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Letter to the Editor
This article originally appeared in the June 2004 Issue of INSIGHT
©2004 Collision Repair Industry INSIGHT All Rights Reserved
SCRS Releases Initial Results of Aftermarket Parts Study
CARQUEST and FIX AUTO Enter Strategic Partnership Agreement
AAIA Launches Data Audit and Certification Service
FinishMaster Q1 Earnings Up 18%
ASA Announces Collision Division Operations Committee
BASF Seminar Teaches Paint Fundamentals to Jaguar and Land Rover Field Service Engineers
Trevethan Enterprises to Develop New Estimating Databases
UnitedAuto Group Enters Northern California
Sherwin-Williams Acquires Duron
CCC Information Services Signs Agreement with CompUSA
Valspar Reports Q2 Net Income Up Almost 22%
Mentors at Work's Mark Claypool on International E-Conference Panel
3M CEO Says Customer Dedication and Innovation Drive Solid Growth Momentum
June 12th is Automotive Service Professionals Day
Earl Scheib Signs Letter of Intent to be Acquired by Elden Holding Group
INDUSTRY UPDATE
The Society of Collision Repair Specialists (SCRS) has released the preliminary results from a study that focused on the distribution and quality issues surrounding non-OEM parts.
Beginning late last summer, SCRS disseminated an aftermarket parts data collection form to collision repairers all across the country and requested that they fill out the form when they ordered certified aftermarket parts such as lamps, sheet metal and bumpers.
According to Dan Risley, Executive Director of SCRS, "Although the data is not statistically valid due to the small sampling of returned surveys, the results illustrate several trends and a few that conflict with what several non-OEM parts manufacturers, certifiers and distributors have reported to the industry.
"As an example, it has been reported that the return rate of aftermarket parts is less than 10 percent. Our study shows an alarming 49 percent of the 118 parts ordered were returned. Moreover, it has been stated on several occasions by (CAPA) Certified Automotive Parts Association that they receive complaint forms on less than 2 percent of all their certified parts. This doesn't compare with our findings of 7.5 percent.
"Another key early finding is that 69 percent of the 64 non-OEM parts orders placed had at least one part returned," stated Risley. "If this statistic is validated after compiling more data, one could only guess the negative impact it is having on cycle time."
Of the parts that were returned, 88 percent were replaced with OEM parts.
"We believe that this high percentage of lost sales will spur non-OEM parts manufacturers and distributors to look at ways of improving their respective businesses and capture those lost opportunities," said Risley.
Risley was quick to point out that the results of this effort simply provide data to analyze, but by no means is it meant to be misconstrued as a statistically valid sampling. He further stated that in this type of situation, it is feasible for someone to focus on the weaknesses and not the positives.
SCRS hopes that publicizing the initial results will increase awareness and will prompt repairers all across the country to take the time to complete a survey on each and every aftermarket parts order for a short period of time.
"If repairers spent a few minutes each time they ordered certified aftermarket parts for the next 30 days, we would be able to gather some very powerful data. This data would enable us to pinpoint supply chain issues and address them accordingly. All too often we hear people say that the parts were 'no good' and unfortunately, that is all the data supplied. We have a chance to work on the specifics - let's not let that pass us by," said Risley.
Repairers wishing to participate are asked to download the survey form on the SCRS website, contact the SCRS Administrative Office at (877) 841-0660 or e-mail to scrs1@aol.com.
"Ultimately, SCRS hopes to identify areas where improvements can be made to the entire non-OEM supply chain that will benefit everyone involved," Risley concluded. "Working together is the most important work we do.”
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FIX AUTO has named CARQUEST as the exclusive supplier of automotive parts to the FIX network. In addition, CARQUEST will provide equipment and leasing services to FIX members.
Through this agreement, FIX will be able to offer its members a national supplier agreement for all automotive parts.
“Our goal in working with CARQUEST is to establish a strong partnership with the nation’s leading automotive parts distributor,” said Doug Kelly, president and COO of FIX AUTO USA. “CARQUEST is committed to supporting independent repair centers and they have coverage everywhere -- two important factors when partnering with suppliers.”
Both companies have agreed to support each other in the growth of their business.
Art Lottes, CARQUEST president, commented, “We view this as more than just a supply agreement. FIX AUTO USA and CARQUEST are both quality companies that are focused on the customer. We are confident that this partnership will build value for both organizations and for the customers of FIX AUTO.”
