The term "independent" is often used in the automotive industry to refer to service shops owned and operated by individuals not associated with the original equipment manufacturers (OEMs) through dealerships or corporate-owned franchises. However, the term "independent" is misleading on several levels.

Most dealership body shops are independently owned but aren't considered "independent" because of their relationships with the OEMs. Consolidation of independent shops by corporations is "graying" the definition of "independent" as well - are these shops still independent after a consolidation? If a shop owner has five locations, is each one independent?

Trying to make this distinction is merely rhetorical because no shop is truly independent - they are all dependent to some degree on outside sources to ensure continued business success.

There are three sectors of the collision repair industry whose organizations play key roles in the success of body shops. The relationships between body shops and these three sectors - parts suppliers, paint manufacturers and insurance companies - are crucial, and these relationships have changed over the years.

Of course, there are other business sectors that have important relationships with body shops, such as vendors of shop equipment, banks or towing companies, for example. But for the sake of this article, we will concentrate on those relationships relevant directly to getting the paint and knowing how to correctly apply it, getting parts to complete the repairs and getting paid.

Parts suppliers
Some body shops have indicated satisfaction regarding their relationships with OEM parts suppliers, and think the relationships have improved over the years for various reasons.

"Most of our parts suppliers are OEM suppliers," said Keith Kumler, owner of Kumler Collision Inc., Lancaster, Ohio, who indicated that there haven't been any major problems with these relationships.

"We use very few aftermarket parts," he said, and added his shop works with three vendors for the aftermarket sheet metal parts they do use, and the relationships with these companies are not "up to par" compared to his relationships with the OEM vendors.

Kumler orders parts through a single dealer per vehicle make. "We do shop around, but it [going through only one vendor] gives us more buying power." Continuously using a single dealer opens up the opportunity for more negotiation and discounts, he said.

"I buy all my GM parts from one dealer," said Bob Anderson, owner of Anderson's Automotive Service, Lorain, Ohio. He said he has forged a relationship with this supplier built on trust. Anderson receives discounts and good overall service, which he attributes to his one-on-one relationship with a salesperson there.

Not all shop owners view their relationships with OEM suppliers with the same enthusiasm.

"They're someone I buy a product from, and they send me a bill at the end of the month," Larry Stafford, owner of Rivercity Collision Service, Austin, Texas, said.

Other than that, he said, they offer very little in terms of value-added benefits. To Stafford, his parts suppliers are not advisors, he has very little contact with them and he doesn't have "personal" relationships with them.

Some shop owners cite the personnel employed by vendors as the most important factor when choosing a supplier. Tom Prescott, owner of The Bodywerks, Holly Hill, Fla., who has been in the industry for 23 years and has changed suppliers in the past, said, "It's been the person behind the counter that makes or breaks them [parts suppliers]."

Although he uses one supplier at a time per vehicle make and has used the same companies for years, Prescott contends he has continued to use the same suppliers only because of the "parts people" representing them. Specifically, he gauges the quality of the supplier by the knowledge and helpfulness of his contacts at these suppliers.

"Sometimes we go through stages and change [suppliers]," Prescott said. However, he considers it a good sign that his shop has used the same suppliers for years and thinks his current relationship with his vendors is more than adequate.

The relationship between body shop and parts supplier has certainly changed over the years, according to Kumler. Parts suppliers provide more service and are more in-tune with the needs of the body shops. Kumler cited just-in-time delivery as an example of increased service, since this aspect of parts delivery was unheard of a decade ago.

Enhanced service is a key aspect of parts distribution today, according to Prescott. "In years past, you could get parts in maybe two days, or up to a week or a week and a half," he said. "Every manufacturer can now get parts to you the next day."

Prescott said parts distributors are also storing more parts on-site to accommodate body shops, and they have expanded the reach of their distribution networks to areas where it may have previously been difficult to obtain OEM parts in a timely manner.

The desire to enhance availability and timely delivery of parts is due in part to the existence of aftermarket parts, according to Prescott, who thinks the OEMs want to get their parts out faster to preempt the use of aftermarket parts.

Not as impressed with current parts distribution, Stafford said he is having more problems these days getting parts and the suppliers are not as responsive as they should be.

He cited a previous problem his shop had with some 1997 Ford pickup trucks. Stafford became aware that front bumper brackets were not available for some trucks, and therefore the shop had to replace the entire frames at $1,500 per frame as opposed to $150 for a mere bracket. He said it wasn't until industry organizations such as the Automotive Service Association (ASA) and insurance companies brought the issue up that Ford made the brackets available.

