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Letter to the Editor
This article originally appeared in the August 2003 Issue of INSIGHT
©2003 Collision Repair Industry INSIGHT All Rights Reserved
CIC Report from Fort Lauderdale: Remote Desk Auditors Face Questioning
Allstate Introduces New Direct Repair Program in Texas to Comply with New Legislation
PPG Reports on Q2 and Announces Awards
FinishMaster Files Form 15 with SEC to Delist Stock
Sherwin-Williams Reports on Q2
California May Re-introduce Insurer Owned Shop Legislation
Ford Names Codina Customer Service Division Vice President
Six BASF - Certified Body Shops Honored by Honda
Allstate Q2 Profits Up Significantly
Keystone CEO Charlie Hogarty to Retire in August 2004
Rick Tuuri Joins I-CAR as Director of Business Development and Field Operations
Georgia Collision Industry Association Discusses Steering
Unlicensed Car Dealer Fined Under New Michigan Law
Collision Repair Owner Prevails Over Sterling in Bolingbrook
California Court Rules for Caliber to Prevent BAR Action Against San Marcos Facility
INDUSTRY UPDATE
Third-party "desk auditors" faced some critics and tough questions during a panel discussion at the Collision Industry Conference (CIC) held in Florida, in late July.
Representatives of three companies that offer insurers remote reviews of repair estimates discussed their companies' histories, employee training and auditing practices. The three were asked, for example, whether they are compensated for their work based upon the amount they are able to reduce a shop's estimate.
"We are compensated on a per-file basis, whether there are savings or not," said John Gizzio of ACE, a Pennsylvania-based desk review company that audits more than 10,000 claims each month. "We do not take part of the savings. And we do...charge if there are no savings. We are compensated for every job that we do."
Mike Price, of the Georgia-based, 30-employee Audit Services, Inc., also said his firm is paid on a per-claim, per-assignment basis.
Mike Saliba, vice president of ComSearch's Ready Review desk auditing service, said his company's compensation is "based on a number of things, but savings is not one of them."
Gizzio said that some of the savings they offer insurers is not just in reduction in the bottom line of repair estimates, but in reductions in cycle time, rental costs, and direct expenses such as field adjusters.
The three were also grilled about state laws that some feel should limit the practice of remote auditing. All three said Massachusetts is the only state in which they do not offer their services because state law there requires physical inspection of any vehicle in which repair costs exceed $500.
"There are certain states where you cannot use a photograph to write an estimate, but auditing is basically reviewing what has been written by someone else," Gizzio said.
Saliba also said a number of states - including Vermont, New York, Connecticut and Rhode Island - require auditors to have appraisal or adjuster licenses, so his company makes sure that enough of its 58 reviewers have the licenses to handle claims in those states. But he also said he doesn't believe his company is adjusting claims.
"I don't believe it's an adjustment. It's an audit, not an adjustment," Saliba said.
All three of the companies say they are not using electronic systems that automatically flag certain items on estimates for review. Rather, the reviewer enters the estimate into the company's chosen estimating system - Mitchell for ComSearch and ACE; ADP for Audit Services - and checks it against the profile established by their insurer client.
While those "profiles" cover such things as non-OEM and salvage parts use, all three of the companies say they do not change "judgment" repair times.
"We do not adjust or change judgment items," Price said. "We apply our client's guidelines.… When it comes to a judgment item, obviously we haven't seen the damage."
The other two companies represented on the panel concurred. Although the three represent a majority of the desk audit market, nearly all shop owners at CIC raised their hands when asked if they have had judgment times changed as part of desk audits.
"There are other companies that do this work," Gizzio said. "We're not representing them, just our own companies here today.… If you put down a five-hour repair, you get a five-hour repair."
Price said he would recommend that if a remote auditor changes judgment times, the shop should call the insurer involved.
Other news and discussion
A wide variety of other subjects were also discussed during CIC in July. A sampling:
- A presentation on "black box" technology - the airbag control module that records such data as vehicle speed and braking when an accident causes the airbag to deploy - raised as many questions as it answered.
