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Letter to the Editor
This article originally appeared in the April 2003 Issue of INSIGHT
©2003 Collision Repair Industry INSIGHT All Rights Reserved
Vernon Crump to Chair NACE2003
PPG Earns PACE Award for 4th Consecutive Year
California DMV and Allstate Reach Settlement on Confidential Records Access
DuPont Performance Coatings Will Not Exhibit at NACE2003
Texas House Bill 1131 Sponsorship Increases to 67
SCRS Details Flex Additive Requirements
InsWeb Index Shows Auto Insurance Rates Up 11% in 2002
CCC Information Services Acquires Comp-Est Estimating Solutions
Ray Anderson Named Vice President DuPont Refinishes America
Keystone Receives ISO 9001:2000 Certification
Sherwin-Williams Lowers Q1 Earnings Expectations
PPG Automotive Glass Operations Achieve Global Environmental Certification
ADP Lowers Outlook on Flat Revenues
Toyota Sponsors CCAR's S/P2 Online Training for Tech Network
FinishMaster Same Store Sales Growth Flat for 2002
INDUSTRY UPDATE
Leaders of the Automotive Repair Coalition (ARC) have expressed satisfaction with the actions that the California State Bar Association announced against members of the Trevor Law Group in Los Angeles. The Trevor attorneys had filed complaints against thousands of California's automotive repair service dealers in 2002 that ARC has considered extortionate.
"The Trevor lawyers admitted at the recent January hearing by the Legislature's judiciary committees that they did no investigation of the shops they sued," noted Marty Keller, ARC Executive Director. "They just took listings off the state regulatory agency's web page and slapped them into their complaints. They were taking advantage of loopholes in the state's Unfair Competition Law to try to make some money off what they saw as defenseless small businesses."
Keller additionally noted that, although the State Bar's action is welcome, preventing the Trevor attorneys from further legal work still leaves the state's small businesses vulnerable to lawsuits like the ones filed against the auto repair dealerships.
"We fear that the State Bar's action will just alert other attorneys to what they need to avoid when they file these kinds of frivolous lawsuits."
The Coalition's position is that the Unfair Competition Law needs to be reformed to prevent these kinds of lawsuits from being filed in the first place.
The Automotive Repair Coalition represents the state's automotive repair service dealers through its members and member trade associations.
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Vernon Crump, body shop director at John Eagle Collision Center in Dallas, Texas, will be chairman of the 2003 International Autobody Congress & Exposition (NACE).
Crump is a veteran NACE attendee with more than 25 years of experience in the collision repair industry. He is active in several industry groups, serves on numerous advisory committees and has a specific devotion to educating today's youth about careers in collision repair.
Crump runs a 50-employee, 75,000-sq. ft. dealer body shop that, because of its unique procedures and processes, regularly provides tours to area high school students and body shop owners and managers. He is an I-CAR instructor and past co-chairman of the Dallas I-CAR group. He has formerly served on the Texas State USA Skills/VICA board of directors and on advisory committees for the Texas State Technical Institute, Eastfield College in Dallas and two area high schools. Crump is also director of education for the Texas Educational Agency for the Summer Autobody Workshop.
In addition to being a NACE attendee for the past 17 years, Crump has led NACE seminars on managing assignments, customer expectations and direct repair program (DRP) relationships. He serves on the NACE Attendee Advisory Council, and in 2002, was instrumental in organizing a career day at NACE that was attended by more than 400 students.
He is a Certified Collision Repair Manager from the Masters School of Autobody and has a degree in marketing and management from the University of North Texas in Denton.
"NACE is an all industry event and therefore, we are very honored to have Vernon serve as the first dealer NACE chairman," said Galen Poss, president of Hanley-Wood Exhibitions, the NACE show management company. "His industry involvement and extensive background in collision repair, as well as his commitment to youth education, make him one of the industry's finest leaders," Poss concluded.
CeramiClear clearcoat by PPG Industries has received a PACE Award, marking the fourth consecutive year the company has won recognition from the program that honors product innovation and management excellence among automotive suppliers worldwide.
