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Letter to the Editor
This article originally appeared in the October 2005 Issue of INSIGHT
©2005 Collision Repair Industry INSIGHT All Rights Reserved
Keystone Automotive Anticipates $1 Million Sales Loss in Q2 from Hurricane Katrina
Mitchell International Acquires ClaimIQ
I-CAR Offers Online 24/7 Collision Industry Training
Progressive Launches Research Program to Gather Driving Habit Information
Keystone Automotive Industries Comments on Favorable Illinois Supreme Court Ruling
CarMax Reports Record Q2 Results
BASF Provides $1 Million in Aid to Hurricane Katrina Relief Efforts
CIC Report: Info Providers Share Solutions to Estimate Rekeying
Investcorp Acquires CCC Information Services
Collision Industry Offers Assistance for Hurricane Katrina Recovery Efforts
NACE 2005: IBIS@NACE - A Global Perspective
INDUSTRY UPDATE
Keystone Automotive Industries, Inc. is still in the process of assessing the full impact of Hurricane Katrina on its six locations in the region and addressing the needs of its employees at the affected locations. Five of the six locations are operational. It appears the New Orleans facility will take several months to rebuild.
Based on a preliminary assessment of damages to its operations in the Gulf region, the company expects the financial impact in the second fiscal quarter ending September 2005 will reduce sales by approximately $1.0 million and result in write-offs totaling $450,000 relating to account receivables and insurance deductibles for property damage. These estimates are subject to revisions. The company is unable to determine the impact, if any, on future quarters at this time.
Separately, Keystone said its inventory recovery facility located in Greenville, Michigan, which recycles plastic bumpers, was recently destroyed in a fire and operations have been temporarily relocated to its facility in Saranac, Michigan. The company said that, fortunately, there were no injuries to employees. While the company does not anticipate any impact on sales as a result of the fire, property damage is estimated to be approximately $250,000 net of insurance.
"The financial impact on operations from Hurricane Katrina should have a relatively modest effect on Keystone's overall operations. However, a number of Keystone team members, their families and many customers have been significantly affected by the destruction caused by the hurricane in the Gulf Coast region and our organization has worked diligently to address the human situation," said Richard Keister, president and chief executive officer.
He noted that payroll continuity and meeting other needs of Keystone's team members, some of whom have lost their homes and their possessions, have been a top priority for the company. Keister indicated that the company has reassigned a couple employees to positions elsewhere, but the majority will continue to support Keystone's customer service efforts in the region.
"We are also extremely concerned about the impact of Katrina on Keystone's automotive body shop customers in the region. Helping customers get their businesses running and their employees back to productive work is another top priority of Keystone, as well as the Collision Industry Foundation - which we support," Keister concluded.
Keystone distributes its products through its 129 distribution facilities, of which 22 serve as regional hubs, located in 38 states and Canada.
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Mitchell International, Inc. has acquired San Francisco-based ClaimIQ, a provider of claims decision optimization and best practices applications for insurance carriers.
ClaimIQ will join the Mitchell organization as a business unit of Mitchell’s medical division. All products of both Mitchell and ClaimIQ will continue to be supported and expanded, and a new set of integrated products that combine the strengths of decision support, bill review, and collision estimating will be introduced.
“This acquisition makes strategic sense for both organizations,” said Jim Lindner, Chairman and CEO of Mitchell International. “Combining ClaimIQ’s expertise with Mitchell’s will enable our combined organization to deliver enhanced functionality requested by both companies’ customers in a single, integrated platform, creating a powerful base for future growth. In addition we will be able to provide our customers with a unique and rich set of business analytics coming from both first and third party medical claims, incorporated with auto physical damage claims.”
ClaimIQ’s sophisticated claims decision-optimization applications deliver automated best practices, predictive analysis, and real-time recommendations, enabling its customers, auto and general liability insurance companies, to drive claims processing efficiencies across their entire claims organization.
In combination with existing features and functions, the platform aims to enable the delivery of next-generation solutions based on the successful product lines of both companies.
Uniting all these capabilities on a single platform will, according to a Mitchell press release, enable adjusters to quickly and easily access the critical information needed to develop an effective negotiation strategy, driving the consistent application of best practices on all settlements.