A representative of one insurer at CIC, for example, said his company has had several legal cases brought against it by attorneys saying the insurer destroyed evidence by not retrieving the black box data before disposing of a total loss vehicle. That has the insurer - and some shop owners at CIC - wondering what it should do with the airbag control modules that are replaced or that are sold with a totaled vehicle.
Also left unclear at the end of the discussion: Does the system that retrieves recorded information from the airbag control module allow the user to link a vehicle identification number (VIN) from one vehicle to airbag module information actually pulled from a different vehicle? And if the vehicle owner owns that data, who owns it after an insurer buys the vehicle as a total loss?
- Lirel Holt, chairman of the Coordinating Committee For Automotive Repair (CCAR), urged CIC participants to encourage schools offering automotive and autobody training to use CCAR's free online safety and pollution prevention training. About 800 schools are using the "S/P2" training, Holt said, but there are still about 3,800 other schools with auto-related programs.
Holt said each of the S/P2's two programs include testing and require about 45 to 90 minutes to complete. Federal regulations require safety and pollution prevention training for all employees, so Holt recommends that schools and shops check out the CCAR online training (www.sp2.org) or call CCAR at (866) 477-2669 for more information.
- CIC's Parts Committee has proposed that CIC oversee research into non-OEM parts certification groups (such as CAPA, the Certified Auto-motive Parts Association) and process validation programs (such as MQVP, the Manufacturer's Qualification and Validation Program) to review how well these programs accurately identify high-quality non-OEM parts.
The committee proposes that the research be funded by the programs themselves, which would be asked to voluntarily pay a fee to an independent evaluator to validate their processes.
The committee also plans to develop "best practices" for insurers, repairers, and parts distributors regarding use of non-OEM parts.
- The Society of Collision Repair Specialists (SCRS) announced it will conduct a study of the non-OEM distribution channel. SCRS Executive Director Dan Risley said an informal survey of shops found that almost 20 percent of the time a CAPA-certified part is ordered, a non-CAPA part is delivered, and that 25 percent of CAPA parts had to be returned.
To get more statistically valid data, SCRS will conduct a larger, more formal survey over the next several months. Participating shops will have to fill out a survey form each time a non-OEM part is ordered. To participate in the study, call SCRS's Risley at (708) 598-2384.
Allstate Insurance Company has announced plans to introduce a new direct repair program in the state of Texas. The new direct repair program (DRP) is needed to comply with restrictions placed on Allstate by Texas House Bill 1131, which became law June 20th.
The bill, prohibiting insurer ownership of collision repair facilities requires Allstate to change its existing relationships with auto body repair shops and provide uniformity between its owned and non-owned auto body repair operations.
“Allstate vigorously opposed this legislation in Texas,” said Allstate Assistant Vice- President John Edelen. “These are changes Allstate is being forced to make in our Texas claim strategy to comply with legislation we continue to view as anti-business and anti-consumer. In order for us to help ensure DRP referrals on identical terms for all facilities, it is necessary to create a new direct repair program in Texas.”
Effective August 1st, 2003, according to an Allstate press release, all existing Allstate direct repair relationships in Texas are being discontinued. Between now and August 1, all current Allstate DRP facilities in Texas are being sent applications to enter Allstate’s new direct repair program. With the application, shop owners and managers will have the opportunity to send updated information to Allstate outlining the current capabilities of their repair facility.
This information, along with historical Allstate DRP performance, current Allstate need in the market, and the geographical location of the repair facility, will be considered in the selection of Allstate’s new DRP facilities.
“Allstate has an obligation to our customers and claimants. We need to ensure our customers and claimants continue to receive high quality repairs in a timely fashion. In order to ensure this customer service and help ensure uniform treatment of each direct repair facility, as required by H.B 1131, Allstate needs to make sure our DRP facilities and capacity are properly dispersed to handle the potential flow of claim traffic,” Edelen said.
Allstate’s expectation is that most existing Allstate DRP facilities in Texas will choose to join and be included in Allstate’s new program.
“Allstate is committed to maintaining strong relationships with our direct repair facilities,” Edelen said. “The DRP relationship is an essential part of Allstate’s long-term claim strategy and we will continue working to make those relationships stronger.”