CeramiClear clearcoat uses nanoparticle technology in the final coating applied to car bodies, protecting the color coat while providing a durable, glossy appearance. The patented nanoparticle technology creates a highly cross-linked network at the surface of the coating for superior resistance to damage caused by day-to-day use, car washes and environmental hazards such as acid rain and tree sap.
Twelve PACE Awards were presented in the annual competition sponsored by Automotive News magazine and Cap Gemini Ernst & Young. Recipients were selected from 22 finalists after a comprehensive evaluation by an independent panel representing industry and academia.
"This award validates our ability to leverage the vast technical expertise of PPG to meet the needs of the automotive industry in ways that only we can," said Dennis Kovalsky, PPG vice president of automotive OEM coatings. "CeramiClear clearcoat is such a breakthrough product that we actually had to create new, tougher test procedures because no automotive coating had achieved this level of mar resistance before."
Developed in conjunction with Mercedes-Benz during a three-year period, CeramiClear clearcoat commercialization began in August 2002 at the Sindelfingen, Germany plant.
Allstate Insurance Company has paid a fine of $1 million to the California Department of Motor Vehicles, and the company's access to confidential DMV records was suspended until March 17, 2003, as part of a settlement involving Allstate's failure to adhere to state laws and regulations concerning access to and use of confidential records.
State audits conducted at seven Allstate claims offices throughout California determined that there was a failure to adequately monitor and regulate access to confidential DMV driver license and vehicle registration records.
Allstate has been in negotiations with DMV since their electronic access to information was inactivated on January 16, 2003.
Under the terms of the settlement agreement:
- Allstate paid a $1 million fine and reimbursed the DMV for attorney's fees, costs related to the state audits, and will pay for additional audit costs over a four year probationary monitoring period.
- Allstate's access to DMV records was suspended until March 17, 2003, and a further period of no access will be stayed provided that Allstate complies with all DMV regulations and state laws.
- Allstate has implemented comprehensive security reforms in its offices throughout the state that meet the DMV's information security requirements.
Explaining just what the agreement with Allstate Insurance will mean, DMV Director Steven Gourley said, "These important reforms establish Allstate as a model for others to follow with respect to DMV security and confidentiality."
"Allstate takes its obligation to safeguard the confidentiality of consumer information very seriously," said Terry Lewkoski, director for Allstate's California claims operation. "We are committed to continue working with the DMV to ensure that we continue to strengthen our processes."
Gourley confirmed, "The reforms put in place by Allstate are designed to ensure that there is neither a deliberate nor inadvertent breach of confidential DMV records, thereby protecting the public's right to this confidentiality."
DuPont Performance Coatings (DPC) will not exhibit at the 2003 NACE show, choosing instead to focus resources on education and programs that the company feels will better benefit DPC customers and the industry as a whole.
"The decision to forego NACE for a second year in a row was a difficult one," said Doug Moore, vice president, DuPont Refinish Americas. "In making it, we considered a number of factors, from the uncertain economic conditions to alternative investments and activities to support the industry and our valued customers.
"In the end, we decided to focus on efforts that directly impact the business success of our customers. The resources that we would have devoted to the NACE show will be targeted toward programs that facilitate growth - for our body shop customers, our partner jobbers, and for the entire collision repair industry."
Moore said that DPC is placing special emphasis on assisting industry training efforts. He pointed out that in 2003 DPC has already donated $200,000 to Florida Commun-ity College at Jacksonville for expansion of the school's collision repair and refinishing training center.
"And earlier this month," he said, "we announced that we will make a significant contribution over the next three years to the Automotive Youth Educational Systems, a non-profit organization dedicated to bringing young people into the automotive service and repair industry."
AYES builds partnerships between selected quality secondary-technical schools and participating local automotive dealerships. They have begun to integrate I-CAR collision repair courses into their program, which includes 280 schools and 3,200 dealerships.
