Thursday, 08 May 2008 11:33

Method Used to Price Salvage or Recycled Parts Appears in Flux

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Discussion at the Collision Industry Conference (CIC) held in Philadelphia in mid-April indicates there is little consensus in how used or recycled parts should be priced.

    The problem as an industry trying to create best practices is we have two different pricing mechanisms out there, and we’re trying to create some sort of standard that’s accepted by all,” said Ken Weiss, chairman of the CIC Parts Committee.

    Auto recyclers participating in the discussion estimated that about 20 percent of recyclers, include Greg Freeman of Freeman’s Auto Salvage Center in Joplin, Missouri, have moved to pricing parts as undamaged while 80 percent still quote an “actual part price” to which allowance for any damage must be added.

    “From the interacting I’ve been doing with our customers, the collision shops were asking for an undamaged part price, and we’re trying to get (other) recyclers to get to that level,” Freeman said.

    But Weiss pointed out that based on discussions he heard at the Automotive Recyclers Association (ARA) convention last fall, only a small minority of recyclers have made that change.

“A lot of the recyclers who are not part of this national dialogue, in their own meetings said, ‘What’s undamaged pricing?’” Weiss said. “They didn’t even know what it was.”

    CIC participants raised a number of other issues impacted by how recycled parts are priced:

    • Industry consultant Tony Passwater said one challenge for shops is that if a part’s price is adjusted down after it is received because of damage, the shop has to somehow shift some of that part’s price into a labor category in order to compensate and track the technician performing that repair work. Passwater also points out that in states that tax parts but not labor, insurers may be over-paying sales tax if some of the part’s price is actually covering labor.

    • Several CIC participants pointed out the need (in some states, mandated by law) to have the final shop invoice to the customer accurately reflect what was done to the car. This might not be happening, they said, if repairs made to a used part are not indicated on the shop paperwork and are only incorporated in a price listed for the part.

    • Rick Sherwood of OEM Collision Repair Resources said that such issues also distort parts pricing comparisons. Unless the cost of what is needed to make that part usable is included with the actual parts price, Sherwood said, the true costs of salvage parts is not being reflected in comparisons made (by insurers or others) to other parts options.

    Weiss said the committee will continue to discuss the issue as it works to develop industry-accepted standards related to service, warranty and pricing of the various types of parts used in collision repair.

Other discussion, committee actions

In other news and discussion at CIC in Philadelphia:

    • Attorney Erica Eversman of Vehicle Information Services said that insurers’ anti-trust exemption does not protect them if they engage in such activities as discussing among themselves what agreements or arrangements they each have with particular shops. She said evidence of just such a practice recently came to light when an insurer’s email, which suggested to a field claims manager that he discuss with another insurer what pricing agreements that insurer has with a particular shop, was inadvertently also sent to the shop involved as well.

    • Toyota announced it has recently made its “Collision Repair Reference Guide” available for free through its wholesale parts website (www.ToyotaPartsAndService.com). By registering at the free site, users can check the searchable reference guide for vehicle high-strength steel locations, jacking and hoisting specs, wheel alignment specs, airbag component replacement information, vehicle identification charts and more.

    • After making a presentation at the meeting, Jim John, an investigator with the Pennsylvania Insurance Department, was asked how his department addresses such issues as mandated use of remanufactured wheels when many automakers have issued position papers raising safety concerns. On that issue, John said, “We really tried to fight hard with the insurance companies to say, ‘You prove to us that this is safe. Because safety is of the utmost importance, and if you can’t prove it’s safe, we think you better change your mind.’ We don’t have the authority to tell them you can’t use them, but we sure strongly suggest it.”

    • The CIC Education & Training Committee announced it is creating a website (www.Education1Stop.com) that will serve as a link to technical and management training sources in the industry.

    • The CIC Business Management Committee is contacting the Top 25 insurers to ask them to review the committee’s suggested “complete repair plan,” which the committee believes will reduce the need for supplements and the costs – for both shops and insurers – associated with current inefficiencies in claims and repair processing.

    • The CIC Repairer-Insurer Relations Task Force expects to ask CIC participants at the next meeting (July 23 in Scottsdale, Arizona) to approve a finalized two-page set of best practices that “outlines, in general terms, what can be expected of the collision repair process, from the time the incident occurs to the complete and safe repair of the vehicle, through vehicle delivery to the consumer and closure of file.”

    • The CIC Insurance Relations Committee at the July meeting also expects to have an updated draft of its “Estimating Best Practices” document, which spells out suggested guidelines related to vehicle inspection, photo documentation, parts replacement options, and other estimating steps.

    • The CIC Repair Standards Committee is compiling a list of existing standards in four categories: man (technician training and skill requirements), machine (tools, equipment and facility), materials (paint and parts) and mechanism (processes). It is creating an online bulletin board for  for submittal and discussion of existing standards, and at the July CIC plans a discussion of what’s missing in existing standards, and whether and how the committee can take the topic further. (www.collisionindustrystandards.org)

    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 (www.CrashNet work.com). He can be contacted by email at jyoswick@SpiritOne.com

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