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Letter to the Editor
This article originally appeared in the August 2007 Issue of INSIGHT
©2007 Collision Repair Industry INSIGHT All Rights Reserved
Keystone Automotive Industries Signs Merger Agreement with LKQ Corporation
ASA States Position on Feather, Fill, and Block Procedure
PPG Offers $3 Billion for Dutch SigmaKalon Group
CIC Database Task Force Meets with Information Providers
State Farm Reinvests in SkillsUSA
Assured Performance Reaches 3,000 Member Milestone
SCRS Supports Proposed Total Loss Disclosure Legislation
United Auto Changes Name to Penske Automotive Group
ASA States Position on Open Platforms
CARSTAR Adds Seven Locations in June
AASP MA/RI and Industry Groups Testify in Support of Right to Repair at Hearing
INDUSTRY UPDATE
Keystone Automotive Industries, Inc. has signed a definitive merger agreement with LKQ Corporation in which LKQ will acquire Keystone for $48 per share in cash, representing an aggregate purchase price of approximately $811 million on a fully diluted basis.
The merger is expected to close early in the fourth quarter of calendar 2007, subject to the approval of Keystone's shareholders, regulatory approvals, and other customary conditions. The merger agreement does not contain a financing contingency.
Keystone's board of directors has unanimously approved the terms of the merger agreement and has resolved to recommend that the Keystone shareholders approve the transaction.
Commenting on the merger, Rick Keister, Keystone's president and chief executive officer said, “In addition to providing tremendous value to our shareholders, this transaction delivers a true combination of complementary strengths. Keystone's aftermarket product offerings are a perfect fit with LKQ's leading presence in the recycled parts business. We envision an outstanding combined distribution network, greatly enhanced by Keystone's exceptionally strong organization - one that has grown dramatically over the last decade. Today, Keystone is the leading distributor of aftermarket collision replacement parts -- comprised of a highly respected team dedicated to quality, superior customer service and growth. The Keystone-LKQ merger presents unique opportunities to provide a comprehensive program of aftermarket, remanufactured and recycled parts to our customers, and we look forward to realizing these opportunities.”
J.P. Morgan Securities Inc. is acting as sole financial advisor to Keystone, and Latham & Watkins LLP is acting as Keystone's legal advisor.
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The Automotive Service Association (ASA) board of directors has approved a position statement on the "feather, fill and block" procedure presented by the ASA Refinish Subcommittee. The subcommittee drafted the text under the direction of subcommittee chairman Dan Stander of Jerry Stander's Collision Works in Littleton, Colorado.
The approved statement officially presents the association's position that as an industry standard, the process of "feather, fill and block" occurs during the refinish process of a repair. ASA recognizes the necessity of this process to provide the consumer with the highest standard of repair and craftsmanship in regard to the refinish process of a repaired panel.
ASA also acknowledges the "gap" (as defined by the Collision Industry Conference and addressed by the major information providers within their estimating guides) between preparation steps needed to raise the condition of a repaired panel to that of a new and undamaged panel.
In addition, ASA is aware of the lack of payment for this necessary procedure and strongly encourages insurers to acknowledge this action and compensate repairers accordingly for the labor and materials associated with this operation.
"This is such a prevalent issue. With rare exception, shops are simply not compensated for the feather, fill and block steps after each panel is straightened," said Darrell Amberson, ASA's Collision Division director and president of Lehman's Garage in Bloomington, Minnesota. "CIC has provided a clear definition and it's time to implement steps to include this part of the repair process on estimates. Even though the database providers acknowledge the process, there is no automated system currently. It is up to the user to make a manual entry on each estimate. All who make compensation based on our industry's estimating systems, particularly insurers, should recognize these steps and make appropriate allowances."
PPG Industries, Inc. has offered $3 billion for SigmaKalon Group, a Dutch paint and coatings producer acquired four years ago by investment firm Bain Capital. The Pittsburgh-based coatings, glass and chemical maker's bid included assumed debt. Bain Capital has given PPG a period of exclusivity as it considers the offer.
SigmaKalon supplies architectural, marine and industrial coatings in Europe, Africa and Asia. SigmaKalon had revenue of about $2.76 billion last year. Sherwin-Williams Company had initially also expressed some interest in the Dutch company's purchase.
Bain Capital bought SigmaKalon in 2003, four years after the company was formed by a merger of Britain-based paint maker Kalon Group, a subsidiary of France's Total SA, and Sigma Coatings, owned by Belgian oil company Petrofina.
