This article originally appeared in the May 2008 Issue of INSIGHT
©2008 Collision Repair Industry INSIGHT All Rights Reserved
Liberty Mutual Group and Safeco Corporation have entered into a definitive agreement by which Liberty Mutual will acquire all outstanding shares of common stock of Safeco for $68.25 per share in cash.
The proposed transaction, which is valued at approximately $6.2 billion, has been approved by the Boards of Directors of both companies. It is subject to approval by Safeco’s shareholders as well as the customary regulatory approvals and conditions. The transaction is expected to close by the end of the third quarter of 2008. The transaction is not subject to financing contingencies.
Upon completion of the transaction, Liberty Mutual will become the fifth largest property and casualty insurer in the United States. Currently, Liberty Mutual Group is the sixth largest property and casualty insurer in the United States based on the company’s 2007 direct written premium of $20.2 billion, while Safeco had 2007 direct written premium of $5.9 billion.
Following the transaction, Safeco will become part of Liberty Mutual Group’s Agency Markets business unit. Liberty Mutual Agency Markets had revenues of $5.6 billion in 2007. Combined, the organization will have about 15,000 independent agencies.
“The addition of Safeco significantly expands and strengthens the Liberty Mutual Group,” said Edmund F. Kelly, Liberty Mutual Group chairman, president and chief executive officer. “Safeco’s operations and product mix complement our existing Agency Markets operations. Additionally, both organizations have superb Surety businesses which when combined will form the second largest Surety business in the United States.”
Safeco president and chief executive officer Paula Reynolds said, “This is the opportunity to take West Coast inventiveness and launch it with a global brand at a substantial premium to Safeco shareholders.”
Gary Gregg, president of Liberty Mutual Agency Markets, said, “Safeco is an excellent addition to Liberty Mutual Agency Markets and I look forward to working with the Safeco leadership team to deliver even greater value to our independent agent partners. With revenue approaching $12 billion, Agency Markets will rank third in personal and fifth in commercial property and casualty products distributed through independent agents in the United States. Just as important, we share Safeco’s commitment to employees, customers, agents and the communities in which we do business.”
In light of the proposed transaction, Safeco has postponed its previously scheduled annual meeting of shareholders to have been held on May 7, 2008. Safeco will provide information on the timing of the annual and special shareholder meeting to approve the transaction announced today when available. Safeco has been advised by Morgan Stanley & Co. Incorporated and Skadden, Arps, Slate, Meagher & Flom LLP in connection with this transaction.
Boston-based Liberty Mutual Group is a diversified global insurer and sixth largest property and casualty insurer in the U.S. based on 2007 direct written premium. The company also ranks 94th on the Fortune 500 list of largest corporations in the U.S. based on 2007 revenue. As of December 31, 2007, Liberty Mutual Group had $94.7 billion in consolidated assets, $82.3 billion in consolidated liabilities, and $25.9 billion in annual consolidated revenue.
Agency Markets, a major business unit of the Liberty Mutual Group focusing on independent agency distribution, had $5.2 billion in net written premium in 2007 and has approximately 7,000 employees. Liberty Mutual Group offers a wide range of insurance products and services, including personal automobile, homeowners, commercial multiple peril, commercial automobile, general liability, surety, workers compensation, global specialty, group disability, assumed reinsurance, and fire. Liberty Mutual Group employs over 41,000 people in more than 900 offices throughout the world.
Safeco provides a wide array of property and casualty insurance products, including personal auto and home as well as coverage for small- and mid-sized businesses, and surety bonds. Safeco sells its products through a national network of agents and brokers.o
PPG Industries has reported record sales for the first quarter of $3.7 billion, surpassing the prior year’s first quarter results by 41 percent. First quarter net income was $100 million, or 61 cents per share, comprising net income from continuing operations of $87 million, or 53 cents per share, and income from discontinued operations, net of tax, of $13 million, or eight cents per share.
Reported net income from continuing operations includes non-recurring acquisition-related costs of $89 million aftertax, stemming from the company’s January acquisition of the SigmaKalon Group. Adjusted net income from continuing operations was $176 million. The company’s tax rate on income from continuing operations for the quarter was 30 percent.
PPG’s sales for the first quarter 2007 were $2.6 billion. First quarter net income was $194 million, comprising net income from continuing operations of $176 million, and income from discontinued operations, net of tax, of $18 million.
Net income from continuing operations included an aftertax charge of $5 million, to reflect the net increase in the value of the company’s obligation under its proposed asbestos settlement agreement, which is subject to pending court proceedings. Adjusted net income from continuing operations was $181 million. The company’s tax rate on income from continuing operations was 23 percent.
