Nine Industry News Items and Trends You May Have Overlooked During This Past Year
By John Yoswick
As another year comes to an end, here are nine bits of industry news that might have flown under your radar amid the day-to-day challenges of running your shop, but that could prove helpful for you to know about.
1. Just weeks before a jury this fall awarded a Texas couple $42 million for auto accident injuries they say were exacerbated by faulty prior collision repairs made to their vehicle, an industry survey found shops are getting better about checking for OEM repair procedures.
Nearly half (48.8 percent) of shops responding to the July “Who Pays for What?” survey, conducted by Collision Advice and CRASH Network, said they research OEM procedures all or most of the time; this was up from 42.7 percent in the same survey two years earlier.
Only 18.2 percent of shops said they either “never” or “only occasionally” research OEM procedures, an improvement from two years ago when more than 25 percent said they rarely or never did.
“Some shops think if they fix the same type of vehicle frequently, they don’t need to check those procedures every single time,” said Mike Anderson of Collision Advice. “Earlier this year, when you replaced a quarter-panel on a Ford Mustang, the procedure required replacing the roof as well. Today, Ford has a sectioning procedure. So it’s important to research the procedures every time because things change.”
Anderson said that while he is pleased to see more shops researching the proper repair methods, “At the end of the day, this should still be done 100 percent of the time.”
Collision repairers who want to sign up to take the next “Who Pays for What?” survey (in January), or get information from previous surveys, can visit: http://www.crashnetwork.com/collisionadvice
2. The July survey also found that of shops that said they have fewer direct-repair programs now than they did a year earlier, only 15 percent say it was because an insurer dropped them from the DRP. That means that 85 percent of those who have fewer DRP programs chose to leave those programs. In the survey, those shops cited such reasons as the insurer having “unreasonable demands” or not being “willing to pay for a proper repair.”
What impact has having fewer DRPs had on those shops’ overall sales? CRASH Network compared how shops who reported having fewer DRPs also answered another survey question about how their total sales in the first half of 2017 compared to the first half of 2016. Looking first (as a baseline) at only those shops who said they had the same number of DRP programs this year as last year, 47.3 percent said they had higher sales this year, and 22.3 percent said they had lower sales; that means a net 25 percent (47.3 percent minus 22.3 percent) had higher sales.
Perhaps not unsurprisingly, of those shops that said they had more DRP programs this year, 60.4 percent indicated they had higher sales, while just 12.5 percent reported lower sales, for a net 47.9 percent with higher sales.
But among shops that had fewer DRP programs, 47.6 percent said they had higher sales (very similar to shops whose DRP count had not changed), and only 20.6 percent had lower sales; the net 27 percent of those with fewer DRPs but higher sales is slightly better than the shops that said they had sales growth with the same number of DRP programs.
3. Unsure of how to conduct a repair for which there are no vehicle-specific OEM repair procedures? Check out a new compilation of “I-CAR Best Practices” on the organization’s Repairability Technical Support website (https://rts.i-car.com/collision-repair-news/now-available-on-rts-inter-industry-developed-and-vetted-best-practices-published-by-i-car.html).
4. Industry observers have been watching Rhode Island carefully ever since collision repairers there pushed through a 2015 law that established a two-tier shop classification based on equipment and training. The law requires insurers to conduct labor rate surveys to determine “separate and distinct” prevailing labor rates for the two tiers.
The state’s Department of Business Regulation, which enforces the regulation, recently announced what rates the insurers told state regulators they will pay based on their surveys. Collision repair shops designated as “Class A” will receive body labor rates as high as $53 per hour from some insurers; that’s as much as $8 per hour more than the other (“Class B”) shops in the state will be paid by some insurers.
But there are some significant variations among the labor rates established by different insurers in the state. The three insurance companies with the highest market share in the state reported no change from last year in their prevailing body/paint labor rates: Progressive will continue to pay both Class A and Class B shops $47 per hour, Allstate will pay $50 for Class A shops and $48 for Class B shops, and Geico will continue to pay the lowest rate in the state, $45 per hour, to both Class A and Class B shops.
Geico, in fact, reported a drop in prevailing mechanical labor rates, down from $54 last year to just $50 this year; by comparison, Allstate pays $59 per hour for mechanical labor, Progressive pays $60 per hour, Ohio Mutual pays $69 per hour (down from $77 last year), and Selective Insurance pays $80 per hour for mechanical labor (up from $60 last year).
Some insurers did report higher body labor rates than last year. National Indemnity reported a prevailing labor rate of $47 per hour (up $2 from last year) for both Class A and Class B shops. Liberty Mutual, Mapfre and Ohio Mutual also list body labor rates that are $1 to $2 higher than last year.
USAA (at $52 per hour) and Travelers (at $53 per hour, up $1 from last year) continue to report the highest Class A rates, $2-$3 more per hour than they are paying Class B shops.
The regulator’s bulletin showing the insurer’s payment plans lists aluminum rates of between $50 and $101. The requirements for “Class A” status include being aluminum-certified by at least one automaker.
