Scott Biggs Blog

State Farm – Parts Trader: It’s about losing profit, control, and your very survival.

biggs — Thu, 03 May 2012 13:03:42 +0000

The following is my opinion, my fear, and my prediction based upon my own research and speculation. It is one man’s opinion.

State Farm’s latest entry into the parts business is more threatening, robust and all consuming than anything attempted in the past. In my opinion, this program will destroy the OEM list price, funnel all of the shop and dealers confidential pricing, discount and profit information to the insurer, undermine the OEM parts distribution network, wipe out thousands of OEM wholesale parts dealers, give control of parts pricing to State Farm and other insurers, and eventually eliminate the shops profit on parts. The shop’s and OE wholesale parts dealer’s survival is now in serious peril. This is a crisis of unequaled proportions. And, that prediction is mild compared to my worst fears!

After researching and listening to the explanation of the program, I came to the conclusion that this is the biggest overreach in auto physical damage (APD) insurance history. I drew the conclusions not because of what they have said or what they will show you today, but rather what they didn’t want to say, and what they try to avoid saying. Based upon 28 years of watching how these things go, I speculated about the logical next steps these initiatives always take. I also looked at what they are doing in the construction industry where contractors only get a 10% material handling fee if they are doing work under state farm’s version of DRP in housing rebuild.

As I heard the State Farm spokesperson say they would continue with their roll out of the parts “Trader” program regardless of the market reaction, it sent a shiver up my spine. I could just hear the quote “Resistance is futile, you will be assimilated,” depicted in the movie Star Trek Universe. The evil Borg took over as they linked the humans into their “one-mind” machine. The parallels are obvious. The Borg were soul-less cybernetic organisms and used forced “assimilation” onto everyone they conquered. They forced electronic connection to the “hive mind” and mother-ship where all control was maintained. Their mission was to “achieve perfection” by eliminating anything they interpret as inefficient. They did it on behalf of their perception of the greater “good.”

GEORGE ORWELL’S 1984

You could just see a classic scene from any Orwellian-type movie plot as Big Brother takes away all choice, and eliminates another freedom from the masses. Eerily, the “State’s” representative said, “We are doing this to address what we see as inefficiency for the good of our policy holders.” He went on to apologetically say to other groups how the mother ship thinks they are doing the “right thing” as though it is a favor to the shop and industry.

Just 5 years ago, I heard the same State Farm spokesperson tell groups of shops across the nation to ignore the mandatory parts compliance clause in the state farm DRP agreement. He said, “they’re just not going to get into parts, so just ignore that one.” I actually have it on video tape! That turned out to be a blatant lie. Contrary to their denial, they are in the parts business, and now in a really big way! Now, shops that signed away their freedom MUST agree to the parts clause – or get kicked off the program.

Market by market, the thousands of shops on State Farm Select Service are being told they MUST use the software to order the parts. They must do it as part of the agreement they knowingly signed! Although, when they agreed to the terms, this was not part of the conditions. The next step in the evolutionary process is getting the vendors to start chasing the prize as they unknowingly destroy their profit structure.

As they roll out their plan to each market, the wholesale parts dealers are being told they must use the trader software, but not by the “State” but rather by their shop customers on the Select Service Program. Like the first taste of a highly addictive drug, once they use it, the fix is in. Using the “Trader” software system, the transaction between the insurer and the shop is totally visible to the “State” and other insurers if they jump on. This shows both the bid “list price” the dealer is offering as well as the “shop discount.” With this system, the “State” will know every confidential discount rate between every dealer and every shop in every market. They will instantly know the “prevailing competitive pricing” and what the shop’s profit margin is. They will also have the means to use that discount knowledge to better negotiate, and force dealer pricing into conformity regardless of if a shop is on the system. They will just start claiming they won’t pay more than the prevailing competitive rate on parts as they do on labor. Using this new found information power, they will force dealers and shops alike to play along or face extinction as they migrate all of the purchasing power to those who will.

Of course, right now, it looks innocent and quite harmless! They sell it is as just a tool the shop can use to be more efficient and still stay with their favorite vendors …for now! They sell it to the shops and industry like a piece of candy to lure an innocent child into the awaiting van!

As dealers fold under the pressure and begin to “bid” on the parts order, they will start lowering the “OEM List Price” to be competitive with the lower list price of the imitation parts offered by someone else. This is the beginning of the destruction of the “OE List price” structure everything is based upon today. This helps to create a free-for-all market place where the lines between genuine OEM and aftermarket is blurred. This too will follow the direction of the UK model some industry notables are so enamored with and want to sell you on.

KPI – THE DRIVING FORCE

Unknowingly, shops will be the driving force and make this doomsday prediction a reality because each must meet their “score” through the KPI program the “state” now uses to grade shops against each other. Remember, only those who “play best” according to SF rules will be rewarded with a promise of a referral (monitored by the score they get from the KPI dashboard). Shops will also be forced to sell aftermarket parts to the consumers to get their pricing down to score “high” on the state’s KPI’s. State Farm made the subtle change in business practice with the distinction that alternative or aftermarket parts can be used on a vehicle as long as the consumer has given consent. It is the shop’s job to get the consent.

To control the “collective” from the mother ship, State Farm uses a KPI dashboard that provides the shop with a score. There locator and referral mechanism puts those with the highest score at the top. The problem with the KPI dashboard program and the “scores” the “mother ship” is handing out, can’t be reproduced by shops using their own management systems. The “State” refuses to share how the numbers are created. Thus, requiring the shops to simply take the word of the insurer that they are less competitive than their peers. This seems like perfect mind and behavior control from a blind authoritarian master … psychological studies show how even lab rats go crazy under similar conditions. No matter what the shop does, they can be manipulated into thinking they need to work harder and cheaper to become more efficient, competitive and indebted to the “State”. Remember, these KPIs the shop must follow are not based on their own management systems and business analysis numbers. They are not based upon the highest profitability, quality of repair, dollars per customer, multiple profit centers, dollars per hour, employee production efficiency, etc. They are based upon only what the Borg has determine should be the measurement … only what Big Brother says and what they indicate as degrees of state farm VENDOR success. By the way, Walmart does similarly to their vendors. I highly recommend reading the book, The Walmart Effect.

It’s totally Orwellian. The “Trader” parts software is forced upon the shops by Big Brother, State Farm. Even the names fit into this sinister plot as state farm could be thought of now as Big Brother and the dictator state owned farm that ripped the private ownership and choice from the independent farmer as the “State” takes over. They now have your numbers, and you are forced to conduct business through yet another program that harvests your data and reports your every move to Big Brother. They know all, and control your every action, profit margins, rates, and now even who and how you buy parts. Is paint next?

Soon, they will tell you to just order the parts with the program, they will negotiate everything, determine the parts they want on their insured vehicle, and pay for it even. They will spin this as they are doing something nice for you taking the burden of cash flow off your plate, and they will offer to give you a 10% handling fee for just pushing the button on the parts order. They may even suggest they will increase your labor profit to make up for what they steal from you on parts. This assumes they decide to ignore the “prevailing competitive rate” compliance demand they use to control your shop labor rate and profits, now. They will tell you that you should like the idea of being in the labor business because you are good at it, and they are better at massive procurement. It is not true! They are not even the most efficient insurance company in spite of the fact they have over 19% market share!

THIS TIME WE MUST SAY NO AND MEAN IT

This time, shops must finally say, no! Dealers must finally say, no! And, the industry needs to tell insurers to stick to the business of insurance while shops stick to repairing. Shops are notorious for selling each other out, chasing the promise and whoring themselves into the poorhouse. Everyone is expecting shops to once again conveniently believe the lie, ignore the obvious future, and agree to doing the most harmful thing possible. Everyone is expecting that the Consolidators will see the opportunity, agree to it, and start the avalanche as they have for the last 15 years. But this time, it is not up to just the shops.

AUTO MANUFACTURER RESPONSE

The stakes are bigger and threaten dealers, the Auto Makers themselves, and the entire industry financial structure. Auto manufacturers will have to take a stand as well, and they will this time. If the “State” does not get the message, then the Auto Makers will have no choice but to get into the APD insurance business with their own brand-driven insurance that requires the use of genuine OEM parts when repairing new model vehicles. They will have little choice but to fight fire with fire. And, we won’t have to wait long to see it. It is only a few months, or at most maybe a year away! What State Farm may have done is just wake the sleeping giant because at least a half dozen of the biggest Auto Manufactures have their own auto insurance solutions, but none have pushed it…yet. If the State presses ahead, I know they will pull the trigger.