"The SigmaKalon business has performed well financially and would be a strong complement to our existing coatings businesses," Charles E. Bunch, PPG's chairman and chief executive, said in a statement. "It would give us an excellent footprint in the European architectural coatings segment, where today we have very nominal participation."
This deal would double sales in Europe and expand PPG's global portfolio by more than 40 percent, Bunch said.
The acquisition would be subject to regulatory approval.
PPG Industries also reported that its second-quarter profit fell 11 percent, hurt by an asbestos-related settlement charge and higher income tax rate. Quarterly earnings were $249 million, down from $280 million in the prior-year period.
Sales rose to $3.17 billion from $2.82 billion, topping analysts' expectations of $3.13 billion. The company reported sales of $11.08 billion last year.
The Collision Industry Conference (CIC) Database Task Force and four major estimating system providers recently concluded a series of meetings at ASA headquarters in Bedford, Texas in an effort to enhance the accuracy and functionality of the estimating systems used by the collision repair community to estimate the cost to fix today's high-tech vehicles.
The Alliance of Automotive Service Providers (AASP), the Automotive Service Association (ASA) and the Society of Collision Repair Specialists (SCRS) comprise the CIC Database Task Force. Meeting with them were representatives from CCC Information Services, Motor Information Systems, Audatex and Mitchell International.
Among the issues discussed were the information providers' response time to collision industry inquiries; feather, prime and block; refinishing flexible substrates; blending of repaired panels; new substrate material (identification, labor times and specific repair/ replace procedures); disclosure of major product changes and system defects; and paint and materials calculations.
Members of the CIC Data-base Task Force in attendance included Darrell Amberson, Denise Caspersen, Lou DiLisio, Barry Dorn, Nick Kostakis, Daniel Risley, and Rick Starbard. Among the attendees in the various meetings involving information providers were Bruce Yungkans, representing CCC Information Services Inc.; Phil Cunningham, John Lypen and Tom Stryker, representing Motor Information Systems; Rick Tuuri, representing Audatex; and Tom Fleming from Mitchell International.
Kostakis, immediate past president, AASP, and owner of Angelo's Auto Body Inc. in Irvington, New Jersey, said, "Increasing tension between various industry segments has resulted in additional challenges for the Database Task Force, but there is good work to be done and resulting benefits for all parties if we can continue to find ways to work constructively with the information providers in pursuit of win-win solutions."
Dorn, SCRS vice chairman and owner of Dorn's Body and Paint Inc. in Mechanicsville, Virginia, said, "We thank the information providers for their time and attention and look forward to renewed efforts to address the myriad of issues identified and discussed. We are also confident that we made inroads in developing a more open and timely communication methodology."
Amberson, ASA's Collision Division director and president of Lehman's Garage in Bloomington, Minnesota, commented, "We appreciate that the information providers came to Bedford and listened to the concerns of the repairers. As a follow-up from previous CIC Database Task Force meetings with the information providers, we are glad to see the progress being made on substrate material identification. After addressing the issues of blend within, database disclosure, refinishing flexible substrates and feather, prime and block, we hope solutions will be developed."
In the interest of maintaining a workforce with the skills needed to repair homes and vehicles, State Farm has maintained its support of SkillsUSA. In addition to a $100,000 contribution, the insurer is providing hundreds of hours in time donated by employee volunteers.
“Our investment in skilled trades, such as auto collision repair and home construction benefits our customers every day,” said Warren Farrar, Assistant Vice President-Claims. “We spend billions of dollars for repairs to our policyholders’ cars and homes every year. Therefore, our investment to help develop skilled technicians to complete these repairs is time and money very well spent.”
State Farm supports ongoing SkillsUSA educational programs as well as the organization’s national competition. In attendance at this year’s competition held in Kansas City, Missouri, June 26 through June 29, were:
- 5,000 contestants (students)
- 1,200 judges from business and industry
- 650 business and industry volunteers who designed and managed the contests.
SkillsUSA is a national not-for-profit organization serving teachers and students who are preparing for careers in trade, technical, and skilled service occupations. SkillsUSA is a partnership of students, teachers and industry working together to ensure America has a skilled work force.
State Farm insures more cars than any other insurer in North America and is the leading U.S. insurer of homes.
Assured Performance Network (APN), a non-profit consumer advocacy organization and body shop cooperative, has reached major milestones in growth with approximately 3,000 Qualified Members, and over 1,200 Member shops participating in the co-op buying group, making them the largest network of independently owned body shops in the world.
