Following the recent verdict in the lawsuit against State Farm for its requiring body shops to use aftermarket parts when repairing vehicles, the consumer press and broadcast media have devoted a lot of space and time to covering this topic.

Bob Redding, ASA's Washington D.C., representative, was interviewed by CNN and portions of the interview were fed to the ABC and FOX networks.

But aftermarket parts is not a new subject to the industry. It has been a major focus of ASA's Collision Division for several years. In 1997, ASA hosted a series of meetings to develop a consensus on replacement crash parts. During these summits, several key issues were brought to light. Participants expressed concern for both the safety and quality of parts used to repair vehicles after a collision.

Original parts, whether manufactured in the United States or imported, are inspected on new vehicles either by the National Highway Transportation Safety Administration (NHTSA) or the U.S. Customs Service. Unfortunately, aftermarket parts do not seem to go through the same scrutiny.

Concerned with this problem, ASA met with top administration officials in 1998 to discuss problems of an unregulated replacement crash parts industry. Also that year, members of ASA's board of directors met with Dr. George Chang, chief of NHTSA's Trend and Analysis Division. They shared their concern about the inferior fit and inferior quality of some aftermarket parts, and also addressed the failure of NHTSA to inspect replacement crash parts to ensure they meet quality standards.

And the debate continues.

At the International Autobody Congress and Exposition (NACE) in December, many parts issues were discussed.

Among many other topics, Kevin Caldwell, ASA's Collision Division director and chairman of NACE '99, shared his views on aftermarket vs. OEM parts.

In his State of the Industry ad- dress, Caldwell said, "Insurers must communicate to their customers what their policy does and does not cover. Don't ask collision repair professionals to explain what your policy covers. That's your job."

The question of aftermarket vs. OEM parts continues to face repairers after the recent verdict in the State Farm lawsuit. ASA, Caldwell said, has pushed for notification and consent laws and as many as 20 states will likely consider such legislation in the near future.

ASA has drafted model legislation on this issue, Caldwell said. ASA supports an open marketplace where there is a place for aftermarket parts. However, the choice to use OEM or aftermarket parts must be a choice that rests with the vehicle owner.

Non-OEM aftermarket parts have received a considerable amount of attention in other arenas as well.

The December issue of the ASA State Observer reports that the Tennessee Department of Commerce and Insurance has implemented a new regulation that prohibits non-OEM aftermarket crash parts to be used on current year- or immediate prior year-model motor vehicles without the permission of the owner of the vehicle. The regulation also requires disclosure of the use of aftermarket parts.

International Expansion and Quality Control
Car Care Parts Mfg. Co. has focused on international expansion and product quality to better meet the needs of customers.

The company recently expanded its international customer service capabilities with the opening of a European Car Care Parts Mfg. Co. The company has also introduced a limited "Lifetime Warranty" on all new and remanufactured Car Care Parts A/C compressors, when installed according to their established usage guidelines.

"No other manufacturer has had the faith in its products and in its customers' ability to apply proper installation procedures, to back its A/C compressors with a lifetime warranty," said Ali Erturk, national sales manager for Car Care Parts. "Car Care Parts Mfg. Co. is making this unprecedented move (instituting a limited lifetime warranty) based on our uncompromising factory quality control standards and field-tested installation procedures. The combination of excellent product and thorough installation work has proven to significantly reduce comebacks and boost repaired system performance in all vehicles." Of course, specific procedures must be maintained to qualify for the lifetime warranty. For more information about Car Care Parts Mfg. Co., visit their Web site at www.carcareparts.com.

LKQ Corp., a recycler of automobile parts, is also promoting its guarantee on mechanical parts, sheet metal and glass.

For mechanical parts, LKQ will guarantee for six months that its recycled parts will be free from defects. In addition, the company will provide parts and labor coverage on qualified OEM engines and transmissions.

The company also guarantees that its sheetmetal will be free of internal rust and corrosion for the lifetime of the product.

Under the company's glass replacement policy, LKQ reports that it will replace side window glass if broken during installation, subject to inventory availability.

The Internet
With a growing dependence on the Internet, e-commerce is streamlining the parts procurement process.

Mitchell International's strategy to meet this need is to help collision repair facilities order parts and supplies through Carstation.com's e-commerce system. The company reports that the integration of Mitchell's Advanced Business System with Carstation.com allows collision repair facilities to streamline parts ordering and purchasing, and allows customers, insurers, car rental companies, and any other participant in the claims process to view vehicle repair status via the Internet.

This Internet solution promotes easy, fast access to parts and supplies, and also opens the communication lines within the entire collision repair community.

"Since the Internet is today's most powerful information tool it's a perfect extension to our strategy," says Jim Lindner, president and CEO of Mitchell International.

CarStation Marketplace features a vendor directory, and wholesale purchasing of OEM, recycled, aftermarket and reconditioned parts to collision repairers.

