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Letter to the Editor
This article originally appeared in the September 2007 Issue of INSIGHT
©2007 Collision Repair Industry INSIGHT All Rights Reserved
Akzo Nobel to Buy ICI for $16 Billion
Progressive President and CEO Renwick Apologizes for Church Spying
Repairability Factors of High Interest to ASA Collision Division
Mitchell Collaborates with DEG Project to Identify Key Database Issues
Nick Notte Returns to Allstate as Auto Director
ASA Supplement Form Tool Available for Collision Division
Mansfield Named Valspar Chairman
LKQ Corporation Q2 Earnings with Operating Income Growth Over 29%
State Farm Contributes $50,000 to I-CAR Education Foundation
CARSTAR Names Franchisee of the Year at 18th Annual Conference
I-CAR Points to Positives Following Tough Year
INDUSTRY UPDATE
Dutch chemicals group Akzo Nobel NV has agreed to buy Great Britain's Imperial Chemical Industries Plc (ICI) for £8 billion ($16.2 billion), strengthening its position as the world's largest industrial coatings maker.
Akzo Nobel faces some possibly firm shareholder dislike for the deal, with anticipated opposition from U.S. fund TPG-Axon, one of its major investors.
Akzo's price for ICI, maker of Dulux paints, is 22 percent above ICI's closing share price on June 15, the day before it announced a bid approach from Akzo.
If finalized, Akzo Nobel's acquisition of ICI will give the company a market share of about 15 percent.
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Progressive Insurance President and CEO Glenn Renwick has released the following press release in response to the report in an Atlanta newspaper about Progressive investigators going undercover at church meetings:
Yesterday a story appeared in the Atlanta Journal-Constitution about an investigation authorized by Progressive people in August 2005. When I read that story I was appalled and, frankly, didn't believe that it could possibly be accurate. I have since learned that the essential facts in the story are correct. What the investigators and Progressive people involved in that case did was wrong - period. I personally want to apologize to anyone who was affected by this incident.
At Progressive, we have a stated set of Core Values that we use to guide our decision making and actions. One of these Values is the Golden Rule - treat others as you would like to be treated. The actions of the investigators and Progressive people involved in this situation were incompatible with our Values and inappropriate.
For the past 70 years, we've built our business by building trust. Trust that we will do the right thing on behalf of our customers - every day, every time. On behalf of the 28,000 hard-working Progressive people and the more than 30,000 independent insurance agencies that choose to represent us, I want to assure all of our customers throughout the country that we remain committed to doing the right thing. We know that we were wrong in this situation and we take full responsibility for the mistakes that were made.
Obviously, we wish that what happened two years ago had not happened. And, we believe that it wouldn't happen today with the written guidelines we put in place more than a year ago that prohibit any type of misrepresentation in conducting investigations. Those guidelines have been widely communicated internally and we now audit to ensure compliance. We are committed to doing the right thing -always. We apologize to all involved and will work even harder going forward to maintain our customers' and the public's trust.
The Progressive Group of Insurance Companies is the country's third largest auto insurance group and largest seller of motorcycle and personal watercraft policies based on premiums written, and is a market leader in commercial auto insurance.
The Automotive Service Association (ASA) is exploring ways to provide input into how today’s vehicles are designed, with an overall goal to address repairability issues that affect independent automotive service and repair businesses.
Initial steps taken by ASA’s Collision Division Operations Committee included contacting major automobile manufacturers to determine existing opportunities in which ASA could participate in repairability-related discussions through committee involvement or other avenues. The Auto Manufacturer Subcommittee contacted various manufacturers earlier this year, under the direction of Dan Bailey, subcommittee chairman, and president and chief operating officer of CARSTAR Franchise Systems Inc., Overland Park, Kansas.
