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Letter to the Editor
This article originally appeared in the March 2007 Issue of INSIGHT
©2007 Collision Repair Industry INSIGHT All Rights Reserved
Investment Group Led by Aurora Capital to Acquire Mitchell International
ARA Supports Efforts of Senator Lott to Provide Consumers Access to Total Loss Vehicle Data
Andre B. Lacy Retires from FinishMaster
I-CAR Education Foundation Launches New Campaign to Assist Career and Technical Schools
CarMax Foundation Awards $100,000 Grant to Safe America Foundation
ASE Collision Repair and Refinishing Series Available
BASF Automotive Refinish to Host Discussion Panel in Southern California
CARSTAR Names Bartnik Assistant Vice President and Director of Franchise Services
Panel Debates Issue of Underwritten Initial Estimates
CIC Wrestles with Abundance of Suggested Topics for 2007
INDUSTRY UPDATE
Mitchell International, Inc., a provider of information, workflow, and performance management solutions to the automotive insurance claims and collision repair industries, has signed a definitive agreement to sell the company to an investment group led by Aurora Capital Group and including General Electric Pension Trust.
“Mitchell has enjoyed an excellent partnership over the past seven years with its current shareholder group, led by Hellman & Friedman LLC,” said James D. Lindner, Chairman of the Board and Chief Executive Officer. “Over this period we have enjoyed industry-leading revenue and profit growth, but more importantly, have been successful in delivering market-leading solutions developed through the tireless efforts of our many dedicated employees. In addition, we have reinforced our outstanding reputation as a company that can serve its customers with integrity and a firm commitment to product innovation and world-class customer service. It is gratifying that Aurora Capital and GE Pension Trust recognize what we have accomplished and are wholly supportive of our vision for the future.”
“Aurora Capital and GE Pension have been longtime investment partners with tremendous capital resources and an unfailing commitment to seeking out great companies and providing the necessary support to further their strategic goals. Mitchell remains deeply committed to the markets we serve and our ability to invest in our customers, products and people has never been greater. We have developed a unique breadth of auto property and casualty and collision repair solutions and recognize the importance of continually adding value for our customers. Look for more great things to come,” added Alex Sun, President of Mitchell.
“Mitchell International not only has a storied and well recognized brand in the collision repair market but in recent years has emerged as the dominant provider of auto injury claims solutions,” said Gerald L. Parsky, Chairman of Aurora Capital. “They have an impressive roster of customers and have invested in building a rich pipeline of promising new products. We very much look forward to partnering with Jim, Alex, and the entire Mitchell management team to grow the business and continue their success in delivering valued products and services to their customers. As our partner, Mitchell will have an opportunity to draw upon our many years of operating experience growing and nurturing great companies. Led by Lawrence A. Bossidy, former Chairman and Chief Executive Officer of Honeywell International, Aurora’s investment advisory board is an invaluable resource that can assist in analyzing investment opportunities and further enhancing company strategy.”
“We believe there are significant opportunities to grow and even enhance Mitchell’s growth trajectory by working with management to execute its established business plan,” added John T. Mapes, Partner of Aurora Capital.
The transaction is expected to close in March 2007 pending customary conditions and certain regulatory approvals.
Goldman, Sachs & Co. and Wachovia Securities, Inc. acted as financial advisors to the Company. Goldman Sachs Credit Partners L.P. will be the sole lead in obtaining financing for the transaction.
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The push for VIN Disclosure legislation in 2007 took a major step forward with Senator Trent Lott’s (R-MS) introduction of the “Consumer Access to Total Loss Vehicle Data Act” (S.545). Senator Lott’s bill exemplifies his commitment to stem total loss vehicle-related fraud, theft, and other illegal total loss vehicle activities, not only in the USA, but worldwide. The Automotive Recyc-lers Association (ARA) applauds Senator Lott for his leadership in the effort to stem the abusive practices associated with title fraud.