Stafford said aftermarket parts provide competition to some OEM parts, keeping the prices somewhat reasonable. Where there is no competition, he said, prices go up drastically. He sees OEM suppliers as using this lack of competition to their advantage.

Shops of course need parts to repair the vehicles in their care. If parts have to be ordered for a certain repair job, the shop is at the mercy of the supplier to get the part to the shop as quickly as possible.

"They [parts suppliers] can affect cycle time," said Chris Dameron, owner of C.B.W.D.'s Inc., Raleigh, N.C. "This has a direct influence on a shop's bottom line."

Shops have become more dependent on parts for their revenue over the years, and have therefore become more dependent on the suppliers, says Dameron. "Ten years ago, 25 percent of the total [shop] ticket came from parts sales. Now, that figure is close to 50 percent."

Kumler agrees that profit margins from parts sales have increased in relation to shops' overall profits, but contends that parts profits in absolute numbers have decreased in past years because parts have become less expensive.

He explained two factors that make this situation possible: There is more parts replacement now than in years past and the percentage of revenue received from "everything else" has decreased. Therefore, even though parts profit has decreased over the years due to cheaper parts, the percentage of a shop's overall profit coming from parts profit has increased because of rising parts volume and decreasing profits from all other shop revenue centers - hence making the parts supply network that much more important for body shop profits, according to Kumler.

Paint companies
The relationships between paint companies and body shops have significantly improved over the years. While they are still selling a product like all vendors, paint companies have changed the dimension of their relationships with body shops to the extent that it is not uncommon now to hear both body shops and paint companies refer to their relationships as "partnerships."

Prescott contends that while paint companies used to be mere product vendors, they now help shops to stay in business by providing much more, and he describes his relationship with his paint vendor as "excellent."

In today's industry, the paint manufacturers and vendors have become valuable in terms of providing value-added service to shops, says Stafford.

Of all the industry relationships shops have with vendors, relationships with paint companies are the most important, says Kumler. "Paint is what we have the most problems with and it is the part of the company that is the least profitable, but paint companies can help us overcome that."

He cites seminars sponsored by paint companies for both painting skills and management skills as helpful for ensuring shop productivity and profitability.

According to Prescott, some major benefits provided by paint companies include equipment updates; programs to streamline productivity and cut costs; CSI programs; and building design and layout consulting.

Stafford is both a participant in and an instructor for the value-added program offered by his paint supplier. "The program gives shop owners a new way of looking at the process of managing a shop," he said.

The program Stafford uses gives participating shops free consultation services - Stafford obtained new information about running his shop and was able to identify customer concerns through the independent study his shop received. "I've gained a lot of new information, and also reinforcement of some things I've been doing all along."

Kumler's paint supplier provides him with EPA-related information that helps his shop stay within regulations, a benefit he says is a "godsend."

"They've really made strides," Prescott said of the paint suppliers. He attributes most of this progress to increased competition among paint companies to provide a more attractive package to body shops.

According to Stafford, paint companies have become involved in offering more to body shops than just paint in the past three to four years. He thinks paint companies expanded their programs, in part, because they realized paint products are now more similar and they needed to distinguish themselves from their competitors.

Of course, Stafford added, the paint companies also want body shops to continue to grow and prosper in order to buy more paint.

Kumler contends there is a major difference in how paint companies relate to body shops now as opposed to years past, and he too thinks the change has been positive. "In the old days, they sold us a product. Now, there is more partnering."

He cites warranties covered by the paint companies as an example of the new partnership. Several times in the past, when previously repaired cars were brought back into Kumler's shop some time after the initial repair because of problems with the paint jobs, the paint company has inspected these vehicles and determined it was the paint itself that caused the problems. They have obliged the warranty and paid for the re-repairs.

Not only does this make for a good business relationship between the paint company and the body shop, according to Kumler, "It [warranty] is a great selling tool for us."

Kumler added that another reason paint company support is vital to a body shop's interest is the fact that the paint job is what the customer sees most visibly after the repair and uses to gauge the success of the repair.

Prescott contends his business has benefited from following some of the suggestions made by paint companies, including raising the professionalism of the shop and making sure the backlog is longer. The fact that paint materials are now easier to use has helped his business as well, he said.

The direct effect of his shop using the valuable benefits provided via an enhanced relationship with his paint company was summarized by Prescott's response, "Well, sales are up."

Insurance companies
The majority of collision repairs, and hence the revenue generated by shops, are compensated by insurance companies. A variety of changes have taken place in the relationships between shops and insurance companies over the years, and there is a wide range of opinions on what effects these changes have had.

"In my experience, the relationship is better now," said Kumler. He thinks insurance companies are now negotiating more on a basis of trust toward shops as opposed to 15-20 years ago.