In addition, Mitchell plans to integrate select ClaimIQ product functionality with certain Mitchell auto physical damage products.
Donald Light, Senior Analyst at Celent, commented, "This is an acquisition that makes sense for both companies. ClaimsIQ brings analytic capabilities to some high value parts of the automobile claims process. Mitchell brings its own strong portfolio of claims solutions and its extensive market presence. Both companies, and their customers, should benefit."
Senior vice-president and founder of Mitchell Medical, Tom McCarthy, will assume executive leadership of the ClaimIQ organization.
Former president and CEO of ClaimIQ, Tom Baird, will be joining the Mitchell organization as senior vice president, product management, marketing, and business development.
Baird commented, “This is great news for our customers, investors and employees. Mitchell is a recognized industry leader in automotive claims technologies and we are excited to be part of the Mitchell family.”
Mitchell International facilitates millions of electronic transactions among more than 16,000 business partners each month.
ClaimIQ is a provider of claims decision optimization applications. Auto and general liability insurance companies using the solutions have experienced as much as a 50 percent reduction in claims processing leakage.
The latest revolution in I-CAR training is the launch of the I-CAR online self-study training available 24/7. These online programs are unique and contain content not found in I-CAR Live training. Their content is designed to supplement programs in the I-CAR training paths. Upon successful completion of an online self-study training program, the student will earn 0.25 (one-quarter) Gold Class points. Students will also be able to print their own certificate after successful completion of an online training program’s post test.
Visit the I-CAR training website: www.i-caronlinetraining.com for more information, or to participate in a complimentary demo on “2002 Saturn VUE Lower Front Rail Partial Replacement.” No Gold Class points will be awarded for the free demo.
Online training programs:
- May contain vehicle- or procedure-specific information or general concepts
- Allow students to learn at their own pace
- Are approximately 30-60 minutes in length
- Are available 24 hours per day, 7 days per week, 365 days per year
- Include interactive exercises, activities, and quizzes
- Contain an online post test
- Are continuously stored in a student’s online library once purchased
- May be purchased individually or in bulk using redemption codes, which work similarly to I-CAR discount training coupons.
“The launch of online training offers a unique opportunity to I-CAR,” commented I-CAR Director of Business Development and North American Operations Rick Tuuri. “The programs included in the I-CAR Online Training library are a wonderful supplement to the material covered in I-CAR Live training programs. Offering online training programs allows I-CAR to delve into collision industry topics that may not otherwise fill a full Live training program, and offer a new training resource to the collision industry.
“As is our goal with everything that I-CAR does, we hope that the launch of online training will help I-CAR achieve its Vision that every person has the necessary technical knowledge and skills relevant to their position to achieve a complete and safe repair,” concluded Tuuri.
The Progressive Direct Group of Insurance Companies has launched a research program to gather driving habit data that may change the traditional ways that auto insurance policies are priced.
Progressive is asking if there is information about how a person drives that is far more predictive of the risk of being involved in a crash? For example, would knowing about the trips one takes each day, or just the trips on Monday, help insurance companies price a particular policy more accurately? What about the amount of time spent driving at highway speeds vs. slower? Does it matter that an insured drives short distances quickly or long distances more slowly?
Progressive Direct is taking what it believes to be the next big step in the evolution of auto insurance pricing by inviting its customers throughout the country to participate in a voluntary research program that will gather driving habit information. Customers who choose to participate will install in their car a small device called a TripSensor(TM) that will record information about how often, how fast and when their vehicle is driven, along with information about acceleration and braking.
Using the information collected by the TripSensor, Progressive Direct expects to find data that will help it to continue to advance the science of auto insurance pricing.
For helping with its product research and development efforts, Progressive will reimburse customers $50 for six months of data from each car in the program. Customers may install a device in as many cars as are insured with Progressive Direct and may sign up for multiple six-month terms.
Progressive Direct's goal is to collect a substantial amount of information from a representative sample of U.S. drivers in the next couple of years. All driving information is shared voluntarily with Progressive and will not affect the cost of the customer's current auto insurance policy.