5. A mid-year report issued by CCC Information Services this past summer offered one set of interesting statistics on pre- and post-repair vehicle scanning. CCC says that based solely on the automaker position statements that had been released prior to its research, just over 68 percent of all vehicle damage appraisals in the first quarter of 2017 should have included a pre-repair or post-repair scan. Yet CCC found that only 1.6 percent of those estimates included a line-item for a scan (at a fee averaging $124, either flat fee or based on labor time). (It’s important to note that CCC published data is often based on DRP claims only.)
“The absence of a scan entry in the appraisal does not necessarily mean that the scan was not performed,” the CCC report concludes. “However, the disparity does underscore how the industry is still grappling with the when-why-and-how-much for vehicle scans — something we can expect to hear more about as more and more vehicles are equipped with technology that requires this type of repair.”
6. How many hours a year of formal training do each of your technicians receive? If it’s 10 hours or more per year, your shop is offering more training than 50 percent of all other shops — yet that amount isn’t even half as much as many automakers believe technicians need each year.
One industry survey conducted last spring asked how many hours of formal training (from I-CAR, OEMs, paint companies, vendors, etc.) shops are providing their employees each year. Nationally, the median amount of training provided to technicians among the 674 shops responding is 10 hours per year.
A discouraging 13 percent of those shops admitted to providing zero hours of training per year. Others are offering 40 or more hours to each of their technicians, though that amount of training is more than that offered by 95 percent of all other shops.
The Collision Industry Conference (CIC) Education and Training Committee earlier this year reported the results of a similar survey it conducted related to training practices in the industry. That survey, completed by about 130 shop employees (production workers and administrative staff) around the country, similarly found those employees received an average of about 10 hours of training each year over the past five years.
The CIC committee also asked paint manufacturers and automakers how much annual training they believe technicians should be receiving. Asian vehicle manufacturers said technicians should get between 16 and 20 hours of annual training, while domestic vehicle manufacturers suggested 19 to 27 hours annually, and European automakers called for even more, 23 to 76 hours. Paint manufacturers on average thought painters should receive about 24 hours of training each year.
So if the survey findings are indicative of the entire industry, then 75 percent of all shop technicians are not getting enough ongoing training.
7. The latest Census Bureau report data on the industry shows the total number of people employed (by shops with employees) in the collision and auto glass repair industry was essentially flat from 2014 to 2015. The national total grew by just 74 employees to 219,558.
That does, however, follow the prior year’s growth of nearly 6,000 employees, which was the largest single year of growth since the year 2000, and the latest employment count is still at post-recession highs.
Looking at the data by state shows that California shed quite a few jobs from 2014 to 2015 (down 1,359, or 4.2 percent). But the rest of the country made up for most of that loss. Georgia added 610 new jobs in 2015 (up 10 percent), the most of any state; Illinois added 439 jobs, an increase of 4 percent.
The biggest percentage decline came in Oklahoma, down 9.2 percent, equaling 256 fewer workers throughout the state’s 449 facilities. The next largest percentage decline occurred in West Virginia, down 8.7 percent, though that equates to just 97 jobs statewide.
8. One former multi-shop operator this past summer offered some advice to those still in the industry. As a real estate developer, AJ Leone didn’t ever expect to enter the collision repair industry, but over a dozen years acquired three locations for Charleston Collision in South Carolina, before selling the business in 2015 to Caliber Collision. Always thinking about what future real estate investors would be looking for, Leone chose convenient, accessible locations on busy stretches of road.
His key piece of advice for collision repair business owners: Have an exit plan.
“As entrepreneurs, you spend a lot of time putting your blood, sweat and tears into the business, and in my opinion, that’s only half of the equation,” he said. “Anyone who is in a for-profit entity needs at some point in time to think about the next step, the exit.”
Not doing so, he said, can lead you to get over-extended when you should be trying to shed debt. It also keeps your focus on maintaining “clean financials,” that aren’t “muddied or clouded with some other hobbies, shall we say.” Those records will not only help you make good financial decisions as you run the business, he said, but will be what bankers or any potential buyers will want to see as well.
That paid off for him in terms of a sale that went “quickly and smoothly,” he said.
“It was not painful, and was very enjoyable, actually,” Leone said of the business sales process.
9. Of the 769 shops who reported their DRP status in one industry survey this year, 68 percent said they have a DRP agreement with one or more of the eight largest U.S. insurers.
Of those shops that do have DRP agreements, one-third indicated they have an agreement with just one of the eight largest insurers. Nearly one quarter of them (23.8 percent) have agreements with two of the insurers, and another 20.1 percent have three. The remaining 23.6 percent have four or more DRP contracts with “Big Eight” insurers.
Although one-third (32.6 percent) of the shops reported having no DRP relationships with any of the eight insurers, some of them may have DRP relationships with other smaller insurers. Given that, it seems reasonable to infer that fewer than one-in-three U.S. shops is DRP-free. •
John Yoswick, a freelance writer based in Portland, Ore., who has been writing about the automotive industry since 1988, is also the editor of the weekly CRASH Network (for a free 4-week trial subscription, visit www.CrashNetwork.com). He can be contacted by email at john@CrashNetwork.com.
