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Letter to the Editor
This article originally appeared in the February 2006 Issue of INSIGHT
©2006 Collision Repair Industry INSIGHT All Rights Reserved
State Farm Changes Auto Damage Service Programs
Allstate Introduces Your Choice Auto Car Insurance
CIC Database Task Force Meets with Mitchell International
PPG Q4 Profit Falls 38% Despite Record Q4 and Full Year Sales
Nationwide Offers AutoWatch for Online Monitoring of Vehicle Repairs
Keystone Automotive Named in Ford ITC Complaint
New Jersey Steps Up Search for Unlicensed Auto Body Shops
Sherwin-Williams Named to FORTUNE’s 100 Best Companies to Work For List
PPG Auto Glass Acquires Distribution Assets of Independent Glass Distributors
HARA and Mohawk College Partner in Pilot JobConnect Autobody Training Program
Should the Collision Repair Industry Support or Oppose California Crash Parts Bill A.B. 1852?
INDUSTRY UPDATE
State Farm Mutual Automobile Insurance Company, the largest insurer of autos in the nation, is initiating changes in its auto damage service repair programs.
Designated markets in California, Indiana, Illinois, and Michigan will test an agreement that will replace existing Service First and Select Service programs in those markets. This program will carry the Select Service name.
As with State Farm’s current programs, customers will maintain freedom of choice when selecting a repair facility.
Through the new agreement with participating repair facilities, State Farm will extend a premier level of vehicle repair service to all State Farm customers having repair work performed in the market areas where the program will be implemented.
In addition to the one-stop convenience of State Farm’s current repair programs, customers will receive other premium services including national limited lifetime repair warranties, guaranteed completion dates, wash and vacuum of repaired vehicles, and pick-up and delivery service.
Later this month, repairers in the designated markets will have an opportunity to review the new agreement and decide whether to apply to participate in the new program.
According to a State Farm press release, Select Service eligibility will be extended to the most qualified, most competitive repairers in the industry – large or small. Repairers who are best suited to meet the repair value and capacity needs of State Farm customers will be invited to participate following the application process.
The revised performance-driven Select Service program, according to State Farm, will provide customers with the best value in vehicle repairs with a continued focus on quality, efficiency, and competitive price.
The press release concluded: “The collision repair industry consistently ranks State Farm as one of the best insurers. State Farm intends to maintain its quality relationships with repair facilities and continue to provide the highest level of service to our shared customers. State Farm will monitor results in these designated markets and will continue to seek input from collision repair industry representatives and customers as future changes are considered.”
INSIGHT will continue to track the State Farm activity in the designated test markets, and report more in upcoming issues of our newsletter.
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Allstate is introducing a new kind of car insurance to encourage and reward safe driving. With Your Choice Auto, Allstate is offering new rewards to consumers who drive safely and enhanced protection for those not able to stay out of harm's way.
Beginning this year, Allstate Your Choice Auto is being supported with a national advertising effort including national radio and television advertising featuring actor Dennis Haysbert and online and print advertisements.
Allstate Your Choice Auto Insurance allows consumers, in states where the product is available, to customize their policies based on a variety of benefit and costs options, including safe driving deductibles and bonuses, accident waiver enhancement features, and expanded new car protection plans.
“For too long there has been a ‘one size fits all’ approach to auto insurance,” said Tom Wilson, president and chief operating officer for Allstate. “We know that Americans want more choice and benefits from their auto insurance. Your Choice Auto breaks the mold of products traditionally offered by many insurers by presenting consumers with even more choices, innovative features and enhanced rewards for safe drivers.”
Allstate designed the new product features in response to research by the insurer indicating nearly nine out of ten people shopping for auto insurance would be highly compelled to purchase policies which immediately reward safe driving through reductions or credits to their deductibles. Additionally, eight out of ten shoppers would be motivated to choose policies which protect against premium increases because of accidents, regardless of fault.
According to a company press release, rewards offered for safe driving include:
- Deductible Rewards: Gives $100 off collision coverage deductible the day you sign up and an additional $100 off for each year of safe driving - up to $500.
- Safe Driving Bonus: Gives customers the opportunity to earn up to a five percent credit that can be applied toward their next renewal premium, in addition to any savings the customer may qualify for through Allstate's safe driving discounts.