"Today, auto insurance pricing is all about using data about you and people like you to determine a price that will cover the cost of the risk you present," said Dave Huber, product development manager, Progressive Direct. "We've been constrained in the types of data we can use because it's the only information we could gather. We're breaking through that barrier and using technology to gather different data to see what it tells us."
This research program is the latest in Progressive Direct's product research and development efforts and uses technology currently deployed in a usage-based auto insurance discount pilot program underway in Minnesota. Called TripSense(SM), drivers in the program are eligible for a discount on their renewal policy if they choose to send their driving data to Progressive.
"We are continuously looking for ways to make car insurance more competitively priced and easier to use," said Huber. "We believe that if we could know more about how you drive, we could charge you a rate that more accurately reflects your driving characteristics and, therefore, your insurance needs."
The Progressive Group of Insurance Companies, in business since 1937, ranks third in the nation for auto insurance based on premiums written.
Keystone Automotive Industries, Inc. has said an Illinois Supreme Court decision overturning a lower court ruling in a national class action case involving aftermarket crash parts - Avery vs. State Farm Insurance Company - represents a significant victory for consumers as aftermarket collision replacement parts are a high quality cost-savings alternative to original equipment.
"The collision repair market is a $16 billion industry that is 76 percent controlled by automobile manufacturers. With an estimated 20 to 40 percent savings over those parts supplied by the automobile manufacturers, the utilization of aftermarket generic collision replacement parts by the collision repair industry represents an important alternative for consumers, analogous to benefits to the healthcare industry from generic brands," said Richard L. Keister, president and chief executive officer of Keystone Automotive Industries.
Keystone believes that substantially all of the aftermarket crash parts that it distributes are of like kind and quality to OEM crash parts as defined by the Illinois Supreme Court because, when installed in a competent manner by collision repair shops, vehicles are restored to their pre-loss condition.
CarMax, Inc. has reported results for the second quarter ended August 31, 2005.
Total sales increased 23 percent to $1.63 billion from $1.32 billion in the second quarter of last year. Comparable store used unit sales rose 10 percent for the quarter. Total used unit sales grew 21 percent for the quarter. Net earnings in-creased 39 percent to $41.4 million, or 39 cents per share, compared with $29.9 million, or 28 cents per share, earned in the second quarter of fiscal 2005.
For the third quarter of fiscal 2006 ending November 30, 2005, CarMax expects comparable store used unit sales growth in the range of 2 percent to 8 percent, and earnings per share in the range of 19 cents to 25 cents.
"We are very pleased with our second quarter results," said Austin Ligon, president and chief executive officer, "especially considering the constantly changing environment in the auto retailing marketplace. Continuing excellent execution by our store teams took advantage of a strong increase in store traffic, which we believe was helped in part by the new car employee pricing programs..... Our no-haggle consumer offer makes price-comparing easy, giving us a unique advantage as consumers cross-shop.... We increased our radio advertising during the summer, focusing almost exclusively on our 'we buy cars' message. Even as prices on SUVs fell dramatically, we stayed active in the market, making a fair offer to purchase any consumer's vehicle."
"We believe the new car pricing programs helped stimulate the robust increase in our appraisal traffic," Ligon added. "Consumers continue to learn that they can come to CarMax for a free appraisal of their cars.... The increase in appraisal traffic was the primary driver of the 25 percent increase in wholesale sales."
Ligon said, "We have again put a wide range on our quarterly expectations because market conditions continue to be uncertain and we are going into the ever- challenging model year changeover period. ...Thus far in September, we've experienced a slight benefit from replacement purchases resulting from Hurricane Katrina. However, we have no way of knowing if and to what extent our sales might continue to benefit."
CarMax opened one superstore during the second quarter, bringing to five the number of superstores opened in the first half of the fiscal year. The company entered the Salt Lake City market with a standard superstore, which opened on August 31, the last day of the quarter. CarMax's plans call for opening four additional superstores during the second half of the year, including two satellite superstores that have opened in September, one in Miami and one in Nashville.
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BASF will donate $1 million to agencies supporting Hur-ricane Katrina relief and recovery efforts in the company’s site communities in Louisiana, Mississippi, Alabama, and Texas.
