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Letter to the Editor
This article originally appeared in the February 2003 Issue of INSIGHT
©2003 Collision Repair Industry INSIGHT All Rights Reserved
CIC Gold Pin Planning Meeting Report
Keystone Automotive Acquires Advance Bumper and Body Parts
RadTech Starts Automotive Refinish Team to Promote UV Technology
PPG Profits Up Helped by Coatings Sales
Tony Aquila Named President and COO of Mitchell International
Rick Tuuri Leaves ADP Claims Services
DuPont Performance Coatings Alliance Offers Standard Operating Procedures Component
Insurance Auto Auctions Acquires Salvage Management
PPG Opens New Refinishes Training Center in LA
Caliber Files Lawsuit Against Bureau of Automotive Repair
Consumer Lease Volume Down 50% since 2000
INDUSTRY UPDATE
What are the key issues facing the collision industry in 2003?
That question was the primary topic as participants in the Collision Industry Conference (CIC) gathered in San Diego, Calif., early this year for CIC's annual planning meeting.
About 125 people - representing shops, insurers, and industry vendors from around the country - assigned such topics to CIC committees as steering of consumers to particular collision repair shops, and the increasing number of third-party claims administrators.
Overseeing his first CIC meeting since being named CIC Chairman last December, Roger Wright spent several hours of the two-day meeting gathering input from meeting attendees on what CIC had accomplished and done well in the past year or two, and what aspects of the meetings and committee work could be im-proved upon for the future.
But the bulk of the meeting was devoted to assigning topics to CIC's dozen or so committees.
The CIC Insurance Committee, for example, was assigned several topics, some rather broad, including addressing "inefficiencies in shop-insurer relationships." The committee will also look into the increasing number of total loss vehicles, and examine issues surrounding two-tiered insurance policies; 34 states, for example, allow insurers to offer a choice of a higher-priced policy that ensures the vehicle will be repaired with only OEM parts.
A new Information Technology Committee was asked to look at issues arising from the increasing number of third-party claims processors or administrators serving as the communication link between shops and insurers.
"Where you're going to end up at a shop is that you're going to have five icons on the left hand side of your screen, and every insurance company is using one of these different third-party administrators," Wright said. "Heck, the insurers might even let you use any of the estimating systems, but you still have five different processes, so it hasn't really gotten any better. There's a lot of duplicate entry. These systems don't interface with our management systems now; you have to re-key or cut and paste a lot of the information from one to the other. It's a labor intensive process."
Ron Guilliams, director of quality assurance for Fix Auto, said CIC's Write It Right Committee should continue to look at state regulations impacting shops, in particular the requirements of the California Bureau of Automotive Repair (BAR). The BAR, for example, now considers it fraudulent for a shop to charge for a parts price increase if the consumer and insurer weren't notified of the increase in advance. CIC participants from around the country agreed that CIC could help the industry in California address such issues - as well as raise awareness nationwide because so many regulations that get their start in California "migrate" to other states.
When it's unclear how CIC can address an issue but participants recognize it as one that should be reviewed, it often first gets assigned to the Industry Discussions Committee. The committee uses its time at CIC meetings for in-depth presentations or panel discussions of assigned topics. That committee will look at insurer ownership of shops, and consumer disclosure and consent issues during 2003.
Chuck Sulkala, owner of Acme Paint & Body in Jamaica Plains, Mass., asked that the CIC Fraud Awareness Committee review the implications of "direction of work" or "steering of consumers to particular shops," which Sulkala called a "critical issue facing the industry."
The Legislative Committee was asked to research licensing or bonding of collision repair shops, and the OEM Commit-tee will focus on the "repairability" of vehicles (based on design) as well as issues for shops with regard to hybrid vehicles or other new technology.
And the CIC Parts and Airbags Committee was assigned the topics of non-OEM parts certification, CSI (customer satisfaction indexing) by parts vendors, and salvaged airbags and airbag covers.
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Keystone Automotive Industries, Inc. has acquired certain assets of Advance Bumper and Body Parts of Springfield, Missouri. Advance recorded sales of approximately $1.5 million in 2002. Terms of the transaction were not disclosed.
"The acquisition complements our existing Missouri operations and will allow Keystone to expand Advance's product line by adding remanufactured wheels, recycled bumpers and body shop supplies," said Charles Hogarty, president and chief executive officer of Keystone.
He added that Keystone would consolidate Advance's operations with its existing Springfield facilities.