This is not about Insurers & Parts Trader, or the electronic parts ordering efficiencies – Those are arguments and predictions are little more than water cooler conversation. For the Body Shop, it is about profit, control, and your very survival.

I do not know how, or why, the insurer which has been found to be the most reasonable to work with in the past has embarked upon a strategic direction that will make them the most reviled and destructive force in collision repair history. This incredibly invasive strategy and overreach on their parts will completely and entirely blow up the industry within 5 years and leave nothing but scorched earth in its path. Shops will be labor businesses with only one, highly-complex profit center to make their business worth owning in a time when they need more profit centers, not less. Consider the Farm will have all three legs of the triangle to completely control the shop and erase any profit: 1) Their manipulative and distorted prevailing shop labor rate survey, 2) Their KPI score card based on a secret and self-serving formula of success, and now, 3) Their strangle-hold on parts profit, and sourcing.

Shops, dealers, OEMs, and the industry must take a stand on this one and say NO! Do whatever you must. Move your business and resource support to the other 82% insured by others. Support the auto makers that will support you, and get all of your customers to pick another brand of insurance that is not out to destroy your business and your industry.

And, if State Farm needs a graceful way out of the foolish strategy they have embarked upon, they only have to change their demand to say that all shops on their select service program must start using any sort of electronic parts ordering. That will help address inefficiencies, but the Farm can respectfully go back to being one of the most highly rated insurers and not become the evil empire that destroyed the collision repair industry.

Joint Venture for National Body Shop Certification Announced

admin — Fri, 17 Feb 2012 05:43:02 +0000

Since 2005, Assured Performance has been qualifying and certifying shops. Back then, “Qualifying” was enough and did not require the extra expense of onsite inspection. There was no significant value to being “Certified” without a major promotional effort and others recognizing the “Certification.” We certified over 500 shops over the years, but it was not complete coverage of the US and it was not promoted, far and wide.

Times have changed. Now, competition for market share is fiercer than ever. There are far too many shops for the volume of work available. Making matters worse, more and more consumers are being pushed to DRP network shops regardless of the shop quality or their repair quality. Too many are selected based upon the shop agreeing to provide concessions to the insurer, including aftermarket part usage. Far too many DRPs have shops in their networks that do not have what it takes to repair today’s vehicles. Shops that are not qualified in repairing vehicles are even more concerning as we consider future technological advances rapidly appearing on all vehicles – not just the hi-line cars as in the past.

Based upon the looming cloud on the horizon and massive request from our Member shops who want to establish a clear distinction and differentiators between their best-in-class businesses and everyone else, it is time to take a bold step forward. Beginning about 2 years ago, we started to retool our systems and repackaged everything to address the new demands and the challenges that face shops across the US. We added several powerful elements to our program and created an efficient shop on-site inspection process to enable us to provide body shop certification, nationally, and for thousands of shops, and even for many other different entities.

OFFICIAL LAUNCH – Joint Venture for Shop Certification

Assured Performance Network is proud to officially launch a joint venture national body shop “Certification” program. Assured Performance is addressing our goals and objects, but we are also collaborating with other entities to create a massive – far-reaching – high impact solution that will transform the industry and refocus on the consumer and repair safety. The goal is to have a certified shop located within 15 minutes of 98% of the US population. The objective is to have a certified choice for consumers in every community. To provide this demographic coverage of the United States, we will Certify at least 2,500 collision repairers – anything much less leaves significant holes where consumers will be left out.

CERTIFIED ONCE, RECOGNIZED BY MANY

Assured Performance is providing our certification and third-party administration capabilities to other networks and organizations wanting to recognize which shops can provide safe repairs and deliver an exceptional consumer experience. It makes sense. To excel far beyond anything ever done, our certification efforts are a joint venture where multiple credible organizations recognize those shops that can meet generally recognized standards or criteria. Together, we are identifying those shops that have the right tools, equipment, training and facilities – This initiative will allow consumers and everyone else to know which shops can ensure the fit, finish, durability, safety, and value of their automobiles – now and in the future.

Our strategy is straight-forward. By using one Certification process for multiple organizations, we are able to eliminate redundant costs. This makes Certification highly affordable for shops that want to make the grade. Another benefit is that once a shop is Certified, they will be recognized and promoted by multiple entities which exponentially enhances the shop’s credibility. We are collectively adding more value to the shop’s brand – at a time when others are trying to erase it.

The “Certifying” standards we are using are a culmination of widely recognized industry standards. We have also added requirements from various OEMs and other organizations so one set of requirements fits all of the strategic partners leveraging this single approach.
To keep the questions relevant and streamlined, we have eliminated redundant criteria that is already required and enforced by federal, state and local laws. We have also avoided anything related to repair re-inspection and expensive ongoing repair verification. There are over 60 requirements to become Certified. Several of the key requirements are:
• a written lifetime warranty, supported by the national Network,
• use of a third-party CSI provider,
• use of a 220-volt 3-phase Squeeze-type Resistance Spot Welder,
• to provide consumers with a “Certificate of Authenticity,”
• I-CAR Gold Class designation,
• use of “OE repair procedures” with electronic documentation as proof.

Putting Our Money Where Our Mouth Is

Obviously, we have been a loud and zealous advocate of using repair standards to repair today’s automobiles. The survey we took of our Members said loud and clear that our Members believe in repair standards and we already declared that OE repair procedures are our repair standards. Therefore, we had to make using OE repair procedures part of being certified. It is a requirement!

Since our survey showed that a vast majority of our Members wanted the ability to document the use of OE repair procedures with a “proof of compliance” we added that as a requirement, too. Now our Members have the extra benefit for better customer service and far better documentation for liability exposure.

We also added the requirements like participation in a nationwide warranty program. This is great news for our shops. Now, they have the ability to work with other “Certified Collision Care Providers” to fix an issue anywhere in the country if they ever need it. It is a rarity, but important if you ever need it.

Each organization that recognizes the shops becoming certified will offer various benefits to the shop. For example, they will be recognized and promoted as a “Certified Collision Care Provider” by Assured Performance and automatically receive shop-branded VIP Collision Care loyalty cards. The shops will also receive other tools to enhance their relationship with their customers, giving them a unique competitive advantage in their local market, increasing their brand value.

COST OF – ECONOMIES OF SCALE AND COST REDUCTION:

As we were rebuilding the Certification program, we found out the real cost to do the whole process even without a profit is at least $5,000 per shop (Assured Performance is a non-profit organization)! If a shop has to pay that for several automakers and other organizations, they could be faced with $100,000 in redundant costs and extra requirements. We set out to find a way to reduce the cost and make it affordable for everyone.

To make Certification affordable for shops and other entities, Assured Performance leverages our massive size with thousands of shop Co-Op Members to achieve “economies of scale.” Furthermore, by collaborating with other organizations, we are eliminating redundant costs. Then, we are able to combine our administrative efforts with 100% Write and the Co-Op rebate management for efficiency. As a result, we are able to create a subsidy, lowering the hard cost to less than $2,000. Then, we allow our shops to use their rebate funds to pay for the certification, training, and even tools and equipment required. This makes the entire program and meeting the requirements a “no cost” proposition for our Members. Keep in mind, most of our Members can generate over ten thousand dollars annually from just the 100% Write Rebate Reward program by using 100% OEM parts to make a repair.

Now we have added, GM, Nissan, Chrysler, Ford and several others to the 100% Write program. Member shops also gain rebates from Enterprise Rent-A-Car, and several other leading vendors. In just the last several years, Assured Performance has funneled millions of rebate dollars from multiple OEMs back to our members through programs like the 100% Write Rebate Reward program.

THE FUTURE

In the future, we will invite and add more and more strategic partners to leverage our joint-venture certification program. We will also add other criteria, elevating our network of Certified Collision Care Providers. We will collectively promote that network to consumers in every way possible based upon the right tools, equipment, training and facilities – This initiative will allow consumers and everyone else to know which shops can ensure the fit, finish, durability, safety, and value of their automobiles – now and in the future.