In addition to direct cash donations, the company has established the BASF Katrina Relief Fund with the Baton Rouge Area Foundation to accept employee and retiree contributions during the month of September to aid those affected by Hurricane Katrina, primarily in Ascension Parish, where BASF’s Geismar, La., site is located.
BASF Corporation’s disaster relief effort will also include the following:
- Establishing a program to provide short-term financial aid for the immediate needs of BASF employees seriously impacted by Hurricane Katrina.
- Allowing employees, at their managers’ discretion, in the affected states to volunteer on company time to help assist those in need.
- Working with several organizations to bring BASF products, technology and expertise to help in the rebuilding efforts.
The three primary estimating system providers last month outlined their plans to respond to the problem of shops having to rekey insurer-prepared estimates, but not everyone was impressed with what they heard.
Lou DiLisio, a member of the Collision Industry Conference (CIC) Electronic Commerce Committee, told the information providers that a task force made up of five major insurers and three national trade associations had spelled out in an 8-page document exactly what the industry was seeking as a solution to the estimate rekeying problem.
"Apparently, none of the three of you read the description of what took place at the task force meeting, because none of you have incorporated any of those things that we've asked for," DiLisio told representatives of ADP, CCC Information Services and Mitchell International at CIC in San Francisco in September.
The task force outlined two types of scenarios in which shops should be able to receive insurer-prepared estimates electronically. In the first, the estimate is prepared at the shop, so the file could be transferred to the shop's estimating system via a thumb-drive, the USB drive or even a CD or floppy disk.
Chad Taylor of Mitchell said his company offers such capability now, and Bruce Yungkans of CCC said Pathways 4.3, released in mid-October, would as well. Yungkans said CCC's system would require a one-time set-up fee of about $150. But Scott Jenkins of ADP said his company has no plans to create such capability, preferring to put its "development effort" into addressing other scenarios that require estimate rekeying.
"What kind of development does it take, to allow an estimate to be copied to a disk and transferred to another computer?" Craig Griffin of Laney's Collision Center in El Dorado, Ark., asked Jenkins. "My assumption is since every other software in the world allows me to do this, that it's more likely more difficult for you to keep me from doing that than it is to let me do it, other than you can't charge me for it."
The second scenario that leads to estimate rekeying that ADP has pledged to solve by next April is when the shop and appraiser are not at the same location and cannot physically move the estimate file from one computer to the other.
Jenkins said ADP currently has a system in place that allows a shop in an insurer's direct repair program to download that insurer's estimate into the shop's estimating system. By next April, shops not in that insurer's DRP will be able to do that as well, Jenkins said, once that insurer gives a one-time permission for the shop to do so.
"There will be a charge [for this capability]," Jenkins said. "We're working out if it will be a subscription charge or on a per-transaction basis."
Yungkans could not provide a timeline as to when a shop would be able to download an estimate from the insurer's estimate library through the CCC system. But he said that by late 2006, the insurer will be able to download such an estimate to a shop that requests it.
Jerry Burns, a New Mexico shop owner and member of the Automotive Service Association's Collision Division Operations Committee, told Yungkans that having to make such a request and wait for the insurer to download the estimate were just the sort of steps the task force said should be avoided; insurers and shops on the task force, he said, agreed that a shop should be able to use a pass code printed on the estimate in order to download it.
Taylor said Mitchell has such a shop download system in place for one insurer's DRP shops now, and will expand the program to other insurers and non-DRP shops in mid-2006. He said the shop set-up fee for such a system should be around $100, but there could be a per-transaction fee as well.
DiLisio said he didn't understand why not all the companies were creating systems like those the task force requested - and why widespread availability of some of the programs was a year away when they were in place with some insurers today.
"Can we make sure they get another copy of the report the task force developed so that maybe they might decide to do some of the things we've asked for," DiLisio urged committee chair Cindy Granse.
A summary chart outlining the three information providers plans - as well as the task force's document about the problem and its suggested solutions - can be found at the Electronic Communication Committee's section of the CIC website (www.ciclink.com).