“We are very pleased to have delivered solid organic growth despite a slowdown in the overall U.S. economy,” said Charles E. Bunch, PPG chairman and chief executive officer. “We achieved this growth due, in part, to our prior investments in coatings, optical products and emerging regions, which have strengthened our overall portfolio. In addition, the recent acquisition of Sigma-Kalon contributed to our record first quarter results. This business, which we are successfully integrating, has exceeded our expectations.”
Bunch noted that a key measure of the company’s growth is its total business segment earnings, which increased 17 percent.
“Looking ahead, while we will likely continue to experience a difficult North American economy, we remain confident in our ability to grow both sales and earnings. This is due to our leading products and technologies, and because we have significantly broadened our geographic presence. In fact, the United States and Canada now account for only about 45 percent of our total sales,” Bunch said. “We are focused on improving our already strong cash generation, and we intend to use this cash to continue to grow earnings, initially through paying down debt.”
Performance Coatings segment sales in the first quarter increased $259 million, or 30 percent, as a result of the SigmaKalon and Barloworld acquisitions, the positive impact of stronger foreign currencies, increased selling prices and improved volumes. Segment earnings were comparable to last year, as favorable manufacturing costs and currency were offset by growth-related expenses. Stronger price gains were offset by inflation in raw materials, transportation and other costs.
Glass segment sales increased $8 million, or three percent, based on the positive impact of stronger foreign currencies and increased selling prices. These were slightly moderated by lower sales volumes. Segment earnings improved by $13 million due to lower manufacturing costs. The absence of a prior year write-off of an investment in a fiber glass joint venture offset the negative impact of inflation.
On April 28, in recognition of World Day for Safety and Health at Work, DuPont announced its participation as the premier sponsor of the XVIII World Congress on Safety and Health at Work, to be held this year in Seoul, Korea, June 29 to July 2.
Held every three years, the World Congress draws together several thousand key leaders and influencers of workplace safety policy from industry, government and labor to present and discuss emerging safety research, trends, best practices and innovations in the workplace. Today's World Day for Safety and Health at Work was established by the International Labour Organi-zation in 2003 to emphasize the prevention of illness and accidents at work. DuPont will contribute to the World Congress in a number of ways, including:
"For more than 200 years, DuPont has demonstrated its commitment to protecting the lives of our employees at work and elsewhere," said Mark P. Vergnano, group vice president, DuPont Safety & Protection. "Over the years we have extended that commitment and applied our science and safety expertise to developing products and services that help protect the lives of people at work, at home, and in other environments around the world. We are proud to be a sponsor of this year's World Congress on Safety and Health at Work as we continue to promote the importance of protecting what matters most - human life."
One example of the DuPont commitment to workplace safety is the World Safety Declaration. In 2005, a cross-industry coalition of companies from around the world publicly pledged to advance workplace and home safety practices globally over a three-year period signing the first-ever "World Safety Declaration: Global Industry Commitment to Workplace Safety."
The declaration, unveiled at the XVII World Congress of Safety and Health at Work in Orlando, Florida, in Sept. 2005, called for participating companies "to effect real-world change to achieve an attainable goal of increased safety and injury reduction." One of the declaration's goals is to recognize that safety enhancements in workplaces and homes are achievable objectives that can be defined, evaluated, and measured, despite the differences of geographies and environments around the world. The companies also committed to reporting their progress, successes and challenges at this year's event in Korea.
The global coalition of the "World Safety Declaration" includes 15 founding companies, headquartered in various countries: DuPont, General Electric, British Petroleum, TATA Steel, BE&K services, Calvert, Fluor Services, Rohm & Haas, TATA Chemicals, Evergreen Aviation Technologies, Aker Kvaerner services, Yantai Wanhua Polyurethanes, Hindustan Lever, CEMEX, and Reliance Industries.
The World Congress on Safety and Health at Work is the world's largest international event in occupational safety and health. It aims at contributing to the prevention of occupational accidents and the protection of workers' health through the exchange of information, knowledge and experiences on new technologies related to safety at work, on preventing occupational diseases, and on safety and health cooperative projects. The 2008 World Congress organizers are the International Labour Organization (ILO), the International Social Security Association (ISSA), and the Korea Occupational Safety and Health Agency (KOSHA).
In addition to companies that have supported I-CAR over the years, several new sponsors are backing the 2008 I-CAR International Annual Meeting and the new opportunities available at this meeting.
This year’s meeting will give those in the inter-industry the chance to share their perspectives and to have I-CAR listen. It will also be an opportunity to receive current, first-hand information from a number of OEM participants and other presenters, to better understand the direction in which I-CAR is moving forward, and to have the chance to network with others in the industry.
Over 50 percent of this year’s financial supporters for this event are new.
“With additional companies involved in this year’s meeting, it will be rewarding to receive feedback from an even larger pool of inter-industry members. This will shape the way I-CAR moves forward in serving the industry with relevant training,” explained Joyce Kasmer, I-CAR Director of Marketing.
