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Letter to the Editor
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October 2007 Issue

Features in Review

From State Farm’s latest changes to the tragic death of an industry leader, the topics we have covered in recent months require updates.

On the last day of August, a month in which INSIGHT’s feature centered around shops’ views of the new State Farm Select Service program, the insurer announced a change we had been anticipating but were not sure when it would occur. Starting this fall in two markets, State Farm will begin testing a new parts procurement plan.

And tragically, just as our September issue was being completed, one of our sources for our September feature – and one of the industry’s shining lights – Hawaii shop owner March Taylor died unexpectedly.

With these events, as well as reactions we have heard to other recent features, INSIGHT takes a break this month just before NACE to look back just a bit before moving forward.

Taylor set himself apart

Much has already been said and written about March Taylor’s many contributions to the industry during his career. From our perspective one of the key things that set him apart from the many talented and sharp shop owners we come into contact with regularly was the unique perspective he offered the industry. Few owners of shops that have reached the size of Taylor’s 30-employee Auto Body Hawaii are still “turning wrenches.” Taylor was (and wanted to be) deliberately putting in place a management team to run the business, allowing himself to still be regularly involved in actually repairing cars.

He brought that experience to his active role in the industry. When he discussed errors or inaccuracies within the estimating databases – something he did frequently through the Collision Industry Conference and his involvement with the Society of Collision Repair Specialists – he was not just relying on information from technicians. He was actually “living” how those databases relate to the real world.

While not to diminish the fine and necessary role many others in the industry play in improving the estimating databases, Taylor’s contributions will sorely be missed. He died on Sunday, August 26, while diving off the northern coast of the big island of Hawaii.

Even if you never met March Taylor, your business has been impacted positively from his involvement in the industry. You can help honor him by making a contribution to a special fund established by his family and the I-CAR Education Foundation. As his friends have said, Taylor would have known no greater tribute than to have such a fund established and used to help those who need financial assistance receive collision repair training.

Tax deductible contributions can be sent to the March Taylor Memorial Educational Fund, c/o I-CAR Education Foundation, 5125 Trillium Blvd., Hoffman Estates, Ill., 60192.

State Farm steps into parts procurement

As mentioned, INSIGHT has regularly been speaking with shop owners about the impact State Farm’s Select Service has been having on their businesses and their markets.

As we noted in several earlier articles on the topic, the Select Service agreement requires shops, if requested by State Farm, to “utilize an automated replacement parts locating service or application we [State Farm]specify for sourcing replacement parts…at no additional cost to State Farm.”

The insurer is beginning to put that clause into action this fall. They are not buying the parts directly. They are not specifying from whom you are to buy the parts. And they are not, it appears, taking a cut of your parts profit. But for Select Service shops in at least two markets for now, State Farm is definitely getting involved in parts procurement.

The insurer on August 31 announced a test this fall in the San Diego and Indianapolis markets of an electronic ordering system for parts. Select Service shops in those markets will be required to use a particular software system, but can purchase parts through any dealer that is also set up to use the system.

George Avery, a State Farm claims consultant, said the intent of the program is to test the added efficiency, accuracy and other benefits of electronic parts ordering, and that it will save the insurer money because of “an OEM provided discount.”

“The details on how that actually works, we’re not in a position to talk about,” Avery said. “But it’s really built with two things in mind: That the repairers can still buy from whom they want. And two, we’re not going to get into their profit margin…. We understand how important that is to the repairer.”

According to one Indiana-polis area shop owner, who asked not to be identified, State Farm is requiring his company to use two parts ordering software systems, one for Toyota parts and also OEConnection for other lines.

The shop owner said he had used OEConnection in the past but had stopped using it because his staff felt it added a lot of administrative work (which the shop owner says may actually have been offset by greater parts accuracy) and because several dealers he wanted to do business with stopped using it as well. The shop owner said more dealers are signing up with it now because of the State Farm program.

According to other sources, at least six of the largest-volume automakers have agreed to offer State Farm a discount – reportedly three percent – off retail parts pricing without impacting either the shop or dealer’s parts profit (margin or actual dollars). But the Indianapolis shop owner said neither he nor his local State Farm personnel are exactly sure how that process will occur, nor how it will impact the final invoice and paperwork he prepares for the customer and insurer.

If automakers are offering the insurer a rebate or discount on parts in hopes of staving off State Farm’s return to use of non-OEM parts, the insurer is going out of its way to make it clear its decision about non-OEM parts use does not hinge on this test.

“During the test, we are going to maintain our current position, which is that we don’t specify those outer sheet metal parts,” Avery said. “But there is no change in our continued effort to look at aftermarket part usage. We will continue to evaluate that through the test and beyond.”

The Select Service agreement could allow State Farm to renew calling for use of non-OEM parts, which it halted back in 1999 following a subsequently overturned $1 billion judgment against the insurer, because the agreement specifies that if any non-OEM part is used, it must be CAPA certified.

Recycler sees growth ahead

Speaking of parts use, Sandy Blalock is bullish on the prospects for recycled parts in the coming decade. Perhaps she has to be, as the owner of Truck and Auto Parts, Inc., in Albuquerque, New Mexico, and first vice president of the Automotive Recyclers Associ-ation. But Blalock offered her take on parts use after we reported this summer that while OEM parts usage has hit a record low of 70 percent and use of non-OEM parts has grown to about 12 percent, recycled parts use has held steady at between 12 and 13 percent throughout the past decade.

“I hope to see the number of OEM used auto parts included on repair orders increase over the next decade,” Blalock said. “With all the other costs that the insurers and shops are facing, we are in a good position to help alleviate the problem of the cost of parts to repair vehicles. We can help control the costs of repairs, and that relates directly to premium dollars. I believe that increased usage of OEM used auto parts will keep more vehicles from being declared total losses.”

Fewer totals and more repairs are a trend she, like many recyclers and repairers, would like to see, she said, because “that is when our potential sales growth is the best.”

More on attracting women to the industry

Patty McConnell, president of Old Dominion CARSTAR, which has two locations in Eugene and Springfield, Oregon, agreed with many of the suggestions we shared this summer as ways the industry can attract more women as technicians and employees.

But she added that she thinks more women in the industry should help hold open houses at their shops, making a special effort to invite high school girls and other young women to attend and see the opportunities in the industry. Alternatively, she said, women can take the message directly to the schools.

“I think it would be helpful to have women in the industry who are personable, who present themselves well and who are very professional, speaking at community colleges, high school events, and networking type functions,” McConnell said.

We will give McConnell the last word this month, as we head out later this month to the 25th annual NACE in Las Vegas.   o

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