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Letter to the Editor
This article originally appeared in the August, 1999 Issue of INSIGHT
©1999 Collision Repair Industry INSIGHTAll Rights Reserved
Boyd Group Secures $17 Million from BASF to Fund Expansion- Money to Fund Acquisition Strategy
CIC Issues Best Practice Guidelines for Estimating and Claims Handling
Insurance Auto Auctions Retains Investment Banker
Towing Consolidator and Equipment Supplier Miller Industries Expects Substantial Fourth Quarter Loss
GM and NHTSA to Study Crash Avoidance Technologies
AutoNation Seeks New Chief Executive Officer
General Motors Collision Repair Information Added to I-CAR’s UPCR
Copart Announces New Internet Salvage Locator Service
Sonic Automotive Selects PPG Refinish as Exclusive Supplier
INDUSTRY UPDATE
The Boyd Group Inc. announced July 6 that it has entered into arrangements with BASF, and their wholly-owned jobber operation Automotive Refinish Technologies, that could provide the company with approximately $17 million ($25 million Cdn) in capital funding over the course of the next three to six years.
The agreement is subject to certain obligations and performance criteria, which Boyd anticipates being able to meet. The funding Boyd receives will not have to be repaid. According to sources, the money will be made available to Boyd to fund their cash needs for acquisitions.
Typically, collision repair facility acquisitions are being paid for with a mix of stock and up-front cash. BASF will apparently assist the Boyd Group with their cash needs, providing Boyd meets agreed to performance levels regarding the percentage of refinish sales volume in the acquired facilities.
Editor’s Note: For an in-depth analysis of how the deal could be structured and affect acquisitions, see the expanded Investment Update article beginning on page 14 of this issue.
"These are significant shareholder value enhancing arrangements in that they provide us with additional capital to grow our business without any equity dilution or carrying costs to our shareholders," said Brock Bulbuck, Boyd’s senior vice president and CFO. "These arrangements will also provide us with many value added services including assistance with the further development of e-commerce strategies, innovative repair process strategies and large customer initiatives."
The Boyd Group operates 42 company owned locations and also has 13 third party owned licensed locations trading under its tradenames. o
The Collision Industry Conference (CIC) Write-it-Right Committee presented their Best Practice Guidelines for Estimating and Processing Auto Physical Damage Claims at their meeting in St. Charles, IL on July 21.
The Guidelines, a set of 19 specific practices covering all aspects of the estimating and claims handling process, were developed by a volunteer group of insurers and repairers. The goal of their activity, led by committee chair Linda Holcomb, was to determine the best procedures that both shops and insurers could agree upon that promote fast and accurate estimating and claims handling procedures.
According to the printed guidelines the work represents, "A consensus on how to work together for the benefit of the vehicle owner in the spirit of good faith business practice and mutual respect."
According to Dale Delmege, chairman of the CIC, "This is one of the great moments for CIC. We have accomplished real change with the publication of these guidelines."
Regarding the hard work of the committee and the cooperation of repairers and insurers, "The value of what the people have done here for the industry is out. The toothpaste cannot be put back in the tube. We have established a beachhead of mutual cooperation."
The guidelines include a mix of steps for both repairers and insurance company personnel to follow at various stages throughout the repair process.
Of particular note, repairers are urged to "Document any changes to the repair process as they occur or daily." This best practice was designed to eliminate fraud concerns if repair versus replace procedures are changed from the procedures originally proposed during the estimating process. For example, if a shop decides that due to parts availability problems they will repair a component instead of waiting for a replacement part, this fact must be noted in the file for the job, as soon as possible. At issue is a concern regarding in-process inspections by insurers or governmental consumer protection agencies. If an insurance company representative, or a governmental agency, inspects an in-process repair prior to the documentation of a change in procedure, potential fraud allegations could result. While insurers wanted changes to be documented by repairers“as they occur,” repairers on the committee were concerned that this could create a burdensome tracking requirement for shop management. Daily updates were agreed to be a suitable compromise, allowing repair facilities to update their files at the end of the day, and make notifications as necessary.