Independent Automotive Damage Appraisers (IADA) Executive Vice President John Williams said, “We at IADA feel I-CAR is the most recognized authority for training and continued education within the collision repair industry.”
Bruce R. Pohlig, President of Car Bench North America commented, “Car Bench is supporting I-CAR because we believe in the I-CAR mission to educate and inform. By contributing our knowledge and resources to this effort, we hope to support the I-CAR industry-leading educational programs, with the vision of all body shops producing complete, accurate, and safe repairs. As a leading supplier of OEM-approved benches, jigs, and pulling systems, we know that it is only with the proper training and equipment that technicians can successfully repair today’s vehicles. For Car Bench, participating as an event sponsor at the 2008 I-CAR International Annual Meeting signifies our commitment to helping the industry achieve a high level of technical training.”
A Transtar Autobody Technologies, Inc. representative stated, “Transtar stands by its reputation as a premium manufacturer of automotive refinish product solutions that benefit their customers, the industry and the environment. We are thrilled to sponsor this very important event that draws automotive repair professionals from around the world.”
As I-CAR reorganizes itself to become a more customer-focused organization, the industry’s support will be vital in order to provide the latest in technical training to help achieve proper and safe repairs to consumer’s vehicles. Current I-CAR Sponsors (as of April 28, 2008) are:
Citing concerns about misinformation surrounding the Motor Vehicle Owners’ Right to Repair Act, the Automotive Service Association (ASA) has launched a campaign aimed at ensuring consumers that independent repair shops are “Open for Business.”
“Proponents of H.B. 296, The Motor Vehicle Owners’ Right to Repair Act, are doing independent repairers in Massachusetts a great disservice by implying that only franchised dealers can repair today’s vehicles. We want to set the record straight,” said Ron Pyle, ASA president and chief staff executive. “Every auto manufacturer makes available to independent repair shops the same service and repair information it makes available to dealers.”
Independent repairers continue to use third-party information providers, and the automaker Web sites are an additional source for service information. Links to all original equipment manufacturer websites can be found at the ASA website, www.ASAshop.org. The websites are also listed on the National Automotive Service Task Force (NASTF) website, www.NASTF.org.
ASA encourages independent repairers to work through NASTF to help identify and rectify any repair-related concerns they may have. NASTF serves as a forum to resolve any potential gaps involving service and repair information and tools. This national, voluntary solution has proven to be an effective resource for repairers and manufacturers alike, and over the course of the past six years has become a productive forum for dialogue between independent repairers, other industry stakeholders, and automakers, as well as an effective mechanism to help identify and resolve any issues that arise.
Rusty Savignac, co-owner of Paxton Garage in Paxton, Mass., added, “I am concerned that consumers are being left with the impression that independent repairers like myself can’t fix today’s vehicles. That is simply not the case. I own an independent repair shop and am adamantly opposed to the Right to Repair legislation. All of the necessary service information has been made easily accessible on a number of web- sites. This legislation is addressing a problem that does not exist. If repairers are willing to make an effort to keep up with the changing technologies, they should have no problem repairing any vehicle that comes in the door.”
ASA’s consumer campaign will focus on rebuilding consumers’ trust in their local neighborhood repair shops. To help support local technicians, ASA will also hold a series of Service Information Workshop programs throughout Massachu-setts beginning this month.
The Automotive Service Association, headquartered in Bedford, Texas, is the largest not-for-profit trade association of its kind dedicated to and governed by independent automotive service and repair professionals.
Mitchell International has announced that its fourth annual "Full Speed Ahead!" Road Show will be held from May 8th to October 2nd. The 2008 Full Speed Ahead tour will visit 13 cities, making its first stop in Seattle, WA.
Mitchell’s Full Speed Ahead! Road Show is designed to educate auto body repair shops on the latest tools and techniques for optimizing business performance. The Mitchell team has put together a roster of informative programs, which includes informed guest speakers who highlight the latest technologies intended to help repair shops provide quality services, increase customer satisfaction and grow their businesses. The event is a once-a-year opportunity for shop owners and managers to learn, to network, and to share best practices.
The event covers timely topics, including:
Although the state insurance department representative who spoke at the mid-April Society of Collision Repair Specialists (SCRS) annual meeting was from Pennsylvania, much of the discussion may offer insights to those in other states trying to interact with their own state’s regulators.
Cindy Fillman, a consumer liaison with the Pennsylvania Insurance Department said she liked several ideas she heard from attendees at the event, including development of an independent shop labor rate survey, saying her Department does some of that sort of thing with regard to some medical insurance.
“It would be a gigantic undertaking, I think, but I like that it’s much more fair than the way it’s currently being done,” she said.