Collectively, the APN network of shops performs nearly $10 billion dollars in repairs with buying power of nearly $5 billion. APN now has at least one Qualified Collision Care location within 15 minutes of at least 95 percent of the entire U.S. population.
Founded in 2004, Assured Performance Network has shown real growth over the last year, adding roughly 50 new members per week - nearly 200 members per month for over a year now, from 350 Founding Members in the spring of 2006 to 3,000 Qualified Members to date. APN's goal is to have over 5,500 members by year’s end.
“Our momentum continues to grow as dozens of new shops apply each week and hundreds are qualified each month,” said Stacy Mitchum, Director of Network Development. “Our tipping point came as shop owners began to recognize the power and collective benefit that can be realized by thousands of the top shops working together through their own co-op.”
“First and foremost, we only allow shops to participate that are best in class and become qualified. But then, instead of charging them fees, we financially reward them for their accomplishment and participation,” noted Scott Biggs, founder and CEO. “We created two entities to make this work: a non-profit consumer advocacy organization that sets the standards and qualifies the shops, and a separate shop-owned cooperative that allows leading vendors to provide financial rewards to those that can meet the standards.”
“Now that we have complete coverage of the entire country, we are beginning to move our focus to helping members transition to the next level of participation and take advantage of all of the various tools and benefits we offer,” added Mitchum.
Commenting about future plans, Biggs said, “There are almost endless opportunities to help improve the consumer experience as well as refine the buying - selling relationships. Just imagine what we can all do with over 5,000 of the best shops with nearly $5 billion in buying power, all working towards better business practices, greater service offerings, and more efficient buying as well as improved performance.”
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The Society of Collision Repair Specialists (SCRS) has declared its support of two legislative bills that would change the way that vehicle total losses are disclosed to the public.
H.R. 1029, introduced in the House of Representatives, and S. 545, introduced in the Senate, have similar aims: to direct the Secretary of Transportation (S. 545) and the National Highway Safety Administration (H.R. 1029) to require insurers and self-insurers to make available information relating to the fair market value and safety of damaged cars, in particular, total loss vehicles.
Three required areas of disclosure are proposed: the vehicle identification number and odometer reading, the date of and primary reason for the total loss determination, and whether the airbags deployed.
A coalition (including the National Automobile Dealers Association) championing efforts requiring insurers to make total loss data available has lobbied diligently to gain bipartisan backing for both bills. SCRS has added its support to the mix because these laws, if passed, will provide significant protections for the consumer.
"All too often an unsuspecting individual purchases a used car with a clean vehicle title that in actuality has been totaled, rebuilt and resold," explained SCRS Legislative Committee Chairman Rollie Benjamin. "The proposed legislation will make it significantly more difficult to perpetrate this dangerous misrepresentation by making it easier for consumers and dealers to identify those vehicles that have re-entered the market with a history of extensive damage."
Provisions are built into the bills to ensure that the data pertinent to a repaired vehicle's background be made easily available in a commercially reasonable, electronically accessible format. The expected outcomes are timely and complete vehicle history reports, better informed decisions by potential buyers regarding the safety and fair market value of used cars, and a reduction in the number of unsafe cars on the road.
"Adherence to honesty, fair play and protection of the consumer's best interests is the driving force behind the ongoing development of collision repair professionalism," stated SCRS Chairman Farzam Afshar. "SCRS has worked to foster those principles from its inception, so it makes perfect sense to align with the parties working hard to see these bills through."
International automotive retailer United Auto has officially changed its corporate name from United Auto Group, Inc. to Penske Automotive Group, Inc., effective July 2, 2007. The company's ticker symbol on the New York Stock Exchange has been changed to "PAG" to reflect the change in name.
Voting and all other rights relating to the company's common stock will not be affected by the name change. Further, the name change has no impact on the validity or transferability of currently outstanding stock certificates. Stockholders are not required to surrender existing certificates as a result of the change in name.
Headquartered in Bloomfield Hills, Michigan, Penske Automotive operates 311 retail automotive franchises and 26 collision repair centers.
The Automotive Service Association (ASA) board of directors has approved a position statement on open platforms presented by the ASA Insurance Subcommittee. The subcommittee drafted the text under the direction of subcommittee chair Mike Schoonover of Schoonover Body Works in St. Paul, Minnesota.