The committee and the CIC hope that both shops and insurers will support these guidelines and implement them in their operations.
Editor’s Note: An Adobe Acrobat version of the CIC Best Practices Guidelines is available for download here on the INSIGHT website.o
Insurance Auto Auctions, Inc. (Nasdaq: IAAI) announced July 13 that it has retained Greif & Co. as their financial advisor to lead the development and structuring of a range of strategic alternatives intended to enhance shareholder value.
Thomas J. O’Malia, Chairman of the Board of Directors, stated, "We have set the company on a course of solid earnings growth, which we expect to continue in future periods. We intend to continue to build upon the growth in earnings while pursuing opportunities that may be available to further enhance shareholder value through acquisitions, marketing, share repurchases or other strategic partnerships or transactions. Greif & Co. has worked with us in the past and has many years of knowledge of our business and industry. We think they are uniquely able to assist us in developing these opportunities."
Does this mean the company is for sale? Apparently not, though they appear to be keeping the door open to all possibilities. A few months ago, the company spurned an offer from Copart to merge operations.
Towing Consolidator and Equipment Supplier Miller Industries Expects Substantial Fourth Quarter Loss
Miller Industries, Inc. (NYSE: MLR) announced in late June that it expects a substantial loss from both their manufacturing and RoadOne towing businesses in its fourth quarter ended April 30, 1999. The company nevertheless currently anticipates that full year fiscal 1999 earnings will be positive.
The company also announced that Adam Dunayer would leave his position as Chief Financial Officer to return to Bear, Stearns & Co., Inc. as a Managing Director in July. J. Vincent Mish will assume the role of Chief Financial Officer of the company on an interim basis. Mr. Mish served in this position from the Company’s inception until 1996, when he was appointed President of Miller Financial Services Group. Mr. Mish will continue as President of Miller Financial. The company has commenced the search for a new Chief Financial Officer.
Miller Industries manufactures towing and recovery equipment and is a consolidator of towing services.
General Motors, the U.S. National Highway Traffic Safety Administration (NHTSA) and the University of Michigan Transportation Research Institute announced in June a $35 million project to study accident avoidance systems geared towards reducing rear end collisions caused by distracted drivers.
Delphi Automotive Systems also announced that they have been selected to provide the key technologies for the study designed to assess the benefits and to accelerate the development of vehicle collision avoidance systems.
Delphi Delco Electronics Systems will provide Adaptive Cruise Control (ACC), forward collision warning, driver interface technologies and the systems integration for the vehicles involved in the project.
"This is a unique opportunity for industry, government, academia and private citizens to gain a broader and more thorough understanding of the benefits of collision warning technologies," said David B. Wohleen, president of Delphi Delco Electronics Systems. "We believe this study can help speed the learning curve for these products in terms of how they help enhance driver safety and convenience."
The Delphi ACC, which is currently being rolled out commercially, measures the distance and relative speed of preceding vehicles, using a sophisticated microwave radar sensor mounted at the front of the vehicle. When the cruise control is engaged, the ACC system uses throttle control and limited braking to adjust speed to maintain a driver pre-selected distance from the vehicle in front, thereby reducing the need to manually accelerate or decelerate with changes in traffic flow. If the lane ahead is empty, the vehicle cruises at the set speed. The system keeps a constant gap to the vehicle that it is following or cruises at a constant speed if the lane ahead is empty.
Delphi’s forward-looking collision-warning system uses a microwave radar sensor to assist the driver’s awareness of objects in the vehicle’s forward path. The sensor assesses the threat and issues mechanical, visual and/or audio warnings to help the driver avoid potential crash situations. With collision warning, information such as object range and relative speed, as well as vehicle speed, steering wheel position and throttle position, are continuously fed to the collision-avoidance processor. The data is analyzed to determine which objects are in the vehicle’s path and which objects are not, in order to minimize issuing false alarms. For many years, the automotive safety community has postulated that if drivers had just one-half to one-second additional warning, it could reduce the rate of rear-end collisions by more than 50 percent. "These systems are designed to provide this additional early warning time," Wohleen said.