Edelen says Allstate’s intent is to have the initial phases of the new direct repair program operational before August 1, 2003 to ensure a smooth transition for Allstate customers, claimants, and direct repair program shops.
PPG Industries has reported second quarter net income of $152 million, or 89 cents a share, which includes aftertax charges of $7 million, or 4 cents a share, to reflect the net increase in the current value of the company's obligation under its previously reported asbestos settlement agreement, and $2 million, or 1 cent a share, related to restructuring. Sales for the quarter were $2.30 billion.
This compares with a net loss of $345 million, or a loss per share of $2.03, for the second quarter 2002, which included the $495 million aftertax charge, or $2.92 a share, for the asbestos settlement announced in May of last year, and income of $3 million, or 2 cents a share, related to a restructuring reversal. Sales for the quarter were $2.13 billion.
For the first six months of 2003, PPG recorded net income of $230 million, or $1.35 per share.
For the first six months of 2002, PPG recorded a net loss of $311 million. Sales for the first half of 2002 were $4.01 billion.
Coatings sales increased $62 million, or 5 percent, due to the strengthening of foreign currencies offset slightly by lower prices in the automotive original equipment business. Volume gains in Asia nearly offset declines in North America and Europe.
Operating earnings were down $9 million largely because of higher pension and retiree medical costs and inflationary cost increases.
Glass sales increased $20 million, or 4 percent, on stronger volumes in the automotive original equipment and automotive replacement glass businesses as well as the strengthening of foreign currencies.
In other company news, the Global Refinish System (GRS) from PPG Automotive Refinish has been selected by GM's Collision Repair Technology Center (CRTC) in Warren, Michigan for evaluation and research.
The CRTC, established over 20 years ago, is a research center where GM evaluates new technologies and develops field repair procedures for its OEM vehicles.
PPG Total Service Solutions was recently awarded chemicals management programs at the General Motors Corp.'s Wentzville, Mo., Oklahoma City and Janesville, Wis. assembly plants to help the automaker reduce total costs associated with managing indirect chemicals and product vendors. Initial implementation of the programs began in May.
Finally, PPG's more than 300 Platinum Distributors have joined the Automotive Service Association (ASA) as associate members.
FinishMaster, Inc., the national independent distributor of automotive paints and related accessories, has filed a Form 15 with the Securities and Exchange Commission in order to effect a termination of registration of its common stock under the Securities Exchange Act of 1934.
Under the SEC's rules, a company with fewer than 300 record holders may voluntarily terminate the registration of its securities by filing a Form 15 pursuant to which it certifies the number of record holders of the class of securities registered is less than 300. FinishMaster currently has fewer than 300 record holders.
Registration of the securities will not terminate until 90 days after the filing of the Form 15. However, the company's duty to file periodic reports, such as 10Qs and 10Ks, is suspended immediately upon filing the Form 15.
Because FinishMaster's securities will no longer be eligible for listing on the NASDAQ Small Cap Market, the company's common stock will immediately be delisted. The company anticipates its shares will trade in the over-the-counter market and be quoted in the Pink Sheets quotations system.
According to a company press release, FinishMaster is taking this action for a number of reasons, foremost of which is to reduce the corporate costs associated with being a "reporting company" under the 1934 Act. The Board of Directors concluded that the advantages of being a reporting company did not offset the costs involved, the thinly traded stock, and the competitive disadvantage in a field of privately-owned competitors.
Andre B. Lacy, Chairman and Chief Executive Officer of FinishMaster, stated it is the company's intention to provide its shareholders annual audited financial information as well as to make available on its website unaudited quarterly financial information.
The Sherwin-Williams Company has announced its financial results for the second quarter and first six months ended June 30, 2003.
Consolidated net sales increased 1.3 percent in the quarter to $1.47 billion from $1.45 billion during the same quarter last year and 0.7 percent in the first six months to $2.62 billion from $2.60 billion in the first half of 2002.
Diluted net income per common share increased in the quarter to $.75 per share from $.70 per share in 2002. The net loss after cumulative effect of change in accounting principle for the first six months of 2002 was $40.8 million, or $.27 per common share.