SURVEY SAYS! The Results of the Assured Performance Collision Repair Standards Survey

admin — Fri, 06 Jan 2012 22:32:18 +0000

Recently, there was a study conducted by the CIC Standards Committee regarding the creation of a separate and new entity for the creation and management of Collision Repair Standards. A small group wanted to create their own entity and did all they could to get the industry to buy in to their vision. On the other hand, some of us felt that creating a new entity was unnecessary. We could not understand why and how any other entity could possibly be a better or more legitimate choice than the OEM. Who would even take on that kind of liability and exposure?! After much politicking and maneuvering, this special interest group raised money from the industry (nearly $60,000) and conducted a so-called study. They claimed they were going to determine “the industry’s appetite for repair standards.” Later we would all find out they were really trying to sell the industry on their plan.

During this whole time, I elected to stay involved with the executive committee in hopes of influencing their efforts and steering them back in the right direction. But after reviewing the questions they wanted to use as the basis for the study, I protested. I had many issues with their approach and pointed out how bias the questions were and how they distorted the intent and objective of the study. I personally asked the consultant to change the questions so they were not so blatantly bias and begging the question or assuming a response. I was ignored or overruled.

The national Associations joined together to take a position they felt was best for their Membership. We suggested that we should officially recognize the OEM repair standards such as they are as the official basis for repair standards. We also suggested I-CAR was the best choice to “host” a council to refine coordinate and manage the ongoing efforts to publish official repair standards.

The industry was confused who was supporting what. Some thought we made the joint statement because we were in support of their plans and agenda. Many even thought we were in support of their “study.” We were not. We actually made the joint statement in spite of the biased survey. We were trying to ensure the industry would not go off on a tangent and we would be waiting another 18 years for standards to be adopted and recognized by the industry.

In all this, no one was asking the opinion of those who would have to use the standard the most and who would be affected the most. We needed to know the opinion of the shops. So Assured Performance Network decided to ask our members. The results of our survey was an effort to gain an unbiased snap-shot of the opinion of the better and best in class independently-owned body shop owners – the Co-Op members of Assured Performance Network.

The opinion of our members suggests a far different direction than their “study” suggested. Our Members said loud and clear that the industry needs and wants repair standards, they want them based upon OEM repair procedures, they trust I-CAR to be the source to manage them, and they would like them as a functional product with specific features. We used the results of this survey at the most recent CIC meeting when the repair standards committee presented their “study” to make sure our Member’s opinion was heard.

Below are the results of OUR survey:

ASSURED PERFORMANCE COLLISION REPAIR STANDARDS SURVEY RESULTS

• Total group size emailed: 4,638
• Total responses: 3,143 (67% response)

The first and most important question asked was, “Should the industry have ‘collision repair standards’ that define the repair methodology required to properly and safely repair each vehicle?” 96.1% said yes!

• 98% of those felt “repair standards” were valuable to their business.
• 97.7% felt it is important that the repair standards are “officially recognized” by the industry
• 78% felt their technicians needed them to repair vehicles properly.
• 93% felt that as the vehicles get more and more technologically complex, repair standards will be essential.
• 76% felt repair standards should be available and followed for every repair including some form of “proof of compliance.”

Addressing resistance and concerns that the shops might have:
• Just 57% were concerned that the standards would be manipulated by insurers.
• Only 32% thought the insurers would ignore them.
• Regardless, the majority with 57% of respondents thought the insurers would be inclined to follow them.

Exploring the question of what should be the source or basis for repair standards:
• Over 70% thought the official OEM repair procedures should be the basis for collision repair standards.
• On the other hand, less than 30% thought a new independent entity should be created by the industry for this purpose.
• And, not surprisingly since the survey was sent to only independently owned collision repair businesses, less than 3% thought insurance-based organizations like Tech Corp should be the basis for the standards.

Shops were given 4 different choices as to who or what they would trust most to manage, publish and refine the industry “repair standards.”
Of the 4 different options, the shops ranked the following:
• I-CAR was noted as the most trusted choice with nearly 98% trusting them to manage standards.
• Next on the “trusted to manage” scale was the choice of “Associations working together like DEG” at 78%.
• Third in line was a “new independent entity to be created by the industry” with only 34% support.
• And of course, last was an insurer organization like Tech Corp.

Repair standards left in some database will not be useful to anyone. At some point, for repair standards to be useful down to the technician level, they have to be a product of some sort. The respondents surveyed felt the most important features of repair standards as a usable product should be:
• #1 Ranked as the most important feature was that the repair procedures should be “electronically on demand matched to your estimate details” with 71% thinking it was important and only 12% thinking it was not needed.
• #2 was the “Ability to document “proof of compliance” without the need for an inspector” was ranked as the second most important feature with 61% and only 14% did not think it was needed.
• #3 was “Itemization of repair skills required to repair the vehicle in question.”
• #4 was “Itemization of equipment required to repair the vehicle in question.”
• #5 was “Itemization of tools required to repair the vehicle in question.”
• #6, Last and least was “third-party inspection to ensure compliance to standards” with only 16% thought it was important. But conversely, 71% expressed that it was unnecessary illustrating an overwhelming negative impression.

Comparing potential applications and features:
• 89% supported the use of a “proof of compliance” form allowing the shops to document that they followed OEM repair procedure.
• While only 19% supported requiring a third-party inspection (at a cost) to ensure compliance.

The survey reported very good news for the vendors such as ALLDATA, Mitchell, CCC or any other that may sell a product that includes the repair standards. Nearly 60% of all the respondents said they would buy “repair procedures/standard” products if it had the key features they supported as described above. This left no doubt that as a Co-Op, we will continue to work on making sure we leverage our buying power in this area for your benefit and work with these companies to bring you the products you need and want.

Thanks to all of those who responded. These survey results were shared in part at the last CIC meeting in January to help refute the “study” that was being pushed by other special interests and heading in a direction we thought would NOT be in the best interest of you, our members.

About Assured Performance Network, (www.AssuredPerformance.net) Assured Performance Network is made up of two organizations: A legal Co-Op, and a non-profit consumer advocacy organization. Combined, they operate as a third-party administrator for body shop Certification, consumer awareness, and various vendor rebate programs including the 100% Write Rebate Reward Program. Assured Performance Network is the largest network of independently owned shops with approximately 3,500-collision repair business members.

For more information go online or call: (949) 221-0010.

ASSURED PERFORMANCE COLLISION REPAIR STANDARDS SURVEY RESULTS

Q&A Regarding Our Positioning on “Repair Standards” and I-CAR as the Review Council

admin — Thu, 01 Dec 2011 17:36:48 +0000

. QUESTION: The SCRS, ASA, Assured Performance Network, and AASP and 24 other Associations have publicly declared OEM repair procedures to be the industry’s standards for repair processes. What exactly does this mean? How much weight does it carry when prominent organizations like these make such a declaration?

Unfortunately, our industry has never officially declared OEM repair procedures as our repair standards regardless of the fact the industry uses them to create training, testing, course design, educational programs, documentation and even software products. The only true way to officially make this declaration is by those that represent repairers. Remember, only repairers use repair procedures and therefore repair standards. Having each of the leading trade organizations and nearly all of the state Associations unanimously and publicly support this position removes any doubt that it is official.

QUESTION: What happens from here? What other organizations or segments of the industry need to back these standards in order for them to truly become recognized as the industry’s standards? What are the next steps?

Looking ahead, once we established a foundation with what is already in existence, it makes all of the next actions much more clear and easily defined. This is critical to address the obvious gaps or missing OEM published information so we have complete coverage for all repair procedures. This is an ongoing objective that will be even more critical as new technologies are introduced in the new model vehicle. Training and testing will have to follow these. With that in mind, we need an organization to host and manage this ongoing process. That is why we added the section in our joint statement asking I-CAR’s board to consider using their 32 years of credibility and well-established infrastructure to create a council and process to document gaps, working with OEMs to ensure that the published repair procedures are robust and conclusive, and establish a common place for all stakeholders to address the many issues surrounding all that.

QUESTION: It seems as though this declaration of “standards” won’t mean anything until it’s backed by the insurance segment of the industry. Is that an accurate assumption or no? What will it take to get insurers on board with these standards?

Oh contra! It would be great to have insurers get on board, but it is not necessary. Shops need this for themselves and the consumers they serve. Insurers could benefit, but there are many reasons that they might not want to officially endorse anything. Let’s remember, the insurer’s role is really to ensure the vehicle is made whole and pay for that. Logically, they do not want to pay any more than they absolutely have to. If they have a disagreement with a particular repair methodology, they need to have a means of suggesting that to a body that can weigh in on the matter. This debate should have a place to happen somewhere other than the shop floor when the technician is trying to repair the vehicle. Both repairers and insurers are paying billions in friction costs and inefficiencies due to the lack of repair procedures – technicians just need to know the right “how to.”

