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Thursday, 22 July 2010 17:26

Industry Pioneer Earl Scheib, Inc. Folds After 75 Years Painting Cars

Nationally famous for its low-priced paint jobs, Earl Scheib, Inc. ceased operations nationwide on Friday, July 16 as the company closed its doors for good in order to turn control of its company-owned stores over to individual owners.

The company has been owned since 2009 by the San Diego-based private equity firm of Kelly Capital, LLC who acquired in 2009 for an estimated $8 million, and relaunched the corporate operations as New Earl Scheib Paint & Body Shop.

The California-based chain consists of more than 175 stores in about 150 U.S. cities. About half of the company’s facilities are in California, but the company had stores in 16 other states as far east as New York, Virginia and Washington D.C.

Though the stores are primarily known for economically priced, production auto painting services, body and fender repair services are also offered. Earl Scheib manufactures its own paint at a company-owned facility in Missouri. The company established a fleet sales division in 1998. The Earl Scheib brand became well known largely through founder Earl A. Scheib, a pioneer of advertising.

The company was founded in 1937 by its namesake, Earl A. Scheib who opened the first  Earl Scheib Paint and Body in Los Angeles. Scheib decided to paint a few cars in his gas station’s garage during the evening hours when the station was closed. What began as a small, after-hours endeavor soon blossomed, and Scheib could not keep up with demand.

Scheib was the first to introduce production painting of automobiles in the United States. Offering low prices of $29.95 for sedans and $24.95 for coupes, Scheib seriously undercut competitors’ prices, which generally ran a few hundred dollars for a complete job. Because of the rock-bottom prices, customers rushed to Scheib’s shop, reportedly causing traffic snarls that required assistance from the police. Open daily, Scheib and his ten employees painted between 150 and 210 cars per week during the early years.

Scheib began to expand nationally in the 1950s, and to raise awareness of his auto painting shops he turned to advertising. Earl Scheib marketed his shops through low-budget television commercials on late-night TV programs. Scheib soon became a national icon and celebrity, and his oft-heard sales pitch, “I’m Earl Scheib, and I’ll paint any car, any color for $29.95. No ups, no extras,” became an instantly recognizable phrase.

Scheib is credited as being the first spokesperson for his own company, handled all advertising and developed and wrote his own television commercials. Scheib believed viewers would find his ads more convincing and genuine if he spoke directly to the viewers about the company’s offerings.

As son Donald explained in a company statement: ‘He’d personally call the station manager and tell him to interrupt a sponsored show at a pivotal moment and run his ad. ... So you’d be watching a show, the villain’s sneaking up behind the hero with a knife, and just when he’s about to plunge the knife into the hero’s back ... Earl comes on the screen pitching his service.’ Scheib’s commercials were seen and heard on television and radio stations in more than 100 cities, and he continued to film spots until his death in 1992.

Earl Scheib, Inc., which went public in 1963, was the largest non-franchised auto painting chain by the 1980s. Though the cost of a standard Earl Scheib paint job had grown to $99.95, the chain’s prices were still among the lowest in the industry and appealed to budget-minded consumers. Car owners were choosing to keep their cars longer, and this trend was reflected in Scheib’s sales; in the early 1980s the company’s sales increased an average of 17.6 percent per year, and between 1982 and 1985 the firm’s stock quadrupled. By 1985 there were 275 Earl Scheib stores, ranging from Hawaii to New York. The company opened its first store in Canada in 1984 and and an Earl Scheib store opened in London in 1985.

On February 29, 1992, a day after turning 85, Earl Scheib passed away, leaving behind a legacy and a struggling business. A few days later the company’s stock skyrocketed 47 percent as investors speculated about the future of the company. Many believed Scheib’s 37 percent interest in the company would be sold in order to finance his estate taxes. Irwin Buchalter, an Earl Scheib board member and executor of Scheib’s estate, indicated that the 37 percent stake would be divided between Scheib’s three sons, all of whom were employed by the company. Buchalter acknowledged problems with Scheib’s management and commented in the Wall Street Journal that Scheib ‘refused to take realization of the economy--of what was happening to the auto-painting business. He always felt he had to have the lowest prices in the business by a wide stretch.’ Scheib’s belief, Buchalter noted, prevented him from raising prices to compensate for slow sales. It was not until June 1991 that Scheib finally relented, raising the price of a basic paint job from $99.95 to $119.95.

Earl Scheib’s death, his son Donald was named president and CEO. Donald Scheib had previously served as vice-president. Irwin Buchalter was elected chairman. The company also announced that it had no plans to sell. The formidable task of turning around the ailing company was started. For fiscal 1993 the company reported sales of $53.64 million and a net loss of $110,000. The following fiscal year sales declined to $48.49 million, yet net loss grew to $1.82 million.

The New Earl Scheib

A major restructuring strategy was adopted in fiscal 1995, and as a result 84 unprofitable stores, most situated in the Midwest and East, were closed. The company took a pre-tax charge of $4.2 million for restructuring-related costs. The following fiscal year Earl Scheib reported its first profit in four years.

The company spent about $4.6 million to renovate and convert 137 stores into the New Earl Scheib Paint and Body store format. The new stores boasted an updated look, including new paint and graphics, as well as new exterior signs. The shops also offered a customer information center and modern equipment, such as the Infrared Quartz Finish Drying System. Conversions of stores in California were completed in early 1996, and results were initially positive.

The new shop format was designed to boost the chain’s image, and to back up its new exterior, Earl Scheib started developing a new, top-quality paint. “We definitely had some of the worst paint in the industry,” Chief Operating Officer Christian Bement admitted in the Los Angeles Daily News.

“When I first got here I received letters from customers complaining about the paint jobs. The paint that was chipping off was actually in the envelopes,’ he added. The company-owned paint manufacturing plant in Missouri was called upon to create a high-quality auto paint, and the outcome was Euro-Paint, a 100 percent acrylic urethane paint. Introduced in 1997, the paint provided durability and a high-gloss finish and was rated as the best paint in production auto painting by Paint Research Association Laboratories Inc. The paint, as well as other changes, effectively reduced the percentage of jobs that had to be redone because of poor quality. The company’s ‘redo rate’ dropped from 22 percent in 1995 to below six percent in the late 1990s.

Recently, according to the company website, at least some of the stores had been using Sherwin-Williams brand and some are now in the process of switching to Sherwin-Williams’ waterborne.

Earl Scheib stepped up its expansion efforts beginning in 1997, concentrating on opening more stores in existing markets to diminish the need for increased advertising expenditures and to fully penetrate existing markets. In 2000, the company continued with its comeback strategy. The company hoped to increase sales in stores open for more than a year and to continue expansion, but rising materials and administrative expenses stalled growth.

A company statement read “Effective Friday July 16 Earl Scheib, Inc will be going out of business and closing our doors. We will be unable to respond to any warranty repair issues or any outstanding invoices due to our current circumstances. Thank you.”

In a statement on its website, the company said, “We truly apologize for any inconvenience this may cause you, however we believe the independent owners and operators will continue to provide the same great service that Earl Scheib, Inc. offered for almost 80 years.

The shops received notice of the company’s plans to close about a week ago through telephone calls from company management. It will be up to the individual stores to decide whether they keep the Earl Sheib name.

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