Wednesday, 20 March 2013 22:58

NORTHEAST™ 2013—Tradeshow, Seminars, and Insurer-Mandated Parts Procurement Panel

AASP/NJ hosted the 2013 NORTHEAST™ Tradeshow at the Meadowlands Exposition Center in Secaucus, NJ, on Friday, March 8 through Sunday, March 10. While the expo floor setup and number of seminars remained much the same as the past two years that I’ve attended, I was impressed with the great variety of exhibitors and seminar topics offered this year.

Insurer-Mandated Parts Procurement Program
For me, the highlight of AASP Northeast in 2013 was the panel on insurer-mandated parts procurement programs.  On Friday night, from 6–8 p.m., Aaron Schulenburg, Executive Director of the Society of Collision Repair Specialists (SCRS), moderated a panel discussion on insurer-mandated parts procurement programs. This seminar attracted a large number of attendees eager to discuss how programs such as State Farm’s PartsTrader may affect their businesses once it is instituted nationwide.

Schulenburg noted, “It’s a concern because, frankly, as independent business owners, we believe that the right and responsibility to find parts and to run your business falls on your own shoulders. And we’re concerned when insurers start to enter into the business of telling you how to run your business. It’s one thing to give goals, it’s one thing to give objectives, it’s one thing to have relationships if that’s important to your business model, but telling you how you are going to perform and how you’re going to run your business and what providers and service models you’re going to use is an entirely different story.”

The panel for this seminar consisted of three auto body professionals from various regions of the country who have all had some experience with insurer-mandated parts procurement programs. Andy Dingman, owner of Dingman’s Collision Centers in Omaha, NE, has participated in American Family’s APU Solutions while Dan Hunsaker, owner of Dan’s Paint and Body, has been required to participate in State Farm’s PartsTrader due to being located in Tucson, AZ, one of their test markets.     Due to his involvement with Consumer Auto Repair Excellence, Inc., and Alabama Automotive Repair Industry Society of Excellence (ALARISE), Steve Plier has received a lot of feedback from shops participating in PartsTrader in the Birmingham, AL, area. Schulenburg stressed that it is important for shop owners to be aware of what is happening in these test markets in order to “understand the potential ramifications so you know how to plan beforehand and can make an educated decision.”

Hunsaker began the panel discussion by explaining that PartsTrader was a ‘nightmare’ to set up, and though it is now technically functioning in his shop, it is not any easier and he would not choose to use it with other insurers. He dislikes the fact that the program dictates which vendors he can use since he spent years developing relationships with his suppliers.

In regards to APU Solutions, Dingman noted that it is important to grow and change to stay in business, and ordering parts electronically allows him to free up his telephone line for incoming calls from customers. Still, he believes it is important to develop relationships with parts suppliers, and he noted that the only benefit to APU is that it is quick to search for parts, allowing him to avoid wasting suppliers’ time with quotes on total loss cases.

Referencing the feedback garnered from shops in the Birmingham test market, Plier noted that PartsTrader slowed shops down with additional administrative duties, taking an average of 45 minutes to go through the additional steps in the process and increasing to as much as an hour in the case of total losses. Since shops are still using the same suppliers, many of them feel that it is quicker to call their suppliers.
Hunsaker concurred, noting that changing the parts search function to include AFM or alternate parts can easily turn into a three-step process, requiring an additional person half the time to tend to the administrative duties created by use of PartsTrader.

Noting that it’s required to use APU Solutions in order to remain on American Family’s DRP program, Dingman still uses the same suppliers because, while APU has a ‘nearly unlimited’ number of suppliers across the U.S. that meet their standards, the shop does not set this criteria, creating a concern in regards to the quality of the suppliers on the program.

Hunsaker expressed another concern: these parts procurement programs create and record a pipeline of the recommended parts that are not chosen which the insurer is apt to question without regard for the reasons shops may have chosen a different supplier, such as quality or delivery time. The insurer only sees that the shops are spending more money than absolutely necessary on parts.

Confirming Hunsaker’s speculation, Dingman admitted that he has been audited by APU requesting documentation explaining why he chose not to buy their recommended parts. He objects to blindly following APU’s recommendations because “a program can’t use common sense and knowledge of the suppliers out there.” The program can only provide options and information, but it’s a poor business decision to delay a repair for two days in order to save $5 on a part. “Using the program exactly as it was designed, ordering only recommended parts, would be a complete train wreck.”