The “Consumer Access to Total Loss Vehicle Data Act” (S.545) would make available to consumers and to state and local law enforcement information about automobiles that insurers have declared a total loss. The legislation directs the National Highway Traffic Safety Administration to require insurers to disclose information pertaining to these vehicles, including through online auto services.
“An estimated half million vehicles were damaged by Katrina, and there is evidence that these cars are being cleaned up and sold to unsuspecting consumers,” Senator Lott said. “Many of these cars are unsafe and shouldn’t be on the roads. And consumers are overpaying for vehicles they believe are sound.”
ARA supports the establishment of a disclosure system that provides consumers themselves with valuable information that currently is only available to insurance companies and transportation officials. Over the last year, ARA, along with a coalition comprised of automotive dealers, automakers, service organizations, and others, has called for consumer-protection legislation designed to unmask fraud in the titling process by making total-loss data electronically available to the public. Educated consumers are less likely to purchase a wrecked, flooded or stolen vehicle that has been declared a total loss.
“Empowering consumers with a publicly accessible electronic database of total loss VINs not only increases consumer protection, but will deter fraud by chipping away at the underground market auto supply,” said George Eliades, ARA Executive Vice President. “We look forward to Congressional debate on this bill to stop vehicle title fraud and help law enforcement crack down on criminals who alter titles on totaled vehicles.”
ARA encourages the Congress to consider including language regarding export of vehicles in any final VIN disclosure bill. The export provisions are a vital tool for law enforcement agencies to stop VIN cloning and to fight terrorism, fraud, and other crimes. ARA looks forward to working with the Congress to enact title and vehicle fraud legislation in this session.
Founded in 1943, ARA, based in Fairfax, Va., is an international trade association representing an industry dedicated to the efficient removal and reuse of automotive parts, and the safe disposal of inoperable motor vehicles.
Andre B. Lacy, Chairman and Chief Executive Officer of FinishMaster, Inc., retired December 31, 2006. He will continue to serve as Chairman Emeritus for FinishMaster and as Chairman of LDI, Ltd., the company that owns a majority interest in the publicly traded FinishMaster.
"When we acquired a majority interest in FinishMaster in 1996, I believed the organization had significant potential for growth. Over the past ten years, we have realized that growth and have built the infrastructure for continued growth," Lacy said. "It has been a great ride."
David N. Shane, President and Chief Executive Officer of LDI, Ltd., will succeed Lacy as Chairman. Shane joined LDI in 1997 as Vice President and Corporate Counsel, was promoted to President and Chief Operating Officer in 2002, and in December of 2006 took on the responsibility of CEO.
Shane commented, "FinishMaster has great employees and a solid leadership team and I'm looking forward to working with them to keep the momentum going."
In addition, J.A. Lacy, President of FinishMaster, was promoted to President and Chief Executive Officer. Lacy joined FinishMaster in 1999 as Senior Vice President of Planning, after serving as President of Tucker Rocky Canada, another LDI company. He was promoted to President in 2002.
"I view my new role as just a continuation of our efforts to build shareholder value for our investors," Lacy noted. "Our industry is changing and I know Dave's guidance will help us continue to develop the infrastructure, organization skills and improved processes that will lead to continued growth and value creation."
FinishMaster is a national independent distributor of automotive paints, coatings, and related accessories to the automotive collision repair industry. The company is headquartered in Indianapolis, Indiana and operates three major distribution centers and 170 branches in 27 of the 35 largest metropolitan areas in the country.
The Valspar Corporation, a global coatings company, has reported net income for the first quarter ended January 26, 2007 of $23,598,000 compared to net income of $22,541,000 for the comparable period last year. Last year's results included expenses of $0.01 per diluted share related to the company's manufacturing rationalization plan. Sales for the quarter increased 10.3 percent to $694,523,000 compared to $629,765,000 last year.