The Automotive Finishes Segment's net sales decreased 1.9 percent to $121.3 million in the second quarter and 3.2 percent to $227.7 million in the first six months versus the comparable periods last year. Net sales for the Segment increased 0.5 percent and 0.3 percent for the second quarter and first six months, respectively.
Domestically, a reduction in the number of repairable vehicles continued to restrain growth in collision repair sales while the slowly recovering automotive market continued to hamper OEM sales improvements.
Operating profit in this Segment decreased to $15.3 million from $17.7 million in the second quarter and to $25.4 million from $29.2 million in the first six months. This Segment's operating profit was negatively impacted in the second quarter and first six months primarily by lower sales volume, related manufacturing absorption and the reduction in net pension credit compared to last year.
In a press release after the Texas signing of House Bill 1131 into law, the California Autobody commented, in part:
The California Autobody Association (CAA) has been patiently waiting this year to see if Texas would be successful on their legislation prohibiting insurers from owning auto repair shops. On Friday, June 20, Republican Texas Governor Rick Perry signed into law Texas House Bill 1131, the Insurer-Owned Repair Facility Legislation.
The bill prohibits insurance companies from owning auto repair facilities in Texas. This bill was amended to allow facilities currently owned by insurance companies to remain in business if they meet certain criteria outlined in the legislation.
Last year, the CAA sponsored SB1648 (Speier) prohibiting insurer owned shops in California but it was defeated on the Assembly floor. The CAA still has time this year to introduce legislation prohibiting insurers from owning body shops and is seriously looking at options.
The SB 1648 reasons for preventing insurer owned shops were as follows:
- Inherent conflict of interest
- Creates anti-competitive behavior
- Provides consumer with less choice
- Potential for fraud.
The California Autobody Association is a not-for-profit organization comprised of approximately 1000 collision repair businesses and associated professionals belonging to the collision repair industry.
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Ford Motor Company has named Francisco "Cisco" Codina Vice President, Ford Customer Service Division, effective immediately.
He succeeds Kathleen Ligocki, who has been appointed president and chief executive officer of Tower Automotive, a supplier of body and lower vehicle structures, suspension components and modules.
"Kathleen is a talented automotive executive, and this is a terrific opportunity for her," said Bill Ford, chairman and CEO. "I want to thank her for all of her contributions to the company during her time here."
Codina joined Ford in 1977 in the Customer Service Division as a parts and service representative in New Orleans. He held several leadership positions for 15 years at FCSD before moving to Lincoln-Mercury marketing. He has also worked in two international assignments - as president of Ford Argentina and in Marketing and Sales in Ford of Mexico.
He most recently was General Marketing Manager of Ford Division, a position he has held since March 2001. Codina will report to Jim O'Connor, Group Vice President of North America Marketing, Sales and Service.
"Cisco's past experience at the Customer Service Division as well as his knowledge of dealerships and the needs of customers from his job at Ford Division will be valuable in his new role," added Mr. Ford. "I look forward to working with Cisco as he leads the division in its effort to help meet the goals of our Revitalization Plan."
Six dealer-owned collision repair facilities that use BASF refinish systems exclusively have been recognized by American Honda Motor Co. as meeting its stringent standards for high-quality work and customer value.
The six BASF-certified collision repair facilities recognized by Honda were:
- Jeff Wyler Body Shop, Wilder, Ky.
- Brown Paint & Body Center, Toledo, Ohio
- Casey Collision Center, Newport News, Va.
- Schaefer & Strohminger Collision Center of Belair, Baltimore, Md.
- O’Donnell Collision Center, Baltimore, Md.
- Honda of Hollywood Collision Repair Center, Hollywood, Calif.
Gene Hausknecht, Manager, OEM Services, for BASF’s Automotive Refinish business commented, “We congratulate the six businesses that have been honored by Honda. Their selection shows that a genuine and consistent commitment to training, professionalism and customer service -- which are hallmarks of BASF’s certification program -- is the key not just to recognition, but to business success.”
The Allstate Corporation has reported, for the second quarter of 2003, net income of $588 million, a 75 percent increase in net income EPS, and a 33 percent increase in Operating Income EPS.
Property-Liability Premiums written grew 6.3 percent over the second quarter of 2002, with the Allstate brand standard auto and homeowners lines growing 6.9 percent and 12.7 percent respectively.