Keystone Automotive distributes its products in the United States through its 114 distribution facilities, of which 21 serve as regional hubs, located in 37 states, Vancouver, Canada and Tijuana, Mexico.
The RadTech Automotive Focus Group has forged a team to promote the potential of UV technology in the automotive refinish industry while expanding its visibility within this market. Raw material and equipment suppliers and coating formulators will participate.
"UV offers a high-quality, ultra-fast, environmentally friendly alternative to traditional methods," said David Diehl, of PPG Industries, and RadTech president-elect. "With the widespread use of UV for automotive, the use of this technology by the automotive refinish industry is poised for rapid growth."
The RadTech Automotive Focus Group has generated considerable momentum in the development of UV technologies for the automotive industry.
"Each car produced in the United States has some type of UV-cured component," commented Chuck Cameron, of Ciba Specialty Chemicals and one of the co-chairs of the automotive group. "We see UV as a truly enabling technology for automakers, which will allow them to do things they couldn't otherwise accomplish like the work that's been done on SMC primers to prevent defects. RadTech has been a leading force in creating more awareness of the benefits of UV in the auto industry. I think the refinish effort is perfectly timed and well suited to our overall mission."
Paul Mills, President of UVPowerhouse, will lead the group as planning begins for RadTech's next biennial conference, in 2004 in Charlotte, NC.
"It's the perfect time for us to address this issue," said Mills. "We want to capitalize on the tremendous opportunity RadTech presents to showcase new technology and to incorporate refinish topics into the Automotive Group's agenda."
After setting the goals and objectives for the group, team participants will learn the current state of the technology and support ongoing efforts to expand within the refinish market. Focus on this market will accelerate the technology and application developments, which will aid participating companies by helping them achieve their objectives within the refinish market.
The first general meeting of the Automotive Refinish Team is scheduled for the RadTech Winter Meeting, February 3-4 in Clearwater, Florida.
PPG Industries Inc. has reported a 13 percent rise in profit as higher sales offset pension costs and an asbestos settlement.
A three percent rise in coatings revenue was driven by higher paint and sealant demand from customers. The increase, along with rising sales of chemicals and glass, bolstered total revenue to $1.99 billion from $1.91 billion a year ago. Sales got a boost from strengthening foreign currencies.
Fourth quarter earnings reflected lowered expectations, which the company announced in November amid a manufacturing slowdown. At the time, PPG said sales and earnings would rise, but less than previously expected.
PPG, which has cut jobs and closed plants during the past year's downturn, reported net income rose of $94 million, or 55 cents a share, up from $83 million, or 49 cents a share, the year-ago period.
Net income would have been 11 cents a share higher if not for ongoing pension and medical costs, the company said. PPG also took a fourth-quarter charge of $4 million, or two cents a share, to set aside money for an asbestos settlement. Excluding the charge, PPG earned 57 cents a share.
"We expect the global economic environment to be challenging once again in 2003," said Raymond W. LeBoeuf, PPG chairman and CEO. "Nevertheless, we remain committed to further improvements in our cost structure and cash flow. Last year we lowered manufacturing and overhead costs by about $140 million, reduced debt by more than $400 million and increased our dividend payments for the 31st consecutive year. We expect another year of strong cash flow in 2003, which will allow us to reduce debt and increase our financial flexibility."
Meanwhile, chemical sales climbed 13 percent, helped by volume increases and higher prices, which offset rising energy costs. Glass sales increased slightly.
Mitchell International, Inc. has announced that Tony Aquila has been appointed to the position of President and Chief Operating Officer.
"Tony's outstanding track record in the automotive claims industry, combined with his keen customer focus and broad leadership skills, positions him well to direct the operational activities of our company," Jim Lindner, Mitchell's Chief Executive Officer (CEO) and Chairman of the Board of Directors, said.
He added that he and Aquila "will work in a collaborative manner on both strategic and operational issues as we focus on developing new products and services to meet our customers' needs as well as continuing to provide our customers with the highest level of service."
Aquila joined Mitchell as Executive Vice President of Sales, Marketing and Product Management in 2001. He came to Mitchell with an impressive background and extensive experience, having spent more than 20 years in the automotive collision repair and claims industries. Prior to joining Mitchell, Aquila was founder and CEO of Ensera, an eBusiness solutions provider for the collision repair and claims industries, which Mitchell acquired in August of 2001.
"I am pleased that we now have an opportunity to more fully avail ourselves of the talent and skills that Tony brings to our company," Lindner said. "The respect that he has earned within the automotive claims industry reflects well on him and Mitchell."