CCC Information Services Group Inc., a supplier of advanced software, communications systems, Internet and wireless-enabled technology solutions to the automotive claims and collision repair industries, has announced that it has signed a definitive agreement to be acquired by an affiliate of Investcorp, the global investment group.
Under the terms of the agreement, CCC stockholders will receive $26.50 in cash for each share of CCC common stock, representing a 10.3 percent premium over the average closing price of CCC's stock for the last 90 trading days. The fully diluted equity value of the transaction is approximately $495 million.
"This transaction delivers excellent value to CCC Information Services stockholders, and we look forward to pursuing with Investcorp a range of opportunities that lie ahead for our Company," said Githesh Ramamurthy, Chairman and CEO of CCC. "The successful completion of this transaction, combined with our tender offer in 2004, will result in our having returned approximately $700 million to our stockholders. This transaction represents an endorsement of the success of CCC's business, and our ongoing commitment to provide our customers with significant value."
"CCC is the recognized leader in its market, with outstanding products and services and a strong management team," said Christopher Stadler, Investcorp's Head of Corporate Investments for North America. "We look forward to working with the CCC team, led by Githesh Ramamurthy, to continue to create value for CCC's customers and to pursue the opportunities for growth we see in existing business lines and new products and customer solutions."
CCC will continue to be headquartered in Chicago and to be led by the current management team, including Ramamurthy as CEO.
The merger agreement has been unanimously approved by the Board of Directors of CCC. In addition, CCC's two largest stockholders have agreed to vote shares in favor of the transaction representing approximately 30 percent of the voting power of CCC's outstanding shares. Specifically, White River Ventures, Inc. has agreed to vote a total of 4,751,735 shares of CCC Common Stock, and Capricorn Investors III, L.P. has agreed to vote its 51 shares of Series F Preferred Stock.
The transaction is expected to close during the fourth quarter of 2005, subject to various conditions, including approval of the transaction by CCC's stockholders and the expiration of the applicable waiting period under the Hart-Scott-Rodino Act. The definitive agreement includes customary provisions permitting CCC's board to receive and accept an alternative proposal if that proposal is more favorable to the company's stockholders and reasonably capable of being completed, subject to expense reimbursement and payment of a termination fee.
Credit Suisse First Boston LLC acted as financial advisor to CCC. Latham & Watkins LLP acted as legal advisor to CCC and Gibson Dunn & Crutcher LLP acted as legal advisor to Investcorp. O'Melveny & Myers LLP acted as legal advisor to Capricorn Investors II and III, L.P.
CCC plans to file with the SEC and mail to its stockholders a Proxy Statement in connection with the transaction. Investors and security holders will be able to obtain free copies of the Proxy Statement and other documents filed with the SEC by CCC through the web site maintained by the SEC at www.sec.gov.
CCC Information Services Group Inc., headquartered in Chicago, facilitates communication among approximately 21,000 collision repair facilities, 350 insurance companies, and a range of industry participants.
Investcorp, established in 1982, is a global investment group with offices in New York, London and Bahrain. The firm has four lines of business: corporate investment, real estate investment, asset management, and technology investment.
On Friday, September 2nd, a conference call was set up to discuss the assistance options for those ravaged by Hurricane Katrina.
“Over a hundred people from all facets of the industry were on or tried to get on the call,” stated Chuck Sulkala, Executive Director of the National Auto Body Council (NABC). “The result of the call is that NABC will spearhead a united industry effort to relocate ANYONE in the collision industry who has either been displaced or who now finds that he or she doesn’t have a job. It’s important to note that the objective is not simply moving people from one location to another. The goal is to help our people with no home or job to start rebuilding their lives, to get back to functioning as families, with a job, basic work tools, housing, transportation and kids back in school.
“The Collision Industry Foundation (CIF) has set up a special account for relief aid contributions. The Automotive Service Association (ASA) has a blog web site at www.asashop.org that will be used for general information, discussion and comments. They, along with the Society of Collision Repair Specialists (SCRS) and the Alliance of Automotive Service Professionals (AASP) are asking their state and local affiliate associations for help finding a home and a job for industry members in need. We are in the process of setting up a specific website to record and enter all the information from those who can hire a displaced family. This is not just a person we are hiring, it is a family we are taking in and helping to get back on their feet,” stressed Sulkala.