Moore also pointed to two ongoing DPC projects with leading technical institutions:
- An educational alliance with Universal Technical Institute (UTI) to support the Collision Repair & Refinish Technology program offered at UTI's campus in Houston;
- Training and support materials for Pennsylvania College of Technology's Collision Repair program in its new home on the College's main campus in Williamsport.
Moore concluded that DPC "fully supports ASA," and a decision on whether to participate in NACE 2004 will be made early next year.
Similar announcements of decisions to refrain from exhibiting at NACE in December are expected from PPG, BASF, Akzo Nobel, and Sherwin-Williams, the other major refinish paint companies in the U.S. Valspar was the only major refinish presence last year in Dallas.
Texas House Bill 1131, sponsored by Reps. Kino Flores, D-Mission; Kenny Marchant, R-Carrollton; Joe Driver, R-Dallas; Allan Ritter, D-Nederland; and Rick Hardcastle, R-Vernon, has gained 62 new co-sponsors. This brings the total number of co-sponsors to 67.
The bill will make it illegal for an insurance company to have any ownership interest in an auto body repair facility.
The legislation passed the House Licensing and Administrative Procedures Committee by a unanimous vote of 7-0 on March 6. A hearing is scheduled for the companion Senate Bill 435 in the Business and Commerce Committee for the week of March 17.
The Automotive Service Association (ASA) supports H.B. 1131 and S. 435.
Bill Haas, the Automotive Service Association (ASA) vice president of divisions, education and training, testifying at the March 6 hearing, said, "ASA is not opposed to direct repair programs, but when insurance companies move into the ownership of shops, the consumer loses. Keeping repair costs low has been the central focus of repair policy in the last few years."
Bob Redding, ASA's Washington, D.C., representative said, "We are very pleased with the outcome of the hearing and of the additions to the co-sponsor list. Policymakers continue to grow weary of consumers losing their rights in dealing with insurers.
"We believe this piece of legislation protects the quality of the repair and the consumers' right to choose in the repair marketplace," Redding said.
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In recent months, the Society of Collision Repair Specialists (SCRS) has received an increasing number of complaints from repair facilities reporting that insurers are stating that the addition of flex additives is not required in the refinish of flexible plastic components.
In an effort to clarify the need for flex additives, SCRS has contacted major paint manufacturers to determine their specific recommendations regarding the use of flex additives.
Beyond the issue of flex additives alone, repairers must check the included operations in their estimating platform to take into account the larger number of plastic replacement parts that are delivered to the repairer unprimed.
Dan Risley, Executive Director of SCRS, reported, "In the past six to nine months, numerous SCRS members have contacted me requesting help concerning the use of flex additives. These callers' main concern was whether or not the use of flex additives is a necessary step in the refinish process for plastic components."
According to SCRS's re-earch, the answer to these questions is complex and depends upon the specific manufacturer and products used during the plastic parts refinish process.
"No blanket response can be made regarding the need for flex additive. All paint system manufacturers recommend flex additives in some part of the plastic refinish process. However, the recommendations depend upon the specific products the refinisher employs in their paint process. Some require flex additive in undercoats and topcoats, some in clear coats alone, some recommend a combination of methods, and some not at all," stated Risley.
SCRS recommends that repairers who are questioned by their insurance partners regarding the necessity of using flex additives provide them with copies of the technical documentation specific to their paint system. In addition, SCRS has compiled the responses received from major paint system manufacturers that may be of assistance to repairers. SCRS members may request a copy of these responses by calling the SCRS office at (877) 841-0660.
Additionally, SCRS contacted ADP, Mitchell and MOTOR for their documentation on the issue of additional labor operations for unprimed (raw plastic) replacement parts:
- ADP reports in their non-included labor operations that additional preparation or cleaning of new unprimed panels and removal of mold release agents from raw unprimed bumper covers.
- Mitchell reports in their non-included labor operations the removal of release agents for OEM raw plastic components.
- MOTOR reports that refinish times do not include removal of mold release agents from new unprimed molded components.
InsWeb Corp., a large producer of automobile insurance in the U.S., has announced the updated results for its Auto Insurance Index based on fourth quarter 2002 data. The Index is designed to identify and track general pricing trends of personal auto insurance.