QUESTION: What were the motivating factors that caused these organizations to make this declaration? Why is it necessary for clear repair standards to be laid out for industry professionals?

Repair standards have been needed for a long time. It was 18 years ago that the industry came to the conclusion for the first time. From that time, I-CAR created UPCR, universal procedures for collision repair. That was a start, but it was never finished or became a product at the fingertips of every technician. Now, nearly two decades later, the good idea is soon to be a crisis. The new technology introduced into the vehicle makes repairing an exact science that will require the technicians to repair according to exact methodology. It is only a few years out that questions of the “how to” will not be debatable. The complexity of the vehicle, special metals and materials and therefore the repair methodology removes the variances in many cases. We need the how to procedures on demand for every repair. Interestingly, there are at least three major companies with products now that will do that – they are based upon OEM repair procedures to the degree they exist. The politics need to catch up to the reality that now exist at the shop level.

QUESTION: There are other industry issues that will come into play if OEM repair procedures become accepted as the standard. For example, will the use of AM parts still be a viable repair option since OEMs do not endorse use of AM parts? Will reconditioned wheels still be a viable repair option since OEMs do not endorse their use? What liabilities might repairers incur if they choose to deviate from these adopted standards?

There are 4 elements to the complete process needed for shops to successfully complete a repair: The technician’s ability (training), the methodology (repair procedure standards), the tools and equipment (needed to performance the prescribed repair), and the materials (parts, etc.). What we have to address is just one; the methodology. There is still plenty of room for debate about the rest of the elements. That is why an entity within I-CAR makes sense to address the other elements where there is full representation of the industry and all segments.

QUESTION: Why are these standards good for the industry? Why are they necessary, and what problems will these standards help resolve? What is the industry benefit that could result from this?

Most understand that insurers might not want to support the OEM repair procedures in mass especially if there is any an implication regarding parts usage. All reasonable people also understand that an insurer might not want to blanket endorse every procedure since some might not be acceptable for a variety of reasons. On the other hand, we all might be able to agree that we should have some means to work out the differences and come to reasonable solutions related to how a vehicle should be properly repaired. This is especially relevant as we enter a future where precision repairs are mandatory.

We all know the OE procedures are used as a foundation for training, testing, documentation and more. It is undeniable that the OE procedures are not complete, and therefore we have gaping holes in the information available to techs, training organizations, and others that need it. Most would agree that when we have differences of opinion related to a procedure, there should be some means to address the differences so the guys trying to fix the vehicles are not caught in the middle and we all suffer more unnecessary friction costs and inefficiencies. and,
Nearly everyone agrees that I-CAR with their 32 years of experience, credibility and existing organization structure makes the most sense as the industry common-place to resolve and address these kinds of issues. We have sent a message to the industry that while we will inherently disagree on many things by the nature of a buyer-seller relationship and nature competition within our industry, we can work together on key issues that are beneficial to all parties involved.

Now, They are Trying to Hi-Jack Repair Standards!

admin — Fri, 11 Nov 2011 01:30:50 +0000

THE HISTORY
For nearly 2 decades, it has been the desire of many to address the issues of “Collision Repair Standards.” Nearly 18 years ago, I-CAR attempted to address the same need at the time by purchasing the rights to the Exact Foundations repair procedures. They ended up recreating the whole thing into what become known as UPCR, the Universal Procedures for Collision Repair. To make this happen, I-CAR had to decide then if repair standards should be part of their charter. They had to overcome massive industry politics and dance a delicate line so as to not be perceived as overreaching. It was a great start, and had great promise. The product the smart guys in Appleton create was slick and thoughtful. Unfortunately, the Executive running I-CAR at that time did not understand how to market and sell the product. He ultimately made a mess of the whole larger plan. UPCR never sold and never became a viable instrument for technicians and a tool at their fingertips. Some have attempted to characterize this as I-CAR’s failure and proof they can’t handle repair standards. Several that are on I-CAR’s staff, Board and even former board Chair use this as evidence that I-CAR should not be involved in the repair standards efforts, now. But, they are wrong because so much has changed inside of I-CAR, the leadership of ICAR, the industry, the fact there are now commercially viable products delivering repair procedures/standards to the shops in mass, and even in the car technology and the requirements on how they must be repaired.

THE LOOMING FUTURE CRISIS
Fast forward to a new decade. We are on the precipice of massive technological change in the the technology of the vehicle and the requirements to repair these vehicles. As was highlighted in the recent CIC meeting in Las Vegas during the panel discussion, the industry is faced with unprecedented change. To appreciate the scope of our collective challenge, consider that less than 10% of all shops in America have all of the right tools, equipment, training and facilities to repair the vehicles sold by the auto manufacturers today? … As we look into the future, even fewer shops will make the grade when we take into account the changes in vehicle and repair technology just 5 years from now. How can the industry meet these challenges when, according to i-car, currently less than 25% of the shops in the industry commit to ANY training at all? To make matters worse as we move to the future, virtually none of the current workforce has the training needed to address the massive advances in vehicle technology and the repair techniques necessary to repair the vehicles of the future. Compounding the challenges is the glaring fact that the collision repair and claims segments of the industry have never agreed upon or committed to official repair standards as the basis for all of the training, tools, equipment and processes needed to deliver a safe and proper repair. Undoubtedly, the collision repair industry is at a cross road, and facing a serious moment of truth and unprecedented challenge. All of the panelist that represented Insurers, Repairers, and Manufacturers agreed that in the future cars will have to be repair to a far higher level of precision and accuracy. That is code for they will have to be repaired to exact OEM specifications and according to precise repair standards using sophisticated tools and equipment. Someone can train the techs, but according to what? WE DON’T HAVE ANY AGREED UPON STANDARDS, yet.

THE FIRST AND MOST OBVIOUS STEPS
Over the last 5 years, CIC has toiled with “Repair Standards” as a topic for their committees. I have sounded like a broken record for over 7 years at every meeting hounding the attendees on how much we desperately need repair standards defined. Consider that while the industry has continuously debated the need for repair standards, we have yet to tackle the most fundamental action that is needed as a first and decisive step. We have been so busy wrestling over the questions like inspections and creating and funding new independent entities, we overlooked taking the first steps.

Most assume OEM repair procedures are the default standards. We all know that OEM repair procedures are currently the foundation for training development, testing, vo-tech programs, documentation and more. Regardless, we as an industry have never officially established that OEM is our default repair standards. It may seem obvious and fundamental, but without having ever made the official declaration, it leaves room for others to try to claim they set the standards. The repair community is exposed and vulnerable to the self-interest of others with differing agendas. Until recently, that was not really a concern.

UNSCRUPULOUS SOB’S
Recent actions by a small number of self-serving individuals gave me concern. The lobby every day to draw support away from the obvious direction and toward their vision. They claim to be conducting a study to see if the industry wants a separate and independent repair standards entity and what the industry appetite is for repair standards. They even ask the industry for funds to conduct the study, but they have already named the entity, written the operating bylaws and rules of governance and are working on their standards! Yet, they claim there is not a forgone conclusion. They hoodwink everyone into thinking they are representing the industry’s best interests while they are trying to create their own nest … and they are using their positions on boards and as Chairmen of this or that to feather that nest. They have no concern that they have a massive conflict of interest … one who is even paid as a Director for I-CAR is is doing all he can to pull support away from I-CAR related to the repair standards efforts.

Regardless of the opinion of any other entities or groups, we came to the conclusion that these hidden agendas are well on their way to hi-jack the industry standards efforts for their own personal gain. It is our perception that they are trying to railroad the industry standards effort to create their own “independent entity” driven by them, for them, under their control at the potential detriment of the industry. Some have positioned themselves to create the U.S. version of what they have in England called Thatcham. They even have existing agreements with Thatcham while they sit on the I-CAR board.

These self-serving actions are bad enough, but meanwhile, there is no forward progress on “Repair Standards” for over 5 years now. I have expressed concerns for some time. I finally decided that for me and those I attempt to represent, the urgency of the situation called for decisive action and for us to take a stand representing our Network Members.