“With an increasing number of vehicles being totaled, members of the Auto Manufacturer Subcommittee recognize the importance of working directly with auto manufacturers before the new vehicle designs enter the marketplace,” said Bailey. “To date, Ford Motor Co. and General Motors Corp. have spoken with ASA. Members of the subcommittee, who have more than 150 years of collective collision repair experience, are seeking opportunities to work with the various manufacturers to improve vehicle collision repairability and reduce totals.”
Working in conjunction with the operations committee, Bill Haas, ASA’s vice president of education and training, recently attended ETI Week in Detroit seeking avenues in which the association might further its efforts to address repairability issues.
ASA welcomes invitations to participate on existing repairability committees and related groups, and is also interested in creating opportunities for discussion where they may not currently exist. To learn more about ASA’s efforts regarding repairability, contact Denise Caspersen, ASA Collision Division manager, at 800.272.7467, ext. 236, or denisec@asashop.org.
Mitchell International, Inc., a provider of performance management solutions to the automotive insurance claims and collision repair industries, is the first of the information providers to step forward to collaborate with the newly formed Database Enhancement Gateway (DEG) Project. Through this collaboration, Mitchell and the DEG Project will work to collect broader industry data in an effort to identify, monitor, and analyze wider industry trends and issues concerning the collision industry.
The DEG Project was developed by the three nationally known industry organizations: the Alliance of Automotive Service Providers (AASP), the Automotive Service Association (ASA), and the Society of Collision Repair Specialists (SCRS) to create a single industry website for collision repairers to file database requests for review with the industry's three main information providers, as well as to view all responses from the database providers themselves.
“Mitchell welcomes the formation of the DEG Project as a vehicle for the collision repair industry to voice concerns and issues about sourced data,” said Tom Fleming, Vice President Industry Relations, Mitchell International. “Mitchell has a long, successful history of being responsive to our customers' questions and concerns about information accuracy and provides customers with direct, toll-free telephone access to Mitchell labor editors to clarify and answer those questions.”
In addition to cooperating with the DEG Project, Mitchell is asking its customers to continue to directly contact its in-house repair data editors with specific inquiries using its toll-free number: 800.854.7030 ext. 8220.
“Every labor time inquiry Mitchell receives is documented as part of a broader process to continually validate the data and ensure that it reflects ‘real world’ repair situations,” continued Fleming. “This is a proven process that allows Mitchell to continually verify that its repair information is accurate and up-to-date. It’s important that our customers continue to contact us directly with these specific issues so that we are able to document them along with others.”
Reflecting this process and acting in the spirit of openness with the DEG Project, Mitchell has recently released a breakout of included refinish operations based on a typical refinish allowance of 2.2 hrs. This breakout provides further transparency into the composition of the key included operations that make up a normal panel refinish allowance.
AASP Past President Nick Kostakis commented, "Mitchell has once again taken a lead role in supporting the collision repair industry, and it hasn't gone unnoticed."
"Since the project's infancy, all three national associations have devoted a considerable amount of time and resources in an effort to move this initiative from a concept to a reality. Hopefully, the unity is evident to the industry, and will translate into improved accuracy of the databases," stated Barry Dorn SCRS Vice Chairman.
Allstate Insurance Company has announced that Nick Notte is returning to Allstate as its Auto Director. He is replacing Bill Daly, who was recently promoted to Assistant Vice President of Auto Strategy and Process Development.
Notte spent 21 years with Allstate prior to assuming the role of Vice President of network business development for Mitchell International. During his time with Allstate, he worked as an auto and homeowner adjuster, served on many major cross-functional initiatives, and progressed through various leadership assignments, including Vice President of Tech-Cor, Allstate’s research and training facility, and as Senior Manager of Allstate's direct repair program.
In his new role as Auto Director, Notte will be responsible for Allstate’s auto operations. This includes process development, design, and oversight. He will also support Allstate's ongoing transition to an open platform concept for its direct repair program participants and interface with the industry on key issues.
