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Letter to the Editor
This article originally appeared in the February 2010 Issue of INSIGHT
©2010 Collision Repair Industry INSIGHT All Rights Reserved
DuPont Named Among World’s Most Innovative Companies by MIT Technology Review
Replacement Car Parts Maker LKQ Profit Up 28 Percent in 2009
Connecticut Attorney General Supports Request for Permanent Injunction Against Insurer
Rising Sales in 4Q Earn Penske $18.7 Million
Mac Tools Donates $10,000 in Tools and Equipment to Kansas City Schools
DuPont CFO Says Company Emerging Stronger from Global Economic Crisis
Progressive Launches Social Responsibility Website
Collision Industry Foundation EBAY Charity Auction Drive Goes Through March
Automotive Recyclers Education Foundation and I-CAR Partner for Information Exchange
CIC Report: Ford Responds to Charges of Price Gouging
INDUSTRY UPDATE
The Massachusetts Institute of Technology (MIT) Technology Review magazine has named DuPont to the 2010 TR50, the inaugural list of the 50 most innovative companies in the world. DuPont was recognized for its efforts to develop and commercialize biobutanol with partner BP.
Each company on Technology Review's top 50 list was evaluated based on its business model, strategies for deploying and scaling up technologies, and the likelihood of success. The scope of each company spanned energy, computing, the Web, biomedicine, and materials.
"Each company in the 2010 TR50 has excelled not only at inventing technology but also at using it to transform how we live and work," said Technology Review.
"DuPont was selected for the TR50 for its advances in developing butanol as a new type of biofuel," said Jason Pontin, editor in chief and publisher of Technology Review. "Butanol offers a number of advantages over ethanol, today's most common biofuel. And through its work on butanol, DuPont, which is partnering with BP, could help make biofuels much more attractive. The TR50 list is our selection of companies that show the most impressive innovation in commercializing new technologies."
"The world is undergoing transformational change, and DuPont is responding by sharpening the focus of our innovation engines to meet the increasing demand for food, protecting lives and the environment, decreasing dependence on fossil fuels, and meeting emerging market demand for value-added, science-based solutions," said Thomas M. Connelly, DuPont executive vice president and chief innovation officer. "Today, more than 8,500 DuPont scientists and engineers in every corner of the world are working to help our customers meet these complex challenges that will define the coming decades. New businesses and new business models continue to be implemented to assure our science is delivered to the global marketplace."
DuPont and partner BP formed a joint venture last year, Butamax™ Advanced Biofuels, to bring biobutanol to market. The joint venture will be responsible for managing all aspects of the ongoing biobutanol research and development program to bring biobutanol to the global market following four years of extensive biotechnology development and fuel testing.
"Biobutanol is an ideal molecule for fueling cars," said Craig F. Binetti, president – DuPont Applied BioSciences. "This program is on schedule to deliver a superior process to manufacture biobutanol at large, commercial volumes. This technology puts Butamax in an excellent position to deliver biobutanol at production costs competitive with ethanol, allowing for a simple conversion of existing ethanol plants that will soon have the option to produce better biofuels."
DuPont was joined by companies including Google, Amazon.com, Apple, GE, Intel, IBM, Tesla Motors, and others on the TR50 list.
Technology Review, Inc., an independent media company owned by MIT, is the authority on the future of technology, identifying emerging technologies, and analyzing their impact for leaders.
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LKQ Corp., the maker of vehicle replacement parts, saw net income for 2009 rise 28 percent to $127.5 million due to acquisitions and expanded use of its collision repair parts, according to the company.
For the fourth quarter, Chicago-based LKQ made $37.2 million, up from $13 million in the same period of 2008.
The company earned 89 cents per share for the year, up from 71 cents in 2008. For the fourth quarter, it made 26 cents per share, compared with 9 cents in the same period of 2008.
Excluding restructuring costs and a gain on the purchase of an auto recycling business, LKQ said it would have made 23 cents per share for the quarter and 86 cents for the year, less than Wall Street had expected.
