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Monday, 23 May 2022 14:25

Step Up or Step Back: Thoughts on Dealer Auto Body Shops

Written by by David Roberts and Chris Lane, Focus Advisors Automotive M&A

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Collision repair has often been called the ugly stepchild of a dealer organization. Some dealers, though, have made collision repair the stars of their organizations.

Among the largest dealers, some have focused on providing large scale, fully equipped and staffed operations, able to offer insurance companies pricing and performance equal to many regional MSOs and consolidators.


Many dealers feel owning and managing their auto body shop makes sense to them: keeping customers within their ecosystem, from purchase to repairs to selling new and replacement vehicles, control of quality and timing of repairs, capturing parts sales and providing assurance that the customer never has to go anywhere else.


Some dealers have true market dominance with their brands and are able to attract and retain the best technicians, produce consistently high-quality work and deliver strong operating margins to their organizations.


But for many, the collision operation is something of a toothache: high technician turnover, an unattractive box at the back of the property, an uneven flow of vehicles, constant new investments in equipment and training, the pain of dealing with insurance companies. It’s not uncommon for that large piece of square footage to be the least profitable business for the dealership.


There are lots of reasons why even large dealers have decided to leave collision repair to MSOs and strong local providers including:


Responding to Insurer Demands


Insurers are consolidating just like dealers and collision repairers. The largest insurers want networks of fully enabled and integrated providers across markets. They want discounts for volume and they want commitments on the usage of aftermarket parts.


Many dealers operating large, well-equipped single shops that primarily repair vehicles referred by the dealership are unable to satisfy these demands from insurers. Installing aftermarket parts, in particular, conflicts with both their systems and their commitments to their OE franchisors.


Conflicting Systems


Dealers are often required to use...


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