Commenting on the first quarter results and outlook for the year, William L. Mansfield, President and Chief Executive Officer, said "We are seeing soft demand in architectural paints and portions of our industrial coatings product lines related to the slowdown in U.S. residential construction spending. Our acquired businesses - Huarun Paints, H.B. Fuller powder coatings and our coil coatings joint venture in Brazil - are all performing well and the Valspar brand initiative is building momentum leading up to the nationwide launch this Spring. While we anticipate another quarter of difficult comparison with last year's strong first half performance, we continue to expect Valspar's fiscal 2007 earnings per share to be in the range of $1.80 to $1.90."
The I-CAR Education Foundation has announced a new fundraising campaign asking business owners to contribute $100 per year to help area career and technical schools and colleges. The Foundation will allocate 85 percent of the funds raised to collision repair and refinish school programs in the regions where the funds originated.
The campaign was created to address the lack of entry-level technicians in the industry, as well as several issues identified by career and technical school and college instructors. Those issues included the need for assistance with funding in order to use the I-CAR Live curriculum; assistance with providing students with I-CAR Live CDs, and assisting students with continuing education by offering scholarships.
Jeff Peevy, I-CAR Field Operations Manager said, “We have asked the I-CAR volunteers to get involved in this campaign as they have helped the industry overcome challenges for many years. With their help we can truly help to address the need for entry level technicians. I-CAR volunteer committees will also assist us in getting the support to the local levels where it is needed most.”
Ron Ray, I-CAR Education Foundation Director said, “Many of the schools with a collision repair and refinishing training program operate with limited budgets. This campaign will enable business owners to support their local schools with tax-deductible donations that ensure that they have the curriculum and training to develop entry-level employees. We would like to have each of these schools positioned to offer their graduates I-CAR points through the I-CAR Industry Training Alliance(SM).”
“Young adults entering the collision repair field must possess the fundamental knowledge to complete a safe, quality repair,” commented Mike Cassata, an I-CAR volunteer and a Senior Appraiser for Amica Mutual Insurance Company. “Employers must be confident that new hires from career and technical schools are receiving the best training available. It is our obligation as current stewards of the business to ensure that this is possible.”
Those interested in participating in the campaign and tracking its progress can visit the I-CAR Education Foundation at www.ed-foundation.org and click on the campaign logo. All contributions for the campaign are recognized at the Education Foundation web site, and donors receive recognition via a framed certificate and window decal for display.
CarMax, Inc., the nation's largest retailer of used cars, has announced that the CarMax Foundation has awarded the Safe America Foundation a $100,000 grant to help fund a teen driver safety campaign. The campaign will include educational clinics offered during a multi-city tour across the country. The grant will also be used to help promote the Safe America website, http://www.skidzz.com, that allows teens to learn driving safety using a hands-on approach.
"The grant from CarMax will help our organization potentially save the lives of young drivers," said Len Pagano, president of the Safe America Foundation. "Our program is designed to improve the skills and driving behavior of teenagers through clinics and interactive activities. We believe that it is critical to address such an important public safety issue with a positive and proactive approach."
In 2004, more than 5,890 young drivers aged 16 to 20 were killed in motor vehicle collisions in the U.S.; another 456,000 were injured. According to the National Highway Traffic Safety Administration, fatal motor vehicle collisions are the leading cause of death for this age group, outnumbering the combined deaths resulting from drug use, guns and other violence.
"The CarMax Foundation is devoted to supporting non-profit organizations that address significant needs through positive new approaches," said Joe Kunkel, president of The CarMax Foundation and senior vice president of marketing and strategy for CarMax. "We are proud to be a part of this outstanding program that is working to make a difference in teen driving safety."
The Safe America Foundation teaches teens about a wide variety of topics including: the physical science of handling a moving car; the functions of safety devices and security features in their cars; and how to handle adverse driving conditions. The program also shows teens how to deal with aggressive drivers and other obstacles to driving safety.