She said she would like to see the Governor’s office create public service announcements (PSAs) about various insurance-related issues, given that the average household spends about one-third of its income on various types of insurance. Steering of collision repair consumers could be a good topic of such a PSA, she said.
“I may speak to 5,000 people a year, but you put something on in the middle of a decent TV show, and you’ve touched a million people,” she said.
She also suggested that auto insurers may follow the lead of some insurers in the medical field by helping fund shops’ efforts to adopt “lean” or other cost-saving practices.
“Insurers are putting up money upfront because they’re looking to save money down the road,” she said. “Maybe they will put money into some of these initiatives because it’s got to be expensive to get some of these (consultants) to come into your shop and look at your processes, etc. My request to insurers would be to think about that, providing money to (encourage) that just like they’re doing in the health field.”
She encouraged shops to, when appropriate, spend the 10-15 minutes that she said it takes to file a insurer complaint with the Department on behalf of a consumer, noting that fewer than 100 such complaints are received each year. She said that while the Department cannot address general complaints about business-to-business conduct between shops and insurers, they can act upon complaints filed by consumers or shops about how an individual consumer has been impacted.
“I think a lot more complaints would raise the bar in terms of being able to go to the Legislature and say, ‘These seem to be unfair across the board, not just in these limited cases,’” Fillman said.
(Speaking at another industry event the next day, an investigator with the Pennsylvania Insurance Department said just such a complaint helped force an insurer to pay shops in a rural area for hazardous waste removal just as the insurer was in urban markets.)
Fillman was asked if the Department would be more apt to act if shops, much like medical providers, charged consumers rather than just absorbing a loss for procedures for which an insurer will not pay.
“Yes, especially if there was a trend,” Fillman said. “I’m not one for creating problems for consumers, but the issue is, to put it bluntly, all we hear when we discuss these issues is, ‘The marketplace is taking care of it. People are still being able to get their car fixed.’ That is the push-back that we get.”
Discussion at the Collision Industry Conference (CIC) held in Philadelphia in mid-April indicated that there is little consensus in how used or recycled parts should be priced.
“The problem as an industry trying to create best practices is we have two different pricing mechanisms out there, and we’re trying to create some sort of standard that’s accepted by all,” said Ken Weiss, chairman of the CIC Parts Committee.
Auto recyclers participating in the discussion estimated that about 20 percent of recyclers, include Greg Freeman of Freeman’s Auto Salvage Center in Joplin, Missouri, have moved to pricing parts as undamaged while 80 percent still quote an “actual part price” to which allowance for any damage must be added.
“From the interacting I’ve been doing with our customers, the collision shops were asking for an undamaged part price, and we’re trying to get (other) recyclers to get to that level,” Freeman said.
But Weiss pointed out that based on discussions he heard at the Automotive Recyclers Association (ARA) convention last fall, only a small minority of recyclers have made that change.
“A lot of the recyclers who are not part of this national dialogue, in their own meetings said, ‘What’s undamaged pricing?’” Weiss said. “They didn’t even know what it was.”
CIC participants raised a number of other issues impacted by how recycled parts are priced:
Weiss said the committee will continue to discuss the issue as it works to develop industry-accepted standards related to service, warranty and pricing of the various types of parts used in collision repair.
The National Auto Body Council (NABC) has kicked off this year's edition of Recycled Rides, scheduled to make 100 simultaneous vehicle donations the week of Thanksgiving. The program is a community awareness project whereby members of the NABC repair and donate recycled vehicles to families in need throughout the United States. Repairers, insurers, car rental companies, paint suppliers, parts suppliers, and material vendors all contribute in their own specific ways.
"The project allows shops to utilize their talents to help those less fortunate in their community," explains Recycled Rides Marketing Co-Chair Liz Stein of FIX Auto, Anaheim Hills, California. "It brings all facets of the collision industry together for a common cause and, in the process, draws positive attention to repairers and those with whom they work."
Recycled Rides Shop Coordinator Troy Holm of Collision Services, Hudson, Iowa, said, "We have commitments for over 70 vehicles thus far and we aim to pair a car with each shop that wants to take part. We've even had a few vo-tech institutions show interest. It's really exciting."
All the shops that participated in the 2007 pilot program have indicated a desire to participate again. One such example is Keenan Auto Body in Philadelphia, which was among the first shops to sign-up for Recycled Rides in 2008. "We were glad to be part of Recycled Rides last year. It dovetails with the key values of our company-and we are elated to be doing it once more," said Craig Camacho, director of marketing for Keenan Auto Body. "We have the car and the staff is ready to go. It's a pleasure to give back to our community which gives so much to us."
Shops interested in participating can visit the Recycled Rides link on the NABC website at www.autobodycouncil.org or call the NABC office at 888-66-PRIDE (7-7433) for more information.
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