According to data from InsWeb, the index revealed that as a whole, prices for auto insurance nationwide in 2002 increased on average by approximately 11 percent over the prior year. Based on this data, consumers could be paying as much as $150 more for six-month policies when compared to 2001.
Statistics from the U.S Department of Labor indicate that the after-tax income for the average American household in 2001 was approximately $45,000.
"According to this data, the cost of auto insurance based on a six-month policy in 2002 accounted for approximately 6 percent of the average household's income, a full percent increase over the prior year," said Hussein Enan, Chairman of InsWeb Corporation. "Auto insurance is a major expenditure for the average household. A few minutes spent researching alternatives can save most consumers several hundred dollars, and help them mitigate the effects of price inflation."
For the fourth quarter of 2002, rates for auto insurance appeared to stabilize, exhibiting a pattern similar to the previous two quarters. The majority, or nearly 59 percent, of the roughly 1.3 million quotes viewed by consumers during the fourth quarter were for 6-month policies.
CCC Information Services Inc., the supplier of automotive claims and repair technology solutions and services, announced it has completed the asset purchase of Comp-Est Estimating Solutions, a privately-held provider of automotive estimating software, from Hearst Business Publishing, Inc. through an option exercise. Financial terms were not disclosed, however, it is expected that the acquisition will add to CCC's overall revenue growth.
Comp-Est, based in Colum-bus, Ohio, provides estimating applications to single-location repair facilities, among the fastest-growing market segment for estimating products.
With the acquisition, CCC gains the opportunity to serve 4,500 additional customers and can offer a broader suite of electronic estimating and other tools to all types of collision-repair businesses.
"Comp-Est fits perfectly with our strategy to invest in opportunities that complement and add value to our core business," said Githesh Ramamurthy, chairman and chief executive officer of CCC. "This acquisition strengthens our ability to provide the most complete product offering in the collision repair industry."
"Since 1990, we have focused on making the business of fixing cars easier and more cost-effective for independent and single-location repair facilities," said Chris Trevethan, president and chief executive officer of Comp-Est. "We've succeeded in business because of the strength of our products and our superior customer service. CCC and Comp-Est share these values, and I believe this transaction will be positive for our customers and our employees."
CCC will continue to operate Comp-Est out of Columbus, Ohio.
Ray Anderson has been named vice president, DuPont Refinish Americas. He replaces Doug Moore, who has been appointed vice president and general manager of Advanced Coatings Systems. Moore will relocate to Wuppertal, Germany.
Most recently, Anderson, who joined DuPont's Finance Department in 1974, has served as director of DuPont Investor Relations. Previously, he served first as a DuPont Performance Coatings financial manager, then global business director for the Maintenance Coatings business. In 1983, he was named comptroller and financial planning manager for DuPont do Brasil in Sao Paulo, Brazil.
In 1991, Anderson was appointed president and country manager for DuPont Korea in Seoul, Korea. Returning to the U.S., he was appointed Global Financial Director of the Crop Protection Products business in 1994.
Anderson was next appointed vice president and chief financial officer of DuPont Canada in 1995. Three years later, he moved back to Wilmington as managing director-finance for DuPont's Agriculture and Nutrition platform.
Keystone Automotive Industries, Inc. has received ISO 9001:2000 certification from NSF International Strategic Registrations, Ltd. (NSF-ISR). ISO 9001:2000 is the standard used worldwide to assess a company'¹s ability to comply with many requirements, including the ability to meet customer satisfaction and regulatory requirements. Certification is the successful result of this assessment.
"Keystone Automotive Industries is fully committed to providing our customers with the best products and service in the industry," stated Charles Hogarty, president and chief executive officer of Keystone. "This certification is another step we have taken to ensure our customers' complete satisfaction."
Following standards set forth by the ISO, Keystone developed a series of quality management systems to meet the ISO criteria. Beginning in February 2001, the systems were implemented in Keystone branches across the nation.