CARQUEST began in 1974 with 100 auto parts stores. Today there are nearly 4,000 CARQUEST stores in North America.
The FIX AUTO Network was established in 1997. Headquartered in Anaheim Hills, Calif., FIX has 148 locations in the U.S. and 135 locations in Canada, making it North America’s largest network of independent collision repair centers.
The Automotive Aftermarket Industry Association (AAIA) has announced a new service that enables aftermarket manufacturers and suppliers to audit and certify product information compliance with the Product Information Exchange Standard (PIES).
The Data Audit and Certification service (DAC) is provided in partnership with Comergent Technologies, Inc., a leading demand chain management software applications company based in Redwood City, California.
The Product Information Exchange Standard is the industry standard template for nearly 200 fields of item-level product information.
The DAC service is available to test and certify that aftermarket suppliers are in compliance with the standard. The PIES standard and now the DAC service enable complete and accurate product information data exchange between aftermarket trading partners.
Agreement and compliance with a common data standard are critical first steps to the long-term goal of industry-wide product information management and synchronization.
In 2003, AAIA conducted a PIES pilot study of basic product data essential to automated e-commerce. The research concluded that errors in part numbers, UPC codes, minimum order quantities, units of measure and other related fields contribute to $1.7 billion in annual wasted expense throughout the aftermarket industry.
The study underscored the pressing need for an industry-wide initiative to cleanse product information and synchronize the data between suppliers and their trading partners.
"The aftermarket industry has awoken to the staggering cost of product data errors in collaborative e-business," explained Scott Luckett, vice president of technology standards and solutions, AAIA. "The Data Audit and Certifi-cation service will enable suppliers to synchronize clean and accurate data with their customers and to begin lowering their respective costs. Everyone wants to see more ROI from their investments in technology and DAC is an essential step to reaching that goal."
"We are excited to partner with AAIA as the solution provider for the PIES Data Audit and Certification service," said Jean Kovacs, president and CEO, Comergent. "Ensuring complete, accurate, and standardized product data throughout an industry is primary to realizing benefits from investments in collaborative e-business initiatives such as multi-vendor catalogs, vendor managed inventory, and automated order capture and processing. The aftermarket in-dustry is leading the way for other industries to follow suit."
FinishMaster, Inc. has reported that net income for the first quarter of 2004 increased 18 percent, to $3,282,000, or $0.42 per share, compared with net income of $2,773,000, or $0.35 per share, in the prior year period. The improvement in net income for the quarter compared to the prior year period was a result of higher net sales and decreased interest expense.
The increase in net sales was due to positive same branch sales growth and prior year acquisitions.
The increase in same branch sales is attributable to various sales and marketing initiatives implemented during the prior year designed to increase the company's competitiveness and market presence.
The prior year acquisition that had a significant impact on the company's current quarter sales increase was the Automotive Refinish Technologies acquisition which resulted in FinishMaster’s entry into ten new markets.
Higher gross margin dollars resulted from increased sales volume, partially offset by a 130 basis point decline in the margin rate. The deterioration in margin rate was a result of higher shipping and handling costs as a percentage of net sales, increased discounts to attract and retain customers, and the lower margin-rate fulfillment business representing a greater share of our overall sales verses our full-service business.
Operating and selling, general and administrative expenses as a percentage of net sales decreased 90 basis points to 23.4 percent as a result of expenses increasing at a lower rate than net sales.
The increase in overall expense dollars was due to the selling and operating expenses associated with the ten branch locations acquired in the prior year from Automotive Refinish Technologies; higher wages and benefits associated with the company's initiative to increase sales personnel; increased insurance costs; and higher bad debt expense.
FinishMaster is headquartered in Indianapolis, Indiana, and operates three major distribution centers and 165 branches in 27 of the 35 largest metropolitan areas in the country.
In elections held earlier this year, Automotive Service Association (ASA) members elected Michael Anderson, Wagonwork Collision Center, Alexandria, Va., as collision division director. As such, Anderson serves on ASA’s board of directors and chairs the 2004 ASA Collision Division Operations Committee.
The remaining members of the operations committee were named by ASA’s board and include Darrell Amberson, AAM, Lehman’s Garage, Bloomington, Minn., who is serving as assistant division director.
