction, transportation, health, business and design as well as collision repair.

This joint educational endeavor is the first of its kind for the Automotive Refinish Training Department of PPG Industries. Their joint mission statement is:

"The Pennsylvania College of Technology and PPG Industries Consortium seeks to provide premier educational opportunities for a global workforce. The educational experience will be accomplished through quality, excellence and value, while focusing on continuous improvement and assessment. The consortium recognizes and supports a diverse workforce, environmental stewardship and the need for lifelong learning."

The first joint venture between PPG and Penn College involves the PennSTAR training program. The Pennsylvania Department of Environmental Protection (DEP) requires spray paint guns, gun cleaning systems and refinishing materials in a business to meet clean air regulations. Shops must adhere to Mobile Equipment Repair and Refinishing (MERR) regulations. Every MERR shop is required to provide training for all employees in the proper use and handling of coatings and solvents.

Penn College and PPG will work together to provide training to cover MERR law standards, spray techniques, material and waste management, proper cleaning of equipment, air quality regulations and record keeping. As a result, shops will save on material cost, reduce waste and comply with MERR regulations.

Training will be conducted at select PPG Business Development Centers using PPG instructors in addition to the Penn College mobile training unit, which is equipped with everything needed to train technicians at a shop location.

Future plans for the partnership include developing a curriculum utilizing PPG training facilities and instructors that will allow students to obtain an associates degree from Penn College.

CARSTAR and Mitchell Sign Collision Repair Product Use Agreement

CARSTAR, the large national collision repair network, and Mitchell International have announced the signing of a multi-year premier business partner agreement, making Mitchell's body shop management solutions the preferred choice for the CARSTAR network.

"Mitchell's products offer a feature set unparalleled in the industry," said George Hansen, CEO of CARSTAR. "No other provider can offer the functionality, real-world usefulness and breadth of Mitchell's solutions. We entered into this agreement because we believe our network members will gain a competitive advantage by using Mitchell's solutions."

Under the agreement, CARSTAR will use Mitchell's ABS Body Shop Management system exclusively in all its corporate stores. ABS also be-comes the preferred system for CARSTAR's U.S. network of nearly 200 body shops.

Additional Mitchell solutions selected for CARSTAR are: UltraMate, the electronic estimating system; ImageMate, an imaging system for storing and sending repair estimates and photos; PartsPoint, a quick reference tool for accessing electronic parts and labor information; Collision Repair Series, an extensive application providing vehicle dimensions, air bag information, wiring diagrams, etc.; and Mitchell's Collision Estimating Guides, containing up-to-date information on parts prices, labor times and more.

Michael Noirot, Mitchell's Director of Business Development and National Accounts, said Mitchell is very pleased to enter into this agreement with CARSTAR. "We have great respect for the CARSTAR organization and view their selection of Mitchell's products as a testament to their quality, dependability and innovation. We work hard to ensure our products meet the highest standards and are pleased that CARSTAR regards them as the best on the market."

In particular, Hansen praised ABS as the most advanced and innovative body shop management system in the industry today. "ABS will enable our network members to save time and money through its proven reliability and broad functionality."

Hansen added that the partnership agreement formalizes a long-standing relationship between Mitchell and CARSTAR. "Many of our facilities already use Mitchell products because we have always regarded them as the highest quality," he said.

With over 300 locations across the United States and Canada, the CARSTAR managed repair network generates annual repair revenue in excess of $375 million.

Delaware Assembly Honors DuPont’s 200th Anniversary

The Delaware General Assembly recently passed a resolution honoring DuPont for its accomplishments throughout the company's 200-year history.

The resolution cited DuPont's long history of research, which has resulted in "many innovative and useful products" that "have made the lives of people around the world happier, more productive, more comfortable and more secure." It also noted DuPont's core values: safety, health and the environment, ethical conduct, and respect for people.

Founded on the banks of the Brandywine River in 1802, DuPont's headquarters is in Wilmington, Delaware. The company also maintains eight manufacturing and business sites in the Diamond State.

DuPont Performance Coatings, which includes the DuPont Finishes, Standox, Spies Hecker, and Nason brands, traces its history to 1924 and the introduction of Duco nitrocellulose lacquer, the first sprayable automotive finish. Today, it is a leading supplier to the automotive finishes industry worldwide.

AAIA and Car Care Council Join Forces for Consumer Education

The Car Care Council and the Automotive Aftermarket Industry Association have joined forces to present a unified aftermarket industry voice to the consumer.

The role of educating consumers about the benefits of vehicle maintenance and repair will be that of the new "Be Car Care Aware" campaign. Spear-headed by AAIA, the campaign will be presented to consumers under the Car Care Council brand.

The AAIA-CCC partnership will build on the more than 30-year heritage of the Council and its credibility among consumer media and recognition among the motoring public and the industry. The Council will cease as a separate entity.