Revenue for the year was $2.05 billion, up five percent from 2008. It rose 20 percent to $555.9 million for the quarter.
"We reached a major milestone in 2009 and exceeded the $2 billion revenue mark," said CEO Joseph Holsten. The company, he said, overcame economic headwinds early in the year and finished with a strong fourth quarter. He sees a continuing trend toward expanded use of the company's collision parts.
LKQ acquired Greenleaf Auto Recyclers in the fourth quarter, as well as a heavy-duty truck operation in Fresno, California, and a wholesale recycled products business in Albuquerque, New Mexico.
LKQ expects full year 2010 income from continuing operations to be in the $145 million to $155 million range.
Connecticut Attorney General Richard Blumenthal wants to intervene in a class action lawsuit against The Hartford Insurance Company to help “prevent unfair and biased automobile body damage appraisals.”
The Auto Body Association of Connecticut (ABAC) has announced that Blumenthal has asked the Stamford Superior Court for permission to appear amicus curiae and file a brief in support of the ABAC motion for a permanent injunction.
In November, a jury awarded $15 million to Connecticut auto body repair firms, saying The Hartford engaged in unfair business practices.
“Attorney General Blumen-thal has been a champion of small business and has been with us every step of the way,” said attorney David Slossberg of Hurwitz, Sagarin, Slossberg and Knuff, of Milford, co-counsel for ABAC. “The AG’s intervention in this action sends a strong message: The Hartford’s unfair trade practices must stop, it must follow the law, and the hundreds of auto body shops in our state must be able to run their businesses on an even playing field, absent The Hartford’s influence and control. We are delighted with this development.”
“We trust that the results of this action will help the court conclude what has been a significant injustice,” said Bob Skrip, president of ABAC and owner of Skrip’s Auto Body, Inc. in Prospect. “Mr. Blumenthal is a long time advocate on our behalf against insurance companies that try to take advantage of our businesses and we are grateful for this latest support.”
The lawsuit filed by ABAC and three of its members alleged that the insurance company artificially suppressed body shop labor rates by eliminating the use of independent appraisers and relying exclusively on its own automobile service representatives to perform appraisals so the company could control their content, including labor rates. The result: consumers do not get fair, independent appraisals of the damage to their automobiles.
The jury agreed.
Following the verdict, ABAC filed a motion for a permanent injunction to prevent the unfair business practices and asked the court for punitive damages in addition to the $15 million. Those motions are pending.
Blumenthal’s petition said “The State seeks to prevent unfair and biased automobile body damage appraisals and unfair suppression of labor rates – conduct which not only violates State law, but which also has a direct and adverse effect on Connecticut’s general economy.”
Further, it said the “State has an interest in preventing the unfair suppression of labor rates that significantly harms the State’s economy and results in extreme economic hardship for independent automobile body repair shops.”
In its ruling in November, the jury agreed with lawsuit claims that The Hartford improperly forced auto body shops to charge lower labor rates than general market conditions otherwise allow, in effect strangling the industry by exerting undue influence on its appraisers.
The lawsuit said that when customers need auto body repairs following an accident, employees of The Hartford, called customer care team specialists, were instructed to direct the customers to a preferred shop in The Hartford’s “customer care repair service program.” Consumers were often pressured to abandon their choices in favor of The Hartford’s preferred shops, allowing The Hartford’s appraisers to exert greater control over the repair.
“Automobiles have become increasingly sophisticated over the years. Ongoing training is necessary. Expensive, sophisticated equipment is continually required to keep up with ever-more complex vehicles. Those who work in our profession today are extremely talented craftsmen and professionals. It’s time for compensation to catch up to our expenses,” Skrip said.
“The Hartford handles only about seven percent of the auto insurance business in Con-necticut,” Skrip continued. “We anticipate pursing legal action against other insurance companies that insist on engaging in similar illegal actions in Connecticut.”