Notte has served as Chairman of the Board for the Inter-Industry Conference on Auto Collision Repair (I-CAR), as Secretary and Treasurer for the Certified Auto Parts Association (CAPA), as a board member for the Collision Technician Apprentice Pro-gram (CTAP), and as a sub-committee member for the National Association of Independent Insurers (NAII). He currently serves on the auto physical damage sub-committee for the Insurance Services Organization (ISO).
The Automotive Service Association (ASA) has made available another tool to help ASA collision repair professionals in their daily operations. From the Collision Division comes a free, downloadable and customizable supplement form designed for ASA-member collision repair facilities. The form is designed to maximize customer satisfaction by minimizing delays in the repair process, as well as to save ASA members time by providing a thorough, standardized supplement form.
ASA's Insurance Subcommittee, an extension of the Collision Division Operations Committee, developed the project under the guidance of Mike Schoonover, owner of Schoonover Bodyworks in St. Paul, Minnesota, who chairs the subcommittee.
"The ASA supplement form will streamline the supplement process with insurers by offering more consistency. When shops utilize the supplement form, claims adjusters and appraisers will see the same form from each shop. So often shops 'reinvent the wheel,' which can disrupt the process," said Schoonover. "Insurers will now see the same form coming from all shops that take advantage of it - with the only difference being the shop's name, logo and contact information. Our industry needs more effective tools and procedures. This is one that will have a positive impact for those who take advantage of it."
Two versions of the supplement form are available to members as downloadable Word documents. One version can be completed electronically and sent via e-mail to third parties; the second version is designed to be used as a hard copy and faxed. Both files are available on ASA's website, www.asashop.org.
Non-members interested in joining the association or learning more about ASA's member benefits, may contact ASA's membership department at 800. 272.7467, ext. 295.
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The Valspar Corporation Board of Directors has elected William L. Mansfield, Valspar president and chief executive officer, to the additional role of chairman of the board, effective immediately. Mansfield succeeds Thomas R. McBurney, who has served as chairman for the past two years. McBurney will remain chair of the Board's governance committee and lead director.
"Bill Mansfield is a proven leader with an excellent record of driving sales growth and operational efficiency," said McBurney. "With his in-depth knowledge of global coatings markets and clearly articulated plan to create Valspar shareholder value, Bill is uniquely qualified to lead our Board. His appointment brings to successful completion the transition plan we have had in place for some months."
Mansfield joined Valspar in 1984. After experience leading most Valspar businesses, he was named chief operating officer in April 2004. He has served as president and chief executive officer since February 2005.
"I am honored by the Board's confidence in me," said Mansfield. "I look forward to continuing to work with the Board and our management team in leading the company to new levels of profitable growth."
The Valspar Corporation is a global leader in the paint and coatings industry.
LKQ Corporation has announced results for its second quarter ended June 30, 2007, with revenue of $233.3 million, net income of $14.0 million and diluted earnings per share of $0.25.
"We exceeded our previously issued earnings estimates for the second quarter. We were highly encouraged by the expansion of our operating income margin to 11.4 percent compared to 10.6 percent in the second quarter of 2006," said Joe Holsten, President and Chief Executive Officer. "In addition, the supply of wholesale salvage vehicles was fairly robust and as such we significantly increased the number of vehicles we purchased in the quarter by over 17 percent from the level we obtained in the second quarter of 2006."
Commenting on business acquisitions, Holsten said, "We were particularly pleased with our two recent Canadian business acquisitions that spearhead our entry into the Canadian markets. Of course our primary acquisition efforts over the last few months related to our previously announced signing of a definitive merger agreement on July 16 with Keystone Automotive Industries, Inc., the leading distributor of collision repair aftermarket parts with over $700 million in annual revenue."
For the second quarter of 2007, revenue increased 19.6 percent to $233.3 million compared with $195.0 million for the second quarter of 2006. LKQ organic revenue growth for the quarter was 10.5 percent. Net income for the quarter increased 20.2 percent to $14.0 million compared with $11.7 million for the second quarter of 2006.
