January 1999 Editor's Page
A Look Back... A Look Ahead...

Looking back a few years from now, I wonder how we will view 1998 with the perspective time allows. Major developments abounded in the year just passed. To highlight just a few:

• The investment by Ford in repair facility consolidator Collision Team of America;
• The growth of numerous, multi-regional consolidators;
• Consolidation on the paint manufacturer side of the industry with DuPont’s announcement of their intention to acquire Herberts;
• Fractures in the alliance between ASA National and their State Affiliate Organizations;
• The continued increase in size by the largest repair facilities in the U.S.

Taken alone, each bit of news had broad-reaching impact on the industry. Together, these changes represent a vast restructuring of the way each repair facility, supplier and insurer must view this industry.

To many, the rise of multi-regional shop consolidators has struck the first chords of a dirge dedicated to the mom-and-pop repair facility. In some areas, most notably Southern California, the Dallas-Ft. Worth metro area and the Twin Cities of Minneapolis-St. Paul, competition by consolidators is beginning to have an impact. We expect consolidators to broaden their grip on these markets through acquisition and greenfield expansion in 1999.

In other markets, large independent businesses will continue to thrive... seizing on the opportunity to increase their business at the expense of their smaller competitors.

Several big questions for consolidators remain:

• Will additional Auto Manufacturers enter the fray and invest in consolidators?
• Will venture capital or other financing continue to flow into consolidators’ coffers, enabling their expansion plans?
• Will consolidators find and implement operational efficiencies for labor and purchasing that offset increased overhead thereby avoiding problems faced by roll-ups in other industries?
• When will the first consolidator combination take place?

The last question is a wild card- the combination of two multi-regional competitors, though not clearly a certainty could prove possible this year. The eventuality depends primarily on the state of the U.S. economy and its financial markets. A slow down, or tightening in the availability of capital, could give a healthy, well-funded group the chance to acquire a competitor in a not-so-favorable position.

On the paint supplier side, competition will increase this year. DuPont will surely go after the customers of European brands, using their acquisition of the European-based Herberts as the necessary ammunition. My friends at ICI reminded me, however, that last month’s editorial where I stated that DuPont would try to influence their jobbers that carry Akzo, BASF or ICI brands to drop those lines in favor of DuPont’s European brands, was not quite correct. Thanks to their competition, ICI distributes primarily through single-line jobbers. Oops!

However, the war of attrition among paint suppliers for shops’ materials business will gain new vigor this year- count on that.

Finally, on the front page we report the decision by the dissenting affiliates to cooperate under the Automotive Service Professionals banner. What does the fracture of ASA and a majority of their affiliates mean for repairers and their representation to state and national legislators? The answer is far from clear.

ASA National is secure; their income from NACE alone assures this in the short-term, but a significant decline in their membership would reduce their ability to lobby in Washington. Though the changes to their affiliate agreement are far from draconian and, as National will quickly point out, are quite common among other national associations with regional affiliates, I feel forced to wonder why the ASA National leadership finds it necessary to force a confrontation.

Certainly, the conflict with ASA Illinois where ASA National felt forced to disaffiliate with the group due to contrary positions on several issues, played a part in their decision to seek changes in the affiliate agreement. But their actions this past Fall have turned many of their supporters during that crisis into opponents this time around.