“Enough is enough,” Skrip added. “We can no longer allow huge insurance companies to force their will on businesses and consumers. It’s your car. It’s your choice where to have it repaired.”
The Auto Body Association of Connecticut is a statewide consumer advocacy association dedicated to the advancement of the collision repair industry.
Penske Automotive Group Inc., based in Bloomfield Hills, Michigan, reported earnings of $18.7 million in the fourth quarter, recovering from a year-ago loss, on a combination of higher sales, a strong performance in the United Kingdom, and cost-cutting.
Chairman Roger Penske said the automotive retailer's premium and luxury segment performed especially well. He said retail revenue rose 18.2 percent including growth of 8.6 percent in the United States and 38.7 percent in the United Kingdom.
For the three months that ended December 31, Penske Automotive earned 20 cents per share. That compares to a loss of $511.9 million, or $5.59 per share a year earlier when charges
weighed on its results.
Overall revenue rose 13.4 percent to $2.4 billion from $2.15 billion a year ago.
The company was expected to earn 19 cents per share on lower revenue of $2.19 billion. For the full year, Penske earned $76.5 million, or 83 cents per share, versus a loss of $420.0 million, or $4.47 per share, in 2008. Annual revenue fell 18 percent to $9.5 billion.
Mac Tools has come to the aid of the Kansas City Kansas Community College’s Technical Education Center by donating $10,000 in new tools and equipment through the I-CAR Education Foundation. Mac Tools provided the school’s collision program the opportunity to select the tools, and the school selected over 60 pieces of tools, equipment, and supplies from Mac Tools that are on the NATEF required tool list.
Mac Tools Sports Marketing Manager Tony Merritt stated, “Mac Tools’ strongly supports and believes in the I-CAR Education Foundation’s efforts in assisting automotive collision students, schools, and instructors. As this group is the future of industry, ensuring that they have up-to-date tools and equipment is vital for the industry’s future success. Mac Tools is happy to provide the Kansas City Kansas Com-munity College’s Technical Education Center with this $10,000 tool grant.”
Kansas City Kansas Com-munity College Technical Education Center Instructor Ron Bales said, “On behalf of the school and students I would like to thank the Mac Tool company for the grant to my class. The quality tools that Mac is providing my students will greatly enhance their lab work and will save time because they won't be required to share tools quite as much.”
Scott Kruger, I-CAR Education Foundation Executive Director, stated, ”Kansas City Kansas Community College’s Technical Education Center was an applicant school to the Foundation’s recent Ultimate Collision Education Makeover grant. Through their application the Foundation was able to see their requested need of additional tools and equipment for their collision program. We matched that request with Mac Tools’ generosity and the collision students of this school will benefit with the latest in tools and equipment. I thank Mac Tools for their kind gift and allowing the school to select which tools they needed as part of the $10,000 donation.”
DuPont Senior Vice President and Chief Financial Officer Nicholas C. Fanandakis said the company is emerging stronger from the global economic crisis after taking a number of actions in 2009 to better position it for sustainable growth. Fanandakis made his remarks at the Morgan Stanley Basic Materials Conference.
"Under very difficult conditions, our work in 2009 redefined the company and repositioned it for sustainable growth," said Fanandakis. "We used the downturn to change the course of the company. Our focus is on delivering superior growth for our shareholders through customer-driven and science-based solutions, carefully prioritized investments, industry-leading productivity and strict accountability."
Fanandakis said DuPont took several swift actions in 2009 which resulted in:
- Realigning the company to support the commitment to customers, sustainable growth, and delivering revenue and earnings growth through market-driven science
- Maintaining its R&D investment at $1.4 billion during the economic crisis and introducing more than 1,400 new products – up 60 percent over 2008
- Delivering $1.1 billion in fixed cost productivity and $1 billion in working capital productivity
- Delivering $3.4 billion in free cash flow.