He continued to explain that clearly documenting why he wouldn’t use a specific provider wastes valuable time in going through the motions when he could just order parts from the quality supplier he has a relationship with. Furthermore, the unnecessary waste of time also affects his month-end clerical work as he must use additional time to separate and file documentation for multiple suppliers.

Plier added that PartsTrader doesn’t intervene in problems between shops and suppliers, despite the fact that they are the ones “pressuring the shops to use their suppliers.” Though State Farm claims that shops can order from whichever supplier they want, shops are being judged on how competitive they are, based on the parts they order. Birmingham shops were also unhappy with the lack of information received at meetings about the program as they were frequently informed that questions would have to be answered at a later date, even when reading directly from the Select Service Agreement. Many shops left these meetings feeling ill-equipped to make an educated business decision.

Schulenburg noted that 17 Select Service shops pulled out the day before PartsTrader launched, and another shop withdrew two days later. Plier contributed that these 18 shops were sickened when they realized how many things they agreed to do for free as part of the Select Service Agreement, but by sending letters to customers explaining that they decided to withdraw from the program as part of their quality assurance for their customers’ benefit, these shops were able to retain over 90% of their customer base.

When PartsTrader was introduced in Tucson, Hunsaker said that local shops resisted immediately. A large, nine-dealership supplier pulled out of the program upon realizing that they were forced to go through the program even when ordering supplies from their own parts department. With the drive seemingly being to reduce MSRP, which has always been the standard, it didn’t take long for Tucson shops and suppliers to express their disapproval for the program.

Reading a letter from a parts supplier who was unable to attend AASP Northeast 2013, Schulenburg addressed the supplier’s view of PartsTrader. The list of cons was immense and included inefficient uses of time as only about a quarter of quotes result in actual orders and filling quotes for uninterested people takes up to ten minutes each. There has also been an increase in the use of A/M parts which undermines OEM pricing and profitability, especially as OEMs are not [always] given the opportunity to price-match like A/M suppliers are. Additionally, suppliers suffer from the lack of relationships with shops, plus PartsTrader will supposedly begin charging suppliers to participate in the program in the near future, even when selling to prior customers.

For suppliers, the pros of involvement with PartsTrader are limited to seeing the entire process and possible increased exposure to a larger market, assuming that shops are actually interested in buying from them and not just requesting a quote to fulfill the process.

Plier noted that suppliers in Birmingham view PartsTrader as a trap—many large providers refuse to participate at all or plan to remove themselves from the program once the intended participation fee is instituted.     State Farm claims that PartsTrader offers a chance to bid on parts and increase business, but suppliers object to giving their parts away. Since the two largest suppliers in Birmingham withdrew from the program, there is no large OEM or A/M players, so more OEM parts are being used for local repairs than ever before.

Hunsaker refuses to change his suppliers as they fulfill all his business needs. He quipped that PartsTrader is “a great program if you’re looking for the cheapest prices and don’t care about your customers.” The shops are the one who must call the customer if something is wrong with a part, yet the insurer wants to dictate that shops use cheaper parts without taking customer service or quality into consideration. Though State Farm doesn’t technically tell shops which supplier to use, they are judging shops on their competitiveness, measuring shops’ performance by the parts they order and those they choose not to order for whatever reason.

Shifting the direction of the discussion, Schulenburg noted that, at its launch, PartsTrader’s focal driving point was on efficiency, yet State Farm has no documentation to prove efficiency gains or ease of administrative duties. Hunsaker agreed that he has seen no evidence of increased efficiency through the use of PartsTrader. He disapproves of the insurer intruding in his business, insisting that “it is an issue to drive margins down as no one in this industry is making a fortune.” He is concerned that quality dealers will be put out of business because of competition from lower quality, less reliable, and less expensive suppliers. Pointing out that costs are increasing as profits decrease, Dingman said he is frightened by the idea of losing even more profits through parts procurement, pointing out how much worse it will be when shops are required to contend with more than one of these programs at a time.

Though not many adjustments on MSRP have been seen on the OEM side of the business, Schulenburg points out that the program is still in its infancy and questions how this dynamic will change when the program goes nationwide and increases its pressure for downward price trending. Hunsaker said that his first quote through PartsTrader contained a MSRP reduction, but he hasn’t experienced the problem again since venting his frustration to State Farm and PartsTrader. Dingman has not seen any changes to MSRP, though he has noticed some price differences due to multiple AFM quotes.