TAKING A STAND ON REPAIR STANDARDS
With all that in mind, Assured Performance joined with ASA, SCRS, and AASP on November 2, 2011 to take the first steps toward ensuring the right thing is done when it comes to industry recognized “repair standards.” Since then, a few dozen state associations have signed on, too. We joined with these Associations to declare once and for all that OEM repair procedures are our repair standards. In addition, we also expressed our desire that I-CAR with their 32 years of experience, structure and credibility serve as the future organization to address the deficiencies of the OEM repair procedures. Please read our Joint statement below:

The undersigned organizations continue to be the leading voice of collision repair businesses and technicians across the United States, just as they have for decades. Representing their interests, we hereby recognize published repair procedures, as provided by the Automobile Original Equipment Manufacturers (OEM), as the official industry recognized “Repair Standards” for collision repair. These standards, where they exist, shall be the basis for the establishment of training, testing, repair practices, and documentations.

Whereas, we acknowledge that OEM repair procedures are incomplete in comparison to the full scope of vehicles and repair operations which exist in the marketplace; the OEM published repair procedures shall serve as the baseline for industry repair standards, with the recognition that further development of procedures will be necessary in areas not covered by published procedures.

Therefore, we officially ask the Board of Directors for the Inter-Industry Conference on Auto Collision Repair (I-CAR), to establish within their overall organizational structure, an industry council to identify gaps in existing OEM procedures and develop processes to close gaps, vet industry proposed alternatives, modifications, and additions to OEM repair procedures. The Council will include volunteer representatives serving at least ASA, SCRS AASP, and I-CAR.

The organizations supporting this resolution include, but are not limited to:

Alliance of Automotive Service Providers (AASP), Assured Performance Network, Automotive Service Association (ASA), Society of Collision Repair Specialists (SCRS). And, since last week, dozens of other associations have signed on to this position statement.

MORE POLITICKING AND LOBBYING
Perhaps, most would think our decisive actions would be the end of it. I-CAR would get the message, rise to the occasion and we would be well on our way to a brighter future, but the last acts have yet to be played. The minute the meeting was adjourned, the plot thickened as the “self-interest” crowd began to lobby the I-CAR board to vote NO! One of the leaders of their effort called me despicable and suggested that because I disagreed with him, I should be kicked off the Executive Committee of the Repair Standards Committee …. as though that was a prize position or honor. I have asked over and over, who he was representing with his position and how he could justify his blatant conflict of interest. He accused me of being a lose cannon and Rogue!

A PLACE FOR INSURER’S OPINIONS, TOO
I discussed much of the overall logic of I-CAR and OEM repair standards with several insurers, too. Following the joint statement by the major repair associations, several insurers expressed interests in what was done and why. I had several tell me that depending upon the wording of a statement they might be able to officially agree to at least a few of the key points such as I-CAR. Most understand that on the insurance side of the trading relationship, they might not want to support the OEM repair procedures in mass especially if there is any implication regarding parts usage. All reasonable people also understand that an insurer might not want to blanket endorse every procedure since some might not be acceptable for a variety of reasons. On the other hand, we all might be able to agree that we should have some means to work out the differences and come to reasonable solutions related to how a vehicle should be properly repaired . This is especially relevant as we enter a future where precision repairs are mandatory. If this is true, we have a few key areas in common. Consider these:

-We all know the OE procedures are used as a foundation for training, testing, documentation and more.
-It is undeniable that the OE procedures are not complete, and therefore we have gaping holes in the information available to techs, training organizations, and others that need it.
-Most would agree that when we have differences of opinion related to a procedure, there should be some means to address the differences so the guys trying to fix the vehicles are not caught in the middle and we all suffer more unnecessary friction costs and inefficiencies. and,
-Nearly everyone agrees that I-CAR with their 32 years of experience, credibility and existing organization structure makes the most sense as the industry common-place to resolve and address these kinds of issues.

Based upon these facts, perhaps we have at least one or two points of agreement between insures and repairers. The industry has now heard form the organizations representing the repairers. On the other hand, if a similar document could be signed by key insurers, I-CAR would have the full support and input from all stakeholders in the industry. Together we send a message to the industry that while we will inherently disagree on many things by the nature of a buyer-seller relationship, we can work together on key issues that are beneficial to all parties involved. Insurers could say something like this:

INSURER POSITION STATEMENT RELATED TO REPAIR STANDARDS
As an Automobile Physical Damage Insurer, we acknowledge that OEM repair procedures are most often the basis for establishing training, testing, repair practices, and forms of documentations. In some instances, OEM repair procedures are absent or incomplete in comparison to the full scope of repair operations necessary in the repair of collision damaged automobiles.
It is therefore our position that further development of procedures will be necessary in areas not covered by published procedures and that alternative procedures may be suggested and offered to the industry. To accomplish this task, we officially support the request by the repair community to the board of the Inter-Industry Conference on Auto Collision Repair (I-CAR) to establish within their overall organizational structure, a council review and work-process to identify gaps in existing OEM procedures and develop processes to close gaps, vet industry proposed alternatives, modifications, and additions to OEM repair procedures.

It seems sad that such an obvious positive can be twisted into something so negative. It is infuriating that the dirty rat bastards are trying to hi-jack this when we are so close to doing a great thing to move this industry ahead. I hope that the industry rank and file and the leaders alike will rise to the occasion and do the right thing. Consider just how important this is to a far brighter and better future for everyone. Instead of fighting about the “how to” we could all be focusing on repairing in the most efficient manner possible. Yes, of course we will continue to fight about the “how much,” but at least insurers will be paying on a more equitable basis.

INSURERS PAYING MORE OR TOO MUCH
Many are concerned that with repair standards they will be pressured to pay more. I have often asked the question the other way. If what an insurer pays all repairers in a market the same, aren’t they overpaying some? If the labor rate the insurer pays in a market area is based upon repairing a car right, then why do they pay shops without the right tools, equipment, training and facilities that same rate as those that do? Those shops without the right stuff obviously cannot fix the vehicle correctly or to the same level as a shop that has all that is required to repair a vehicle to manufacture specifications. Frankly, aren’t insurers paying some far too much to some? Repair standards would be a step in the right direction so that when an insurer is paying for a repair, they are paying for the right repair, and not overpaying for a wrong one.

Adding “Good News” to a Negative Report: ASSURED PERFORMANCE CARFAX REPORTING

admin — Thu, 14 Jul 2011 17:30:11 +0000

Anyone who has bought a used car in the last several years knows that CARFAX reports a
vehicles history of repairs and maintenance based upon the Vehicle Identification Number
(VIN). They also create a record when a vehicle is damaged. This information is available
to anyone wanting to review a vehicle’s history. Without supporting information on how the
vehicle was repaired and the credentials of the repair business, the report may create a negative
perception of the vehicle and thereby lower its resale value. For the consumer to protect their
vehicle’s value after they get into an accident, they need to ensure that the “good news” on
how the vehicle was repaired (OEM parts / Certified Repair Center) is reported to support the
restoration of the resale value.

CARFAX gets accident information from a wide variety of places from data providers to public
information supplied by the DMV and many other sources. What is missing is the “good news”
on how the vehicle is properly repaired. Until now, there has not been a service or method that
can assist the vehicle owner in protecting their vehicle’s resale value by supplementing the
damage report with a “how it was repaired” report. Assured Performance has devised a plan
that allows our Network shop Members to supply this service to their customers by creating an
agreement with CARFAX to report when a vehicle is repaired using 100% OEM Collision
repair parts, BUT only if it is already reported as damaged. The repair reporting is an option
the shop elects, and it is up to the shop to ensure their consumer’s expressed consent.

Our logic in making this agreement was to enable our Member body shops to supply the “good
news” to help their customers. This agreement between Assured Performance and CARFAX
enables us to report two critical events of the vehicle’s history, but only if the vehicle is
already reported as damaged. Buyers and sellers of used cars will now have key positive
information about how the vehicle was repaired after being damaged. Again, CARFAX does
NOT get any accident information from Assured Performance or our shops in our network.

The information Assured Performance will supply helps to address consumer full disclosure
requirements often neglected by the industry. Reporting the positive news could also be a major
consumer benefit that a shop can leverage. A body shop that can meet the standards and pass
an on-site inspection and become officially Certified by Assured Performance can also leverage
that to the advantage of their customer and their shop. Now the shop has the benefit of being
designated as a “Certified Collision Care Provider.” This exclusive status and recognition can be
used in their shop sales, marketing, and promotional efforts.