After several months of employee training, NSF-ISR audited the systems, and upon final approval, Keystone received ISO 9001:2000 certification.
"ISO 9001:2000 certification demonstrates our ongoing commitment to quality assurance and also complements our participation in the Manufacturers Quality Validation Program (MQVP), which establishes quality guidelines for non-OEM manufacturers and distributors," concluded Hogarty.
NSF International Strategic Registrations, Ltd. is a third-party certification body providing confirmation that the quality systems behind Keystone's products and services measure up to established ISO standards. NSF-ISR will continue to audit Keystone's ISO 9001:2000 certification every six months, to ensure continuing quality management.
The International Organization for Standardization (ISO) is a worldwide federation of national standards bodies. The mission of ISO is to promote the development of worldwide standardization to facilitate the international exchange of goods and services, and to developing cooperation in the spheres of intellectual, scientific, technological and economic activity.
ISO's work results in international agreements that are published as International Standards. Standards are documented agreements containing technical specifications or other precise criteria to be used consistently as rules, guidelines, or definitions of characteristics, to ensure that products, processes and services are reliable and effective.
Keystone operates 118 distribution centers throughout the United States. In addition, the company operates 30 plastic bumper recycling centers and nine wheel remanufacturing plants.
The Sherwin-Williams Company is updating its expectations for the first quarter and reaffirming its annual expectations for 2003 which were previously announced on February 6, 2003.
Sales for the quarter are expected to be the same as or slightly higher than the first quarter of 2002.
The previous expectation for sales in the first quarter had been an increase over last year of approximately 2.5 to 4.5 percent. Severe winter weather over most of the country in February and lower-than-expected sales of product finishes and industrial maintenance products adversely impacted sales results. This is anticipated to result in diluted net income per common share for the first quarter of 2003 in the range of $.20 to $.23 per share, just slightly below previous expectations of $.24 to $.27 per share.
Annual sales for 2003 are expected to be up 3 to 5 percent over 2002. With annual sales at that level, diluted net income per common share for 2003 is anticipated to be within the range of $2.17 to $2.29 per share. These expectations are the same as those provided on February 6, 2003.
PPG Industries has earned ISO-14001 certification for its centralized environmental management system and a total of 16 automotive glass manufacturing facilities across North America.
The certification revolves around effectively managing an operation's impact on the environment.
"We are proud of our environmental performance and firmly believe it is a key to our global competitiveness," said Barry J. McGee, vice president of OEM glass. "Earning the ISO-14001 certification will pay short- and long-term dividends in retaining and expanding PPG's leadership position in the automotive glass marketplace."
A single ISO-14001 certificate covers PPG's automotive glass operation facilities in the U.S. and in Canada. The Cristal Laminado o Templado automotive glass plant in Tepeji del Rio, Mexico, (co-owned by PPG) has also earned ISO-14001 certification. PPG's 27 automotive original equipment manufacturer (OEM), automotive refinish, industrial and packaging coatings facilities around the world also have ISO-14001 certification.
It took PPG two years to achieve the certification, one year ahead of the original schedule.
Automatic Data Processing Inc., the No. 1 U.S. payroll services company, has lowered its fiscal 2003 profit outlook on weakness in its employer and brokerage service businesses.
The company has lowered its guidance for fiscal 2003 to the range of $1.68 - $1.73 earnings per share compared with $1.75 last year, and revenues will be flat with last year.
According to an ADP press release, the change in guidance is due, in part, to continued weak economic conditions, but primarily from an acceleration of activities in three critical areas: 1) increasing investments in highly attractive growth initiatives; 2) cost reductions in selected areas including exiting a few non-performing product lines; and 3) investing in the retention of quality associates.
Arthur F. Weinbach, chairman and chief executive officer, commented, "We have decided to accelerate investments to enhance our leadership position in a number of our most critical markets despite the current weak environment. Therefore, we will substantially increase our investments in our most promising growth areas... In those areas where growth has been short of our expectations we will reduce or freeze our headcount and improve our productivity. In a very limited number of cases we will aggressively exit non-performing product lines and non-strategic businesses to allow us to focus our resources on more promising growth areas.
