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Letter to the Editor
This article originally appeared in the June 2003 Issue of INSIGHT
©2003 Collision Repair Industry INSIGHT All Rights Reserved
Texas Insurer Owned Repair Shop Bill Passes Senate
Anti-Steering SB 551 Passed by California Senate Insurance Committee
New Jersey General Assembly Approves Auto Insurance Reform
North Carolina House Passes Crash Parts Bill
DuPont Performance Coatings Announces Promotions
Major Detroit Auto Insurance Fraud Ring Busted
Pep Boys Net Earnings Down 33% in Q2
Toyota and Northwood University Form Educational Alliance
FinishMaster Announces CARSTAR Agreement
CCIF Forum in Quebec a Success
3M CEO Says Initiatives Drive Company's Growth
Sherwin-Williams and ADP Form Get Connected Program for A-Plus Shops
Ford Launches Certified Collision Repair Network
INDUSTRY UPDATE
The Texas Senate Business and Commerce Committee has passed House Bill 1131, the insurer-owned repair shop legislation, by a vote of 8 to 0. The Automotive Service Association (ASA) has been working with a coalition of repair professionals in Texas on this legislation.
Bill Haas, ASA's vice president of service repair markets, presented petitions signed by thousands of Texas vehicle owners supporting the legislation. Collision repairers from across the state spent months collecting the signatures.
On April 8, the Texas House of Representatives passed H.R. 1131 by a voice vote. The House bill prohibits insurance companies from owning repair facilities in Texas. The bill passed by the Senate committee also prohibits insurance companies from owning repair facilities, but allows for those insurer-owned shops already in place to remain in business if they meet certain criteria detailed in the legislation.
"We owe a debt of gratitude to Sen. John Carona and his fellow senators. We ask that Texas collision repairers continue to let their state senators know of their support for this legislation as it moves to the senate floor for consideration," said Bob Redding, the ASA's Washington, D.C., representative.
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California Senate SB 551, introduced by Senator Jackie Speier, who had last year sponsored SB 1648, which would have outlawed insurer-owned auto body facilities in the state (and failed to pass), was passed by the California Senate's Insurance Committee in a May 7 vote.
SB 551 would "codify existing regulation that prohibits an insurer from 'steering' insureds or claimants to a particular automotive repair dealer and would provide civil remedies for violators of the act."
The New Jersey General Assembly has approved legislation correcting years of politically influenced auto insurance regulations, which, according to the Coalition for Auto Insur-ance Competition, have eroded the availability of coverage for the state's drivers.
The New Jersey Automobile Insurance Competition and Choice Act (S-63/A-2625) aims to attract more auto insurers to do business in New Jersey and provide consumers greater and easier access to auto insurance coverage.
"Years of excessive regulations have turned New Jersey into a horror story for drivers seeking insurance," said John Friedman, chairman of the Coalition for Auto Insurance Competition. "Thanks to bipartisan leadership, New Jersey drivers are closer to reaping the benefits of a more competitive auto insurance marketplace."
Politicizing and over regulating auto insurance is the root cause of the state's exodus of auto insurers, leaving consumers too few companies from which to purchase auto insurance. Five of the six largest auto insurers in the nation do not sell auto coverage in the state and more than twenty auto insurers have left New Jersey in the past decade.
The Coalition for Auto Insurance Competition, a New Jersey-based group of businesses, associations and consumers, has been the leading voice calling for reforms to stimulate competition and greater choices for consumers.
"Considering New Jersey's nationwide reputation for over regulating auto insurance, today's final legislative passage has tremendous significance," said Friedman.
Having passed both legislative houses the bill now goes to Governor James McGreevey for his expected signature.
The North Carolina House of Representatives passed House Bill, 1152, the Motor Vehicle Parts Bill. The bill was introduced by Rep. Nelson Cole, D-Reidsville, and referred to the Senate Committee on Commerce.
The legislation prohibits an insurer from authorizing or requiring the use of non-original crash parts for motor vehicle repairs without the consent of the insured or claimant.