Allstate brand standard auto policies in force (PIF) grew 0.4 percent compared to the first quarter of 2003, which is its first sequential quarterly increase since the fourth quarter of 2001.
Charles J. Hogarty will retire as chief executive officer of Keystone Automotive Industries, Inc. effective the end of August 2004.
"We greatly appreciate Charlie Hogarty's dedication and commitment to the company over the past 43 years, having served in a variety of positions with the company prior to being named president in 1987 and chief executive officer in 1997," stated Chairman Ron Foster.
The company has engaged Korn/Ferry International to conduct a search for a chief executive office to replace Hogarty.
"Under Charlie's leadership, Keystone firmly established itself as the leader within the collision replacement parts aftermarket industry.... Charlie was the leading force in taking the company public in 1996. He also engineered the acquisition of numerous competitors in a highly fragmented industry, which increased Keystone's ability to serve its customers through a nationwide network of warehouse and distribution facilities. Among Charlie's other accomplishments was his work with leading insurance companies on the merits of utilizing aftermarket parts.... The company is well positioned to continue this growth under Charlie's successor," Foster added.
"I feel very fortunate to have had such a long and rewarding career at Keystone, and I am confident that our strong management team will be able to continue the long record of success after I leave in August of 2004. I look forward to contributing in any way I can to Keystone. At the same time, I look forward to enjoying additional time with my family," Hogarty said.
Rick Tuuri has been named as I-CAR's new Director of Business Development and Field Operations. In his new position, Tuuri will be directly responsible for the I-CAR Field Operations and Marketing departments. He will also represent and act as spokesperson for I-CAR to promote the I-CAR mission, the value of I-CAR training and in developing inter-industry partnerships.
Before taking on this position, Tuuri was employed by ADP-CSG for 24 years. Over the course of his employment at ADP he held positions such as Senior Director of Industry Relations, Database Product Manager/Director of Industry Relations, Director of Database Development, Parts Develop-ment Manager, and Manager of Traffic and Reprographics.
Tuuri has also had numerous professional achievements and recognitions: member of the prestigious Collision Industry Hall of Eagles, Chairman of NACE Exhibitor Advisory Council, I-CAR Board of Directors Chairman, member of the I-CAR Education Foundation Board of Trustees, Board Member of National Auto Body Council, and member of IADA Advisory Council.
"Rick's professional achievements speak for themselves for not only his distinguished presence within the industry but also in how much he is respected by his peers. We are very pleased and fortunate to have Rick join I-CAR," said I-CAR Executive Vice President and CEO Tom McGee. "Rick's past experience and dedication in working with I-CAR, the I-CAR volunteers and instructors, and the I-CAR Education Foun-dation provides a tremendous background that will be extremely valuable to further improving the way that we deliver and market training to the industry."
Tuuri commented, "I just couldn't be more excited. I-CAR has a mission and a vision that I believe in."
The Georgia Collision Industry Association's (GCIA) main agenda topic at its recent July meeting was an open discussion on “steering” of collision repair customers. A panel of GCIA leaders, Tom Durden and Gene Hamilton, as well as Georgia State Senator Tom Price, Republican from the 56th District, led the discussion.
The purpose of the discussion was to determine if members are experiencing any illegal steering practices and to gather input from members on how best to address the issue from an association standpoint. The 60-plus members present brought up many related aspects of the issue, including the pros and cons of DRPs. The existing law governing steering in the state of Georgia was discussed and Senator Price pointed out that this law is very vague and ambiguous, written this way to make all sides happy, but lacking any real teeth.
The outcome of the discussion was that the association should research conducting an aggressive consumer education campaign to inform them of their insured motorists’ rights in the state of Georgia.
Howard Batchelor, Operations Manager of the GCIA, said, “You usually have only one opportunity to educate your customer about their right to choose a shop of their choice so each and every shop should use this opportunity to educate the customer. The GCIA is going to pull together the details on our campaign and we’ll bring this information back to the body at the next meeting in September.”
Batchelor passed out information about insured motorists’ rights in Georgia and this document is now available for download in PDF on the GCIA website. This information was obtained from the Society of Collision Repair Specialists (SCRS) in which GCIA is an affiliate member.
