Tuesday, 18 December 2012 20:05

Industry Year in Review—A Month-by-Month Look at the Most Interesting Collision News of 2012

A lot happens in the collision repair industry, so trying to compile it all into a single year-end review is a challenge. But here’s our look at what we saw as among the most important or just plain interesting and memorable news item, event or quote from each of the last 12 months.

State Farm’s George Avery announced that his company is testing the electronic parts ordering system “PartsTrader” with two collision repair businesses. He declined to identify the shops, saying that it is too early in the testing “to put those folks under the microscope and ask, ‘What do you think of the new system?’”
Lots of shops have since voiced what they think of the system. By the end of the year, the program was being rolled out to a fifth market (Chicago) for a total of about 600 Select Service shops.


John Borek of Autocraft Bodywerks in Austin, TX, wasn’t accepting the explanation from American National Property and Casualty Company (ANPAC) that an appraiser working on its behalf was just using “an outdated document” when denying the shop’s supplement for color sand and buff.
In a follow-up letter to the Texas Department of Insurance, Borek pointed out that the document looked like a page from the Audatex guide to estimating, but shows that color sand and buff is included in refinish times; Borek says an Audatex manager who searched the Audatex/ADP “Database Reference Manuals” back to 1993, concluded that the page is “most certainly not a document from ADP/Audatex.”
“This manufactured document can only achieve one goal, which is to convince uneducated consumers and shops that this operation is included so they can ‘short pay’ the claim,” Borek wrote in his follow-up letter to the Department of Insurance.

Chrysler became the latest automaker to announce a certification program for both independent and dealership collision repair shops. Certification requires meeting more than 40 standards including maintaining I-CAR Gold Class status and using squeeze-type resistance spot welding equipment. Under the program, if all OEM parts are used on a job, that will be noted on the vehicle’s CARFAX report, along with the fact that the vehicle was repaired a Chrysler-certified shop.

LKQ Corporation worked to counter ongoing liability concerns for shops about use of alternative parts by announcing that in addition to a lifetime warranty on its non-OEM parts, it would indemnify shops against injury or damage caused by a defective vehicle part distributed by LKQ.
The “Promise of Protection” says it covers a “licensed automotive repair shop” that purchases the part from LKQ, excluding claims arising from shop negligence or malfeasance.
LKQ’s move followed Diamond Standard’s announcement in January that it was offering ASA member shops coverage under a $40 million liability insurance policy for any liability issues related to the performance of Diamond Standard non-OEM structural parts.

Eileen Sottile of the Quality Parts Coalition (GPC) urged attendees at the Auto Body Parts Association (ABPA) conference to contact Congress to support the coalition’s legislation (HR 3889) that would reduce the time automakers can use design patents to prevent other companies from producing replacement crash parts. Sottile said the bill would reduce the patent protection from 14 years to just 2.5 years.
Despite a public relations and lobbying effort funded by LKQ Corporation ($3.7 million), Nationwide and State Farm ($115,000 each), Allstate ($92,000) and others, the bill never got beyond a hearing in the U.S. House.

Insurer groups’ radio ads and other efforts were successful in convincing Rhode Island Gov. Lincoln Chafee to veto legislation that would have given shops in that state the right to sue insurers directly in small claims court over disputed repair costs.
Chafee said he believed the bill would have given shops rights that exist in “no other state in the nation,” and would have “hurt Rhode Island consumers” by raising the cost of auto insurance.
The legislation, supported by the Auto Body Association of Rhode Island and passed by lawmakers, also would have strengthened the state’s anti-steering law, and would have required that damages exceed 75% of a vehicle’s value before that vehicle can be declared a total loss.
The association issued a statement expressing its disappointment with Chafee’s action.
“Though his veto message states that he is concerned about the consumer, he clearly put the consumer and small business’ interests aside and bowed to the pressure of the real ‘special interest group’ —the billion-dollar insurance companies,” the association’s statement read.

Some good news for shops worried about the growing amount of accident-avoidance technology in vehicles: It’s not all working.
The July issue of “Status Report” from the Highway Loss Data Institute examined insurance claims data to see what impact crash-prevention technology is having.
“Forward collision avoidance systems, particularly those that can brake autonomously, along with adaptive headlights, which shift direction as the driver steers, show the biggest crash reductions in the studies,” the publication stated. “But one feature, lane departure warning, appears to hurt rather than help, though it’s not clear why, and other systems aren’t showing clear effects on crash patterns yet.”

DuPont announced it was selling its 11,000-employee automotive paint business to private equity firm The Carlyle Group for $4.9 billion in cash.
“Through targeted investments we will support DPC’s product development and growth objectives as it transitions to a stand-alone company,” Greg Ledford of The Carlyle Group said.
The Carlyle Group earlier in the summer had announced it was acquiring majority ownership in the Texas-based Service King Collision Repair Center chain.

The Department of Justice (DOJ) and Federal Trade Commission (FTC) jointly held a workshop on the topic of most-favored-nation (MFN) clauses, such as the basis for State Farm’s pricing requirements for its Select Service shops.
“Although at times employed for benign purposes, MFNs can, under certain circumstances, present competitive concerns,” the two agencies noted. “This is because they may, especially when used by a dominant buyer, raise other buyers’ costs or (prevent) would-be competitors from accessing the market. Additionally, MFNs can facilitate collusion and stabilize coordinated pricing among sellers.”

Speaking at NACE in New Orleans, representatives of State Farm, Allstate and Nationwide said that any MSOs on their DRPs are measured as individual shops and must compete to perform as-such.
George Avery of State Farm said his company’s experience with M2, the 27-shop consolidator in California that closed suddenly back in 2005, led his company to focus on finding top-performing individual shops, whether stand-alone or part of an MSO.
Rob Knott of Nationwide concurred.
“We think the mom-and-pops still have a place,” Knott said. “Some of the challenges that the MSOs have is over-saturation in certain marketplaces, so you’re not going to put (all their shops in a market) on (the direct repair program). And then there’s the consistency issue, when they expand too fast and aren’t able to maintain the same service levels and quality.”

Toyota previewed a new “predictive estimating” system it is creating that incorporates all necessary parts and Toyota-recommended procedures along with links to all related Toyota bulletins and published documentation. Toyota’s Jerry Raskind called the system a “game-changer,” in that rather than having an estimator start from a blank page and add line items based on what they know or can locate about OEM procedures, the system begins with a complete estimate and allows the user to omit items as appropriate.
“Everything you need to fix our cars correctly and to our standards is there,” Toyota’s Rick Leos said.

The National Insurance Crime Bureau (NICB) released revised estimates indicating that 230,000 vehicles in Eastern states had been damaged by super-storm Sandy. New York had the most vehicles affected by the storm with 130,000 while New Jersey generated 60,000 claims.

John Yoswick, a freelance writer based in Portland, Oregon, who has been writing about the automotive industry since 1988, is also the editor of the weekly CRASH Network (for a free 4-week trial subscription, visit www.CrashNetwork.com). He can be contacted by email at jyoswick@SpiritOne.com.