The Automotive Service Association (ASA) supports House Bill 1152. ASA has established a formal position on the issue of consumer notification and consent, which reads:
ASA supports state disclosure laws that require insurers and auto collision facilities to obtain the express written consent of vehicle owners before installing alternative replacement crash parts. ASA supports disclosure statements that alert consumers that the use of alternative aftermarket crash parts other than those manufactured by the Original Equipment Manufacturer may have an effect on their warranties or market value.
"We encourage collision repairers in North Carolina to contact the North Carolina Senate Commerce Committee and ask for the passage of H.B.1152," said Bob Redding, ASA's Washington, D.C., representative.
ASA has contacted collision repairers across North Carolina asking that they call their state senators to support House Bill 1152.
Troy Weaver and Tim Carmack have been promoted to new positions in the DuPont Performance Coatings organization.
Weaver, formerly a market sales manager in Eastern Pennsylvania, was named Performance Alliance manager. He replaces Carmack, who has been promoted to Economy and Production Shop Segment leader.
Weaver has been with DPC for 11 years, starting as a sales rep in Allentown, Pa. and holding various other sales roles before becoming a market sales manager in 2000.
Carmack joined DPC in 1993. After being assigned to sales territories in Pittsburgh and San Diego, he became account manager for large accounts statewide in California, then joined the DPC marketing group in Wilmington Del. in 2000.
Attorney General Mike Cox, the Michigan State Police, National Insurance Crime Bureau (NICB), and Office of Financial and Insurance Services (OFIS) has announced that a cooperative federal, state and local law enforcement effort has cracked a sixteen-member auto insurance fraud ring operating out of metro-Detroit.
An investigation conducted by the NICB uncovered the scheme in which individuals would buy vehicles at auto auctions for a few hundred dollars, "resell" the car to another member of the ring for a few thousand dollars, and then file multiple claims for damages suffered when the vehicles were allegedly involved in accidents -- allowing the ring members to collect thousands of dollars on a car purchased for a few hundred dollars.
"Crime rates and false claims drive insurance rates through the roof," said Cox. "By cracking down on these type of fraud rings, we can begin to have a significant impact on reducing the cost of insurance, especially in our core urban areas."
The total amount of fraud perpetrated by the group is approximately $1.47 million. A sweep by the MSP has led to the arrest of ten of the suspects. MSP continues to search for the remaining six suspects.
All but one of the ring members face one count of racketeering, and each face at least one and up to five counts of insurance fraud. If convicted, maximum penalties range from four years and/or $50,000 up to 20 years and/or $350,000.
"Combating insurance fraud is everybody's job, from the insured to the insurer, because these crimes affect all of us when we pay premiums," said Judith Fitzgerald, NICB Senior Vice President. "NICB is extremely pleased with the results of the investigation so far as we know insurance fraud is a pervasive problem. We appreciate the efforts of all parties involved and their cooperation on this investigation."
"These arrests are an excellent example of cooperation between agencies," stated Lieutenant David W. Peltomaa, commander of the Michigan State Police Special Investigation Section. "By working with the Attorney General's Office and several local, state and federal law enforcement agencies, we were able to apprehend ten suspects in this case, four of which were habitual offenders."
"OFIS is very concerned about insurance fraud as it contributes to the high premium rates in urban areas -- and across the state," said Commissioner Linda A. Watters. "I am proud that Luke Hasbany, one of the many dedicated and professional OFIS insurance investigators, participated in the investigation and represented us so well."
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The Pep Boys, the national full service automotive aftermarket chain, announced disappointing financial results for the thirteen weeks ended May 3, 2003.
Excluding non-recurring charges associated with an increase in legal reserves, the satisfaction of a pension obligation and the cumulative effect of a change in accounting principle to adopt SFAS No. 143, the company reported that operating and interest expense reductions were more than offset by lower sales and merchandise margins, resulting in comparable net earnings of $9,100,000 ($.18 per share - basic and $.17 per share - diluted), 33 percent lower than the $13,565,000 ($.26 per share - basic and diluted) recorded last year.