In response to a question about State Farm’s claims of increasing efficiency by working on repairs while waiting for quotes, Hunsaker objected, saying that while he may be able to save time if he only ran two estimates daily, his work volumes necessitate running seven or eight quotes in tandem, thus resulting in a reduction in efficiency, not an increase. Dingman insists that APU has not increased his efficiency because the program is not efficient.

Hunsaker is waiting to make a decision about continuing to use PartsTrader once the program goes national, allowing himself time to become acquainted with the system so that he can make an informed decision. Dingman continues working with APU because American Family requires him to do so, but he noted that he would be unable to comply with their demands to use APU if he was forced to use certain suppliers.

Regarding supplier criteria and reasons for involvement with parts procurement programs, Hunsaker said there is no criterion as evidenced by the fact that dealers cut prices by going lower than MSRP. No one on the panel was able to supply a reason why parts providers should voluntarily participate in programs such as APU Solutions or PartsTrader.

Dingman feels it is important to get information out there so shop owners can make informed business decisions, and Plier suggests DRP participants should re-read their agreements and make an educated business decision instead of simply participating out of fear. Schulenburg said he believes that PartsTrader intends to establish prevailing practices as they expand into the national sphere, but he also believes “they’re waiting to see what our industry does—or doesn’t do.”

Collision Repair 2013
On Saturday morning, Jim Mickle, GM Parts Wholesale Automotive Instructor, taught a seminar entitled “Collision Repair 2013” which focused on body structure issues, high tension steel and sheet metal repairs.
Beginning with the 2013 Chevrolet Malibu, Mickle explained that it is designed with hardened steel in the front so the hood hinge will buckle instead of coming back into the windshield in the event of a crash.
Combined with the use of insulation in the fenders, these changes make the 2013 Malibu more difficult to repair. The Malibu is eco-fitted with a 5.4mm acoustic-laminate windshield and 5mm acoustic-laminated front door glass while noise is reduced by 16 expanding-foam acoustic baffles placed in cavities throughout the body structure which need to be replaced after a crash also. Additionally, some pillars contain a mixture of mild and hard steels.

The 2013 Honda Accord features Honda’s next-generation Advanced Compatibility Engineering body structure. Mickle emphasizes that whenever you drill into a metal surface, the corrosion resistance of that panel is compromised. The mild steel included in the structure typically has a tensile strength of less than 270 mega pascals (Mpa), while high strength, low alloy steel has a tensile strength ranging from 300-700 Mpa which means that heating can be used no more than twice, and mig welding can be utilized in the front and rear areas.

Regarding ultra-high-strength steel with a tensile strength greater than 800 Mpa, also known as DPX, repair is not recommended.  This type of steel should only be replaced at the factory joints, and sectioning or partial replacement is not recommended.  Stitch welding and the use of heat to repair damage is not recommended for this type of steel either, and it cannot be used as a backing reinforcement or a sleeve.  To perform structural or collision damage repairs on high strength steel, it is often necessary to drill out resistance spot welds. Luckily, GM Collision Repair Technology Center recently validated the CryoCobalt drill bit which was developed for use with very hard metals due to the increased micro-sharpness and thicker web.

Mickle insists that it is necessary to use a weld-through primer when engaging in front frame sectioning as cutting the frame can expose the metal to corrosion.  Additionally, doors contain anti-corrosion materials which are necessary to reapply when doors are replaced, and certain vehicle structures require anti-corrosion treatment for other areas of the vehicle as well which is why it is so important to read the manufacturer’s repair guidelines.

Mickle’s seminar continued with discussions of closed cavity coatings, metal panel bonding and inverter technology.  He stresses the importance of replacing all seatbelts after any accident serious enough to deploy airbags, urging the necessity of using only OEM airbags due to the dangers of using counterfeit airbags which will not cause the Supplemental Restraint System light to illuminate as the manufacturer intended. Explaining that the seventh number of the VIN represents the type of airbag with digits 1–3 representing front air bags while digits 4–6 indicates side impact air bags, Mickle enumerates on the ways to visibly see the differences between OEM and counterfeit airbags.

Noting that carbon fiber body parts are scheduled to hit the industry in the middle of 2013, Mickle discusses the use of carbon fiber parts in the 2014 Corvette ZRI, Ford Fusion and Ford Escape. Running out of time, Mickle quickly summarizes the importance of disconnecting the 12-volt battery and hi-volt battery in specific repair situations, also mentioning the use of break-away pedals and a new AC refrigerant in all GM vehicles starting in 2013 which will reduce greenhouse gas emissions by 99% as long as it is installed correctly.  In conclusion, Mickle claims that OEM parts can restore a vehicle’s original look and performance.

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