Assured Performance leverages the auditing capabilities used for the 100% Write Rebate
Rewards Program. The program already provides participating Member shops with an
exclusive “Certificate of Authenticity” to present to their customer. The program and process
provides the necessary audit and verification of 100% OEM collision repair parts. The same
automated data-driven audit process will be used for the CARFAX report. Vehicle owners
should keep the “Certificate of Authenticity” with the vehicle should they ever choose to resell
it. Now, the Certificate will also be accessible via CARFAX and tied to the specific vehicle
identification number (VIN). THE CONSUMER’S NAME AND /OR ANY PERSONAL

If anything less than 100% OEM collision repair parts is used, Assured Performance does not
report anything at all. Again, Assured performance and the shop are only reporting the good
news and the best possible good news in light of the fact someone else reported the bad news.
The CARFAX reporting provided by Assured Performance might well raise the bar and stakes
for insurers that are pushing shops to use alternative parts without the consumer’s full knowledge
and expressed consent. This may help to balance the playing field once again and puts the shop
and the shop’s rights to repair in a far better position.

“Our research shows that reporting repairs helps build consumer confidence in previously
damaged vehicles,” said Nancy Fiorino, National Director CARFAX. “Our new partnership
with Assured Performance may help boost the resale value of previously damaged vehicles and
contributes to the overall safety of our highways.”

The agreement between CARFAX and Assured Performance is done on a volunteer basis and
there is no monetary gain by any parties based upon the data provided. Neither party is paying
the other for the service and the shop is able to leverage the reporting without charge as well.

“Oftentimes, the fact a vehicle is in an accident is already being reported to CARFAX.
Now, we can report the positive aspects that it is being repaired using 100% OEM collision
repair parts, and by a Certified Collision Care Provider.” said Scott Biggs, CEO of Assured
Performance Network. “The infrastructure we created through 100% Write and our shop
Certification programs allows us to report to CARFAX the positive information related to the
safety, craftsmanship, and repair quality. All in all, it supports reestablishing the vehicle value,
consumer satisfaction, and confidence.”

For those shops already participating in the 100% Write Rebate Rewards Program, CARFAX
reporting process will be nearly automatic since it uses the same automated data-driven
audit process. The new version of the ESP program provided free of charge to the Member
shop allows for the additional reporting and data management. In addition, the shop can use
OEConnection’s CollisionLink for the 100% Write program.

To get Certified, use the 100% Write program, the ESP data management program and taking
advantage of the CARFAX reporting, shops can call 949.221.0010.

REPAIR STANDARDS: AN ALTERNATIVE POINT OF VIEW AND DIRECTION

admin — Tue, 12 Jul 2011 17:22:17 +0000

Please allow me this opportunity to express my personal and professional opinion related to the repair standards efforts within the collision repair industry. As most should know, I have been an early and avid proponent of the need for and the general recognition and acceptance of repair standards for the collision repair industry. Over six years ago, myself and a few other began a campaign for the industry to awaken to the growing need. We had to overcome many objections and resistance from the hidden agendas that were prevalent at the time. We created a video, conducted panel discussions, wrote articles, and pushed for the formation of committees at CIC. Over the years since, more and more have come to recognize the merits and value of some effort to formalize repair standards in the US collision repair industry.

Unfortunately, there are some of us that are now concerned that the current direction and focus of the efforts are misguided and off course. It is our opinion that much of the most recent efforts and efforts of the late arrivals to the growing party have their own agendas and/or are pushing the standards efforts towards an outcome that is not necessarily in the best interest of the industry and cause. There is a rush to a conclusion that we need a new business entity established for standards. That is not a belief that is held by everyone.

There is a constant misinterpretation made by some that all of us are in agreement that we need to have an organization much like Thathum here in the US to drive our standards needs. Again and again, I see and hear the push toward creating an organization like CEICA. I for one, totally disagree with that assertion. I can also tell you that many others have privately expressed their disagreement with that conclusion as well.

I believe most of us think the industry needs to adhere and recognize standards for repair. However, creating yet another organization that requires funding from donations and then fees is not necessarily what we need. Hiring another industry employee as an executive director is not necessarily what will get us to our goal. Once hired, then we must have a way to pay .. then there is another cost to something we have yet to create or sell!

It is a total misconception to suggest that the industry does not already have many standards in existence and use today; both default and formally established. We have plenty and certainly enough to get started. What we do not have is consistent recognition of the standards that exist nor a consensus related to the “general acceptance of the standards and their use and application.” Creating another self-anointed entity and highly paid executive director will not accomplish that objective, but it may well drag out the process, create obstacles for innovation and commerce, and make another “do-nothing” organization.

People constantly refer to CEICA as a model to follow. CEICA is a great example, but of what NOT to do. The vast majority of effort and work product formed by CEICA was done while it was totally volunteer. They hired an executive director that cost hundreds of thousands and even resulted in threatened lawsuits and many other conflicts. For nearly half of the 20+ year life of that entity, there was little to no new work product beyond the foundation standards created in the earliest VOLUNTEER year (EMS last editing in 2003). Only recently has CEICA turned out new standards (BMS). Unfortunately, there are many that are not even adopting the BMS standards and it is owned by someone and not “the industries.” How does that feel? Meanwhile, the cost of operating the entity has continued. To add insult to injury, somewhere along the way, the CEICA board members arbitrarily decided to take the entity into private ownership and make the work product private claiming ownership of the standards created. This was never agreed to by any group outside of those immediate members of the CEICA organization. Is this what we can expect from a repair standards organization that wants to follow the same blueprint?

This is not a slam on anyone that worked hard for the creation of electronic standards for the industry. Many of us were dedicated and volunteered our time with all the good intentions in the world. We were doing the right thing, but could not have seen where it would go and how our hardwork would turn out. However, we now have history to consider before we repeat it. Apply the CEICA story to the current efforts of repair standards and tell me how this will not follow the same pattern and produce the same results. To ignore history is to repeat it. If we go down that path, all we will be doing is empowering a small group of special or self interested people in creating a job and structure for themselves. Regardless, the industry will have to live with the results.

Instead of yet another separate and independent organization that has no oversight and accountability, perhaps what we need is consensus and agreement between all of the entities that develop and use repair standards already. I am joining with others that have suggested that a far better structure for U.S. repair standards efforts is a board to review and approve acceptance of existing repair definitions and practices, etc. This board could be made up of representatives from the various entities that establish and use repair standards daily including OEM, ICAR, ASE, SAE, ASA, SCRS, Insurers, paint and equipment manufactures, shop organizations, tech-corp, etc.

Our CIC committee 5 years ago established that there were many standards already in use and accepted by the industry. We pointed to many of these used for NATEF, UPCR, ICAR training, OEM repair procedures, Tech Corp, and even those used by various certifying entities, DRP’s, and network groups. It has also been suggested that we consider a model like the accounting world follows. FASAB Federal Accounting Standards Advisory Board. They create the GAAP – General Accepted Accounting Principals that all accounting follows. I have provided links below to consider that model and how they operate. Ask any CPA about them and how GAAP works.

I for one will go on record as formally opposing the creation of another independent entity. We do not need another bureaucracy to accomplish the urgent task at hand. We need representation to openly review and accept the standards we have and perhaps contract someone to codify and publish them in a common (web-base) accessible resource center open to all parties. Assured Performance Network even donated the cost to create such a website, paid for a person to document all of the standards work of the committee and others. We began the process of publishing the work-product created by the CIC VOLUNTEER committee so everyone can see it does not require another separate entity. Please see www.repairstandards.com

Please consider this alternative opinion. I welcome your opinion, too.

__________________________________________
SAMPLE CONCEPT FOR ACCOUNTING WORLD

Federal Accounting Standards Advisory Board
they create the GAAP that all accounting follows.

http://www.fasab.gov/fasabstaff.html

Welcome to the Federal Accounting Standards Advisory Board
Pronouncements

The Pronouncements as Amended is a single PDF file providing all Statements of Federal Financial Accounting Concepts and Standards, Interpretations, Technical Bulletins and Releases, and Staff Implementation Guidance as well as the consolidated glossary of terms. This is the best reference for final pronouncements since it is updated for all amendments as of the issue date.

The mission of the FASAB is to promulgate federal accounting standards after considering the financial and budgetary information needs of citizens, congressional oversight groups, executive agencies, and the needs of other users of federal financial information. Accounting and financial reporting standards are essential for public accountability and for an efficient and effective functioning of our democratic system of government. Thus, federal accounting standards and financial reporting play a major role in fulfilling the government’s duty to be publicly accountable and can be used to assess (1) the government’s accountability and its efficiency and effectiveness, and (2) the economic, political, and social consequences of the allocation and various uses of federal resources. This website provides access to all publications issued by FASAB including exposure drafts, the Pronouncements as Amended, project histories, newsletters, minutes and meeting agendas.