On a GAAP basis, net earnings declined from $13,565,000 ($.26 per share - basic and diluted) recorded last year to a net loss of $9,217,000 ($.18 per share - basic and diluted).
Sales for the quarter were $529,215,000, five percent less than the $558,973,000 recorded last year. Comparable store sales, which continue to be negatively impacted by lower tire sales, decreased 5 percent.
Pep Boys' President & Chief Financial Officer, George Babich, Jr., commented, "Industry-wide weakness in the replacement tire market, coupled with low consumer confidence which continues to depress discretionary spending, negatively impacted our tire, service repair and accessory merchandise businesses.
"While we are extremely disappointed with our financial results, with an improved economy, our merchandising and marketing initiatives should begin to improve sales and drive earnings growth."
In other company news, the Pep Boys announced the appointment of Lawrence N. Stevenson as its new Chief Executive Officer. Stevenson will also serve as a Director on the Company's Board of Directors.
The University of Toyota School of Retail Professional Development and Midland, Michigan's Northwood University have announced the formation of an educational alliance under the common vision: "To elevate the automotive industry to the highest level of professionalism."
Northwood University is unique among universities for offering two- and four-year automobile dealership management degrees.
The University of Toyota School of Retail Professional Development creates and develops and delivers automotive retail education for Toyota and Lexus dealers nationwide.
This educational alliance links Northwood's curriculum-based instruction with professional development training from the University of Toyota.
While Northwood University will benefit from industry involvement and access to automotive industry practitioners, the University of Toyota will expand its range of learning tools and broaden its geographical reach.
Dr. David E. Fry, president and chief executive officer of Northwood University, commented on the successful relationship between Northwood and Toyota. "The relationships the institution has formed with business are key to the mission of Northwood University," he said. "By collaborating with Toyota, a major force in the automotive industry, we give our students a connection to their futures and reinforce that learning is a continuous process in our lives."
"Our alignment with North-wood University will allow us to greatly enrich the education we offer our dealers and will recognize their contributions to industry and the free market," said Bryan Bergsteinsson, group vice president, Univer-sity of Toyota. "The University of Toyota has much to offer Northwood by sharing our retail-proven education with the future leaders of the automotive industry."
For more than twelve years, Northwood University and Toyota have benefited from an informal partnership. In 1990 TMS developed a Dealership Simulation tool, which is part of the coursework for all seniors graduating from the Automotive Marketing/Management dual major program.
FinishMaster, Inc. has entered into an agreement with CARSTAR to service CARSTAR Franchisee locations on a national basis. This agreement aims to provide for consistent delivery and service nationwide for paint and related material.
"FinishMaster, through the use of proprietary database software technology, will provide improved information reporting capability to drive efficiencies within CARSTAR's network and reduce administrative work being done today by CARSTAR and its Franchisees," stated J.A. Lacy, FinishMaster President and Chief Operating Officer.
CARSTAR Chief Executive Officer, George Hansen, commented, "We are pleased with the addition of FinishMaster as a CARSTAR preferred vendor. Applying FinishMaster's market knowledge and expertise to CARSTAR's nationwide network of repair facilities will provide immediate value to both companies as well as long-term benefits as CARSTAR expands its franchise base."
FinishMaster operates three major distribution centers and 157 branches in 25 of the 35 largest metropolitan areas in the country.
CARSTAR has more than 300 locations across the United States and Canada.
Copart, Inc. has reported results for the third quarter and nine months ended April 30, 2003. Copart earned net income of $15,422,800 in the third quarter of fiscal 2003 on revenues of $93,928,700. This quarter's net income is seven percent lower than the $16,600,400 earned in the same period of fiscal 2002 on revenues of $90,158,100. Fully diluted earnings per share (EPS) for the quarter was $.17 compared to $.18 last year, a decrease of six percent.
For the first nine months of fiscal 2003, Copart earned net income of $43,885,800, or $.47 per diluted share, on revenues of $260,207,000. Copart reported net income of $41,854,000, or $.46 per diluted share, on revenues of $233,823,100 for the same period in fiscal 2002.
