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Letter to the Editor
This article originally appeared in the August 2006 Issue of INSIGHT
©2006 Collision Repair Industry INSIGHT All Rights Reserved
CIC Database Task Force Meets with CCC and MOTOR
Sherwin-Williams Q2 Net Income Up 20%
AMI Website Receives Communications Award
PPG Reports Record Sales, Earnings for Any Quarter
House-Senate Conference Committee Agrees to Perkins Act
BASF Names Raimar Jahn to Head Global Coatings Operating Division
LORD Corporation Signs Vendor Partnership with CARSTAR Canada
PPG Announces Management Appointments
Valspar Acquires Majority Interest in Huarun Paints
ASA Collision Division Uses Time Study to Address Feather, Edge, and Fill Issues
Mitchell Provides Transparency on How Labor Times Are Developed, Verified, and Maintained
INDUSTRY UPDATE
The Collision Industry Conference (CIC) Database Task Force (Task Force) met with representatives from CCC Information Services, Inc. (CCC) and MOTOR Information Systems (MOTOR) on June 21st and 22nd at MOTOR’s headquarters in Troy, Michigan.
The Task Force is comprised of representatives from the three largest national collision repair trade associations: the Alliance of Automotive Service Providers (AASP), the Automotive Service Association (ASA), and the Society of Collision Repair Specialists (SCRS).
As an extension of ongoing dialogue between the three organizations and information providers, the day-and-a-half meeting addressed macro-level issues including but not limited to: MOTOR / CCC’s industry forum, substrate identification, specific OEM manufacturer repair and replace procedures, database disclosure and the database inquiry (or request for review) process.
SCRS’s Immediate Past Chairman Lou DiLisio stated, “The Task Force was encouraged by the outcome of this meeting. Clearly, the three national associations working together have proven to be an effective model. Instead of each association voicing their concerns independently, the industry has one voice, which makes it easier for companies like CCC and MOTOR to respond to our needs and concerns.”
AASP board member Rick Starbard commented, “The OEs are manufacturing vehicles with newer substrates (i.e. ultra high strength steel) at a rapid pace. In many instances that substrate will require a specific repair or replacement procedure and in some cases, specific equipment, that is different than a conventional repair. As a result, it is critical that this type of information be incorporated in the database. We believe CCC and MOTOR clearly understood the urgency surrounding this issue and have committed to work together with us to address it.”
“We spent a significant amount of time addressing their database inquiry process and the issues our members are having when submitting things such as a labor time inquiry. Upon reviewing their processes, sharing the industry’s concerns and offering suggestions for improvement, we are confident that positive changes are forthcoming,” stated Darrell Amberson, AAM, ASA Collision Division Oper-ations Director.
MOTOR’s President Kevin Carr and Carlos Navarro, CCC’s Vice President of Key Applications Technology, who were in attendance at the meeting, committed to continue working with the Task Force. They expressed their willingness to seek ways to continue to improve their products. They intend to host several conference calls during the course of the year to provide updates on the progress they have made on the issues raised. Moreover, the companies are expanding their industry forum participants to accommodate additional representatives from within the Task Force.
Their industry forum assists in driving future product features and enhancements, as well as raising the issues that are most pressing to repairers, as they relate to the database.
The Task Force will continue to report upon the progress made with CCC and MOTOR in addition to the two other information providers at future Collision Industry Conference (CIC) meetings.
Carr added, “MOTOR, to-gether with our business partner CCC, is committed to an open dialogue with all industry segments. We appreciated the opportunity to host this visit by the Task Force. It was especially valuable to hear a front-line perspective on current issues from the Task Force members. MOTOR is confident that everyone involved in these meetings, and ultimately the entire industry, benefited and will continue to do so in the future.”
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The Sherwin-Williams Company announced its financial results for the second quarter and first six months ended June 30, 2006. Compared to the same periods in 2005, consolidated net sales increased $164.6 million, or 8.4 percent, to $2.13 billion in the quarter and $394.6 million, or 11.3 percent, to $3.90 billion in the first six months due primarily to continuing strong domestic and international paint sales.
Consolidated net income increased $31.4 million, or 20.5 percent, to $184.6 million in the quarter and $61.7 million, or 26.1 percent, to $298.3 million in the first six months. As a percent to net sales, consolidated net income improved to 8.7 percent from 7.8 percent in the quarter and to 7.7 percent from 6.8 percent in the first six months due primarily to improved operations.