"While it is premature to discuss the impact of these actions in detail at this time, I estimate we will spend between $150 to $200 million over the next twelve to eighteen months. "The most important message here is that ADP is a very strong company with excellent growth prospects... I am very optimistic about ADP's future and its growth," Weinbach concluded.
ADP, with $7 billion in revenues and 500,000 clients, is one of the largest independent computing services firms in the world.
The Coordinating Committee for Automotive Repair (CCAR) has received a corporate grant from Toyota Motor Sales, U.S.A., Inc., to provide CCAR's S/P2 online training in Safety and Pollution Preven-tion to the schools across the U.S. that comprise the Toyota Technical Education Network (T-TEN).
CCAR is providing S/P2 free of charge to the nation's students pursuing careers in automotive service and collision repair, thanks in part to the support of corporate sponsors that include BASF Corpora-tion, CARQUEST, and CARSTAR.
T-TEN was established by Toyota Motor Sales, U.S.A., Inc., in 1986, in collaboration with educational leaders and Toyota dealers. The innovative program has allowed more than 3,000 students to take advantage of T-TEN through the auspices of nearly 60 handpicked vocational and community colleges nationwide.
Tracy Underwood, Toyota's National Manager - Corporate Contributions, noted, "…It is clear that [CCAR has] outstanding goals for creating harmony between technical training practices and the stewardship of our environment. We are proud to be able to support you in these efforts."
CCAR's Internet-based S/P2 training addresses the key safety and pollution prevention issues that face schools training future technicians for positions in the automotive service and collision repair industry.
The program was developed by CCAR over a two-year period in accord with U.S. EPA and OSHA standards, which require both shop personnel and students receive training in safety and environmental regulations before entering the workplace.
CCAR operates "CCAR-GreenLink," the national environmental compliance assistance center for the automotive industr, and is a partner with Toyota Motor Sales, U.S.A., Inc., in its Environmental Assistance Network [EAN], that gives dealers online access to information from CCAR-GreenLink.
The National Automotive Service Task Force (NASTF) has posted the OEM tool matrix on its Web site, www.nastf.org.
In keeping with the auto manufacturers' commitments to independent repair shops, as described in a Sept. 20, 2002 letter to U.S. Sen Byron Dorgan, D-N.D., automakers are making concerted efforts to provide emissions and non-emissions diagnostic tool data-stream information to the Equipment & Tool Institute (ETI) as soon as possible. This will facilitate the development of broader function generic tools by aftermarket tool and equipment companies.
At the November 2002 NASTF meeting, the NASTF tool committee reported that nearly all OEMs had reported the status of information submission for six primary systems: engine, transmission, anti-lock brakes, airbag, HVAC, and cruise control.
Further progress has been made since November, as outlined in the matrix. All emissions-related data-stream information is targeted for submission to ETI by March 30, 2003, and all remaining information is targeted for submission to ETI by Aug. 31, 2003.
FinishMaster, Inc. has reported that net income for the year ended December 31, 2002 was $12,897,000, or $1.64 per share, compared to net income of $6,208,000, or $0.81 per share, in the prior year period. Net income for the year increased by $6,689,000 compared to the prior year period as a result of higher net sales and gross margin dollars, and lower amortization and interest expense. The increase in net sales was entirely due to acquisitions.
Same store sales growth was flat for the year. However, during the last two quarters, same store sales growth was 1.4 percent per quarter. The improvement in margin rate was a result of lower shipping costs as a percentage of net sales, price increases on two major product lines, and higher volume rebates earned under normal vendor programs. Despite a growth in sales, operating, selling and G&A expenses as a percentage of net sales increased 20 basis points to 23.8 percent. Increased employee benefit costs, insurance costs, bad debt expense, and sales labor costs were the primary contributors to the 4.2 ercent increase in operating, selling and G&A expenses.
FinishMaster also announced the acquisition of Caywood's Paint Supply, located in Anaheim, California.
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