A Matter of Life or Death: Do you really want to kill your customer?

biggs — Tue, 24 Aug 2010 17:15:26 +0000

All hell broke lose in late January when a demonstration by Toby Chess at the CIC meeting illustrated clearly that at least some aftermarket structural parts are constructed with an inferior weight and grade of metal making them potentially life-threatening to use. Until now, I have refrained from commenting on the friction between aftermarket and OEM because we are obviously bias toward the use of 100% OEM collision parts.

In an attempt at full disclosure, our organization, Assured Performance Network, believes so much in the superior value of OEM, that we are the company driving the rebate rewards program known as 100% Write Rebate Rewards program. However, the decision to move in that direction, our logic, and philosophy is worth noting as the industry debates the issues surrounding the use of aftermarket parts and structural safety.
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Full Disclosure: We have a bias towards OEM for a wide variety of reasons most especially because OEM will result in a predictably better fit, finish and safety. Plus, our Body Shop Members make more profit using OEM versus aftermarket by an average of at least 23%. The increased profit can be even greater by combining the better GP margins plus the efficiency of repair (R&I time efficiency). And then there is the fact we offer a rebate directly from the OEM for using 100% OEM on any given repair. Our exclusive program is called 100% Write Rebate Rewards.

————————-

In the next few paragraphs, please allow me to explain how urgent and important this issue is.

The Consumer is the Foundation of our Network

The foundation of our national collision business network (Assured Performance Network) is our consumer advocacy. We are consumer focused, but try to always be insurance friendly whenever we can. The cornerstone of our consumer focus is our Collision Care marketing program. Logic follows that we cannot tell a consumer we are their advocate and we will give them a superior experience if our shops are pushing imitation parts on a newer-model vehicles. That would be the height of hypocrisy and counter-intuitive. To ensure the best repair, we can make an easy and clear decision to use 100% OEM collision repair parts – period! But this most recent controversy surrounding structural parts goes much further than our rule of thumb.

A Far Bigger and More Urgent Issue

This new issue surrounding the safety of structural parts is a matter of life or death! Do you want to kill your customer? Are you willing to take the fall for repairing with unsafe parts? The structural parts in question should never be compromised, NO MATTER WHAT DRP you are on. How can a shop owner risk someone’s life rolling over for an insurer concession to use potentially unsafe parts? How can any insurer demand that their DRP shops use potentially unsafe parts? When the issue is framed this way, the answer should be obvious. Ask any owner of a legitimate shop and any manager of any insurer DRP. I am confident none will ever say, “put potentially unsafe parts on the vehicle!” With that said, every insurance company DRP should have new policies like Geico announced that says they will only use “OEM Safe” parts for ALL structural repair.

No Rule Book

The larger problem and issue is there is no “rule book” on the use of parts. The industry has never taken a stand and demanded the all players abide by mutually agreeable terms. The industry has never even established a guideline to debate. An example might be the following:

“The default standard for collision repair parts should be “new OEM only” on any late-model vehicle. “Late-model” is defined as 3 – 5 years old or less. Utility vehicles and wholesale fleet vehicles may vary from this requirement. Any policy the consumer elects to purchase from an insurer that specifically requires imitation parts is also exempt from this standard as a matter of consumer choice.

Further, the default standard for all structural repair parts is “OEM Safe.” Therefore, only structural repair parts that have been tested and certified according to the same standards as OEM should ever be used in any repair as a matter of safety. There are NO exceptions to this rule related to structural safety for any vehicle to be driven on the public roadways.”

Without definitions that set the ground rules and parameters, everyone is in a free-for-all and the losers are the consumer and the body shop that is trying to offer a quality repair. The insurers that don’t want to offer a lower quality policy to their policyholders are also losers because they are competing with corner and cost cutting insurers. These sub-standard insurers demand and support inferior repair methods and parts to contain their low cost policy and high profit projections. These “bottom-feeders” should be identified as such and not allowed to become the default standard. They should be identified as “non-compliant” or sub-standard and their methods should not become the pricing model everyone is forced to use.

No, I don’t want to kill my customer!

We should just say NO! No, I don’t want to kill my customer by cutting a corner on my insurance or my repair methodology! As for correcting the mistakes of the past, I strongly suggest that a national recall should be in effect for every structural part used that was not OEM or not tested and certified. There should be no debate about the urgent need to correct this life-threatening situation.

I hope you agree.

Op-Ed: THE LKQ SMOKING GUN

biggs — Wed, 28 Jul 2010 23:04:24 +0000

If you were on vacation or working double-duty to cover for those around you who were, you may have missed the biggest news story in the collision industry in years or perhaps decades. According to an article by industry freelance writer, John Yoswick, Robert Wagman, Senior Vice President for LKQ corporation told an audience of at least 150 people of their efforts to “get out in front of the guys who are coming after the industry” (aftermarket parts). This was in reference to stopping Toby Chess and others from demonstrating key differences between some non-OEM structural parts and the OEM parts using a reciprocating saw as their proof. Apparently, in his failed campaign to be elected to the ABPA board, Wagman advocated that the board should take a more aggressive stance like LKQ has and said as much in the speech he gave at the Automotive Body Parts Association’s 30th annual meeting .

Yoswick attended the annual meeting, and reported the damning comments from both Wagman and the ABPA Treasurer, Jim Smith, an industry consultant in his article entitled “Non-OEM Parts Industry Discusses Latest Battle Over Structural Parts.” It ran in several industry publications including his own “Crash Network.” You can find this article in publications such as July 2010 Collision Expert, Autobody News, and on-line with Collision Repair Industry Insight. (see link below)

Yoswick’s article may have exposed the lengths some will go and want others to go in their mission to drive the sale of aftermarket parts. Some feel the push for profit disregards safety. Wagman argues otherwise and says they did numerous tests to ensure the safety of their parts and do not sell any of the parts in question. Regardless, the article was certainly prima-facie evidence* that LKQ did in fact manage to stop Toby’s presentation. The presentation was believed by many as revealing an alarming issue of the use of potentially life-threatening parts. On the other hand, perhaps their only real concern was that Toby was using a reciprocating saw to cut through multiple parts as the “test and proof.” If that was their concern, Ford later addressed it.

Once Toby’s demonstrations were stopped, the evidence to support the claim that some of the aftermarket parts used in the industry may be life threatening came in the numerous examples presented by Ford at the last CIC meeting in Chicago. Paul Masse of Ford showed videos of the safety threat and specific evidence including studies and illustrations showing the inferiority and potential hazard of the aftermarket structural parts.

Up to this point, differences between the parts was being exposed by a single individual named Toby Chess, a simple industry guy with decades of practical, hands-on knowledge just doing his part to see cars are fixed right. He is a well-intended, collision repair instructor armed with his handy reciprocating saw being intimidated by the big publicly-traded aftermarket corporation with lots of suit-wearing lawyers. The scene is like a B-movie version of David versus Goliath. But in this real-life version, Toby was stopped in his tracks when he was contacted by LKQ Corporation in April just prior to his scheduled presentation. That is apparently the type of action that Robert Wagman was inferring when he said the board should “…really get in front of these guys who are coming after the (aftermarket) industry.” Ford did not seem to have the same reservation as poor Toby and stepped in with their technical expertise and test center. The result was a mountain of compelling evidence backed by the Original Manufacturer of the vehicle.

Surprisingly, Jack Gillis of CAPA supplied additional damning evidence related to other aftermarket parts not previously thought to be structurally-critical like a hood and hood latch. His presentation added to the overwhelming evidence presented by Ford and left no doubt for anyone watching that there are unsafe parts and they are being used to repair vehicles. Someone is selling them! Possibly the worst part is that some insurance driven direct repair programs (DRP) arbitrarily demand the use of aftermarket parts regardless of their safety and lack of testing. With the overwhelming evidence now presented, it seems past time to change those insurance company’s DRP policies that call for the use of non-certified aftermarket parts.

Several have already made changes to their DRP policies and procedures. Geico immediately changed theirs following Toby’s presentation in January, and is expected to announce further modifications related to aftermarket parts. Several other insurers are also expected to announce changes and more are undoubtedly under way because the potential exposure is enormous.