In addition to Anderson and Amberson, returning committee members are Chuck Sulkala, AAM, Acme Body & Paint, Boston, Mass.; Jerry Burns, AAM, Automotive Impressions Inc., Rio Rancho, N.M.; Myron Hazen, AAM, Collision Repair Center, East Moline, Ill.; Carroll Proctor, A.C. Proctor’s Paint & Body Shop, Augusta, Ga.; and Harry Moppert, Moppert Brothers Collision Services Group, Morton, Pa. New to the committee are Russ Verona, AAM, East Rockford Collision Center, Rockford, Ill.; Ron Nagy, AAM, Nagy’s Body & Frame Shop Inc., Doylestown, Ohio; Steve McDonnel, Grand Prix Body & Paint Inc., Phoenix, Ariz.; and Dan Bailey, CARSTAR Inc., Overland Park, Kan.
The 11 members of the ASA Collision Division Operations Committee represent shops of varying sizes from across the United States. The committee works on behalf of all ASA collision members to advance and promote the collision repair industry.
Seventeen North American Field Service Engineers from automakers Jaguar and Land Rover recently completed an intensive three-day seminar called “Paint Fundamentals” at BASF’s Coatings Campus in Southfield, Mich. The seminar included information on the latest technologies, processes and products in automotive Original Equipment Manufac-turer (OEM) and refinish paints.
“Field Service Engineers are naturally inquisitive individuals, eager to learn more about all things automotive,” said Scott Tucker, Manager, Dealer Technical Support for Jaguar and Land Rover. “This seminar certainly increased our group’s understanding of automotive paint systems and the repair process.”
The seminar was conducted by research chemists and application specialists from BASF’s Automotive OEM and Auto-motive Refinish Coatings businesses.
According to Joe Skurka, Manager of OEM Relations for BASF’s Automotive Refinish business in North America, the purpose of the seminar was to familiarize the service engineers with automotive coatings chemistry and with the relationship between original equipment paint applied at the factory and the paint and application processes used in collision repair facilities.
“As a major worldwide supplier of paints to the automotive OEM and refinish industries, BASF ensures that OEM and refinish paint technologies are compatible and that the finish of a repaired vehicle is indistinguishable from its factory finish,” said Skurka. “The field service engineers serve as the technical liaison between the factory and the dealership’s collision repair shop, and the seminar was designed to teach them about the technical requirements and issues involved in paint repair.”
In addition to basic paint chemistry, the seminar covered OEM application processes and OEM color development and control.
BASF’s Application and Research Center in Southfield includes a 17,000-gallon primer tank and state-of-the-art robotic spray equipment. The seminar participants were able to see how car bodies are painted in an assembly plant.
“Seeing this process up close takes some of the mystery out of how cars get painted,” said Skurka.
The seminar’s second day was devoted to the repair process. Participants learned how to identify common paint defects and their causes, and practiced repairing automotive panels. The third day included a lively roundtable discussion about painting and repairing vehicles.
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Trevethan Enterprises, the group that brought the industry the Comp-Est collision repair estimating system, is developing a new estimating database for the North American collision repair industry.
“Back in 1991, we created an estimating system because we kept hearing from the industry that the existing estimating systems weren’t meeting their needs,” Brian Hemker, general manager of Trevethan Enterprises, said. “Now we see a similar need to offer the industry a more viable solution with regard to estimating databases.”
Trevethan Enterprises is the parent company of Superior Marketing Solutions, distributors of a shop management system; and Enterprise Logistics, which helps facilitate electronic communication of estimates and other data between shops and insurers.
As director of this new database development project, Jason A. Schmidt said he was “pleased to lead Trevethan Enterprises’s effort to create a new estimating database that better meets the needs of the collision industry in North America.”
Schmidt noted, “Chris Trevethan and I both share an interest in developing innovative tools that are more timely, flexible and powerful than those currently in use today.”
Trevethan Enterprises is currently soliciting input on the design and structure of the database from all segments of the collision industry. More information is available at the company’s database website, or by calling toll-free 1-866-881-1487.
UnitedAuto Group, Inc. has signed a definitive agreement to acquire four Honda franchises and two Acura franchises from the Ted Stevens Automotive Network in the San Francisco Bay area.
The franchises to be acquired are:
- Capitol Honda in San Jose
- Marin Honda in Marin County
- Honda North in Fresno
- Gavilan Honda in Gilroy
- Los Gatos Acura in San Jose/Los Gatos
- Sunnyvale Acura in San Jose/Sunnyvale.