Automatic Data Processing Inc.'s quarterly profit fell slightly as it was hurt by a weak employment market in the sluggish economy.
ADP posted fiscal second-quarter profit of $262 million, or 43 cents a share, down from $265 million, or 42 cents a share, a year earlier. The per share figure increased as the company had fewer shares outstanding in the latest quarter due to share repurchases.
In other ADP news, Rick Tuuri, well-known participant in the Collision Repair Industry in CIC and I-CAR activities and meetings, whose quick wit and well-turned phrases have long added kindness and intelligence to industry discussions, has left ADP’s Claims Services Division after 24 years of service.
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The DuPont Performance Coatings (DPC) Alliance is offering a new tool to shop participants: standard operating procedures (SOPs) for insurance work.
Darrell Amberson, president of five auto body shops in the Minneapolis area has developed the SOPs for his Lehman's Garage shops with the aid of the Performance Alliance program. Amberson's shops deal with 18 different direct repair programs, so developing a more effective way to handle the various requirements from each insurer is extremely important to his business.
DPC provided him with a comprehensive template and questionnaire by which to create the SOPs. "It covered absolutely every aspect of dealing with insurers and developing estimates," he says. "We spent three hours going over it with just one insurer, but it was time well spent. Some of the procedures were a little vague or undefined, and this really helped to clarify them."
Amberson feels the SOPs will make his shops more efficient and effective. "It can improve the shop/insurer relationship, but more important, it helps a shop get better at what it does," he says. "It took some work up front, but it's well worth it."
He also noted that he is working through Performance Alliance to develop SOPs for job categories. "We like this approach to doing business," says Amberson.
According to Tim Carmack, Alliance program manager, "It's always been the intent of the Performance Alliance to minimize friction points for our customers so they can focus on growth. The Insurance Pro-gram SOPs are one component of the Performance Alliance program designed to help shops improve their business processes."
Insurance Auto Auctions, Inc., a provider of automotive salvage and claims processing services in the United States, has acquired Salvage Management Inc. (SMI), an operator of two auto salvage facilities in Buffalo and Rochester, New York.
"We are excited by the opportunity to expand our operations in the Northeast and increase our market share in the region," said Tom O'Brien, CEO of IAA. "One of IAA's goals is to strategically expand our service area through acquisitions such as SMI, and we look forward to updating our customers and shareholders on our progress in the year ahead."
The National Auto Body Council (NABC) Board has elected three new Board members and appointed a new slate of officers to its Executive Committee.
Elected to serve on the Board were Bob Smith, Storm Appraisal and Management Service, Inc.; Rick Jazwin, Universal Technical Institute; and Ed Dahm, Northwest Automotive Trades Association. Each will serve a three year term on the Board.
Appointed to serve on the Executive Committee were President: Doug Webb, President of CSi Complete; Vice President: Glen Funk of CompEst and Enterprise Logistics; Treasurer: Chad Sulkala of ACME Body & Paint Co. Inc.; and Secretary: Jeanne Silver, Butterfield Bodyworks CARSTAR.
Leaving the Executive Committee and the Board after years of dedicated service is outgoing president Marco Grossi of Collision Craftsmen. Also leaving the Board at the end of their terms are Charlie Baker of Collision Industry Insight and Barry Thomas of BECCA.
"We thank these dedicated professionals for their leadership and service," said NABC Executive Director Mark Claypool. "As I leave the NABC on January 1, not only do I feel good about the choice of my successor, Chuck Sulkala as Executive Director, but I am also confident that the individuals serving on the Board and Executive Committee in the years to come will continue to provide the kind of leadership necessary to address the critical issue of industry image."
"First, I would be remiss if I didn't thank Charlie Baker and Barry Thomas for their dedicated service to the NABC Board" said Doug Webb, incoming NABC President. "In addition, the hard work and dedication of Marco Grossi and Mark Claypool to the NABC have left all of us a higher standard to adhere to as we move forward. The new Executive Committee and Board of NABC look forward to the challenges ahead us," Webb concluded.
Board members of the NABC are responsible for establishing the mission and purpose of the organization, driving the organization's planning efforts, approving the organization's program of work and evaluating the effectiveness of the organization, ensuring the financial solvency of the organization and more.
PPG Industries has opened a new state-of-the-art training center in Rancho Cucamonga, California, a suburb of Los Angeles. The center offers a wide variety of training courses tailored to refinish technicians, paint distributor personnel, and body shop owners and managers in the Southern California area, as well as neighboring states. All courses will be taught by fully trained and qualified national instructors and available in both English and Spanish.