GO Media's acar.net 2.0 was un- veiled at NACE '99. The site's "marketplace" feature has been expanded to allow vendors to set up secure "storefronts" for direct ordering from shops. Online parts ordering is just one of several features offered.

On the mechanical side, Hahn Automotive Warehouse Inc. has launched iAutoparts.com. This online automotive parts store is powered by CCI/ Triad's eCommerce solution, which features the ePartExpert electronic catalog. Hahn reports that it added the online distribution strategy to its traditional wholesale mix to capitalize on the growing $158 billion U.S. automotive aftermarket industry and the estimated $60 billion automotive parts segment.

ePartExpert provides technical tips, parts specifications and suggestions for related parts. iAutoparts.com offers more than two million nationally branded automotive hard parts and maintenance items in inventory.

The company touts that its direct relationship with manufacturers en- sures rapid delivery of rare or hard-to-find parts and offers nationally recognized branded manufacturers for parts selection including: AC/Delco, Bendix, Champion Spark Plugs, Federal Mogul, Gates, Wagner and Wix.

"Our iAutoparts.com eStore, in conjunction with CCI/Triad's ePart- Expert catalog, is the only Internet site to have an extensive inventory of automotive parts immediately available for online ordering and direct shipment to the consumer's door within 24-hours," says Eli Futerman, president and CEO of Hahn.

ACDelco is developing the Web Integrated Service Environment (WISE) system that will allow independent service centers to diagnose problems and generate estimates electronically while automatically scanning local distributors for the parts needed to make the repair.

GM Service Parts Operations (SPO) reports that seven new engines will be available in early 2000 on SPO's consumer Web site (www.gmgoodwrench.com). Its GM restoration parts are currently available online.

No doubt about it, online technology is becoming mainstream. And if these companies are correct, going online will be one of the easiest ways to protect your bottom line. I

Recycled Parts ...Economic Espionage?

The used parts business plays an important role in today's collision repair market. This segment of the industry was the focus of a NACE Congress seminar, "Recycled Parts ... Economic Espionage?," presented twice during the convention.

When purchasing recycled parts, it's not simply a matter of calling the salvage yard and placing an order. There are quality issues, availability issues, fit issues, delivery issues, and other potential problems that sometimes result in dissatisfaction on the part of the repair professional, recycler, insurer, or even the customer.

Roger Wright of Collision Team USA moderated this lively discussion, held Thursday, Dec. 2. Panelists were Laurie Garcia, LKQ Corp.; Chuck Sulkula, Acme Autobody & Paint Co.; Mike West, Southtowne Auto Rebuild; Norman Wright, Stadium Auto & Truck Parts; and Greg Black, GMAC Insurance.

Just as the panelists represented recyclers, insurers and shop owners, so too did the audience with a number of representatives from each industry segment asking questions of the panelists.

West, a shop owner from Washington, said one of the biggest problems with recycled parts is "proper interchange."

The availability of parts and timely delivery were cited by shop owner Sulkula as his primary concerns relative to recycled parts. Sulkula also said that the time required to ready a salvage part for the repair is often longer than with a new OEM part, and that this may be time that he isn't compensated for.

Norman Wright said recyclers are becoming more professional and the quality of the parts they sell are improving.

The Automotive Recyclers Association (ARA) has developed a Gold Seal Program to distinguish outstanding re- cyclers. Wright, the immediate past president of ARA, encouraged shop owners to do business with Gold Seal yards.

Garcia, representing recycler LKQ Corp., said her employer is dedicated to providing quality parts nationwide. She added that LKQ is developing a parts replacement guide to standardize parts classification and to make it easier for shops to know exactly what they will receive when they place an order.

Recyclers on the panel and in the audience said their industry is changing rapidly. E-commerce will make significant inroads in this business in months, not years, one audience member said.

In both his opening and closing remarks, Norman Wright said that it is increasingly important from an environmental perspective that we recycle and reuse products. "Recycling is the key and reuse is the best form of recycling," he said.

Sulkula said, "If you want us to use salvage parts, reward us. Make the profit margin equal to that on new OEM parts."

Referring to the seminar's title, "Recycled Parts ... Economic Espionage?," Roger Wright said he doesn't see any economic espionage. What he does see, he said, is a business that has a lot of critical issues that need to be resolved.

Recyclers Garcia and Wright told audience members that if they're doing business with a recycler who can't deliver what they promise and who delivers inferior parts, quit using that recycler and find one who is professional and reliable. N

Aftermarket Parts

At a NACE '99 seminar, "Insider Trading ... Exploring Today's Insurance Industry," panelists shared their thoughts on cost containment and aftermarket parts.

Bill Hutton, a self-employed insurance consultant, moderated the panel discussion. Panelists included Nick Gojmeric, Collision Plus Inc.; Bill Lawrence, Caliber Collision Centers; Ed Schrenk, Schrenk Consulting Services; and Mike York, Parnet.