Commenting on the acquisitions, UnitedAuto Chairman Roger Penske said, "These outstanding businesses represent a unique opportunity to enter the northern California market with a substantial footprint. These dealerships expand our presence in California and further illustrate our disciplined acquisition approach to develop scale in selected markets. We are excited to add the Honda and Acura brands to our existing portfolio in California."
The transaction is expected to close during the third quarter of 2004.
UnitedAuto currently operates 12 franchises in southern California. Upon completion of this transaction, UnitedAuto will operate 18 franchises in California and 20 Honda and Acura franchises in the United States.
UnitedAuto, which has pursued a strategy based on internal growth from its existing dealerships, as well as from strategic acquisitions, operates 136 franchises in the United States and 84 franchises internationally, primarily in the United Kingdom. UnitedAuto dealerships sell new and used vehicles, and market a complete line of after-market automotive products and services.
The Sherwin-Williams Company, the largest U.S. paint manufacturer, plans to buy competitor Duron Inc. for $253 million in cash to expand its manufacturing capacity.
Privately held Duron, based in the Baltimore/Washington area, is a leading paint and wallpaper company in the Eastern United States with annual sales of about $350 million.
The company owns and operates 231 stores, with plants in Maryland and Georgia. Duron, which has about 1,600 employees, was founded in 1949 by Harry Feinberg and is headed by his son, Robert Feinberg.
The acquisition, which also involves the assumption of unspecified financial obligations, is expected to close in the company’s second or third quarter and will add slightly to its earnings in the first year.
CCC Information Services Inc., a supplier of information and technology software and services to the automotive-claims and collision-repair industry, has signed an agreement with CompUSA to provide CCC classroom facilities for training on CCC Pathways products.
CompUSA is the nation's leading retailer and reseller of personal computer-related products and services.
Through the agreement, CCC can now conduct CCC Pathways training courses at any of the more than 185 CompUSA locations that have classroom facilities onsite.
CCC-certified sales staff will lead the training sessions, which will cover topics ranging from installing CCC Pathways monthly updates to writing electronic estimates.
"CCC's agreement with CompUSA benefits both the repair facility and its technicians," said Pete Gorka group vice president, automotive services group (ASG) at CCC. "Technicians stay current with the latest CCC Pathways information, while the repair facility benefits from a well-trained workforce."
"CompUSA will be providing CCC Information Services with access to training locations nationwide," said Bill Maddox, CompUSA's VP of Business Services and Technology Training. "Our training facilities are complete with personal computers, audio/visual equipment and high-speed broadband access."
CompUSA will assist in a smooth training delivery by outfitting each trainee with the latest computer equipment to use during the training classes.
Training remains a top issue in the collision repair industry. According to recent research conducted, nearly 75 percent of repairers surveyed cited that keeping up with the demand for highly trained employees was a top concern.
CCC also places importance on training, with each of its 60 ASG account representatives recently completing a sales certification program. The program, designed to meet ISO-9000-compatible professional business excellence standards, was developed to focus on the needs of the CCC Pathways software user.
Added Gorka, "Much like the repair technicians we serve, it is equally important that the ASG staff receives ongoing training. Having the latest information at our fingertips will allow us to better serve our customers and strengthen the value our products can bring to their business."
The Valspar Corporation has reported net income for the second quarter ended April 30, 2004 of $39,089,000, up 21.6 percent from net income of $32,157,000 for the comparable period last year. Diluted earnings were $0.74 per share, versus $0.62 reported a year ago. Sales for the quarter increased 13.6 percent to $638,387,000, compared to $561,770,000 last year.
Net income for the first six months of fiscal 2004 was $57,475,000 compared with $47,776,000 for the same period a year ago. Sales for the first half increased 10.6 percent to $1,139,978,000 compared to $1,030,741,000 during the comparable period a year ago.
Commenting on the second quarter, Richard M. Rompala, Chairman and Chief Executive Officer, said, "Second quarter results benefited from the recovery in the U.S. industrial economy.... We are pleased with our first half growth and expect good sales momentum for the balance of the year.
"With an improved economy and high oil prices, we are seeing significant increases in our raw material costs. We are taking aggressive measures to offset these cost pressures with cost reduction initiatives, productivity improvements and pricing actions where appropriate in the marketplace."
Mark Claypool, President and CEO of Mentors at Work, served as a featured panelist addressing the topic "Human Empowerment: The Role of Mentoring" during an international Internet conference on the subject in early May.
Claypool’s Mentors at Work partners with automotive and collision repair facilities to build and maintain effective, in-house apprenticeship programs.