- Accident Forgiveness: Helps keep premiums from going up just because of an accident.
- New Car Replacement: Allstate will help pay to repair a customer's car without a deduction for depreciation. With the new car replacement feature, if a customer's new car is totaled in a covered loss, Allstate will pay to replace it with a brand new car.
At the 2006 North American International Auto Show (NAIAS) in Detroit, Allstate will unveil the Allstate Bumper Car Derby, an interactive driving experience where accidents are forgiven and safe drivers rewarded. For every participant in the Bumper Car Derby, Allstate will make a donation to the Boys and Girls Clubs of America.
The Allstate Bumper Car Derby will also make a stop at the 2006 Chicago Auto Show in February, with additional dates to follow.
Allstate Your Choice Auto Insurance is now available in nearly 60 percent of the U.S., and will be available in nearly every state by the end of 2006, except in California and Massachusetts.
Mitchell International invited the Collision Industry Conference (CIC) Database Task Force for a meeting at its corporate headquarters in San Diego, California. This meeting was prompted in part due to the collective efforts of this group in working with Mitchell to address a concern over labor times posted for panel bonding.
The CIC Database Task Force is comprised of representatives from the three largest collision repair trade associations in the country: the Alliance of Automotive Service Providers (AASP), the Automotive Service Association (ASA), and the Society of Collision Repair Specialists (SCRS).
The Task Force spent a day and a half touring Mitchell’s facility and meeting with its executive and product management teams.
AASP Immediate Past President Nick Kostakis said, “We viewed this as a great opportunity to continue the open dialogue we’ve established with Mitchell and for their management team to hear first hand the larger issues most important to our members, related to the database providers including Mitchell.”
The Task Force viewed the meeting as successful and commended Tom Fleming, Vice President of Database Development, and Mitchell’s entire Executive Management team for their honesty and willingness to work with the Task Force.
Darrell Amberson, ASA Collision Division Chairman stated, “I think all of us were pleased by how receptive Mitchell was to the issues we raised and to our suggestions for changes that we feel would improve the accuracy of their database.”
Barry Dorn, SCRS Secretary, said, “Our mission was to raise those macro-level issues identified at CIC, and discuss them at length. Hopefully, we can expect to see future changes related to database disclosure, when significant changes are made to the database; identification of new substrates (i.e. magnesium, aluminum, boron); appropriate labor values associated with these new materials and unique procedures; and, finally, an estimate print font size that is more easily readable.”
Fleming further validated Mitchell’s commitment to working with the Task Force, informing the group that the Task Force would be offered three seats on the company’s advisory board. The advisory board, which consists of representatives from various industry segments, meets annually to discuss their database and feature/enhancement requests.
Fleming commented, “The representatives on this Task Force represent a large percentage of our customer base, are leaders in the collision repair industry, and are a valuable barometer of the needs and issues of the collision repair community. We felt adding the voice of the Task Force to our advisory board not only demonstrated our commitment to the Task Force, but also to the collective collision repair industry as we try and meet their needs from a feature and functionality perspective.”
“The Task Force will continue to work with Mitchell International and the other information providers on an ongoing basis,” stated Lou Dilisio. “The need for ongoing dialog and physical meetings between the database providers and representatives of the collision industry, whether it is through the Task Force or Advisory Boards, will continue indefinitely. The extent to which we can work together responsively and productively will determine the methodology used to address the issues as they are raised.”
PPG Industries has reported fourth quarter net income of $113 million, or 68 cents a share, down from $183 million, or $1.06 per share, in the year-earlier period. Lower profit was attributed to aftertax charges of $17 million; $10 million, for direct costs related to the impact of hurricanes; and $3 million, due to the company's obligation under its 2002 asbestos settlement agreement. Aftertax earnings were reduced by approximately $11 million, from lower sales volumes caused by hurricanes. Sales of $2.51 billion were a record for any fourth quarter.
The company continues to work on job cuts and other restructuring moves.
For all of 2005, PPG recorded net income of $596 million. Sales for 2005 were $10.2 billion, a record for any year. Sales were $9.51 billion in 2004.