The GCIA is a statewide association dedicated to promoting professionalism and consumer awareness of the automotive collision repair industry in the state of Georgia.
Michigan Secretary of State Terri Lynn Land has announced that a Wayne County man will be the first person fined by the Depart-ment of State under a new law targeting unlicensed vehicle dealers.
"Purchasing a vehicle is a major investment for families," said Secretary of State Terri Lynn Land. "They deserve to get what they pay for. Unfortunately, there are unlicensed dealers who are making a buck at the expense of Michigan residents. Our message to these folks is simple: Get a license or get out of business."
Benjamin L. Ragsdale, 16425 Weddel St., Taylor, is being fined $5,000 for allegedly buying and selling eight vehicles between March and June.
The Michigan Vehicle Code defines a dealer as anyone who buys, sells, exchanges, brokers, leases or deals in five or more vehicles within 12 months. Dealers must be licensed by the Department of State.
Public Act 652, which took effect Jan. 1, amends the law by authorizing the Department of State to impose fines of up to $5,000 for the first violation and a maximum of $7,500 for each subsequent offense occurring within seven years.
Land noted, "Consumers are afforded certain legal rights when they buy from a licensed dealer."
Buyers at unlicensed dealers have virtually no recourse if they have problems with vehicles. Some unlicensed dealers are criminals selling vehicles with altered identification numbers, stolen parts, forged titles, or collision damage that was not properly repaired.
Land emphasized that the department is not discouraging consumers from buying vehicles from "private sellers." Private sellers are individuals who are simply disposing of a vehicle that they had purchased for personal or business use.
Teresa Kostick, owner of All Line CARSTAR in Bolingbrook, Ill., fought against Allstate Corporation and won. Allstate had plans to build a Sterling Autobody three miles from Kostick's shop in Bolingbrook. The village trustees voted against the Sterling Autobody project in a 5-0 vote.
Bolingbrook is a small village with approximately 69,000 residents. The village already has three collision repair centers. Kostick petitioned the village and asked them to take a look at the economic impact a Sterling Autobody would have on the collision repair business in Bolingbrook.
She used Mitchell statistics to show that there was simply not enough collision repair business in the village to support another collision repair center. The three existing shops in Bolingbrook were already not operating at capacity. Allstate, on the other hand, argued that the Sterling Autobody would pull business into the village.
Initially, the Planning and Zoning committee voted to allow Allstate Corporation to build the Sterling Autobody facility. However, this decision was reversed by the trustees who agreed with Kostick: Bolingbrook did not need any more collision repair centers if the village did not have enough business to support the three already in existence.
In comparing her situation to the Blue Island, Ill. situation, where Allstate filed suit against the town's trustees and was eventually allowed to build its facility, Kostick said, "I don't know what leg they'll have to stand on. It was a 5-0 vote."
She continued, "Bolingbrook isn't starved for revenue, and we have a mayor that's not afraid to fight."
On June 30, Caliber Collision Centers prevailed over the California Bureau of Automotive Repair (BAR) in an order issued by Judge Lisa Foster of the Superior Court of the State of California, County of San Diego.
Caliber went before the Court to seek emergency relief to stop the BAR's surprise efforts to close the operations of Caliber's San Marcos repair shop by denying the facility an updated registration that Caliber was legally entitled to receive. The Court granted the relief on the grounds that the BAR was engaging in conduct that illegally and unconstitutionally abused Caliber's rights and violated the state's Automotive Repair Act.
In a press release, Caliber stated that the BAR's most recent conduct is only the latest in a pattern of regulatory abuse, according to Caliber's statement.
This decision in favor of Caliber represents the company's second successful legal action against the BAR in 2003. Earlier in the year, Caliber filed suit against the BAR to compel the agency to stop illegally issuing Notices of Violation and to prevent the BAR's inappropriate disclosure of data that was being used by unscrupulous lawyers engaging in frivolous lawsuits. As a result of Caliber's suit, the BAR stopped both practices.
Founded in 1997, and headquartered in Irvine, California, Caliber employs over 1,000 employees and has 38 collision repair centers in California.
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