A Delphi head-up display will also be integrated into the system to provide the field-test drivers with critical collision-warning cues. This unit allows drivers to keep their eyes on the road and eliminates the need to look down and refocus for vital information. Introduced on vehicles in 1988, head-up displays use a vehicle’s windshield as an optical element to project virtual images in the direct field of vision of the driver.
More than 100 private citizens from throughout southeastern Michigan will be selected to drive 10 vehicles specially equipped with Delphi Automotive Systems ACC, forward collision warning and driver interface technologies by mid-2001. The test drivers will be recruited from licensed drivers in the area who meet a set of criteria that maximizes the chances of gathering good data without narrowing the breadth of the experiment. On-board computers will automatically download data via cell phones daily to researchers at the University of Michigan Transportation Research Institute who are responsible for managing the experiment.
The project will also identify operational and other issues and evaluate the designs of collision-warning systems. In addition, the research will help determine customer acceptance, product maturity and the perceived values and costs of collision-warning systems. The study also will show how collision- warning systems work in real-life situations, how drivers react to warnings and how well the systems discriminate between targets versus non-targets.
Secretary of Transportation Rodney E. Slater announced the research program at the Department of Transportation’s Spirit of Innovation in Transportation Conference at the Volpe National Transportation Systems Center in Cambridge, MA.
AutoNation, Inc. (NYSE: AN) has announced that it has begun a search for a new Chief Executive Officer. The company, with over 280 dealerships, and U.S. body shop sales in excess of $106 million, has been led by co-CEOs Wayne Huizenga and Steven Berrard.
Huizenga will remain Chairman of the Board and Berrard will stay in his position until a new CEO is found. Also, Berrard will remain on AutoNation’s Board of Directors following the appointment of the new CEO.
Huizenga, commenting on the change stated, "At AutoNation, Steve has accomplished what he enjoys most: building new businesses. Under his leadership, AutoNation has become the country’s preeminent automotive retailer — and it has done so in an incredibly short period of time. Today, thanks in great part to Steve, AutoNation is a company that is poised for greatness."
Berrard said the search for a new Chief Executive Officer is already underway. He added that, once his successor is named, he will become actively involved in New River Capital Partners, his private investment firm, where he will oversee a number of investments in growth companies.
o
General Motors is the latest company to provide collision repair, frame and underbody, supplemental inflatable restraints (SIR), and seat belt repair information for 1998-1999 models in I-CAR’s Uniform Procedures For Collision Repair (UPCR). Information on 151 GM vehicles will be included in UPCR starting with the July 1999 issue.
The July release of UPCR includes 158 procedures in 38 content areas with references to 217 vehicle-specific models. Also included are electronic links to 22 organizations’ vehicle, equipment, or product-specific information.
UPCR is available through an annual subscription, with quarterly issues of new and updated procedures costing $295 in the United States and $370 in Canada. A $50 discount is available to Gold Class Professionals. A $50 discount is also available to members of participating Collision Industry associations. I-CAR suggests that repairers call their association to find out if they participate, or ask them to sign up.
For more information contact I-CAR Customer Service at 1-800-ICAR-USA (1-800-422-7872), or visit the I-CAR web site at www.i-car.com.
Copart, Inc., (Nasdaq:CPRT) announced yesterday the launch of a new Internet service for the public — CoPartfinder.com.
According to the company, the new service allows parts buyers to locate used auto parts around the country. After entering basic vehicle information (year, make, model and zip code), the buyer can view digital images from Copart’s recent sales of vehicles that meet the search criteria. These images are provided free of charge along with vehicle information, and the name, address, phone and email address of the automobile dismantler that bought the vehicle at a Copart auction.
CoPartfinder was in beta testing in June. Without any announcements or links from search engines, CoPartfinder attracted over 1,000 unique users who completed the simple registration process. These beta users conducted over 10,000 searches and CoPartfinder displayed over 600,000 vehicles that met the search criteria
OE dealer consolidator Sonic Automotive, Inc. (NYSE: SAH) announced June 28 they have selected PPG as their exclusive national vendor for refinish coatings.