"We faced many notable headwinds this quarter and during the entire year, including the economic fallout from the hurricanes, historical peaks in energy costs and demanding conditions in some of the markets we serve," said Charles E. Bunch, PPG's chairman and chief executive officer. "Despite these challenges, we achieved record annual and fourth quarter sales, which were supported by all-time high chlor-alkali pricing. In addition, in the quarter we delivered on our commitment made earlier this year to fully recover our coatings margins to the prior year level.
"As we look ahead to 2006, we see continued profitable growth opportunities, but also see continued pressure due to the high energy and raw material pricing environment. ... We are finalizing plans to take severance and restructuring actions to further streamline our operations.... Furthermore, we want to accelerate that growth through potential acquisitions, leveraging our strong balance sheet and consistent free cash flow. This growth will position us to continue our tradition of rewarding shareholders."
Coatings sales for the quarter increased $59 million, or 4 percent, as a result of improved selling prices and higher volumes across businesses. These increases were slightly offset by the impact of weakening foreign currencies. Operating earnings were up $12 million, helped by improved manufacturing efficiencies. These increases were substantially offset by the negative impact of inflation, primarily raw materials costs.
Fourth quarter glass sales increased $24 million, or five percent, due to higher volumes and higher selling prices. The glass businesses posted an operating loss of $1 million for the quarter.
Nationwide Insurance customers can now monitor their damaged vehicle repairs online through Nationwide AutoWatch, an Internet-based software tool offered by the insurer.
AutoWatch is currently being piloted in multiple states and may be rolled out as an optional service in the coming months.
“The website enables customers to log on 24 hours a day, 7 days a week, 365 days a year to monitor their vehicle at different points during the repair process at participating Nation-wide/Allied Insurance Blue Ribbon Repair Shops,” said Terry Fortner, Nationwide associate vice president of Claims.
The AutoWatch link is fully integrated with Nationwide’s existing Web site and can be easily found by logging onto Nationwide’s homepage: www.NationwideAutowatch.com. The service is free to all customers who select a participating Blue Ribbon Repair Facility.
The Nationwide AutoWatch site provides simple access and easy to understand captions explaining progress on the repairs with regularly updated digital photos of the vehicle throughout the repair process. AutoWatch also provides customers vehicle repair information as well as an e-mail platform through which customers may communicate with the repair facility and their Nationwide/Allied representative.
“We designed Nationwide AutoWatch with the customer in mind,” said Fortner. “Our goal is to make vehicle repairs as painless as possible by providing our customers with up-to-date, accurate vehicle repair information on their time. Nationwide’s decision to offer Nationwide AutoWatch demonstrates a true commitment to the needs and concerns of our valued customers.”
The International Trade Commission (ITC) has announced the issuance of a notice of investigation with respect to the importation and sale of certain aftermarket collision replacement parts for the Ford Motor Company F-150 truck based upon a complaint by Ford that the importation and sale infringes certain design patents which it holds.
The notice, which names several Taiwan manufacturers and U.S. distributors, including Keystone Automotive Industries, Inc., involves 14 design patents for the 2004 model year F-150 Ford truck covering its grilles, head lamps, bumpers, bumper lower valences, hoods, fenders, side view mirrors and tail lamps. Ford is seeking a general exclusion order preventing the importation of these parts into the U.S.
"This legal initiative represents an ongoing campaign by original equipment manufacturers to deny consumers an alternative product for automotive collision repair. This case could have far reaching consequences beyond just the automotive industry and we intend to vigorously defend our right to distribute aftermarket parts," said Richard Keister, president and chief executive officer of Keystone Automotive.
The matter will be heard by an ITC administrative law judge, probably in the late summer or early fall of 2006, with an opinion expected by the end of the year. The judge's ruling is subject to review by the ITC, then to a 60-day Presidential review period, and ultimately an appeal may be lodged with the U.S. Circuit Court of Appeals for the Federal Circuit.
To date, Keystone's sales of these parts have been minimal, but as the design for the 2004 model is incorporated into later year models of the F-150 and these trucks have been on the road longer, the sale of aftermarket replacement parts is expected to increase substantially. If the ITC were to uphold each of the 14 design patents in question, it is not anticipated that the sales of these parts over time would be materially adverse to the financial condition or results of operations of Keystone. However, depending upon the nature and extent of any adverse ruling, other car manufacturers may attempt to assert similar allegations based upon design patents on a significant number of parts for several of its models, which over time could have a material adverse impact on the entire aftermarket parts industry.