“We are asking prospective employers to assist or work on local donations to help with, housing, transportation, clothing, furniture, relocation costs etc, etc. However, this should not stop someone from helping especially IF THEY HAVE A JOB OPENING. If need be, the Collision Industry Foundation will step in to provide additional assistance, but the less they need to spend on one family, the more they will have left that can be spent on other families in need.
“We have committees in place to focus on relocation to new areas, tool replacement, fundraising and communication. Additionally, insurers and their CAT teams are being asked to pass the word in those effected areas. The Salvation Army and Red Cross are being advised as well. “By helping our own,” Sulkala said, “we can free up their resources so they can help others.”
The Collision Industry Foundation, an IRS approved Charitable Foundation is charged with collecting and distributing collected funds. All funds earmarked for Katrina Relief will be used only for that purpose. In addition, Doug Webb, Chairman of the Collision Industry Foundation has announced that the ‘Hop on the Bus’ raffle, being conducted by NABC and chaired by Karen Fierst, will be increasing the number of tickets sold in order to provide additional revenue for assistance.
Tax deductible contributions can be sent to: Collision Industry Foundation – Katrina Fund, Collision Industry Foundation, PO BOX 3007, Mechanicsville VA 23116. The Foundation will also take credit card donations online at www.collisionindustryfoundation.org.”
The International Autobody Congress & Exposition (NACE) has announced that IBIS@NACE, an exclusive, globally motivated, one-day program aimed at senior managers and industry leaders from all sides of the collision repair market, will take place on Wednesday, Nov. 2 from 8:30 a.m. – 5:30 p.m.
The world of collision repair is becoming ever more complex and, in terms of vehicle construction materials, technology and environmental legislation, as well as paint, product and equipment developments, is becoming increasingly international. As a result, individual collision repair markets are increasingly affected by developments around the world and domestic markets are increasingly influenced by international issues.
Reflecting the growing globalization of the industry is IBIS – the International Bodyshop Industry Symposium. Organized by Bodyshop Magazine, IBIS takes place each year in Montreux, Switzerland.
First time IBIS attendee, international industry figure, and Hall of Eagles inductee David Newton-Ross said of IBIS 2005, “If NACE is a must attend, then IBIS is right up there with it, make no mistake, if you are serious about your industry then put NACE and IBIS on your list of must do/attend items for the future.”
IBIS@NACE was introduced to the NACE Conference line-up for the first time last year and is back for 2005 with its intensive program based on some of the key highlights from IBIS in Montreux. The IBIS@NACE package offers remarkable value and provides an ideal opportunity to share the knowledge and insights of leading experts from around the world.
The IBIS@NACE 2005 Program agenda is as follows:
- Welcome and Introduction
- Moderator: David Lingham
- Keynote speech: Dramatic Changes on the Horizon
- IBIS Chairman: Chris Mann, Publisher, Bodyshop Magazine
- Design for the Future
- Speakers: Andy Walker, Thatcham and Mark White, Jaguar Land Rover
- Standards and Licensing
- Speakers: Larry Jefferies, CARSTAR; Rick Tuuri, I-CAR; David Newton-Ross, Australian BodyShop News; Ian Groat, Automotive Refinisher Magazine
- Emerging Markets – China
- Speakers: Tom Stryker, Superior Consultants and Chuck Sulkala, NABC
- Insurer Roles
- Speakers: John Edelen, Allstate; Susan Hood, State Farm; David Neave, Royal & Sun Alliance
- International Open Forum
- Moderator – David Lingham
IBIS@NACE will take place at the Mandalay Bay Convention Center in Las Vegas. IBIS@NACE Packages are $350 and includes Wednesday’s IBIS@NACE Program and Luncheon, one ticket to any Conference Session in any of the timeslots featured on Thursday, Friday and Saturday, Wednesday Evening’s Welcome Reception, Thursday’s Opening General Session, Friday’s Luncheon Program, the NACE Exposition, admittance to SEMA and AAPEX, a Congress Briefcase and NACE 2005 Commemorative Pin.To register for this event and NACE 2005, visit www.NACEexpo.com.
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