Net sales in the Paint Stores Group Segment increased 11.8 percent, to $1.33 billion in the quarter and 15.5 percent, to $2.38 billion for the first six months. Net sales from stores open for more than twelve calendar months increased 9.6 percent in the quarter and 13.4 percent in the first six months. Paint Stores Group Segment operating profit increased $34.5 million, or 18.9 percent, in the quarter and $72.8 million, or 28.3 percent, in the first six months. Operating profit as a percent to net sales increased to 16.3 percent from 15.4 percent in the quarter and to 13.9 percent from 12.5 percent in the first six months.
Net sales of the Consumer Group Segment in the quarter decreased $13.6 million, or 3.3 percent, to $400.9 million and in the first six months decreased $10.0 million, or 1.4 percent, to $730.8 million. Consumer Group Segment operating profit increased to 19.0 percent from 15.7 percent in the quarter and 18.2 percent from 15.9 percent in the first six months.
The Global Group Segment's net sales in the quarter increased 10.4 percent, and in the first six months increased 12.1 percent. This Segment's net sales stated in local currency increased by 7.8 percent in the quarter and by 8.6 percent in the first six months due primarily to architectural paint selling price increases and volume gains in Mexico and South America and improved automotive and product finishes sales. Operating profit of this Segment improved $8.6 million, or 33.7 percent, to $34.0 million in the quarter and $20.3 million, or 43.8 percent, to $66.5 million in the first six months. Operating profit as a percent to net sales increased to 8.5 percent from 7.1 percent in the quarter and to 8.5 percent from 6.7 percent in the first six months.
Commenting on the second quarter results, Christopher M. Connor, Chairman, President and Chief Executive Officer, said, "Our management teams will continue to emphasize tight control over selling, general and administrative expenses as another means to improve operating profit. ... During the third quarter of 2006, we anticipate achieving an increase in consolidated net sales between six and nine percent over last year's third quarter...."
The newly redesigned Automotive Management Institute (AMI) website, www.AMIonline.org, was recently recognized as an Honorable Mention Bronze Quill Award recipient from the International Association of Business Communicators (IABC).
Sponsored by local chapters of IABC, the Bronze Quill Awards recognize excellence in business and organizational communications. Judged by leading professionals in the communications industry, awards are given based on conceptual strength, objectives and results achieved.
This year’s nominees were judged in 14 different categories, with AMI’s website receiving the award in the Best Overall Website category.
The site was judged by various members of IABC chapters around the country. One judge stated, “The strongest element of this project is the attention to improving the value and effectiveness of the site for the students by upgrading the site’s technological design and capabilities. Car lovers definitely appreciate good design.”
Redesigned earlier this year, the AMI website features audience-targeted sections, management blogs, a reorganized catalog and calendar, and the ability for students to check transcripts online.
The website was redesigned by Colby Horton, the Automotive Service Association’s (ASA’s) Web operation manager, in collaboration with Toni Slaton, AAM, executive director of AMI.
“It’s an honor to be recognized by IABC as one of the best websites. The redesign was a very big project and the end result is a new, interactive site that is a comprehensive information source for AMI students, alumni and partners,” said Slaton.
AMI was established to answer the demand for continuing education tailored specifically for the business needs of the automotive service and collision repair industry. To date, AMI programs have attracted more than 147,000 enrollments throughout North America. AMI is a not-for-profit educational foundation to which tax deductible contributions can be made.
PPG Industries has reported record sales and earnings for any quarter with second quarter net income of $280 million, or $1.68 a share. That compares with second quarter 2005 net income of $231 million. Sales were $2.82 billion, surpassing the old record of $2.66 billion set in the second quarter of 2005 by 6 percent.
For the first six months of 2006, PPG recorded net income of $464 million, or $2.79 a share. Sales for the first half of 2006 were $5.46 billion. For the first six months of 2005, PPG recorded net income of $326 million, or $1.89 a share. Sales for the first half of 2005 were $5.15 billion.
