Thursday, 31 August 2006 17:00

Finding additional profit in non-insurance-paid work

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One of the ways some shops are coping with what they are finding is decreasing profits in collision repair work is adding services beyond body work: mechanical work, detailing, and spray-on bed liners. 

Others, however, say they're sticking with what they know best - autobody and paint work - but are looking beyond what most used to view as the most lucrative and sought-after form of that work: insurer-paid collision repair work.

Compared to direct repair work, for example, RV repair work is becoming increasingly attractive, says Darryl Burkhardt, owner of Custom Touch Collision Care in Gresham, Oregon.

"We started focusing on the RV niche seven or eight years ago," Burkhardt said. "It involves more labor than parts replacement, and our profit margins on labor are a little better."

He said several area dealers are referring RV work to his shop, which currently accounts for almost 15 percent of his business, and he's installing a new 50-foot paint booth in anticipation of that percentage growing.

While Burkhardt is certainly not parting ways with his company's insurer relationships, Johnnie Walker has. As recently as five years ago, Walker had more than 20 employees working at PJ's Auto Body Shop near Sacramento, a 30,000-sq. ft. facility producing collision repair work fed to the shop by three major insurers.

Today, because of increasing insurer demands, he's dropped all DRP agreements, leased out one-third of his shop's space, and focused with far few employees on vehicle customization work - which he finds more profitable and far more fulfilling.

"It's better now, I'm a lot happier," Walker said, inside the business he now calls "Johnnie Walker Performance Center." "This is what I want to do, and I love doing it."

"Pump up your tunes, trick up your ride," the company's cable television commercial suggests. "Johnnie Walker Performance Center is where art meets craftsmanship. Slam it, jack it, bag it go. At Johnnie Walker Performance Center, everything is possible."

The commercial, which Walker said generates 12 to 20 phone calls a week, definitely plays on the current popularity of vehicle customization television shows, with Walker and his team decked out like the crew from American Chopper.

In near-by Yuba City, California, Ken Pike also operates a facility where custom work makes up more than half of the company's business. Ken's Custom Auto Body has the usual body repair department and paint department in his shop. But the shop also has a third section, where technicians work on a dozen or more Cobra replica bodies as well as other classic and unique vehicles.

"Right now from a dollar standpoint, the custom work is probably about 60 percent of our business, with the rest being collision work," Pike said. "We focus on the Cobra replicas. That's sort of like our bread-and-butter. We do 60 to 70 of those cars a year."

The custom work comes in largely by word-of-mouth, he said. One of the Cobra kit car manufacturers refers customers to Ken's from as far away as Illinois and Michigan.

"I do a lot things to the car to eliminate the 'kit' out of the car," Pike said. "I make it look more like a hand-built car."

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By contrast, at Smiley Body Shop in New Castle, Indiana, second-generation shop owner Jeff Smiley said his company is still very much focused on collision repair work, but is finding customer-paid work becoming an increasing portion of his business.

"Some months as much as 25 or 30 percent of our door traffic is customer pay," Smiley said. "People don't want to turn in a claim or need work done on lease vehicles prior to returning them. The average ticket is much smaller, but the work is much faster, and you can use teams of lower-skilled labor because the bulk of this work is minor. We used to turn it away because it was seen as troublesome. But it can be a really good honey pot."

One way they've boosted customer- paid work is with a "paint-the-balance" program, offering a discount for a complete paint job to owners of vehicles (that are at least four or five years old) that are in for collision repair work. He's also working to develop a more streamlined estimating system designed to make creating estimates for customer-paid work faster and easier.

Another source of non-insurance work shops are taking a new look at is fleet work. Dave Cooper of Dave's Auto Body Quality Repair Shop in Zieglerville, Pennsylvania. (northwest of Philadelphia), said fleet work accounts for almost 25 percent of sales at his 10-employee, 13,000-sq. ft. shop.

"I went after fleet companies because the fact that you do good quality work and offer great service no longer ensures that you'll always have insurance work," Cooper said. "Insurance companies have too much control and are directing work. So fleet work allows us to diversify."

He was already working with about a half dozen regional or national fleets when he joined PPG's CertifiedFirst program, which brought another three or four fleets to his door. The work is nice, he said, because it involves less customer interaction and the fleet companies for the most part leave repair decisions up to the shop.

"You're allowed to be the professional you're supposed to be, and you're not being told you have to use aftermarket parts or this or that," Cooper said. "You write an estimate, send them the photos, and they say, 'Fix it.'"

There are certainly some downsides to fleet work, he admits. Fleets tend to total vehicles sooner than most insurers - sometimes when the cost to repair reaches 40 to 60 percent of the vehicle's value.

"So on 1990s vehicles, you usually need to use used or aftermarket parts to keep them from totaling, but the parts you use are still your choice," Cooper said.

Fleets also generally ask for a discount - some as much as 10 to 15 percent off the complete estimate, parts and labor. And they may want 15 to 30 days to pay. But Cooper said despite these drawbacks, fleet work has helped keep his shop busy and profitable even when other shops in his area are slow.

One thing that makes his shops appealing to fleet managers, he said, is its ability to work on more than just passenger cars.

"Our bay doors are 14-feet high and 12-feet wide, and we're equipped to bring in bigger trucks - not tractor trailers, but box vans and 350 trucks," Cooper said, estimating that such vehicles account for about one-third of his shop's fleet work.

In addition to national fleet companies, shops seeking fleet work are contacting utilities, law enforcement agencies, delivery and courier services, contractors, municipalities and any organization with a mobile sales force.

Even as recently as five or 10 years ago, shops doing much fleet, custom, RV, custom or customer-pay work were often trying to increase their insurance-paid work instead. Now it seems these sources of work are increasingly being seen as a viable alternative to heavily discounted and managed direct repair work.

John Yoswick is a freelance writer based in Portland, Oregon, who has been writing about the automotive industry since 1988.

 

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