In May 2005, Ford filed a similar complaint with the ITC involving a design patent on its Expedition grille. A notice of investigation was issued by the ITC but was promptly dismissed after Keystone advised Ford and the investigative staff of the ITC that the design had been published more than one year before Ford had applied for the design patent.
Keystone Automotive Industries, Inc. currently has 129 distribution facilities, of which 22 serve as regional hubs, located in 38 states and Canada.
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The Alliance of Automotive Service Providers of New Jersey (AASP/NJ) has alerted its membership that the State of New Jersey has intensified its search for unlicensed shops over the past few months.
According to the Bridgeton (NJ) News, over 60 auto body shops in New Jersey were recently cited with notices of violation in an inter-agency undercover investigation by the Division of Consumer Affairs and the State Motor Vehicle Commission (NJ-MVC).
Investigators visited 247 shops in late 2005 to determine whether or not shops were licensed when offering auto body repair services. Of 124 that provided repair estimates to investigators, 60 were not licensed when the estimate was given. The shops were cited with notices of violation of the Consumer Fraud Act and will be fined $5,000 in civil penalties and are required to pay investigative costs of $500.
AASP/NJ President Tom Elder commented, "AASP/NJ has been working long and hard to educate our members as well as our legislators and state government with regard to the large amount of unlicensed shops operating throughout the state. Finally, it seems that all the hard work is paying off."
Although many shops may fear the inspections, AASP/NJ Executive Director Charles Bryant says in most cases, those fears are unfounded.
"If the shops are up to standard and in compliance, they should be ecstatic the state is making an effort to punish those who haven’t done what they have to fulfill the state’s requirements. That’s why we have ongoing meetings that continually update and educate our members as to what the state is looking for. That is one of the most valuable assets AASP/NJ has to offer."
For the second consecutive year, The Sherwin-Williams Company was named to FORTUNE Magazine's list of "100 Best Companies to Work for." In 2006, the Cleveland-based paint company climbed to number 61, up from the 99th spot in 2005, the first year the company made the list.
Chris Connor, Sherwin-Williams Chairman, President and CEO commented, "Given the diligence and rigor that goes into the selection process, it is very gratifying to be named to the list for a second straight year."
FORTUNE scores applicants in four areas: credibility, respect, fairness, and pride/ camaraderie. The selection committee bases its evaluation on a thorough audit of the policies and culture of each company and the opinions of the company's own employees.
To measure employee attitudes, a 57-question survey created by the Great Place to Work Institute in San Francisco is sent to a minimum of 400 employees selected randomly.
The committee also evaluates each company's demographic makeup, pay, and benefits programs.
Out of 1,500 companies that applied or were recruited to participate, 466 completed the exhaustive survey process, and 100 were selected for the final list.
PPG Auto Glass, a consolidated affiliate of PPG Industries, has agreed to acquire certain assets of the wholesale distribution network of Independent Glass Distributors, a subsidiary of privately owned Iowa Glass Depot. Terms were not disclosed.
"The acquisition will strengthen our ability to provide auto glass shops with high-quality products and service, especially in the Midwest," said Marc Talbert, president, PPG Auto Glass.
Based in Cedar Rapids, Iowa, Independent Glass Distributors is a wholesale distributor of automotive replacement glass and related products with 18 branches throughout the central and western United States.
With more than 130 branches, PPG Auto Glass is the largest distributor of automotive replacement glass in the United States.
The Hamilton District Autobody Repair Association (HARA) in conjunction with Mohawk College and the local apprenticeship office of the Ministry of Training, Colleges and Universities apprenticeship offices in Canada are introducing a new pilot program, JobConnect, to answer the need for qualified staff/ apprentices in an affordable way for an initial six local shops.
This unique pilot program works like this:
- Young people who have not finished Grade 12 (the required educational level to start apprenticeship in collision repair) are selected to work part time in a collision repair shop with their employers receiving a wage subsidy. When not working, the young people attend academic upgrading part time to meet the requirements to be signed as apprentices.
- Once their academic upgrading is completed these young people would be eligible for a $1,000 academic scholarship and the shop owner eligible for a $2,000 signing bonus if the young person is hired as an apprentice ($1,000 at signing, $1,000 after 6 months).