"Our results demonstrate that we're achieving our objective of delivering profitable growth," said Charles E. Bunch, chairman and chief executive officer. "In coatings and optical products, which represent nearly two-thirds of our portfolio, our momentum continues. Collectively, coatings and optical products grew at more than ten percent this quarter.... Although growth is moderating to more sustainable levels in North America, we see continued economic expansion worldwide. As we have proven this past quarter, these economic conditions create meaningful opportunities for us to generate value for our customers and shareholders."
Coatings sales increased $129 million, or nine percent, as a result of higher volumes, especially in Asia and Europe; improved selling prices across all businesses; the impact of acquisitions; and the positive impact of stronger foreign currencies. Operating earnings were up $62 million due to the benefits of the higher selling prices and volumes mentioned above and higher other income due to the favorable impact of insurance settlements.
Glass sales increased $30 million, or five percent, because of higher volumes across most businesses. Operating earnings were down $4 million due to the impact of inflation, lower equity earnings and legal matters.
Chemical sales increased $9 million, or one percent, due to higher selling prices for chlor-alkali products and increased optical sales due to organic growth and acquisitions. These increases were partially offset by lower volumes for chlor-alkali products. Operating earnings were down $15 million due to the impact of higher inflation, higher environmental charges and higher manufacturing costs. These decreases were partially offset by the benefit of the higher selling prices.
U.S. House of Representatives and U.S. Senate negotiators agreed to renew the Carl D. Perkins Vocational and Technical Education Act (S. 250) for another six years. Despite President George W. Bush's proposal to leave the program unfunded in his next two fiscal year budget proposals, House and Senate conferees had no trouble agreeing to renew the Perkins Act.
Under the Perkins Act, states receive grants for career and technical education at the secondary and postsecondary levels. High schools and community colleges are able to prepare students for careers that do not require a four-year degree.
Both the U.S. House of Representatives and the U.S. Senate approved individual vocational education bills last year. The biggest difference between the two bills was the decision on how to manage the two grant programs covered under the Perkins Act.
Tech-Prep, the smaller of the two grant programs, provides money for math and science classes to prep students for technical colleges. The Perkins program, the larger of the two, provides a substantially higher amount of money to classes in a wide variety of subjects in high schools and community colleges.
The conference agreement preserves both Tech-Prep and the Perkins program and allows states to use Tech-Prep grants for more expansive Perkins programs. Tech-Prep money is controlled by state governors who decide how to divide the money among local schools.
Rep. Howard P. McKeon, R-Calif., chairman of the House Committee on Education and the Workforce, said, "We're protecting the role of states and local communities and asking for results in exchange for the money we're already spending at the federal level."
Chairman McKeon and Sen. Michael B. Enzi, R-Wyo., chairman of the Senate Health, Education, Labor and Pensions committee, led the negotiations.
Last year, the Perkins Act provided $1.18 billion in state grants. The Senate and House conferees agreed to reauthorize $1.3 billion in grants this week.
Bob Redding, the Automotive Service Association's Washington, D.C., representative, commented, "ASA would like to see final approval for the Perkins Act prior to the congressional August recess. We believe there is time to finish the bill in the next few weeks."
Raimar Jahn has been named to head BASF’s Coatings Operating Division, effective July 1, 2006. In addition, Jahn has been named Chief Executive Officer of BASF Coatings AG. In both positions, Jahn succeeds Jean-Pierre Monteny, who retired on June 30, 2006.
Jahn was most recently President of BASF’s Performance Polymers division, a position he held since 2001.
Jahn joined BASF in 1985 as a Marketing and Sales Manager. After working for BASF’s subsidiary Elastogran GmbH from 1988 to 1989, Jahn relocated to BASF Mexicana in 1989 to work in sales for polyurethanes and specialty chemicals. In 1997, he became Senior Vice President of BASF’s automotive coatings business in North America, based in Southfield, Michigan.
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LORD Corporation, maker of Fusor Automotive Repair Adhesives for automotive body repair, has announced the signing of a new vendor partnership with CARSTAR Automotive Canada.
While many CARSTAR stores already use Fusor products, these same adhesives as well as extensive best practices training will now be available to CARSTAR franchisees as part of the preferred vendor program.
Originally developed for CARSTAR USA, the programs offer easily repeatable, quality procedures that bring consistency to repair operations involving adhesives and seam sealers. Additionally, those repair centers or locations concerned with earning or maintaining I-CAR Gold Class status can earn an I-CAR Gold Class point by attending the Fusor 001 hands-on training course.