Over the past year, AAIA, in conjunction with a coalition of major aftermarket companies and organizations, has created an integrated marketing and public relations campaign to educate consumers under the campaign theme, "Be Car Care Aware." The campaign will focus on three key message areas: safety, dependability and pride of ownership.

An official campaign launch will occur in the Fall 2002; a number of activities and tactics are already underway. The campaign is being operated within AAIA's non-profit Foundation for Aftermarket Research (FAIR).

"Many of the companies who so generously supported the Car Care Council over the years are today participating in the 'Be Car Care Aware' campaign," said Alfred L. Gaspar, AAIA president and CEO. "With the credibility and recognition of the Car Care Council working as the brand and source of information delivered to the consumer, the exciting new industry campaign will hit the ground running."

Copart Acquires Mason-Dixon Auto Auction

Copart, Inc. has acquired Mason-Dixon Auto Auction of Greencastle, PA. With the addition of this 75-acre facility Copart now has four MAG (Motors Auction Group) sites.

"Mason-Dixon is one of the largest public automobile auctions in the country," said Willis J. Johnson, Copart's Chief Executive Officer. "They sell over $34 million in vehicles annually and draw thousands of buyers from all over the Northeast... This new MAG site is the largest public auction that Copart owns in terms of physical size and units sold. In fact, with the addition of the Mason-Dixon location, we will more than double our annual MAG volume."

Since August 2001, Copart has added ten locations including two MAG sites. Copart now operates 94 facilities in 40 states and provides services in other locations through its national network of independent salvage vehicle processors.

Sterling Opens Two Texas Facilities

Allstate-owned Sterling Collision Centers has opened two newly constructed stores in Irving and Grand Prairie, Texas. These are the first Sterling locations in the Dallas/Fort Worth market.

"We're thrilled to be entering the Dallas/Fort Worth business community and stand ready to provide state-of-the-art collision repair service to car owners in the entire Metroplex," said Jon McNeill, Sterling's Chief Executive Officer.

The Irving and Grand Prairie locations are both examples of Sterling's prototype stores.

"We are very excited to launch these first two stores - we'll be adding more throughout the next year. We understand that getting into an accident is a traumatic event, so our goal is to make the repair process easy," says Sharon Mazanec, Regional Director of the Dallas market. "Getting your car repaired should not be a stressful event. We will pick up the damaged car, arrange for a rental car, handle all of the claims paperwork and then can even deliver the car when it's fixed."

Sterling owns and operates automobile collision repair facilities in Florida, Georgia, Illinois, Michigan, Ohio, Pennsylvania and Texas.

(Editor's note: Allstate's Sterling is heading into Caliber territory. Things are getting really interesting.)

CIC Tackles Diminished Value and Non-OEM Parts Certification Programs

Two topics INSIGHT recently covered in-depth were among the focus of discussion at the Collision Industry Conference (CIC) in Salt Lake City in mid-July.

The battle between rival non-OEM parts certification organizations (see "Standard vs. Standard" in INSIGHT's May issue) was highlighted as representatives of the Certified Automotive Parts Association (CAPA) and the Manufacturer's Qualification and Validation Program (MQVP) offered their views on their particular program's strengths.

Representatives of several automakers at the meeting complained that CAPA and MQVP were given an hour to 'advertise' their programs, but CIC chairman Lou DiLisio said the goal was to help clear up confusion within the industry about the competing non-OEM parts certification programs.

CAPA's Jack Gillis used much of his time not just to find fault with MQVP, but to take aim at his organization's latest target: OEM parts. He issued a report on a CAPA study that found that about half of the more than 1,900 OEM parts CAPA studied did not meet its standards for fit, finish and appearance.

In answering questions from CIC participants after explaining the MQVP process, Jim Bender of Global Validators said that about 2,600 of the 3,000 parts currently in its program didn't go through the complete MQVP process, but were selected as a core group of products with which to launch the program.

"We did not per se vehicle test fit the parts, but we did go back and review a two-year quality history for each and every part," said Bender. "Anything that showed any type of return rate at all was rejected."

About 31 of those parts are now going through the "full process as MQVP designed it" because of complaints, and another 100 complaints are under review, Bender said. Although only three insurers (Nationwide, Allied, and Grange) are using MQVP, another five "are in the queue," according to Bender, who declined to identify those five insurers.

CIC also took on the controversial issue of diminished value (see "Diminished Value: Heating up or going away?" in INSIGHT's February issue). During the first of two panel discussions on the issue during the meeting, attorney Bob Hurns of the National Association of Independent Insurers (NAII) offered his view that the answer to DV lies in state law: If a state allows DV to exist, it exists. In states where laws do not allow for DV, it does not exist.

Another attorney, Erica Eversman of the Ohio-based Vehicle Information Services, countered that state law can't dictate consumer perception; unless or until consumers are convinced that a vehicle that has been repaired well is not worth less than one that has never been repaired, she said, diminished value exists. She pointed out that insurers often take previous claims on a vehicle into account when establishing its value to determine whether damage from a subsequent accident will "total" the vehicle.