The company has repurchased a total of 2,695,000 shares of its common stock at an average price of approximately $7.59 per share as of April 30, 2003. The company is authorized to repurchase an additional 6,305,000 shares of its common stock.
Copart, founded in 1982, operates 102 facilities in 40 states. It also provides services in other locations through its national network of independent salvage vehicle processors.
“We’re here to make a difference.” That was the message from over 150 collision repairers and other industry stakeholders at the Canadian Collision Industry (CCIF)’s Quebec City meeting in April. “ ...To make a difference by working together, understanding different points of view, and proposing actions that will help strengthen the collision repair industry,” according to a participant.
CCIF’s meeting agenda certainly gave them a chance to get down to action during the afternoon breakout group sessions, a regular feature of CCIF meetings, where participants join the group of their choice.
Many attended the Parts & Materials Committee breakout, adding their voice on issues such as the use of recycled parts and information updating on aftermarket parts. Others joined the Attracting and Retaining, Education and Training and Communications groups for a lively afternoon of discussion and planning.
Earlier in the meeting participants listened to the case for increased use of recycled parts from speaker, Roger Fugere, of Le Cavalier Auto Parts. Michel Bourbeau, of the Quebec trade association, CCPQ, then outlined his organization’s goals and priorities for strengthening the collision repair industry in the province.
Insurer Desjardin’s Pierre Michaud provided a detailed insight into the strategy, performance, and issues facing his company. He emphasized the benefits of listening and co-operating with collision repairers, suggesting this can lead to harmony in which both insurers and repairers are successful and profitable.
In the committee reports Tracey Blouin (Education and Training) outlined the progress towards listing and detailing all training available to the collision repair industry. John Norris gave an update on progress with the “tool kit” that his committee is developing. This would be used by potential entrants to the industry, but also by collision repairers.
CCIF Chairman, Glenn Hickey commented on the dedication and active participation of attendees. “It is truly a pleasure to see collision repairers, insurers, trainers and suppliers all working in such a positive spirit of co-operation,” added Glenn. “The excellent sponsor support suggests that CCIF meetings are not only of value in their content, but in the opportunity that they provide for relationship building on both an individual and corporate level.”
W. James McNerney, Jr., 3M Chairman and CEO, told more than 3,300 shareholders at the 3M annual meeting on May 13 that the company continues to build momentum after delivering solid 2002 results.
"By focusing on the fundamentals of operating excellence, new product growth, international strength, and leadership development, we were able to deliver solid financial 2002 results," McNerney said. "We achieved these results by driving growth and operations, in large part through the success of the corporate initiatives: Six Sigma, 3M Acceleration, eProductivity, Global Sourcing Effectiveness and Indirect Cost Control. Last year, these initiatives had a combined profit impact of more than a half billion dollars," he said.
3M's solid results continued in the first quarter this year, with sales up 11 percent and earnings per share up more than 11 percent. Excluding special items, earnings per share increased more than 15 percent. Free cash flow was $644 million, up 26 percent from the year-earlier quarter.
"The entire 3M team is excited by these results," McNerney said. "At the same time, we know that economic and geopolitical uncertainty persists -- and it's important to maintain a cautious economic outlook in our planning."
While investing in growth, 3M also continues to pay an attractive shareholder dividend. In February, 3M increased its quarterly dividend for the 45th consecutive year. The company has paid dividends on its common stock without interruption for 87 years.
ADP Claims Services Group and Sherwin-Williams Automotive Finishes have announced a program for A-Plus(TM) members to increase their insurance claim volume by using ADP's web-based claims management applications with their existing computerized estimating systems.
"The strength of ADP's 'Get Connected' program is in its simplicity," said Brian Shenk, A-Plus Program Manager for Sherwin-Williams Automotive Finishes Corp. "A-Plus members can use their current estimating systems to participate. 'Get Connected' helps our members to expand their market by exposing their businesses to new trading partners."
