Friday, 12 January 2007 17:11

Quotes of Note for 2006

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State Farm's new 'Select Service' program; a Texas court's upholding of a state law banning insurer-owned shops; the increasing percentage of vehicles being declared total losses; and the ongoing battle over the "right to repair" were among the most talked-about topics in the industry this past year.

Here's a quick overview as viewed through a collection of some of the most memorable, important, interesting or enlightening quotes heard around the industry during 2006.

A selective disservice

"If you choose to give no discounts whatsoever, that's perfectly fine with us. I don't have a problem with that. But if your business model includes some discounts, then we want to be part of it."

- George Avery of State Farm Insurance, explaining that his company's switch to a new direct repair program will require participating shops to offer State Farm any discounts the shop offers any other insurer.

"The repair industry has said, 'Look, you really need to tailor the number of repair facilities you have in a market associated with your capacity needs.' They told us we had too many. And we are not doing a very good job getting out and visiting with you with [your performance] numbers. So we've agreed that to manage the program, maybe we need to reduce. And if we reduce, we need to look at the top performers."

- State Farm's Avery, saying there will be fewer shops participating in the new program than in the company's existing "Service First" program.

"It's alright, really nothing different except they don't pay us for total loss sheets or storage on total losses. That equates in our shop to I think between $5,500 and $7,500 a year, so there's another profit center that's gone. In our area, we had one shop that opted not to participate in the program, and we had one very small shop that they did not allow on the program. Besides that, everybody else that was Service First is on. So I haven't seen any change (in State Farm work volume). I look at it like this: If at some point the rules were to change and I don't like the rules, then at that point I'll get out. It's not horrific. We just have to deal with it and go. Time will tell."

- Kurt Zimmer of Kurt's Autobody Repair Shop, Inc., in Bloomington, Ill., speaking last Spring about State Farm's shift to the new program in his area.

"I would not sign the contract as presented, and they told me it was non-negotiable. They want the lowest rate you charge, when I don't feel it is any of their business what I charge other people. They should be negotiating their own rate. Someone else may be easier to work with or give me more volume and be entitled to a better discount. If they decide the repairs are overdue, and they feel it's the shop's fault, the shop has to pick up the rental. They decide that. It's so one-sided, the whole contract. I don't think it's good for the industry. A bad deal is a bad deal. A bad contract, no matter how many cars they want to send you, is a bad contract."

- Kelly Swenson of Carty's Collision Center in Ontario, Calif., also speaking last spring about the new State Farm program.

Next target: parts procurement

"I guarantee you there will be parts procurement programs. I'm not at liberty to specify just what they will be."

- John Bosin, chairman of the Collision Industry Conference (CIC) Parts Committee, speaking about insurance company plans to purchase collision repair parts directly, based on the committee's interactions with about eight insurance companies.

"Parts sales are 42 percent of my business. This scares the daylights out of me. I can see this putting me out of business and a whole lot of others out of business. You're going to turn Class A shops into chop shops."

- Craig Griffin, of Laney's Collision Center in El Dorado, Arkansas, speaking at CIC about insurers' direct purchase of parts.

A conflict of interest

"Thus the vertical integration of an insurance company into the auto body repair industry creates an inherent conflict of interest."

- from a U.S. District Court ruling finding that a Texas law banning insurer-owned collision repair shops to be constitutional.

No I-9, no job

"If you're going 'wink-wink' on the I-9 paperwork and knowingly employing people not properly documented to work in this country, you are running a risk of being nailed by this agency. And not only are you going to be criminally prosecuted, but they're also going to seize your shop."

- Employment law attorney Cory King, cautioning business owners that U.S. Immigration and Customs Enforce-ment (ICE) special agents are cracking down on employers who knowingly hire illegal aliens.

"Right to repair"

"The close 14-13 favorable vote came despite an intense lobbying effort [against the bill] launched by the vehicle manufacturers, new car dealers and the Automotive Service Association."