Panelist Bill Lawrence said insurance is a cost-driven market that results in intensified cost-containment pressures. Collision repairers will certainly continue to be the focus of cost-containment initiatives undertaken by the insurers.

One area of cost containment has been the use of aftermarket parts. In light of the recent State Farm lawsuit, an audience member asked the panelists if they thought use of these parts would decrease.

None of the panelists voiced a belief that use of aftermarket parts would decrease. Michael York of Parnet said it's not a parts issue, but rather a disclosure issue. York expects to see a better effort made to disclose to the vehicle owner what types of parts are being used in the repair.

"Everybody will lose if aftermarket parts go away. Prices will go up for everyone," York said. N

The Internet solves some of the problems associated with recycled parts. Giving repair professionals a better selection of recycled parts can increase their use. If a Web site provides 100 Ford Taurus doors, each with different characteristics (condition, location, delivery options, and price) the repair professional can choose the match that best fits their needs. This dynamic pricing model is sweeping the Internet. The condition of recycled parts is very important because the time to repair can make the difference between a good value or a bad value (vs. new OEM or aftermarket). It is very important that damage estimates by recyclers are accurate. Two recycling organizations have relevant damage standards. Automotive Recyclers Association (ARA) has damage codes that define where the damage is and the United Recyclers Group (URG) defines each credit card size worth of damage to be equivalent to one hour of repair. - Jeff Schroder, president, Car-Part.com

1. How do you get parts to the independent shop?

   Much of the current ordering and parts fulfillment process for parts and materials orders in the collision repair industry is still based on the use of the telephone involving person-to-person communications. There is some level of fax and supplementary electronic support since much of the parts information on the demand side is already in electronic form. For example, the Stellix management system from ADP and Akzo Nobel currently offers the ability to order parts directly from the program screen and send an electronic fax directly to the vendor requesting those parts. This is one of the favorite features of the shop management system.

2. What are today's parts trends?

   The parts fulfillment process today is undergoing dramatic changes with the entry of the Internet and other linkages being built to tie parts buyers together with parts sellers. In many cases the parts requirement and the parts inventory are already in electronic form and what remains to be done is to tie these two end points together electronically. The major OEM's have established relationships and defined communications and order process standards (EDI, XML, etc.) that any and all players will have to comply with to do business with them on a go-forward basis. For the collision industry, the Collision Industry Electronic Commerce Association (CIECA) is busy defining a number of transaction standards that represent the parts ordering, shipping, invoicing and payment processes. It is expected that most all of the affected industries will accept these standards and build product solutions that recognize them. Getting the right parts in time for a reasonable price will be the goal for all future solutions in this area. However, we still do not know the effect of the State Farm litigation related to non-OEM parts.

3. How is the Internet changing the market?

   In its simplest form it is providing ready-made solutions for tying the parts buyers and parts sellers together without having to build many proprietary communications linkages. There is still a lot of work to be done by those companies that represent the information solutions for these two industries to take full advantage of the Internet. The Internet has helped move the electronic solution process along faster, but, in and of itself is still not the complete solution. For example, there are OEM franchise requirements for crash parts, so there are restrictions for acquiring those parts. They must come from authorized vendors, who are contracted by the OEs, who, in turn, will have a strong voice.

   - Jamie Nolan, senior director, ADP Collision Repair Services

CARQUEST is focused on continuing what has made it successful: three-step distribution. The CARQUEST jobber is our only customer. Our distribution centers never compete with CARQUEST jobbers. Rather, they are 100 percent devoted to assisting CARQUEST jobbers to compete in the marketplace.

CARQUEST distribution centers have built strong relationships with the jobbers they serve and that will continue into the next century. The strength of this relationship is perhaps the most important advantage of CARQUEST membership. CARQUEST distribution centers provide full coverage of automotive parts and supplies; exceptional order fill; obsolescence protection; comprehensive training programs; and consistent, accurate performance on logistics. They address the challenges brought by competition in the automotive aftermarket by providing programs that enable the CARQUEST jobber to compete for all the business in his market.

For most jobbers the professional service dealer is their No. 1 customer and CARQUEST continues to build the TECH-NET Professional Auto Service program, which is nearing 2,000 locations. TECH-NET was designed to assist progressive service dealers to meet the sales, training marketing, advertising and business management challenges they face. The resulting partnership is a "win-win" for both the service dealer and the CARQUEST jobber.

Parts proliferation, improved bay productivity, and broader service menus are pressures at the service outlet that favor buying from a local jobber. There is a growing need for quick supply of the entire spectrum of parts. This decreases the service dealer's ability to buy direct or from two-step specialists and increases the need to find a full-service, full-line, just-in-time jobber. CARQUEST stores are perfectly positioned to serve this growing segment of the aftermarket.

- Matt Davis, CARQUEST corporate communication manager

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