What if the government agencies were enlightened by this information, investigated, and demanded some sort of recall? The impact of failures of these parts could be substantially greater than Toyota’s recent experience, so a recall is not out of the realm of possibilities. If some government agency or AG demanded a recall, how would the industry handle it? How would you determine what parts were on which vehicles because not all aftermarket parts are the same? Some can pass the test while others obviously cannot as illustrated by Chris Northup in yet another presentation at this most recent Collision Industry Conference (CIC). If they did do a recall, how far back would they go? Who would pay for the re-repair? The fact is that thousands of shops have been pressured into using aftermarket parts that may not pass the crash test. Once the car is repaired, the shop is the “manufacturer of record” and would ultimately carry the burden and liability. This is especially true if any of the shops signed special agreements that hold the insurer harmless under their DRP agreement (a prevalent practice).

The potential cost of a recall could be billions depending on just how far reaching the ramifications might be. A recall could drive thousands of shops into bankruptcy and their liability insurance carriers to run for cover. Eventually, the lawsuits would most likely find the deepest pockets – those insurers that have demanded the use of aftermarket parts without discrimination. Demanding the use of at least CAPA certified parts might provide a veil of plausible deniability, but only a small portion of the aftermarket parts are certified. Jack Gillis of CAPA presented statistics that illustrated that less than 25% of all of the aftermarket parts used are CAPA certified.

Wagman argues that as far as he knows, not one lawsuit has ever been filed for the failure of an aftermarket part “… not even for a stubbed toe,” he said. Perhaps this is all a chicken-little fire drill. Therefore, it is certain that no one really knows what the next shoe is to drop or where all this will end. Regardless, one thing is certain. The exposure for shops and insurers alike is substantial, and all because of efforts to suppress insurance loss severity. Ironically, the exposure could be exponentially higher than the savings. The cost difference of an aftermarket part might be 20% less, but only on a select few parts, and parts are only as much as 40% of the repair bill on average. Do the math. At best, some might have saved a few percentage points in the short term by forcing DRP shops to use aftermarket parts regardless of their functionality, safety, or fit. But, the cost to fix this mistake could be astronomical. This fact alone will force major change upon the industry.

Even if aftermarket parts had to meet standards enabling them to be certified as functionally equivalent, the cost to manufacture, market and sell those parts would raise and make them a closer cost competitor to OEM. Without these savings, there would be far less motivation to demand their use for cost conscious insurers. Would the industry be better off or worse?

No matter what else comes of this, Insurers and repairers alike can no longer claim they did not know that some of these parts are inferior to the point of being life-threatening. Following the presentations, you could hear many saying over and over again, “I had no idea.” Now, we all do! No matter how anyone tries to suppress the truth or spin it, the genie is out of the bottle and there is now a smoking gun for all to see …Thanks to Toby Chess, and John Yoswick’s excellent reporting.

*PRIMA-FACIE, EVIDENCE, Latin for “at first view.” Evidence that is sufficient to raise a presumption of fact or to establish the fact in question unless rebutted. A prima-facie case is a lawsuit that alleges facts adequate to prove the underlying conduct supporting the cause of action and thereby prevail.

John Yoswick article in Autobody News:

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53 Reasons to Change the Way You Do Business

biggs — Thu, 24 Jun 2010 18:42:05 +0000

53 shop employees, including 24 repair shop owners, were arrested and charged with insurance fraud. The five-month-long sting operation in Orange County was geared towards discovering automobile repair shops engaging in fraudulent insurance practices. Every arrested body shop worker and/or owner has been charged with one felony count of insurance fraud charged under CP code 550b(2), which reads, in part:

(b) It is unlawful to do, or to knowingly assist or conspire with any person to do, any of the following:
(1) Present or cause to be presented any written or oral statement as part of, or in support of or opposition to, a claim for payment or other benefit pursuant to an insurance policy, knowing that the statement contains any false or misleading information concerning any material fact.
(2) Prepare or make any written or oral statement that is intended to be presented to any insurer or any insurance claimant in connection with, or in support of or opposition to, any claim or payment or other benefit pursuant to an insurance policy, knowing that the statement contains any false or misleading information concerning any material fact.

CHANGE THE WAY YOU DO BUSINESS NOW

When one drills down on the details, you will hear about a wide variance in the application of the law and the details of the alleged violations depending upon the shop. Some have suggested that the whole thing was a “headline grabbing” effort by someone in an election year. A few have even explained that in their case, they told the person playing the sting to leave and suggested they go to their competitor. Ironically, they were accused of trying to aid the person in fraud. Since this will be decided through the court system, I will refrain from passing my own judgment on if these charges will stand up in court based upon how the sting was conducted, if the charges are entrapment, valid interpretation of the law, an enforceable law, or any other angle that might be used as a defense in court. What I will say is that this situation is a clear and blatant example of poor business practices that need to be fixed. All shops might want to make sure they have tightened up their business practices, training and word track …unless they are crooks. Any shop that wants to be above reproach must immediately change their business practices, but you will have to do more than that if you want to avoid being painted by the same broad brush of this sting and the arrests.

CYA: Cover Your Act

First, every honest shop should do whatever they must to cover their act against another sting or stupid employee mistake. As an industry, perhaps we should make an official distinction between estimates written for use as an insurance claim and an estimate for the consumer. Perhaps every estimate written and presented should carry a disclaimer and clarification of what the intended use is. If the estimate is overall, perhaps the disclaimer should say something like “this estimate is written based upon ALL visual damage regardless of any insurance claim or damage from multiple causes. The estimated price quoted is based upon repairing all damage as listed to pre-accident condition based upon universally accepted repair standards and using OEM parts. Any alterations, exclusions and deviations from the components of this complete estimation will change the price. Further, your insurance company’s business practices may request deviations or repair practices and parts use that may or may not be acceptable and consistent with this business and could result in a price change.”

Just to make sure you cover yourself, you may even add some clause about, “if used as an insurance claim, you may need to itemize estimated damage that is not related to the specific accident or that might represent a ‘betterment’.” Be sure and have your attorney review craft the language you elect to use to cover your act.

As a matter of proper business practices, you might want to consider a policy the requires your estimators/sales staff to write two separate estimates where there is damage from separate incidents. Regardless, you still should use a disclaimer that you are not responsible to know when and how the circumstances of the damage occurred.

NO EXCUSE

Regardless of the legal language you can use to cover yourselves, there is no excuse or alternative to being honest and not a party to insurance fraud. For those that told the consumer how to fraud the insurer, there is no excuse. They are the rotten apples that give us all a bad reputation and black eye. These bad characters should go to jail and their shops closed.

On the other hand, we all know that customers often ask if something can be thrown in or you can help them cover their deductible. Fine, you can do that, but at your cost and not hidden in the cost passed on to the insurer. The key to success and not going to jail may be in making sure all of your employees are aware that no matter how slow the economy gets and how much you need another repair, you NEVER participate in insurance fraud.

Beyond the philosophical position, businesses need processes, procedures and tools to make sure our employees do it right every time. Consider creating specific “word track” that keeps them from saying the wrong thing and gives them the right thing to say, instead. Many times an employee can be stumped and not know what to say, or how to say it so they don’t run off the potential sale. Process is key here. Word track is essential. Once you craft the right word track that diplomatically states your policy and legal position in such a way as to not offend the consumer, write it down! Then, put it on a poster prominently displayed in the lobby of the shop. Next, get it printed on 3 x 5″ cards and a stack left on every employee’s workstation. With these simple tools in place, your employees can point to the poster or hand the consumer the card and say, “This is the law and our policy, but I can help you in this legal and honest way …”

Silver Lining?:

To find a positive aspect of this whole incident is a stretch at best to find a silver lining. This is yet another blemish on our industry. Perhaps the only upside is that the laws and business practices will be further defined and clarified by this case. The fuzzy line defining if the shop is writing an estimate for the consumer or for the insurer will be tested and determined. At least that will make it clear.

MARKETING:

The worst part of the media frenzy was the mistaken idea that by identifying these body shops, consumers would know which shops to avoid. I suspect that instead, crooked consumers and those wanting to cut corners now know which shops will help them! Ironically, this may have been the best marketing for the wrong shops. Unfortunately, the media did not publicize those that were tempted, tested, and still advised the consumer not to break the law. Those that are not crooks need to market themselves against the association with these other guys. Now is the perfect time to make a distinction in the minds of the consumer between the “shinola and the other shops! If you are that honest shop, make sure you market yourself in such a way as to make the distinction. Use the bad publicity and notoriety to elevate your business and your honest business practices.

Putting everything else aside, this is a wake up call to all shops everywhere to tighten up your business practices and ensure you have word track and procedures that will cover your act and keep you and your employees out of jail.