For the six months ended June 30, 2007, revenue increased 21.0 percent to $468.6 million compared with $387.2 million for the same period in 2006. This included organic revenue growth of 10.1 percent. For the six months ended June 30, 2007, net income increased 25.5 percent to $29.8 million compared with $23.7 million for the same period in 2006.
Consolidated aftermarket collision replacement parts, refurbished wheels, and refurbished lighting revenue for the first six months was $118.1 million.
In January LKQ acquired Northern Light Refinishing, near Grand Rapids, MI, that refurbishes head and tail lights. While currently a small business, the company believes many of its light cores can be refurbished into high quality replacement lights that can be sold to collision repair and retail customers. .
Expected to close early in the fourth quarter, the Keystone acquisition will pay shareholders $48 per share in cash.
Excluding any impact of acquiring Keystone, the company expects that 2007 organic revenue growth will be in the low double digits, with the balance of the growth being the full year impact of 2006 business acquisitions and the acquisitions completed so far in 2007. Net income is expected to be within a range of $56.0 million to $58.0 million and diluted earnings per share to be between $0.99 and $1.03.
In April 2007 the company increased the capacity of its bank credit facility from $135 million to $205 million with an accordion feature that could increase it to $305 million with the consent of banks participating in such increase. LKQ also extended the maturity date of the facility to April 2012. The company plans to retire its existing credit facility with proceeds from a $1.09 billion senior secured financing from Lehman Brothers Inc. and Deutsche Bank that is related to the closing of the Keystone business acquisition, expected to occur early in the fourth quarter of 2007.
LKQ Corporation is the largest nationwide provider of recycled light vehicle OEM products and related services and the second largest nationwide provider of aftermarket collision replacement products and refurbished wheels, operating over 130 facilities.
State Farm Insurance Company contributed a total of $50,000 to support the efforts of the I-CAR Education Foundation in July 2007. The $50,000 contribution to the Education Foundation’s General Fund will support many of the foundation’s programs and services.
“The generosity of State Farm Insurance Company will allow us to continue marketing current programs, products, and services, and to develop new materials to attract youth into the collision repair industry. We appreciate having the resources to continue marketing programs like PACE+ST3 and the Industry Training Alliance, which allow participating career and technical schools and colleges to offer their students a head start in the collision repair industry,” said I-CAR Education Founda-tion Executive Director, Ron Ray. “Their continued support shows their commitment to the collision industry and their confidence in the I-CAR Education Foundation. Collision repair facilities will receive the long-term benefits from their generosity.”
Chris Evans, State Farm Claim Consultant, P&C Claims said, "Once again, State Farm is pleased to support the I-CAR Education Foundation and feel that our contributions go directly to improving the collision industry. It’s important that we all work toward attracting quality entry-level candidates and assist in preparing them for careers in the collision industry. State Farm is proud to affiliate with and support such a worthy organization."
CARSTAR Franchise Systems, Inc. held its 18th Annual Conference July 15-17, 2007 at the Lake Las Vegas Resort in Nevada. More than 500 participants, which included CARSTAR independent owners, insurance partners, vendors, and media, joined together to discover the theme – “Stepping Up”.
Dick Cross, Chief Executive Officer for CARSTAR called for all of CARSTAR to “Step Up and be the organization that establishes the new standard for collision repair in the minds of consumers and insurers.”
Keynote speakers for the event included John G. Miller, author of "QBQ! – The Question Behind the Question," examining the concept of personal accountability in the workplace, and Dr. Christopher Bart, North America’s leading mission and vision expert.
Break-out sessions included: “The Voice of the Customer” presented by Alex Sun, President of Mitchell International and “Lean Manufacturing – The Theory of Constraints” presented by Kent Carlson, Collision Resources, Inc.
CARSTAR named Collision Clinic CARSTAR of Edmonton, Washington as its 18th Franchisee of the Year. Collision Clinic CARSTAR was chosen from a field of over 270 franchise locations. Bruce Lingle, owner, has been a CARSTAR Franchisee for the past three years. While with CARSTAR his sales and profitability have grown in excess of 20 percent by implementing the CARSTAR systems while at the same time remaining an independent operator. A member of CARSTAR’s Fran-chise Advisory Board, Lingle said that he has been, “…re-energized personally and within my business by joining CARSTAR.”