The Safe America Foundation is a nonprofit organization that focuses on emerging safety issues at home, work, while traveling and in play. The Foundation is a national leader in innovative teen driving training, emergency preparedness, and kids' safety education. Its ongoing programs include "SafeTeenAmerica," which addresses teen driving issues; "Prepared Not Scared," that educates individuals and businesses on how to prepare for natural and man-made disasters; and the "Safest Kid in America" contest which has reached over 10 million young Americans.
The CarMax Foundation's National Funding Program assists nonprofit organizations that address or improve automobile safety for families and children. The Foundation is supported by CarMax. Head-quartered in Richmond, Va., CarMax currently operates 74 used car superstores in 35 markets. CarMax also operates seven new car franchises, all of which are integrated or co-located with its used car superstores.
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Thomson Delmar Learning, a provider of education and training products and services throughout the world and part of Thomson Learning, announced the publication of the updated ASE Test Preparation Collision Repair and Refinishing Series Manuals. These newly revised 3rd edition manuals cover all collision repair and refinishing exam areas from B2-B6. Topics covered include Painting and Refinishing, Non-Structural Analysis and Damage Repair, Structural Analysis and Damage Repair, Mechanical and Electrical Components, and Damage Analysis and Repair. This series of comprehensive preparation materials reflects the specifications covered in the most up-to-date ASE tasks available.
Technicians seeking certification in any one of the collision and refinish ASE exam areas will benefit from the resources offered by this newly revised 3rd edition series of test preparation material. Each title in this popular series features practice test questions similar to those typically seen on an ASE certification exam which helps users feel more comfortable and prepared to pass the actual test. Coverage includes overviews of each task list topic, descriptions of actual repairs, ASE test taking strategies, and detailed explanations as to why a particular answer is correct or incorrect.
All of the task lists are fully up-to-date and the completely current test preparation questions reflect the most recent ASE task changes providing the most comprehensive coverage possible. Before taking the exam, users will have a better understanding of strengths, weaknesses, and areas needing additional review. In addition, overviews of each task make an easy reference point for help in answering difficult ASE questions. ASE Test Preparation Collision Repair and Refinish-ing Series, 3E is reviewed by master certified technicians making it a valuable preparation tool for preparing for any ASE exam.
Thomson Learning delivers highly customized learning solutions for colleges, universities, professors, students, reference centers, government agencies, corporations, and professionals around the world. Thomson Learning's mission is to shape the future of global learning by delivering consistently better learning solutions for learners, instructors and institutions. Thomson Delmar Learning is the leading provider of lifelong learning products and services for the health care, technology and trades, and career education markets.
In response to industry concerns regarding California’s upcoming regulation and environmental concerns changes, BASF Automotive Refinish is hosting an invitation-only event in March. The event will focus on educating collision shops on the new regulations, and informing them about the issues surrounding waterborne and low VOC products and providing them with solutions from BASF.
Chuck Sulkala, National Auto Body Council Executive Director, will moderate an interactive panel of industry experts addressing the concerns of California bodyshops. The seven-member panel will include representatives from the South Coast Air Quality Management District, collision repairers, BASF specialists, and the insurance industry.
On a lighter note, the evening will conclude with comedian and car nut Christopher Titus, who is best know for his FOX sitcom, “Titus”, and “The 5th Annual End of the World Tour” for Comedy Central.
“BASF Automotive Refinish is committed to the California market,” said Darlene Eilenberger, BASF Marketing Director, NAFTA. “So we are pleased to be able to host a discussion panel that showcases this commitment, as well as our vision of helping make our customers more successful and more productive, no matter what challenges they face.”
CARSTAR Franchise Systems has named Stacy Bartnik as Assistance Vice President and Director of Franchise Services. Bartnik will be responsible for service operations, managing CARSTAR’s regional service managers that provide support to approximately 270 locations throughout the United States..
Prior to her appointment to lead the CARSTAR franchise services department, Bartnik was responsible for store operations for 15 franchises in the Chicago area. Her role included involvement in CARSTAR’s Consulting Program where she analyzed and assisted with franchise development.