"PPG products were already used in most of our existing facilities because of high quality and attractive pricing. We’re pleased to extend this relationship to all of our collision repair centers. Sonic is creating value by improving operations, not just by completing accretive acquisitions," stated B. Scott Smith, the company’s President and Chief Operating Officer.
Sonic Automotive, Inc. operates 28 collision repair centers and 111 OE dealer franchises in the U.S. Their 1998 collision repair sales are estimated at over $16 million. The company has operations in Alabama, Florida, Georgia, Maryland, North Carolina, Ohio, South Carolina, Tennessee, Texas, and Virginia. o
Reports from the UK indicate that DirectLine Accident Management has closed two of their six repair facilities. Press reports cite a shortage of skilled workers for the closures that will affect 180 jobs.
An article published by the UK-based Fleet News states that:The Retail Motor Industry Federation’s Bodyshop division says the closure is a symptom of a much wider sickness affecting the whole repair industry, where the constant drive to cut costs is axing budgets to invest in qualified staff and training. Bob Hood, senior manager for RMI Bodyshop Services, said: "In certain parts of the country, the body repair industry is heading towards insolvency and I appeal to all insurers to stop turning the screw and start rewarding repairers positively so that an urgent injection of cash can be made to recruit and train apprentices."
Direct Line, the insurer that markets auto insurance in the UK directly to consumers, established the facilities several years ago as part of their program to control repair costs. o
CCC Information Services Group Inc. (Nasdaq: CCCG), announced July 22 a 10.4 percent revenue growth for its second quarter ended June 30, 1999. Revenues increased to $51.0 million for the quarter. The increase in revenues was principally due to continued growth in the company’s Consumer Services business, formerly known as Outsourcing, continued growth in digital imaging and revenue from CCC International, an investment made in Europe in the second half of 1998.
Second quarter operating income of $0.6 million declined $4.1 million from the same quarter last year. Several one-time events were responsible for the year over year results. In the second quarter of 1998, the Company recorded a $1.7 million charge associated with the decision to relocate the processing operations of the claims settlement division to South Dakota. Adjusting for that charge, the second quarter 1998 operating income would have been $6.4 million. In the second quarter of 1999, there were $3.3 million of one-time events. These charges included: $1.2 million for the stock repurchase from a charitable trust, controlled by the chairman, Dave Phillips; $1.3 million in consulting costs for projects aimed at improving the internal telecommunications and customer service infrastructure; and $0.8 million in severance costs for the re-alignment of the Automotive Services Division.
Adjusting for the one-time charges, operating margin declined from 13.9 percent in 1998 to 7.7percent in 1999. After the one-time charges, operating expenses increased $7.3 million or 18.3 percent, reflecting the growth in the consumer services business, spending against new initiatives such as Europe and Pathways Enterprise Solution, and continued growth in expenditures to improve service levels.
PPG Industries (NYSE: PPG) reported in July second-quarter net income of $184 million, or $1.05 a share, on sales of $1.95 billion. In the 1998 quarter, net income was $199 million, or $1.11 a share, on sales of $2.0 billion.
,p>For 1998’s second quarter, a charge for the disposition of equity interests in Asian glass operations and strike-related shutdowns at General Motors plants reduced per-share earnings by nine cents.PPG’s first-half 1999 net income was $307 million, or $1.75 a share, on sales of $3.75 billion, compared with net income of $391 million, or $2.18 a share, on sales of $3.92 billion in the same period last year.
Sales and operating earnings in PPG’s coatings segment were records for any quarter, driven largely by recent acquisitions and volume gains in automotive OEM and refinish. Cost reductions also contributed to the record earnings.
In PPG’s glass segment, sales were lower largely because of the third-quarter 1998 divestiture of European glass operations and price declines in fiber glass and automotive glass. Excluding a pretax charge of $15 million in the year-ago quarter for the disposition of equity interests in Asian glass operations, operating earnings declined slightly. Improvements in manufacturing efficiencies across all businesses offset about half of the price declines.
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©1999 Collision Repair Industry INSIGHT
All Rights Reserved
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