- Aaron Lowe, vice president of government affairs for the Automotive Aftermarket Industry Association, speaking of a U.S. House subcommittee's approval last May of "Right to Repair" legislation that would require automakers to make service and repair information available to the aftermarket.

"We strongly oppose this amendment and urge the Committee to strike this anti- consumer provision from the legislation. As long as this provision remains in H.R. 2048, we cannot support the bill."

- From a letter from four consumer groups - including Public Citizen, founded by Ralph Nader - opposing the amended "Right to Repair" legislation which removed the provision for consumers' private right of action; the legislation failed to move further before Congress adjourned in December.

The estimating runaround

"We're not going to sign it. We will not be continuing our relationship with American Family Insurance. Based on the number of claims we get, it doesn't make economic sense for us to sign this contract."

- Chad Eldridge of Majestic Auto Body in Idaho Falls, Idaho, after learning this Fall that the insurer is now requiring its direct repair shops to use the Solera (formerly ADP) estimating system, while Eldridge has seven months left (at $433 a month) on a Mitchell International estimating system contract he had signed when American Family switched to that system about three years earlier.

"I'm happy to report that the two information providers were willing to sit in a room with us and discuss ways to provide relief to repairers. We did talk with the insurer and didn't get quite the results or the same amount of respect or credibility that we did from the information providers. It was disappointing and disheartening. The conversations we did have with the insurer reinforced the fact that they had no courtesy or respect for the collision repairs who are allegedly their partners."

- Dan Risley, executive director of the Society of Collision Repair Specialists (SCRS), on his group's efforts this past fall to work with Solera, Mitchell and American Family Insurance on concerns about the insurer's switch in the its required estimating system for its DRP shops.

In Katrina's wake

"In the first three months, we were working with about 20 or 25 families to try to get them some help and assistance. Over the past three weeks, we've had more new people seeking help than we had in the three months prior to that."

- Chuck Sulkala of the National Auto Body Council, speaking last January about the NABC's effort to help at least 50 families from the industry who lost tools, shops and homes in the late 2005 hurricanes.

"We're one of the only industries that seems to be responding to its own people. I'm really proud to be a part of that."

- Arizona shop owner Mike Quinn, who was among those leading the NABC hurricane relief effort.

"I don't know if it's people looking at damage and not where they are going, or traffic lights not working, or a lot of new people in town or what, but we're pulling in four or five cars a day of collision work."

- Tommy Ferguson of Ferguson Automotive in Biloxi, Miss., on the steady flow of work in his shop this past fall, one year after Hurricane Katrina filled his shop with 11 feet of water, engulfing 25 vehicles in mud, blowing apart his paint booth, and ripping the roof from the building.

Disposable cars

"This thing is moving in the wrong direction and it's moving fast. Based on our analysis, it would not surprise us if we were pushing toward 30 percent totals within two to three years. Every stakeholder in this room is going to lose - is losing now and will lose more. I don't have all the answers, but there's a train wreck coming, and we need to decide if we want to do something proactive about this or just flat get run over. We truly do have a crisis going on in our industry. I don't think we as an industry can ignore [that we are moving] toward a throw-away vehicle."

- Lee Petersen, training marketing manager for Chief Automotive Technologies, speaking about the rising percentage of collision-damaged vehicles being declared total losses.

Truth or consequences

"The problem we have now is we don't know how sharp the teeth [in the law] are."

- Max Yates, president of the Montana Collision Repair Specialists, speaking this past fall about a perceived lack of enforcement of a year-old state law the association helped pass that requires insurers with direct repair programs in that state to open those programs to any shop that meets the program's criteria.

"In past years I've tried to get stricter 'title branding' statutes passed nationally to require that all major auto damage be reported on a car's title, which is linked to the VIN. It's gotten a lukewarm reception from the insurance industry and others who frankly think it's too much work. I expect insurance companies will oppose this latest measure, too."

- United States Senator Trent Lott of Mississippi on legislation he introduced in 2006 that would have required insurance companies to report the details of any vehicles declared a total loss to a national database accessible by consumers.

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

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