"Our claims management platform connects and engages the entire claims community to reduce time and costs for each trading partner and improve customer satisfaction for policyholders," said John Kotsopoulos, vice president sales, collision repair services North America, ADP Claims Services Group. "We're excited Sherwin-Williams is participating in the 'Get Connected' program, which will promote direct repair program relationships and claim referrals for A-Plus members -- and that translates into assignments."
Since ADP posts participating business data on the web-based claims management system, insurance companies have the information they need to send assignments directly to those repair facilities.
To participate, A-Plus members must complete a business profile form that ADP Claims Services Group will share with insurance companies that need repair partners. The business profile includes information on the facilities' size and repair capabilities, estimating and imaging technology, current and desired insurance relationships, and contact information.
Ford Motor Company’s Customer Service Division has launched the Certified Collision Repair Network (CCRN) nationally after successful test results in Michigan and Ohio.
CCRN is designed to certify a national network of Ford and Lincoln Mercury dealer owned collision repair centers, providing the highest level of customer satisfaction and quality collision repair.
“In addition to providing customers with top-quality vehicle repairs, this new program is designed to meet the needs of both the insurance industry and dealers who want to enhance and improve their current operations,” said Dan Townsend, Ford’s CCRN Program Manager. “Under development and testing for the past year-and-a-half, the pilot program presently involves 27 dealers in three markets – Detroit, Cleveland and Cincinnati. The national roll-out will begin later this year and will ultimately include approximately 450 certified dealers across the U.S.”
The Jack Demmer Collision Center in Dearborn, Michigan, is the first shop to be certified in Ford’s new CCRN. Jack Demmer Lincoln Mercury has one of the largest collision repair facilities in the nation with more than 25 technicians working in a state-of-the art 35,000 square foot facility. Demmer’s entire team, led by manager Christopher Diroff, has successfully worked to meet tough certification standards since Ford first began testing the program last year.
“The team at Jack Demmer Lincoln Mercury really sets the standard for the rest of the dealers who will join the network,” said Townsend. “With CCRN, our customers can rest assured that their Ford and Lincoln Mercury dealers will repair their vehicles to factory standards.”
Before a dealer can participate in the CCRN program, Ford experts inspect each collision repair shop to ensure that it meets tough acceptance criteria. During the rigorous certification process, which follows an intensive ten-week training and program implementation stage, an independent third party company inspects estimating procedures, repair quality, equipment availability, training levels, mandatory government licenses, and customer satisfaction data.
Ford’s CCRN is also unique in that shops are required to have and use a computerized unibody and frame measuring system, providing both pre- and post-repair dimensioning reports tied to the overall process quality control program.
In an extra step to assure quality repairs, the independent experts, at the time of certification, perform a detailed formal inspection of three “in process” vehicles. Additionally, overall attractiveness in the customer waiting areas, work area organization, and lighting levels in shop areas are also evaluated.
All of these checkpoints, among other criteria, must meet Ford’s standards before shops are certified. Finally, to meet ongoing quality control standards, dealers must pass annual CCRN re-certification standards.
Ford’s certification program focuses on providing both vehicle owners and their insurance companies with a combination of high-quality repairs and high customer satisfaction. Key to the proven success in the pilot phase of the CCRN program is a unique process quality control program that provides for an eight-point inspection and quality evaluation during the repair process. The quality process is installed in the shop as a part of extensive onsite training in which all dealers participate prior to certification.
CCRN also requires shops to implement a new process for tracking customer satisfaction data. Collision Repair Industry INSIGHT worked with key insurers and dealers to develop an expanded Customer Satisfaction Indexing program which meets specific Ford requirements. The monthly reports track information by insurer and key quality trends, and targets and compares this information with industry benchmarks. This system also immediately “red flags” any concerns or issues.
Following the pilot phase now underway in Michigan and Ohio, plans call for a region-by-region national rollout in 2004. Ultimately, from its list of more than 1,200 dealers that perform collision repairs, Ford expects approximately 450 dealer-owned body shops to qualify for the new program.
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