“LORD Corporation’s Fusor products have long been the adhesive of choice by the OEMs,” said W. Larry Johns, LORD Fusor National Manager Consolidator & Franchise Programs. “Fusor products can be found on vehicles made in North and South America, Europe and Asia. We are excited about the opportunity to serve CARSTAR and their growing organization.”
“Since CARSTAR is the only national collision repair franchise [in Canada] that offers a lifetime warranty, using Fusor products is a natural,” said Larry Jefferies, Executive Vice President of CARSTAR Automotive Canada,. “Repair quality is essential. Ongoing access to Fusor products and systems is one more step in the process of ensuring CARSTAR franchises remain best in class.”
Founded in Hamilton, Ontario, CARSTAR Automotive Canada has grown from eight to more than 100 locations in just ten years.
Developed by LORD Corporation, a global leader in the development and manufacture of high-performance bonding solutions for more than 50 years, Fusor products are recognized to meet OEM standards and have been a proven solution in the aftermarket for more than a decade.
Randy Cremeans has been named manager, collision segment N.A. for PPG Automotive Refinish. In his new position, Cremeans will be responsible for the strategy and growth of the PPG Automotive Refinish premium and mid collision segments.
Cremeans has been with PPG for six years and has held positions within business development and marketing as well as this most recent assignment as global director of collision segments. Cremeans has over 25 years of experience in the coatings industry.
Terrance Chambers has been named manager, color marketing for PPG Automotive Refinish. In his new position, Chambers will plan, develop, and implement a color marketing strategy for all PPG Refinish brands.
Chambers comes to PPG from Sherwin-Williams where he held the position of Director Color Technology for the past five years. He is active in the Cleveland Paint and Coatings Society as well as the Detroit Colour Council.
Jennifer Goings Smith has been named director, business projects, Refinish for PPG Automotive Refinish. In her new position, Goings Smith will be responsible for leading and establishing business processes, infrastructure, and systems to support the original equipment manufacturer, commercial, and collision segments.
Goings Smith has been with PPG for 12 years and has held a variety of Information Technology management positions. Her latest assignment was Director, eCommerce. Prior to PPG, Goings Smith worked at IBM as an account representative.
The Valspar Corporation has agreed to acquire a significant majority of the share capital of Huarun Paints Holdings Company Limited (Huarun Paints), one of China's largest independent coatings companies, from Champion Regal, a Hong Kong based investment company.
Founded in 1991, Huarun Paints has grown to become one of China's leading domestic suppliers of wood and furniture coatings and a rapidly growing supplier of architectural coatings. Huarun Paints achieved sales of approximately $180 million in 2005, primarily through its focus on the development of an extensive network of distributors and exclusive retail paint stores throughout China. The cash purchase transaction is expected to close by the end of July.
William Mansfield, Valspar's President and Chief Executive Officer, commented, "By combining the resources of our two companies, we intend to expand Huarun Paints' product offering and geographic reach in the world's fastest growing coatings market."
With fiscal 2005 sales of $2.7 billion, Valspar is a global provider in the paint and coatings industry.
The Refinish Subcommittee of the Automotive Service Association's (ASA) Collision Division Operations Committee continues to monitor repair issues including time requirements to properly handle quality repairs. Recent activities include ASA's involvement with the CIC Database Task Force, of which Darrell Amberson, AAM, Collision Division director, Carroll Proctor, Estimating Subcommittee chair, and Denise Caspersen, Collision Division manager, are members. This cooperative effort has provided the association a platform to share the results of ASA's feather, edge and fill time study.
"The goal is to have an automated process to compensate for the overlooked steps necessary to complete a quality repair. This could be based on the area of the repair involving feather, edge and fill or a percentage of the straightening time, similar to the concept of paint and material calculations," said Amberson.
ASA's feather, edge, and fill time studies were completed late last year and were announced at ASA's press conference during the International Autobody Congress and Exposition (NACE). To advance the industry as a whole, the studies have also been made available to a number of collision-related organizations.
