“I have been in the middle of negotiation to find out the ‘Salvage Value’ on an auto was high enough for the insurer to convince the auto owner to allow the auto to become a total loss. Now don’t get me wrong, they were big ticket repairs…but as large a repair dollar as they were they did not meet the Total Loss threshold for those particular auto’s in the state of Oklahoma,” said Wano.
Wano did not expect the economy to make a quick rebound in 2012 either.
Wano expressed concerns that current price wars between OEMs and Aftermarkets would continue into 2012.
“OEM parts per unit sold has dropped significantly in 2011 from 2009, where as Non-OE and LKQ have continued a steady climb [referring to the Q4 Mitchell market study on parts]. It has been assumed, that the drop in the OE parts per unit is caused by the ‘Parts Price Matching’ processes a lot of the OE distributorships are offering to combat alternative parts usage. This is a sad state of affairs, when the OE distributors start cutting prices to meet alternative pricing structures due to the carriers driving the mandate of alternative parts or at least the alternative part pricing my gross dollars per repair suffer. Think about it, 25% of $200 is more gross dollars then 25% of $150, the gross dollars dwindle on every OE part price that is matched.”
Wano was also thankful for his current business situation and hopes it continues to afford them success.
“I personally feel incredibly blessed, that we followed a path in OEM Certification that has afforded us the ability to divest from traditional DRP type agreements. It pains me so when we read the ACV on repaired vehicles has increased, the consumers insurance premiums increase, the paint and material prices increase, the technical staffing require additional training and wage increases, yet the average repair cost is stagnant, and next year could be worse,” said Wano.
Hunter Hooge with the Texas Independent Automotive Association (TIAA) weighed in on his views of the industry issues over the last year.
Hooge cited that large, multiple-shop operations have been virtually the only entity of this industry to grow this year (see Autobody News, November 2011 Edition).
“Large consolidators not only eating up a large amount of the market, but they could hold an IPO, giving insurers the potential to have a large say in these companies,” said Hooge.
The fear is that an IPO “could give insurance companies a chance to have a seat on the board of these large body shops.” Although it is illegal for an insurer to buy and own a body shop, there is nothing preventing them from having a large influence this way.
In the state of Texas Hooge talked about frustration a lot of shop owners have expressed with the franchise taxes they have to pay.
"Franchise taxes are costing shops a good amount of money," said Hooge. In Texas, if a business' annualized total revenue is less than $1,030,000, no tax is owed. Speculation about this threshold of taxation being lowered in the future has been circulating; a lower threshold would make smaller businesses eligible for greater taxation.
Hooge sees this as being on ongoing issue as the threat of decreasing the threshold continues. Body shops making more than the threshold must pay a 1 percent franchise tax, even if they are only a one location business. Also while taxes continue to go up, claims are going down.
Bill Burnside, Secretary-Treasurer of the Northwest Louisiana Collision Repair Association (NWLCRA) also weighed in on the past year.
“In 2011, the collision repair industry had to at least recognize that the industry as a product is in the decline stage of it’s product life cycle. Will we go the way of the VCR repairman? Not so!! 2011 saw an increase in technology changes to vehicle design, customer expectations rose, and industry overcapacity became painfully apparent for some. Some businesses responded this year by playing to their strengths. They stayed up with technology, invested in equipment, quality products, training, and processes while creating payback strategies for a serviceable debt. Others reacted with weak business plans that may sustain them in the short run, but will find it increasingly hard to survive as the industry changes,” said Burnside.
He also predicted what this industry will see next year: “The 2012 issue has to be, Manage What You Can Control. The response should be to focus on sound business indicators. Know your numbers and understand your KPI’s. You still can not discount your way to profitability. Standardize processes, focus on quality, create repeatability, gain productivity, and build solid vendor relationships to eliminate waste. If our industry standards for repair are OEM specific, then we must educate and equip technicians to achieve a proper repair and a subsequent “5-Star” crash rating. We must educate consumers individually and nationally about their cars both in design and repair requirements. How about a Ralph Nader for collision repairs? 2012 will bring current and new issues to the forefront. We must eliminate the weakness and respond with our strengths.”
Houston Body Shop Record-Keeping Ordinance Still Undecided
The Houston Autobody Association (HABA) has been entrenched in negotiating the terms of a city ordinance with the Houston City Council for most of 2011. In December, the council voted to postpone voting on the ordinance until Dec 21, so more opinions from local businesses could be heard, so this issue will likely extend well into 2012 (see cover story this issue.)
The city ordinance mainly requires better record-keeping at body shops, cap repair work without consent at $100 and mandate a written estimate of any special fees. Industry representatives, including the HABA, applaud some of the proposed mandates but are quick to say others may end up bogging down reputable businesses, slowing their ability to serve customers.
“HABA has been working with HPD Auto Dealers Division for over a year and that has resulted in a lot of positive changes,” said James Brown, President of the HABA, “HABA has also worked closely with ASA on the revisions and we have made a lot of progress but still have a ways to go.”
MSO Caliber Collision Posts Up For Larger Southwestern Influence
Caliber Collision, one of the southern U.S.’s largest MSOs, made moves this year to expand their presence along the southern half of the nation.
Caliber Collision not only relocated the company’s corporate headquarters from Irvine, California to Lewisville, Texas, they also acquired Arizona and Nevada’s 911 Collision Centers on October 5.
“Our acquisition of 911 Collision Centers sets a new cornerstone in Caliber’s continued expansion plans. After spending time with 911’s management team, it quickly became apparent that 911 Collision Centers provides Caliber with the perfect opportunity to enter the Arizona and Nevada markets behind a well-established, high quality brand,” said Steve Grimshaw, Caliber Collision Centers’ Chief Executive Officer.