- The shop owner would also then be eligible for a tax credit of up to $5,000 for each of the next three years that the young person continued to be employed.
- The apprentice would also be eligible for a tax deduction for the cost of tools and an $800 interest-free loan from the province to offset tool costs.
"This is a great opportunity to take advantage of the reduced risk and reduced costs of hiring a motivated future auto body apprentice just as our busy season starts," said Tony Nigro, owner of Wentworth Collision and president of the collision repair association.
It is hoped that if the pilot is successful, a similar program would be offered across the province to help shop owners and interested future autobody apprentices.
California Assembly Bill 1852 has been introduced in California by Assembly members Ed Chavez, Bill Maze, and Leland Yee. The legislation regulates the use of replacement crash parts, creating a parts certification system in the state of California. Two national industry groups have taken opposite stances on the value of A.B. 1852:
FOR: CAPA
The Certified Automotive Parts Association (CAPA) has endorsed what it calls groundbreaking legislation to increase consumer protections in collision repair that was introduced in the California Assembly. According to a CAPA press release, AB 1852 increases consumer protections while opening the California marketplace to high quality and competitively priced generic certified collision parts. This bill aims to educate consumers to avoid overpriced repairs in the complicated automotive collision repair process that involves insurers, body shops, and the car companies.
“I applaud and strongly endorse AB 1852 by Assembly Members Chavez, Yee, and Maze,” stated Jack Gillis, Executive Director of CAPA. “The legislation contains important new consumer protections and it will help consumers avoid costly repairs when their vehicle has been in an accident.”
“California consumers are being over charged by the car companies,” added Gillis. “AB 1852 will increase competition and save consumers money. The only opposition to this important consumer legislation will come from car companies trying to protect the monopoly that allows them to gouge consumers.”
Gillis highlighted several new consumer protections in the bill including new procedures for recalling defective parts, requiring the disclosure of country of origin of both car company brand parts and certified parts; increase warranty protection for certified parts; and a web site for consumers to access the latest certified parts list.
“Provisions like these increase consumers’ understanding that generic certified collision repair parts are of like, kind, and quality to the expensive car company brand replacement parts. Consumers save billions each year by purchasing generic drugs over the namebrands - the same principles apply to generic certified replacement parts,” stated Gillis. “This bill will provide California consumers with low cost, high quality options over the expensive car company parts.”
AGAINST: ASA
The Automotive Service Association (ASA) opposes A.B. 1852, saying in a press release that the proposed bill will harm both consumers and repairers. According to the ASA press release, the legislation repeals important consumer parts notice requirements in California and increases the paperwork burdens for collision repair facilities.
Specifically deleted is language protecting the consumer's right to know:
“No insurer shall require the use of nonoriginal equipment manufacturer crash parts in the repair of an insured’s motor vehicle, unless the consumer is advised in a written estimate of the use of nonoriginal equipment manufacturer aftermarket crash parts before repairs are made. In all instances where nonoriginal equipment manufacturer aftermarket crash parts are intended for use by an insurer: The written estimate shall clearly identify each such part with the name of its nonoriginal equipment manufacturer or distributor.”
Although the proposed legislation establishes a generic parts notification in the written estimate, the process as drafted, according to ASA, could be more confusing to the consumer.
As have other aftermarket crash parts bills introduced in recent years, the bill establishes a parts certification program. Licensed certifiers will determine “standards of like kind and quality.”
Collision repair facilities will be required by the legislation to report, “on a daily basis,” any automaker collision repair part or certified collision repair part “that does not function as intended and is exchanged or returned to the manufacturer or distributor.” This report to the director of consumer affairs will, at a minimum, include the transaction date, the name of the manufacturer, the serial, certification, or unique identifying number for the part, the make, year and model of the vehicle and a description of the defect.
Bob Redding, ASA's Washington, D.C., representative, said, “ASA believes this bill will dilute established consumer protections in California and place additional bureaucratic burdens on collision repair facilities. In lieu of this initiative, the California parts notice statute should have remained intact and consumers given an additional right of consent as to the use of the replacement crash part. This bill does not provide choice for the consumer or enhance current consumer protections.”
ASA encourages California collision repairers and consumers to contact their representatives in the California Assembly asking that they oppose A.B. 1852. Information relative to this bill, and others, can be found on ASA's legislative Web site, TakingTheHill.com.
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