Many of CARSTAR’s National Preferred Vendor Partners exhibited at the onsite Vendor Expo, and CARSTAR’s Insurance Department held its fourth annual Insurance Forum.
Headquartered in Overland Park, Kansas, CARSTAR is the largest group of independently owned and operated auto body repair shops in North America. The privately held company currently has approximately 270 locations in 27 U.S. states and the District of Columbia, and 120 Canadian locations.
I-CAR leaders, during the training organization’s annual meeting in Orlando, Florida, in late July, openly explained that the past year had been a tough one financially, but also pointed to a number of accomplishments as well as plans for the future that they believe will turn things around for the non-profit organization.
In his report at the meeting, for example, I-CAR CEO Tom McGee noted that the mobile “Welding Qualification Tests” program launched last year has seen “positive results.” I-CAR has outfitted a handful of trucks with welding equipment in order to conduct testing at shops and other locations beyond its 120 established testing sites.
“Nearly 50 percent of the total volume of qualification tests done in fiscal 2007 was done with these units,” McGee said. “This program has been a tremendous asset.”
McGee said he appeared on “Goss’ Garage,” a segment of the television program “MotorWeek,” last fall to discuss the importance of properly trained technicians and the value to consumers of seeking out a shop with the Gold Class Professionals designation.
“We’re going to do another broadcast taping (for the program) related to the mobile qualification testing and the importance of proper welding in collision repairs,” McGee said.
McGee also pointed to the improved ratings I-CAR received in INSIGHT’S annual survey on the industry’s satisfaction with I-CAR training.
“Even though we had a very difficult year, I think we are on an upward trend,” McGee concluded.
The numbers behind that “difficult year” show that “student units” – one unit equals one student taking one I-CAR class – were down 12 percent from the preceding year. At just 100,756 student units, it was the lowest student turn-out in more than a dozen years, and just two-thirds the number it had in such peak years as 1997, 1998 and 2002. That translated into a loss of about $1.1 million, I-CAR’s worst financial performance since 1999 when it lost $900,000.
Incoming I-CAR board chairman John Edelen, an Allstate Insurance executive, expressed support for McGee’s leadership, and said staff and I-CAR’s finance committee have developed a “contingency plan” that will be “activated in 90 days to mitigate further deterioration of our financial condition should we be unable to reverse this adverse revenue trend.”
Also at the meeting, the I-CAR Education Foundation reported it is finalizing a new 10-minute DVD designed to introduce and attract students to training and careers in the industry. The DVD will be distributed to 1,400 schools this fall, and free copies will also be available at no charge through the Foundation.
The Foundation will also issue its latest “Snapshot of the Industry” findings this fall. Every three years, the Foundation conducts a survey looking at the compensation, benefits, turnover and other aspects related to collision repair technicians in the industry.
Another speaker at the event was Peter Roberts, chief executive of the Motor Insurance Repair Research Centre in the United Kingdom. That not-for-profit organization, better known as “Thatcham,” was created by auto insurers in 1969 to help reduce injuries and other costs associated with vehicle collisions and thefts.
Roberts described a number of the organization’s efforts, including working here in the United States with State Farm Insurance and Tech-Cor, the Allstate-owned testing facility that develops repair procedures, to coordinate and improve efforts to encourage automakers to design vehicles with reparability in mind. That work, Roberts said, is being modeled after a similar effort in the U.K.
Several times during his presentation, including when describing a system Thatcham has developed to help provide U.K. collision repairers with vehicle-specific repair procedures and information, Roberts made a statement that backs up I-CAR’s gradual shift to more vehicle-specific training.
“Generic repair methods are obsolete, no longer viable,” Roberts emphasized.
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