Fanandakis reaffirmed the company's commitment to deliver about 20 percent compound annual earnings growth for the 2009-2012 period. By executing on priorities, DuPont expects to generate about 10 percent top-line compound annual growth for the 2009-2012 period. The company also plans to capture $1 billion in fixed cost productivity and $1 billion in working capital productivity gains during the 2010-2012 timeframe.
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Auto insurance group Progressive is now formally reporting on its social responsibility efforts with a new website called “Progressive Together,” accessible at: progressive.com/socialresponsibility.
Progressive sees social responsibility as part of doing business in keeping with its Core Values, especially the Golden Rule - treating others as they would like to be treated.
This is the first time the company has pulled together all of its social responsibility activities into one place, but Progressive has been committed to acting in socially responsible ways since its founding in 1937.
Site visitors can learn about:
- Achievements and goals around efforts to reduce, reuse, and recycle to secure a sustainable future
- Information on Progressive business practices aimed at driving positive changes in car insurance
- Charitable activities and contributions of Progressive employees, agents, and other partners
- Progressive’s Global Re-porting Initiative scorecard and Carbon Disclosure Project report
- Information and resources on how site visitors can personally make a difference.
Progressive Social Responsibility Manager Wanda Shippy commented, “At Progressive, being socially responsible isn’t new. What’s new is that we’re now formally reporting on our social responsibility efforts. People are becoming more interested in what companies are doing in terms of the environment and the impact companies have in their communities. We launched 'Progressive Together' to make it easy for people to get a clear picture of what we’re doing and how we work with others to make a difference.”
Shipppy concluded, “We call our social responsibility site ‘Progressive Together’ because it reflects our commitment to work with our communities, business partners, and customers to create a better future together. We want the site to be a place where people can see what we’re doing and also see ways they can get involved if they choose.”
The Progressive Group of Insurance Companies, in business since 1937, is one of the country’s largest auto insurance groups, the largest seller of motorcycle policies, and a market leader in commercial auto insurance based on premiums written.
The Collision Industry Foundation (CIF) is planning to continue its success of raising funds through its online EBay Store to benefit the charitable causes of the Collision Repair Industry by having a 2010 drive to collect items for the online auction. Last year, the EBay efforts raised $12,000 towards the Blanket the City Detroit project, giving to local food banks in the hardest hit region of our country.
As a continuation of the many good works of CIF, the goal of this drive is to fund projects - new and established - such as Recycled Rides title transfer grants, industry grant assistance, disaster relief funding, and more.
The CIF EBay Store needs donations of any item that can be auctioned through the popular bidding website EBay, such as tickets to sports games, hotel stays, memorabilia, or any other item that could have value. It is not required to be related to automotive. There is no limit to the possibilities that can be donated to the program.
There is no deadline for committed donations of items because the CIF EBay store is perpetual, but a major push for a group of items will be due by March 31st.
To donate an item for the auction, or to find out how to participate, please contact the CIF Administration Office at (804) 427-6982 or visit www. collisionindustryfoundation.com. You may also visit the CIF EBay Store by searching "Collision Industry Foundation" under Seller Stores on the EBay website (www.ebay.com)
The Collision Industry Foundation was established in 2001 to allow for tax-deductible contributions for the National Auto Body Council ("NABC") sponsored Camp Mak-A-Dream Children's Hospital project and has been instrumental in several other collision industry charitable projects.
The Automotive Recyclers Association Education Foundation (ARAEF), developer of educational programs and skill training for the members of the Automotive Recyclers Association and the Automotive Recycling Industry, has announced its collaboration with I-CAR.
In a Memorandum of Understanding (MOU), the two organizations outlined plans for mutually promoting the level of knowledge and skills required to improve communication and educational exchanges between the Automotive Recycling Industry and the Collision Repair Industry.
"Our planned partnership presents an enormous range of potential benefits to the automotive recycling and collision industries," said ARAEF Managing Director Virginia Whelan. "This collaboration will undoubtedly result in new educational training tools and endeavors with tremendous potential for innovation and far-reaching benefit."