Bartnik has been employed in the Collision Repair Industry for more than 25 years, with continuous involvement in industry associations and holding different positions within the Society of Collision Repairs Specialist (SCRS), and the National Auto Body Council (NABC).
Bartnik has been attending the Collision Industry Conference (CIC) as a gold pin sponsor for over ten years, and has participated in many CIC committees throughout that time. Bartnik has also recently been appointed Chairperson of CIC.
“Stacy is a recognized industry figure, and brings a wealth of knowledge and leadership experience to our organization – ultimately benefiting our franchisees,” commented Dan Bailey, CARSTAR President and Chief Operating Officer. “We are pleased that we have someone who possesses a discerning knowledge of the industry, augmenting our franchise processes and systems within the CARSTAR network.”
Bartnik has been featured at NACE as a speaker and presenter, as a contributing editor to ABRN, and was honored in 2004 by Akzo Nobel as one of the Most Influential Woman in the Collision Industry.
The causes and concerns about “underwritten” initial estimates were the focus of a panel discussion including shops, insurers and attorneys in January.
“It could be a breach of the insurance contract with the insured if an insurance company is making a practice of deliberately not including (on an estimate) all of the repairs necessary to restore the vehicle,” Ohio attorney Erica Eversman of Vehicle Information Services, Inc., said in her opening statement at the discussion, held in Phoenix.
“I don’t see any value to the (insurance) company that would be the motivation for doing that,” George Avery, national claims consultant with State Farm, responded, pointing out the risk any such an insurer would be taking.
The panel discussion was the first of two similar events in January, the second being held in the Chicago area during Alliance of Automotive Service Providers (AASP) of Illinois convention. Both were prompted by a report by the Collision Industry Conference (CIC) “Anti-Fraud Committee” last year. In what the committee acknowledged was a non-scientific study, 266 claims submitted by collision repair shops showed an average supplement of nearly $2,400 on initial insurer-prepared estimates that averaged $1,640. The committee subsequently received documentation on more than 700 claims, with the average difference between initial insurer estimate and final repair still remaining above $2,400.
The panel discussions in Phoenix and Chicago were not CIC-organized but were prompted by those who wanted to see more analysis of the subject following the CIC committee’s work. About 100 people attended the Phoenix event. Here is a summary of some of the main points raised by some of those participating on the panel.
- Attorney Eversman said that in addition to breach of contract, insurers could potentially be engaging in consumer fraud if they are training adjusters to not include on initial estimates “items that would be obvious to an experienced collision repairer as necessary.” She believes the problem stems not from policies set in place by top executives at insurance companies but more at a local level where adjusters and appraisers may be rewarded for keeping severity down.
- State Farm’s Avery said insurers are aware of the risk they would be taking if they were to engage in the types of practices Eversman describes. He said that underwriting initial estimates also raises an insurer’s costs because of the resulting supplements. “We try to get everything we can on the estimate because the next time you have to go out (because of supplements) means extra steps, extra time, extra man-power to get those things done,” he said. He also said initial estimates are written to be competitive in the market; a procedure may be necessary, for example, but the competitive price for that procedure in a market might be nothing. Lastly, he pointed out that more than 60 percent of initial estimates on State Farm claims are written by repairers and that there are supplements on those estimates as well.
- Roger Wright, manager of material damage and direct repair programs for AIG, said his company rewards employees for estimate accuracy, not reducing severity. He said the lack of recognized repair standards also plays a role; panel painting may be included on an initial estimate if enough shops in a market panel paint, making it a “recognizable practice,” he said.
- Darrell Amberson, president of Lehman’s Garage, a six-shop collision repair business in Bloomington, Minn., and national director of the Collision Division of the Automotive Service Association (ASA), said that he believes some insurers deliberately underwrite initial estimates. He cited an example of an insurer not including refinish labor time on salvage parts because the part might already be the right color. He said supplements on shop-prepared initial estimates are often the result of insurer requirements to not, for example, include blend time on the initial estimate.
