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Letter to the Editor

Fall Harvest

A crop of timely items combined in a feature recipe to provide some industry food for thought

Just as farmers around the country are bringing in their summer crops, INSIGHT too has found itself with its own "bushel basket of fall bounty." Our toil over the preceding months has resulted in various morsels of information that will be of use or interest to the industry - but that we haven't been able to incorporate into our regular features and columns. So we've harvested this crop of items, gleaned from interviews and recent industry events, into this medley of tips, ideas and information.

Act now to reduce taxes

We asked a number of tax advisers what shop owners may not have thought of in terms of actions they can take now - before the end of the year - to lower their tax burden next April.

Several pointed out that a 2004 change in leasehold depreciation rules may make it more attractive to fix up your building. Any business making qualified leasehold improvements can depreciate those costs over 15 years instead of the previous 39-year standard. The more favorable schedule is good for improvements made through the end of 2005.

Another change last fall was an expansion of Section 179, which gives businesses the ability to immediately write off large amounts of equipment. The 2004 tax change extends through 2007 your ability to deduct at least $100,000 in qualifying equipment purchases annually. That amount is reduced only if you put into service more than $400,000 in equipment in any one year.

And while the survivors of Katrina probably have more pressing concerns than taxes, our advisers pointed out that anyone who has suffered the results of a theft, accident, fire, flood or some other casualty during the year may be able to deduct some of their unreimbursed losses. In particular, if you're in an area that was declared a federal disaster area, the tax deduction for your casualty losses can be claimed retroactively, treating them as if they occurred in the previous year and filing an amended tax return for that year. This allows you to receive a quick tax refund - money that you can use right away.

AIG requires welding certification

If you are not part of AIG's direct repair program but might like to be, take note. Roger Wright, who joined the company in 2003 and saw a need to revamp the program, said one of the requirements that was added was that participating shops have at least one technician who has passed I-CAR's steel welding qualification test.

"We went from having 3,000 shops on the program to 900 shops," Wright said of the change. "Now we're back up to 1,000 shops. We still struggle some in certain parts of the country, but we're committed and believe it was the right thing to have done. We think we get better repairs. It's a commitment we feel strongly about."

Wright said participating shops working on aluminum must also have a technician qualified through I-CAR's aluminum welding test as well.

Advice from burglary victim

Whether it's a symptom of the growing crystal meth epidemic or other causes, many communities are reporting a growing number of business burglaries - including collision repair shops.

One shop owner in the Pacific Northwest said he was aware of at least four local automotive businesses - including his own - burglarized within the same month. At his shop, thieves cut through the chain on the company's gate to gain access to the property, then used a pry bar to bend a steel door on the building, popping the lock through the jamb. Once inside, they loaded a company vehicle with air tools, a welder and tank, tires, batteries and other items, and cut the lock from a bay door in order to drive the vehicle away.

"It looked like they were loading up a customer vehicle as well, but couldn't get that bay door open," he said.

He said shops help perpetuate the problem when they or their employees purchase second-hand tools and equipment when it's not clear those items were obtained by the seller legitimately.

He also had a number of other suggestions for shops looking to protect themselves from theft losses:

• "Make sure on your shop insurance that you have replacement coverage, otherwise they'll do a discounted rate on payment," he said. "That's a big issue. Our insurance policy is replacement coverage, so they have to pay whatever it costs to replace. But that's something we had to add. It's not what the agent was going to give us originally."
• Make sure you have adequate insurance coverage as well. "If you have a seasoned tech with 10 years in the field, $15,000 isn't enough if they take his whole box," he said. "You need around $25,000 or $30,000 a box."
• Bolt top toolboxes to the bottom boxes. "They took a top box and were trying to take a bottom box but couldn't, probably because it was too heavy," he said. "My guys are now also making some steel 'L' brackets to bolt their boxes to the floor."
• Maintain an inventory of all equipment and tools - and have technicians do the same. Photographs of the inside of toolbox drawers also can help in documenting a loss after a burglary.

Another lesson from a mistake

Our feature in August on the mistakes various shop owners said they had made throughout their business careers failed to include this advice for multiple-location collision repair businesses: Always get purchase options on leased property.

Craig Moe, general manager of Magnussen's Car West Auto Body, which has five locations in northern California, said Car West hasn't always negotiated such purchase options, and after investing in improvements in the property, doesn't always find that landlords are flexible about selling.

"And at some point you may find the real estate is worth more than the business," Moe said, pointing to another Silicon Valley shop owner who closed his repair facility and now draws large rent checks from the office building built on his land.

Free GM collision information

Looking for collision repair information for GM vehicles? Certainly you can go to www.gmtechinfo.com but access to the information available through that website will cost you ($20 a day, $150 a month or $1,200 a year).

You may want to first check out another website: www.gmgoodwrench.com. Click on the "For Dealers & Retailers" link to find a whole section devoted to collision repair. In addition to GM's position statements on non-OEM parts, DRPs and use of non-deployed salvage airbags and other used parts, you can find free downloadable collision repair manuals for about 40 GM models.

Mercedes info, certification

Speaking of automaker information, Mike Kukavica, a California-based collision repair instructor for Mercedes-Benz, shared a variety of useful information in a technical clinic at the I-CAR annual meeting this past summer.

For example, he said only three paint manufacturers (PPG, DuPont, and BASF) have an approved refinish product for Mercedes' new scratch-resistant ceramic clearcoat (sometimes referred to as "nano-clear"). The product is used on the company's new S-class vehicles, and has been added to others sometimes as a mid-year model change; in such cases, the paint code on the vehicles with the new clear will be preceded by a "C," but there will be no such indication on the S-class or other models in which the new clear has been used from the start. The ceramic clear can be identified by touch, he said, because it gives the new vehicles a freshly-waxed feel.

Kukavica also said a bulletin released by Mercedes this past spring outlined that Italy's Car Bench has joined Celette in the U.S. market as approved frame equipment for repair of Mercedes vehicle. The bulletin also makes it clear than unlike on past Mercedes models, the jack pins on newer Mercedes vehicles are no longer designed to be used as anchoring points.

Kukavica also outlined the requirements of Mercedes' collision repair shop certification program, something INSIGHT has reported previously. Mercedes has 340 dealers nationwide, but only about 130 shops (dealership and independent) have qualified for the certification program (about another 100 are in-process). Certification can require an investment of $120,000 if a shop doesn't already have the $60,000 bench or other mandated equipment.

The discussion at the session also raised another important issue independent shops should consider about the Mercedes (and virtually any of the automaker's) certification program. Certification for an independent shop requires the approval of a Mercedes dealer; in effect, that independent becomes the "certified solution" for - and at the whim of - that dealer. The dealer is free to approve the certification of a second shop meeting the program's requirements - or drop its approval of an independent.

"From my understanding, you're pretty much at the dealer's mercy," Kukavica said.

Because the relationship is between the independent and the dealer, not Mercedes, it would seem prudent for any independent seeking Mercedes or any OEM certification to develop a written agreement with the dealer to help ensure the investment in the program has an opportunity to pay off.   o

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