In January 2014, Angelo posted on LinkedIn: “State Farm is in the process of rolling out PartsTrader in NY. We declined to sign on so we were immediately removed from the service first program. Hopefully, most shops in NY will do the same!” Palakis graciously agreed to discuss his reasons for refusing to use PartsTrader.
Angelo was “very upset about the implementation of PartsTrader because it’s extortion! By State Farm making the use of PartsTrader mandatory, it’s dictating to body shops where to buy parts from, with potential savings for State Farm at the body shops’ expense. You are not given a choice; if you do not use PartsTrader, they remove you from their Select Service Repair Program and start steering your customers to other body shops.”
Using PartsTrader would also create more administrative work for the shops, Palakis believes. In turn, this will increase the shops’ cycle times as well as rental costs for the consumer. Because PartsTrader requires purchasing parts from the vendor that bids the lowest price, a ten-part order could potentially be shipped from multiple vendors. Palakis recently read an article about a shop owner using PartsTrader whose number of vendors grew from 30 to 300, most of which were located outside his market area.
“To manage parts from so many different vendors would be very time-consuming (receiving them, checking them, and distributing them),” Palakis explains. “To return a wrong or damaged part would also be very time-consuming since you have to find where the part came from and what procedure that vendor wants you to follow.”
Currently, Dale Way has accounts with most of their vendors, granting them 30 days to pay their bills, but using PartsTrader would necessitate paying for their parts upfront, though State Farm won’t pay the shop until the repair is finished and the vehicle is delivered to the customer. According to Palakis, “this is a lot of time that we wouldn’t be compensated for. At the same time, our parts profit margins will shrink. For example, since you’re not purchasing your GM parts from one vendor, you would not be getting the same discount or service. Our ability to negotiate a better parts discount, as an independent business, would be taken away, leaving us at the mercy of the vendors on PartsTrader.
Since opening Dale-Way Auto Body Center in 1981, the Palakis brothers have developed close relationships with their vendors. “Not only when it comes to parts; sometimes, we may need information or help with a vehicle, and they are always there for us. By using PartsTrader, these relationships would be destroyed,” Palakis says.
“State Farm asked us to sign on with PartsTrader and provide them with a list of our vendors so they can approach them and basically intimidate them to sign on and pay a monthly fee or lose our shop’s parts business – those are mafia-like tactics! There is no benefit to the repairer or the customer.”
Serving the customer’s best interest is a high priority for Palakis, but he does not feel that State Farm’s actions regarding PartsTrader align with this goal. “We have a responsibility to our customers who entrust their vehicle repairs to us, the auto body repair professionals. They trust us to repair their vehicles using the best procedures, parts and materials available, but using PartsTrader would mean I’m putting the insurance company’s interest before the customers who authorized us to repair their vehicle in the first place. In the end, the repairer and the consumer would lose, while the insurer and PartsTrader would profit.”
In business for over 30 years, Dale-Way Auto Body Center repairs around 80 to 100 vehicles monthly. Currently, they participate in DRPS for three smaller insurance carriers that are “somewhat fair and do not try to micromanage us,” Palakis shares. In the 1990s, they enrolled in several DRPs for major insurers, such as Allstate, Geico and State Farm, among others.
Palakis explains that the reason for joining these DRPs was because they felt that Dale-Way “could serve our own customer better by writing our own estimate, thus eliminating the need for most supplements and not having to wait for adjusters who were mostly incompetent. We also thought these programs could better our industry because they required shops to be licensed, equipped and trained, thus perhaps leading to higher and fairer labor rates. Obviously, we were wrong.”
Dale-Way began withdrawing from these programs as long as a decade ago when “they tried to micromanage us and dictate how repairs should be done,” Palakis recalls. Even if State Farm was willing to terminate the mandated use of PartsTrader, Palakis would not rejoin their DRP; “the way that they are strong-arming our industry, I don’t think I would trust State Farm enough to participate in their Select Service Repair Program again.”
Palakis feels that what State Farm is doing, in terms of their interference in the repair process, is illegal; he hopes that the lawsuits against State Farm and PartsTrader are successful in MS and FL and that more states follow suit in resisting this tortuous interference via legal channels.
He also believes that “this is just the beginning – once State Farm and PartsTrader implement this program across the country and State Farm has all its Select Service shops using it, after a period of time, State Farm will utilize PartsTrader to squeeze a bigger percentage of the parts profits away from body shops, maybe even just send the parts to the shops and pay them a handling fee.”
What would be Palakis’s advice to shop owners who are still deciding whether to sign up for PartTrader? “Just say ‘no’,” he suggests. “If most shops say ‘no’, State Farm will get the message and stop the mandated use of PartsTrader. If this industry keeps allowing insurers to dictate our practices and interfere in our businesses, it will reduce your parts profits, and you will have less control of your own business.”
Dale-Way Auto Body Center
3039 Tibbett Ave.
Bronx, NY 10463