- Gary Wano, owner of GW and Son Autobody in Oklahoma City, Okla., and vice chairman of the Society of Collision Repair Specialists (SCRS), read from an insurance company document he had obtained that instructed estimators to initially keep all mechanical, electrical and frame labor procedures at the sheet metal rate; to not include any blend times; and to include an OEM parts discount on every estimate. He said supplements on his shop’s initial estimates average about 16 percent of the initial estimate whereas it is not uncommon for supplements on insurer initial estimates to exceed 50 percent. He said that much of his concern about underwritten initial estimates stems from how repairers end up looking in the consumer’s eye when repair costs so far exceed what the insurer initially indicates on the estimate.
At the Collision Industry Conference (CIC) “planning session” held in Phoenix in mid-January, Stacy Bartnik oversaw her first meeting as chair of the conference, leading about 200 attendees through the process of determining which of hundreds of suggested topics CIC committees would tackle in the coming year.
Prior to the meeting, Bartnik had reviewed the results of an online survey in which any member of the industry was invited to contribute what issues they would like to see CIC address. She was able to compile those hundreds of responses into about three dozen broad categories.
Part of the Phoenix meeting was dedicated to allowing attendees to raise issues that might not already be among those submitted via the survey. Several participants, for example, expressed frustration with getting little or no response or action from their state department of insurance or other government regulators to concerns or questions pertaining to claims issues. Dan Risley, executive director of the Society of Collision Repair Specialists (SCRS), agreed that this is an issue he has heard from a number of association members.
“I can’t tell you the number of calls I’ve had saying, ‘We had an issue pop up in our state. We did our due diligence. We tried to contact the Department of Insurance and submitted an inquiry and we’re not getting any response. Or they say they can’t help us,’” Risley said. “So there’s a lot of questions from repairers about what they need to do in the event that they have an issue they are trying to resolve.”
“I would like to see some discussion on the use of photographs to establish judgment times,” suggested Darrell Amberson, president of Lehman’s Garage, a six-shop collision repair business in Bloomington, Minn.
Amberson, who also serves as national director of the Collision Division of the Automotive Service Association (ASA), said such “desk auditing” practices now include using photos to determine, for example, whether a repair time should be two hours rather than three.
“I would question the ability to accurately do that based on a 2-dimensional photograph,” he said.
Gary Wano, owner of GW and Son Autobody in Oklahoma City, Okla., applauded CIC’s recent efforts to push for solutions to the problem of shops having to rekey insurer-prepared estimates into the shop’s estimating system. Each of the three major estimating system providers have developed systems that enable shops to download such estimates from the insurer.
“But in the state of Oklahoma, at this point it seems that unless you happen to be part of that insurers’ (direct repair program), that option is not available,” Wano said.
Boyd Dingman, owner of Dingman’s Collision Center in Omaha, Neb., said he would like to see CIC address the issue of enhanced warranties on repairs.
“I believe if both insurance companies and collision repairers are responsible for a good warranty that stays with the car (even beyond its sale to a new owner), the vehicle will be repaired better and some insurance companies won’t hold back on the repair process,” Dingman said.
All of the issues raised at the meeting were added to those submitted previously on the survey. CIC participants in Phoenix then further compiled the issues into about a dozen categories that will form the basis for CIC committees in 2007.
An “Insurance Relations Committee,” for example, will choose from among a wide range of issues related to how shops and insurers interact.
Other committees formed but not named during the meeting in Phoenix are those addressing issues related to:
- fraud and ethics;
- vehicle design for repairability, and the rise in total losses;
- human resource compliance issues;
- fair commerce and trade practices (including the topics of steering and consumer disclosure);
- legislation and government (including the topics of licensing and repeal of the McCarran-Ferguson insurer anti-trust exclusion);
- parts (including quality, availability and insurer procurement);
- training and the technician shortage;
- repair and other industry standards;
- the information providers (including the topics of perceived bias, shrinking times, time studies,etc.).
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