Friday, 31 May 2002 10:00

Sterling, Steerling, Steering

Written by Dick Strom

There's been a lot of insolent crowing and misguided arrows over the issue of insurer ownership of collision shops, the Allstate/Sterling Consolidation presently holding center stage. To give their questionable venture a hint of correctness, Allstate's V.P., Chuck Paul, recently announced, "Your (collision repair) industry is fragmented; less than 10% of your shops do a million in sales annually" (as if shop stability could be measured only in millions; also neglecting to mention that his insurance industry has systematically worked to keep the collision industry "fragmented," to their advantage). Continuing, he reasoned since "car insurance is mature" and "there is no organic growth in this (insurance) business," Allstate's only avenue to expand and increase its market share is through buying into collision repair shops through consolidations such as Sterling. I feel much better knowing they had no choice! 

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The bottom line is that the entity which controls the "steering" of collision damaged vehicles controls the entire collision repair industry... and our consumers. All the signs of the coming demise of the independent repair shop having been clearly visible for years, only now that their livelihood also has been proven to be in danger are insurer-dependent DRP's finally coming to their senses.
When I was a kid I fashioned a bow from a branch, fitted it with a twine string and carved arrows from old-growth cedar in our woods. At the time we had a rooster who apparently kept his lady friends under his claw while strutting around cock-of-the-rock style... and crowing from beneath my parents bedroom window. Dad, working a late shift at the time wasn't amused, so Mom encouraged me to set my sights on this cocky crooner, promising her coveted chicken stew with dumplings as payoff.
After an exhausting hour of arrow shoot-n-search, one finally, miraculously pinned him to the ground, literally by the skin of his neck, though he continued running, now in tight circles with neck skin stretched to the limit, eyes bulging in terror. Trooping to the kitchen, my prize still flapping and squawking protests from my arrow, Mom began boiling water to scald his feathers off while I was instructed to remove Sir Rooster's brain-housing group with an axe...a thought I didn't relish, having never "dispatched" anything before. Stretched out on the chopping block, axe hovering menacingly above, with what little brain he could muster having finally comprehended the gravity of his insolence, his bulging eyes seemed to plead a last-ditch 'can't we negotiate an amiable settlement?' We didn't. But after pressure-cooking the daylights out of his otherwise worthless carcass, we enjoyed chicken and dumplings, compliments of our silenced beneficiary. 
Though the immediate public response of other insurers, upon Sterling's buyout by Allstate, was to verbally distance themselves, denying they would ever consider such a move, don't count on it…if memory serves me, other insurers expressed similar denials when this same company dumped their "PRO" form of Direct Repair on consumers and collision repair. Other insurers have considered the same move and are only waiting to see how Allstate will fare in the court cases they will face, before announcing their own versions of insurer-owned shops. Call it whatever insurers will, try to distance themselves however they might, such arrangements are still insurer owned, influenced, directed and supported, and if this trend isn't stopped by collision repairers legally challenging these, many more will follow. But is there really anything shops can do to reverse this tide?

Insurer shop ownership is no new concept, insurers having dabbled in it several times in the past. But shops never took these attempts as a serious threat in the past knowing insurers would run their shops into the ground, having no comprehension that operating a collision shop is about as atypical as imaginable from operating an insurance company. In insurers' quest to keep more money in-house, though, they've admittedly smartened up to our world, and have become a formidable challenge to independent business. If insurer ownership of shops is given the legal green light, the floodgates will be open to a totally different repair arena in which larger insurers will buy up existing consolidations of shops, fueling expansion of these and promotion of others... and the total control of remaining independent shops (much more than at present) they so covet.

But independents are coming out of their shells, and are beginning to fight back. Beyond Parts and Equipment magazine (March 2002) ran a must-read article - Blue Island; Goliath vs. David, summarizing Allstate/Sterling's attempts to force one of their consolidator mega-shops into Blue Island, Illinois. When local shops got word that A/S had received a conditional use permit to build a 16,000 sq/ft shop in their midst, they, at first despondent, soon rallied becoming politically active. The result: a city council vote of 11-3 against allowing the large consolidation to carve another shop-notch in their large caliber Sterling-handled pistol. Apparently unwilling to believe the audacity of the city fathers to not cave to Sterling's better judgement, Sterling challenged Blue Island again… and lost again.


Though we could hope they've gotten the message, I wouldn't hold my breath. Recently, Sterling and its developer, Zaremba Land Development, have filed a lawsuit naming the City of Blue Island, IL. and those council members who voted against Sterling on January 22 and February 12, the goal being to create fear and trembling.

Though I doubt A/S will lick their wounds and drop their plans for Blue Island, what contributed to the shops' two favorable rulings is worth noting: Shops' packed the city chambers to over-capacity with concerned shop owners, their employees and families (160 of the 200 seats available... Sterling reps squirming in the remaining 40). It was a classic example of how American politics is supposed to work; those who voted these local council members into office to represent their interests, paid their salaries through local taxes, and won't forget how each council member voted when they come up for re-election, taking precedence. Blue Island citizens had their day in court and their voice was heard loud and clear: How many times we have heard that our representatives want to hear from us... At Blue Island they did... and it paid off! BP&E's own Phil Rack (former native of Blue Island), attorney Michael Hymen (who played an important part in the class action victory over State Farm Insurance for its use of imitation parts), ASPI-Illinois Director Mike Lane and President Mark Pierson, and many others were in attendance making no small impact on the outcome of the vote in giving their testimony against allowing Sterling a foothold. But it was the large number of affected and concerned people present at the meetings whose "voice" spoke loudest. "The sheer number of concerned citizens may, for the first time, have helped the council members realize just how many people would be affected by a Sterling installation." As shop owner Ernie Wisniewski emphasized, "The way we educated the aldermen, to think on their own, was the best thing we could have done."

Some years ago, my local city council tried to pass a bill making all commercially zoned property revert to private property zoning at such time it was sold, basically making the lifetime investments of many local businesses worthless. At the coaching of a friend who deals with these confrontations, we organized all local collision, mechanical, and otherwise affected service-provider business owners and their families to be in attendance at the council meeting (as done at Blue Island).

Though I'm not adept at public speaking, they selected me to present our case, and my friend helped me draft a speech outlining the many adverse effects were such a change implemented. After presenting our side of the issues, I named each shop that would be adversely affected by their proposed ruling. Then, as I called off each shop owner and spouse by name, they stood and remained standing until all had been recognized, at which time I summed up the issue, also handing each council member a written copy of the case we had just presented.

The impact was impressive... when we finished presentations the only people seated were council members. The end result of our shop solidarity was that the threatened code change issue was dropped, though I know the issue will resurface again some day when we've dropped our guard again.

The point is that council members, legislators and otherwise representatives are generally out of touch with the local businesses they are supposed to be representing… or, is it that we shops are out of touch with our council members and legislators? Like the attempt on Blue Island, the lesson learned is that shops that remain "fragmented" will succumb to the organized control of other entities. If your business is to survive, you can no longer sit on your duff waiting for others to fight your battles for you. That old axiom, "The only thing necessary for the triumph of evil is for good men to do nothing" is ever so true today, especially concerning our industry.

Dick Strom, Modern Collision Rebuild, moderncol@aol.com.