Also joining Claypool was Kathy Moore, Mentors at Work’s Personal Trainer, a specialist in interpersonal relations.
The conference, according to John Watkins, founder and creative director of The Simple Society Alliance for Human Empowerment, is one in an ongoing series focused to achieve a single mission: “To design a new, innovative model of a simpler, more humane society that empowers everyone to achieve their full potential; a society that actually solves its problems, and treats everyone fairly.”
“As the automotive and collision repair industries in the USA embrace the use of apprenticeships more and more, our participation in this conference keeps us on the cutting edge of world-wide mentoring issues,” said Claypool.
“True apprenticeships require commitment from the top down, proper selection of mentors and apprentices, training of mentors, a road map to follow and a tracking system,” Claypool added. “Anything less and shops usually end up losing more than they gain when trying to grow their own talent. That’s why so many shops don’t even try anymore, but that won’t solve our long term challenges with human resources.”
For more information, visit the Mentors at Work website.
3M continues to deliver solid growth in sales, profit and cash flow while also maintaining a strong balance sheet, said W. James McNerney, Jr., chairman of the board and CEO, to approximately 3,500 people at the company's annual meeting of stockholders held in May in St. Paul. Consistent with 3M's time-honored legacy, relentless dedication to customer service and worldwide innovation are the keys to company's ongoing growth acceleration, he remarked.
"By any measure, 2003 was a tremendous year for 3M and the 3M team," McNerney said. "2003 was a year in which all of 3M gained momentum; and confidence in our future continued to build. The board reflected that confidence with its approval of the 2-for-1 stock split that took effect in September."
"In 2004, we're re-dedicating ourselves to hearing and valuing the voice of our customers as never before. We are increasingly viewed not just as product sellers, but as problem solvers - as a source of innovative solutions and a contributor to our customers' success." McNerney added, "New products are the engine of 3M growth - always have been and always will be."
McNerney praised 3M employees around the world for delivering the results under conditions of continued economic and geopolitical uncertainty.
3M's solid growth momentum continues in 2004. First-quarter sales of nearly $5 billion increased more than 14 percent compared to the first quarter 2003. In addition, operating income, earnings per share and free cash flow also increased at solid double-digit rates.
In 2001, the National Institute for Automotive Service Excellence (ASE) established National Automotive Service Profes-sional's Day on June 12 to honor the commitment and dedication of automotive, truck and collision technicians, along with parts specialists and other support professionals who serve the motoring public. All will again be recognized in the 2004 Chase's Calendar of Events.
“We can’t do enough to recognize the men and women who service and maintain the highly complex vehicles upon which we depend for our day-to-day transportation,” said Ron Weiner, ASE president. “Their skill and dedication are second to none, and ASE created National Automotive Service Professional's Day to spotlight these individuals for their commitment to their customers, their craft and the automotive industry at large.”
Incorporated on June 12, 1972, the National Institute for Automotive Service Excellence was established as a non-profit organization to help improve the quality of automotive service and repair through the voluntary testing and certification of automotive technicians and parts specialists.
Today, there are more than 420,000 ASE- certified professionals who work in dealerships, independent shops, service stations, collision repair shops, auto parts stores, fleets, machine shops, schools and colleges throughout the country.
The Board of Directors of Earl Scheib, Inc. has approved the execution of a Letter of Intent with Elden Holding Group, LLC , a private real estate investment company whereby Elden will acquire all of the company's issued and outstanding capital stock for approximately $15,000,000, plus assumption of certain transaction and related costs estimated at over $2,000,000. Elden has received a preliminary financing commitment from Kimco Realty Corporation to provide acquisition financing. Earl Scheib currently has approximately 4,380,000 shares of common stock issued and outstanding.
Robert M. Smiland, Chairman of the Board, "After a thorough review of the company's current strategic alternatives with assistance from our investment bankers, Ryan Beck & Co., the Board of Directors firmly believes that this transaction and the premium being paid is in the best interests of our shareholders."
Cary Lefton, Managing Member of Elden, stated, "Our investment group is attracted to the Company's strong asset base including its terrific and well known brand name, and feels that we will be able to reposition the Company's assets and business in a way that will realize the Company's growth potential."
The transaction is subject to the execution of a definitive agreement, completion of due diligence and all requisite regulatory and shareholder approvals.
Earl Scheib, Inc., founded in 1937, is a nationwide operator of 113 auto paint and body shops located in approximately 100 cities throughout the United States.
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