“A mutual understanding of each other’s industries can go a long way in improving communications and meeting customer expectations.” said Jamie Jacobs, I-CAR Instructional Designer. “This agreement between the ARAEF and I-CAR is a big step forward toward this goal, and provides a commitment from both industries to continuing education with regard to the considerations for recycled parts usage during collision repairs.”
The exchange between the ARAEF and I-CAR is intended to improve communication and promote the value of education between automotive recyclers and collision repairers focused on automotive collision claim and repair process.
Ford Motor Company responded at the Collision Industry Conference in mid-January to a presentation at the previous CIC in which the automaker’s price increases for crash parts covered under its design patents were criticized.
Dan Morrissey, a board member of the Automotive Body Parts Association, which represents non-OEM parts makers and distributors, had argued at CIC in November 2009 that allowing automakers to obtain design patents on parts eliminates competition and results in higher OEM parts prices. He used a chart that he said showed that prices for seven parts covered under Ford’s F-150 parts design patent rose 20 to 81 percent from 2007 until November 2008.
At CIC in Palm Springs in January, Paul Massie, powertrain and collision product marketing manager for Ford, acknowledged that some of the parts had “fairly substantial price increases percentage-wise,” but pointed out that others covered under the patent (but not cited in the previous presentation) had gone down.
“We do acknowledge we raised [prices] on five of seven [parts], but why didn’t they show the decreases, too?” Massie said.
He listed a number of factors that play into changes in parts pricing, including changes in cost of raw materials, and whether a part is being made as part of an in-production vehicle.
He also used a chart to compare prices changes of twelve F-150 parts (including left- and right-side parts, and 2- and 4-wheel drive versions) covered under the parts patent to changes in the average price of corresponding non-OEM parts over the same period. That showed prices for the Ford parts rose 9.3 percent while the non-OEM parts prices rose 19.1 percent.
“If Ford’s behavior was monopolistic and price-gouging, and if the evidence of that is price increases on design-patent parts, what was the aftermarket’s behavior?” Massie said.
Ford’s presentation came during the second CIC meeting in a row in which industry trainer Toby Chess showed some non-OEM parts with significant differences from the OEM parts they were designed to replace.
He showed several bumper reinforcement bars, for example, that were bent to shape rather than formed, resulting in a weak spot. He also showed a bumper bracket for the 2000-04 Nissan Xterra that was made of 2-mm-thick material rather than 3.38-mm material used for the OEM part, and foam bumper inserts made of polystyrene ("coffee cup foam") rather than the much-denser polypropylene foam.
"I have a 25-page report here on why (Ford) used magnesium on the core support for the F-150," Chess said, holding a non-OEM core support being sold for the vehicle that is made of aluminum. "On some of these parts you can feel the weight difference, but if you didn't have one to compare it with, how would you tell the difference? We need to have better standards."
At the previous CIC last November, Chess used a firefighters' extrication saw to show how easy it was to cut through the mild steel of a non-OEM bumper reinforcement bar being sold as a replacement for a Toyota Corolla part made of ultra-high-strength steel. At CIC in Palm Springs, non-OEM parts distributor LKQ Corp. said that demonstration led it to make some changes.
"We did a very quick test on our own, and we found that that particular part did not meet our standards," LKQ’s Herb Lieberman said.
He said the company stopped selling the part, is testing all the bumper reinforcement bars it sells, and is not importing more bumper bars pending the outcome of that testing. (The company later clarified that it is still importing bumper bars to test and those that have passed its in-house testing.)
Aaron Schulenburg, executive director of the Society of Collision Repair Specialists, applauded LKQ for its decision, but asked, "What about all the people who have (one of those parts) sitting on their car today? Whose responsibility is it to contact them to make sure they get their vehicle back in and have it taken care of?"
Lieberman said that question "is under deep consideration" at LKQ.
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