The facility features a complete body shop set-up, including a downdraft spray booth; vacuum assisted sanding and all the equipment needed to conduct hands-on refinish repair and application training. There is also a large classroom with audio/visual equipment, plus a conference room and food service facilities.
According to Russ Boston, director of training for PPG Automotive Refinish, "The fierce competition between the automakers to develop better quality, more sophisticated finishes combined with emerging new environmental and safety regulations require refinish technicians to continually stay up to date on the proper use and application of refinish products. Faced with the need to invest in more sophisticated equipment and pressure from the insurance industry to keep costs down, body shop managers and owners must continually look for new ways and methods to keep their businesses competitive and profitable."
Caliber Collision Centers has filed suit in the Los Angeles Superior Court, asking the court to compel the state’s Bureau of Automotive Repair to stop engaging in a regulatory practice that the lawsuit terms unlawful, denying Caliber and other businesses their constitutional right to due process.
According to the lawsuit, the Bureau has routinely issued citations for purported violations of the Automotive Repair Act without the legal authority to do so.
Although the citations were typically issued for merely technical or administrative violations of the bureau’s regulations or for honest mistakes, they were posted on the Bureau’s website as "confirmed violations" of the act. Without giving the facilities an opportunity to contest them, the companies’ due process rights were violated and their reputations were unfairly damaged.
As a result of the Bureau’s practice, as stated in the lawsuit, "Caliber has been forced to defend itself from frivolous and extortionate lawsuits filed under Business and Profes-sions Code ss. 17200, which have been brought solely because the bureau has posted the unchallenged allegations contained in the citations on its website and has illegally characterized them as ‘confirmed violations’ of the act."
Caliber Chairman and CEO Matthew Ohrnstein commented, "As a result [of the Bureau’s actions] automobile repair companies doing business in California are being treated unfairly. This lawsuit points out the need for genuine regulatory reform in the industry. "
Michael Camunez, of O’Melveney & Myers LLP, the law firm representing Caliber, noted, "The Bureau’s allegations are made worse by the fact that good businesses like Caliber are not given the chance to contest those accusations in any way. This puts small businesses... in an untenable situation of having to defend against not only unwarranted bad publicity but also frivolous ss. 17200 lawsuits filed as a result of the Bureau’s postings."
"The irony here is that we have one of the most comprehensive training, compliance, and auditing programs in the industry," said Bill Lawrence, Caliber’s president and COO, "yet we find ourselves targeted with these unfounded lawsuits and accusations."
The lawsuit notes that "extortionate behavior of the attorneys who have brought ss. 17200 lawsuits against automotive repair and collision shops has been widely documented and criticized. It has also resulted in widespread calls for reform, including public expressions of concern from the legislature itself. In addition, Attorney General Lockyer has opened a formal investigation of the attorneys who have brought these suits, and the California State Bar is exploring whether disciplinary proceedings should be instituted."
But Caliber's Ohrnstein said reform of more than just the ss.17200 statute is needed. "The current regulations that the Bureau is enforcing are in desperate need of reform. They were designed for mom-and-pop mechanic shops in the 1970's, but they really don't fit or make allowance for 21st century collision repair businesses like Caliber that use state-of-the-art technology to interface with customers, suppliers and auto insurance companies," he explained. "These antiquated regulations are hurting Caliber and other businesses in California - at just the time when the California economy badly needs new jobs and tax revenue."
According to Marty Keller, Executive Director of the Automotive Repair Coalition (ARC), a non-profit organization representing over 10,000 registered automotive service providers in California, "The Bureau's illegally issued citations and the lack of due process threaten the entire automotive repair industry in California. The ARC supports Caliber's efforts and will work closely with the legislature to effect meaningful regulatory reform."
Caliber's petition asks the superior court to issue a "writ of mandate," which is a court order to the Bureau to follow the requirements of the agency's authorizing legislation to establish an appropriate regulatory regime for enforcing the statute, and to quash or rescind all citations that have been illegally issued.
Based in Irvine, California, Caliber Collision Centers operates 38 repair facilities in California and 30 facilities in Texas.
New lease volume for the period Jan. - Nov. 2002 for the largest national lessors declined 14.5 percent from the same period in 2001 according to a survey conducted by The Association of Consumer Vehicle Lessors (ACVL). There has been about a 50 percent drop in lease volume since 2000.
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