The approved statement officially presents the association's position that ASA supports an individual collision business owner's selection of an estimating system that meets the individual's business needs and commends those insurers that allow for the use of an "open platform." Also, in situations where collision repair estimates are transposed by insurers, all efforts should be made by the insurer to duplicate the original collision repair facility's document.
"In today's world, collision repair shops are under ever increasing pressure to increase efficiencies and reduce operating costs. The concept of necessitating multiple database systems to accommodate different insurers is a wasteful redundancy, often unnecessarily costing shops thousands of dollars each year in database subscriptions, training and maintenance," said Darrell Amberson, AAM, ASA's Collision Division director and president of Lehman's Garage in Bloomington, Minnesota. "Many insurers offer an open platform. I highly recommend all insurers adopt such a policy."
For 56 years, ASA's Collision Division has sought to elevate the professionalism of the automotive repair industry by providing members and industry partners with information and services that will benefit collision repair professionals and the motoring public. In addition, the Collision Division Operations Committee actively works to address and improve a number of issues directly impacting the daily operations and profitability of independent collision repair facilities.
The committee has four subcommittees in addition to the insurance subcommittee - including automobile manufacturer, estimating, refinish, and crash parts subcommittees.
The CARSTAR group of collision repair centers awarded five new franchises and two new locations to existing franchisees during the month of June. CARSTAR Collision now has over 385 locations in the U.S. and Canada.
“We are in a major growth phase”, said CARSTAR Director of Franchise Sales, Paul Evans. “We are seeing more potential franchisees coming to us than ever before, asking the right questions about joining the ranks of the CARSTAR family, demonstrating a willingness to improve, and a desire to be better tomorrow than they are today. Not only are we seeing new store growth, but a 30 percent portion of our total U.S. store count was contributed by owners who have added additional facilities since joining CARSTAR.”
CARSTAR said it continues to outpace the industry, with same store sales in the U.S. ahead of last year by 7.8 percent, in spite of recent reports of an industry-wide downturn.
CARSTAR Chairman and CEO Richard Cross noted, “We are about to reach 'breakaway scale' at CARSTAR. We are becoming one of those rare companies that come up every now and then, that make extraordinary things happen in their industry. It is truly an exciting time for us and while our scale will continue to give us leverage within the industry, it is interesting to note that each of our locations are individually owned and operated. It is absolutely the best of both worlds for our franchisees - independence, and the comfort of knowing they are part of something much bigger. Said differently, the whole is genuinely greater than the sum of our parts.”
Headquartered in Overland Park, Kansas, CARSTAR is the largest group of auto body repair shops in North America.
Various consumers and industry groups had their opinions heard on June 26, 2007 at the first hearing of H.B. 296, the Massachusetts Motor Vehicle Owners’ Right to Repair Act. Members of the Joint Committee on Consumer Protection and Licensure heard numerous witnesses who testified in support of the legislation, including AASP MA/RI Immediate Past President Stan Morin of New England Tire and Vice President Bill Cahill of BC Auto.
"House Bill 296 addresses a growing concern among Massachusetts state legislators who have heard constituents' complaints about the inability of the independent repair industry to fully and completely repair their vehicles due to computer repair information lock-outs by the car companies,” explained Morin. “They don't have a choice in auto repair shops because they're told to return to the car dealerships. Consumers want to spend their income the way they choose. I want to have the freedom of choice on where and how to spend my disposable income.”
Testifying witnesses in support of legislation explained that in spite of investing in diagnostic tools, searching car company websites, and exhausting all other resources, they were still unable to gain access to all the information that is needed to repair vehicles.
However, not all the testimony was in favor of Right to Repair legislation. The Association of International Automobile Manufacturers (AIAM) testified that HB 296 is a security risk. An AIAM post-hearing press release stated: "Vehicle security information is carefully controlled to make sure it stays out of the hands of potential thieves, but under HB 296 any individual who owns a car or any auto repair shop technician would have access to this sensitive information."
Other opponents of HB 296 stated that not only were information access issues intermittent, but that with help of the National Automotive Service Task Force (NASTF), even these infrequent instances could be resolved.
ASA Mechanical President and chairman of ASA-Colorado, Donny Seyfer, co-owner of Seyfer Automotive in Wheatridge, Colorado, further testified that such occurrences were isolated and could be addressed with use of the proper tools.
“It amazes me that opponents of HB 296 [OEMs and ASA] hide behind NASTF and they claim there are only isolated incidents,” concluded Cahill. “Well, if we are all having problems, then they are not isolated.”
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