Meanwhile, the CIC Operations Committee is seeking input as it works toward ways of bringing more standardization to the administrative processes shops face when participating in multiple direct repair programs. The committee is asking shops to review a list of administrative processes (for a copy, call INSIGHT at (800) 860-2744), indicate those for which the variances in DRPs are the greatest and most troubling, and return the form by fax to Operations Committee Co-Chairman Charlie Baker of INSIGHT at (440) 729-0927.

CIC's next meeting will be held October 16 and 17 in Seattle, Wash.

BASF and CARSTAR Business Groups Work Together on Financials

INSIGHT attended a Cleveland-area CARSTAR focus group meeting in July, held at Highway CARSTAR Auto Center, just down the street from the (somewhat humbler) INSIGHT offices.Owner Frank Lanza proudly showed us around the beautiful and efficient facility he designed himself. Joining us on the tour were Guy Bargnes, BASF’s Automotive Refinish Director of Marketing, along with several BASF executives from Europe, including Jean-Marie Nicolas, Vice President, R-M Brand Management.

Tony Torres, BASF National Account Manager, and Ken Marshall, Manager, Coatings Information Systems, demonstrated the new VisionPlus online tool for financials information and comparison that the Cleveland CARSTAR group has been using. Both Frank and Bob Sipos, of Chardon Square CARSTAR, have found the new software user-friendly and instructive. They are enthusiastic supporters of the focus group concept. Lanza summed it up best: “It’s good to share all the right things that everybody is doing.”

OEM Benchmark Study from Planning Perspectives:Better Supplier Relationships Help Japanese Automakers Outpace Detroit’s Big Three

The annual J. D. Power study on initial quality shows consumers perceive Japanese vehicles to be superior in quality. The Harbour Report suggests better manufacturing practices in Japanese plants.

Planning Perspectives, a 27-year old firm that helps clients understand how they can build successful business-to-business marketing relations and purchasing-supplier interfaces, has added a third component for success: the Japanese also have better working relationships with their suppliers than Detroit's Big Three - and this has been true for more than a decade.

"We've seen that in every industry and company we have studied good overall performance results from better management of key processes across a company,” said Dr. John Henke, president of Birmingham, Mich.-based Planning Perspectives, Inc. "Like the proverbial three-legged stool, if top company performance is the goal, all three areas - product quality, internal efficiency, and good supplier working relationships - are essential. If one area is missing, less than optimal results will be achieved."

The company’s 2002 OEM Benchmark Survey, based on the responses of 279 Tier 1 suppliers, found that Toyota and Honda continue to set the standard for supplier-OEM working relationships. Other important findings included:

Suppliers rank Honda and Toyota as the best OEMs with whom to conduct business.
Honda and Toyota balance quality with price when working with their suppliers while the domestic OEMs stress price significantly more than quality.
Detroit's Big Three have practices that hinder the suppliers from doing their best job in meeting the OEMs' price reduction and quality improvement expectations.
Domestic OEMs go about demanding price concessions from their suppliers in a manner that shows little concern for the suppliers' economic viability or supplier working relationships, while Honda and Toyota price reduction demands are conducted in a manner that demonstrates concern for both.
Suppliers’ trust of Toyota and Honda was 50 percent above that of the domestic OEMs.
They also receive more help from Toyota and Honda to reduce their costs and improve their quality than they receive from any of the domestic OEMs.
Toyota and Honda provide greater opportunities for their suppliers to make a profit.
Three times as many suppliers reported the price reduction concession they gave to Toyota and Honda was the result of "loyalty" to a long-time customer.

Sherwin-Williams Donates Paint to GuitarMania Public Art Project

Cleveland-Based Automotive Refinishes Manufacturer Is “Covering the Earth”
From Fenders on Cars to Fender Guitars to Benefit United Way Charity

The Sherwin-Williams Company has teamed up with celebrity artists Yoko Ono, Peter Max, Keith Richards, and others to “cover the earth” in hometown Cleveland with 100 ten-foot high fiberglass Fender Stratocaster guitars during the outdoor GuitarMania public art project. Each original work of art was carefully clearcoated at the Sherwin-Williams Automotive facility in nearby Warrensville Heights, Ohio, with the painstaking finishing and assembly time and materials donated by the company.

The guitars will be sold at auction in November to benefit United Way Services, the Rock and Roll Hall of Fame, and the Make-A-Wish Foundation of Northeast Ohio.

Feedback

Have a comment about this article? Send Email to Editor, INSIGHT's Editor

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

INDUSTRY UPDATE

Cleveland-Based Automotive Refinishes Manufacturer Is “Covering the Earth” From Fenders on Cars to Fender Guitars to Benefit United Way Charity

Feedback

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

Cleveland-Based Automotive Refinishes Manufacturer Is “Covering the Earth”
From Fenders on Cars to Fender Guitars to Benefit United Way Charity