The ASA study is a result of more than 100 time studies recorded and tabulated by the 2005-2006 ASA Collision Division Operations Committee. Mike West, a member of ASA's Refinish Subcommitte and owner of Southtowne Auto Rebuild Inc. in Tukwila, Wash., created the initial format for the study. It was the 2004-2005 Operations Committee that first began to systematically conduct the time studies and collect the data provided by various committee members. Participants of the time studies were asked to record the amount of time involved in the feather, edge and fill procedure. Photographs of the areas measured and vehicle make, model and year was also documented.
"The Refinish Subcommittee's first step was to do time studies about the feather, edge and fill problem, and work with solid data," said Jerry Burns, AAM, Refinish Subcommittee chair and owner of Automotive Impressions Inc. in Rio Rancho, N.M. "For more than two years, ASA committee members have been studying this issue and have collected solid data to help solve this industry problem."
Reviewing the overall data, study results indicate required times to be slightly more than an hour for approximately a 2.5-square-foot area. This is based on the average amount of time spent to feather, edge and fill a repaired panel to return it to the condition of a new undamaged part and ready for the refinish process. ASA's Operations Committee hopes that sharing this time study with the information providers will lead to adjustments in the estimating systems to include additional elements in the repair estimate process.
"ASA's Collision Division Operations Committee has diligently worked to provide systematic and comprehensive data to the industry and its information providers regarding the feather, edge and fill issue," said Caspersen. "Through industry participation and the sharing of information, perhaps the feather, edge and fill issue will soon be resolved."
In response to top concerns of collision repairers raised at the annual National Industry Issues Forum (NIIF), hosted by the Society of Collision Repair Specialists (SCRS), Mitchell International has issued an open invitation to the Collision Repair Industry to come see how the company develops, verifies, and maintains labor times. In a company press release, Mitchell has offered to demonstrate complete transparency to collision repairers, SCRS association leaders and members, and collision repair industry press and analysts, so all can understand how the company derives and maintains its labor times database.
Foremost on the minds of the collision repairers attending the recent SCRS conference was the perception that estimating databases are misused and lack transparency. Participants of the NIIF said that they would like database providers to make available more information about how they derive their labor times, as well as provide disclosure when significant changes are made.
“Mitchell’s response to collision repairers and the SCRS is: We Hear You! That is why we are inviting the industry to personally visit Mitchell to see for itself how we develop labor times. Once collision repairers understand how we develop and maintain our database they will realize that Mitchell’s labor times are the most comprehensive and accurate available to the collision repair industry,” said Tom Fleming, VP of Database Development.
Barry Dorn, SCRS Director at Large and NIIF co-moderator stated, “We appreciate Mitchell’s offer to provide collision repairers with insight into how they derive their labor times, and we are glad that Mitchell hears our concerns and is willing to address them. SCRS believes the Collision Repair Industry would benefit from having an understanding as to how all the information providers develop their times. Hopefully, this will be the beginning of the evolution of database transparency. As important as it is to understand how the times are derived, in some cases it is more important to understand how, when, and why changes are made to the database.
Fleming added, “In addition to opening the doors on labor time development, Mitchell is fully committed to communicating to the industry when significant changes are made to the database. By making our labor time process transparent to one and all, and quickly communicating when changes are made, we are ensuring that the industry can fully trust the Mitchell Collision Estimating Database.”
Highlights on how Mitchell’s labor times are developed, verified and maintained include:
- Mitchell employs the largest dedicated in-house editorial staff (I-CAR, Gold Class, and ASE certified master technicians with more than 15 years average industry experience) of any collision estimator provider. Mitchell’s information comes from over 50 manufacturers in North and South America.
- 300-plus vehicles are annually added or updated to the Mitchell database, which includes more than 2,040 services, covering more than 104,000 model variations and more than seven million parts. Mitchell pays nearly $6 million to achieve such accuracy and comprehensiveness.
- 180,000 vehicle configurations are tested on a monthly basis to ensure the correct availability of vehicle options. Nationwide over 400 shops have participated in Mitchell’s labor time study program. Company editors devote the equivalent of one working day every day of the year to performing a labor time study for use by the collision repair industry. To increase accuracy, multiple studies of the same repair procedure are conducted in different environments, and then the data is normalized to ensure the allowances we report are accurate.
Time studies also include difficult-to-estimate set-up and preparation time, the checking-in and inspection of all parts needed for a repair as well as tool set-up time. The time studies are video taped with date and time stamps for validation purposes.
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