The relationships have changed dramatically over the years, according to Kumler. "It's a much more level playing field now." He attributes this change partly to computers and how they have taken away certain issues that in the past were argued, such as interpretations of the P-pages.

"My relationship has improved overall with insurance companies because I've become more knowledgeable about how the [insurance claims] process works," said Stafford. He no longer feels the adversarial "us vs. them" relationship of the past.

"It's been nearly 12 years since I last threw an adjuster out of the shop and told him not to come back," Stafford said.

Kumler cites the shop owners' enhanced negotiation abilities as a factor in "leveling the playing field." He thinks an enhanced professional demeanor of negotiation from both body shop and insurance personnel has made the repair process more effective.

Most insurance companies seem to share the attitude of the body shops, according to Kumler, which is to get the customers satisfied and back on the road at a fair price. As long as that goal exists and is negotiable, the relationship works, he said.

Stafford said he has learned to deal with the insurance company on a business level, not a personal one. "Your company - not you personally - is dealing with the insurance company. You have to get off the personal level. The person on the other side has a set of rules to go by. There are certain rules you have to go by."

Stafford acknowledges that the insurance company personnel have had to make significant progress over the years.

"They've become more mature and professional, and they now give us the respect we've earned by improving our professionalism." He said that although disagreements are to be expected between shops and insurance companies, he believes both want what is best for the customer and should negotiate professionally to obtain that common goal.

But in that negotiation process, Stafford has also had to convince the insurance company that he needs to make a profit on his investment in the shop, not just make enough to get by.

Direct repair programs (DRPs) have affected the relationships between many shop owners and insurance companies - regardless of whether they participate or not. Those who participate might see an increase in volume, but might be asked to compromise on items such as labor rates and the use of aftermarket parts.

"DRPs make it easier to do business as long as the insurance companies don't ask for concessions," Kumler said. His shop has severed several DRP relationships because the insurance companies expected the shop to make concessions that would have adversely affected the profit margin or the quality of the repair.

"Some [DRPs] have been a joy; some DRP relationships are phenomenal," Kumler said. The mutual trust is there, he contends, and there's no way his shop would take advantage of that situation and violate the trust they've built.

Although he is generally satisfied with his relationship with insurance companies, Kumler did cite the insurance-promoted use of aftermarket parts as "a thorn in our side."

Prescott views his shop's relationship with insurance companies as ambiguous, and terms his overall feeling toward this relationship as "frustration." He said they do have a fairly good relationship and his shop works with them to come to terms; and insurance companies are of course the shop's "bread and butter." But constant changes in insurance companies' policies toward his shop have caused Prescott's frustration.

"It's almost like a daily change," he said. "Even if it's the same adjuster, it [the insurance company's policy] changes every day."

As an example, Prescott noted that, on a specific repair, an adjuster told him that according to company policy he needed to ask Prescott's shop to try using an aftermarket part in the repair, and if it didn't fit, to send it back and then use an OEM part. Two days later, when Prescott notified the insurance company that the aftermarket part it tried to install wouldn't fit, the adjuster told him to try using another aftermarket part.

"Some days we can blend, some not," Prescott said.

He contends that insurance companies have always approached shops this way, but that this type of activity has increased in recent years.

Prescott says his shop doesn't blame or "take out" its frustration on the adjusters or inspectors because he thinks they are merely following orders from "above."

Many adjusters are frustrated over the policy changes as well, he contends. "They know the vehicles should be repaired to pre-loss condition, and they are not getting room to do it right."

When Prescott was asked how the adjusters react when confronting him after they've apparently been ordered to change policy toward the shop, he said, "You can see it on their faces."

Stafford said that top-level insurance executives often share the opinions of the body shop owners, but those views aren't necessarily communicated down to the street-level insurance representatives, or they have misinterpreted their directives.

The solution to an uniformed adjuster, says Stafford, is to speak to his manager or a regional manager when reaching an impasse. But do it professionally and don't try to degrade the adjuster by doing so, he recommends.

"Know your position and back it up," Stafford said. He refers to I-CAR procedures and other credible sources of industry information to support his claims.

Instead of making accusations toward insurance representatives every time a disagreement arises, Stafford claims he ensures success by following his own advice: "Be a better businessperson and manager, and try to understand people and their viewpoints."

RATE THIS ARTICLE What do you think of this article? Your input will help AutoInc. develop additional articles on this subject. Share your thoughts! Your name Your e-mail address

MOST ACCESSED ARTICLES Fuel Injection Service, Not Just Cleaning The Art of Extraction EGR Systems: Operation and Diagnosis Proactive Target Marketing:_Rethinking Your Business Strategy Engine Performance: HO2S Diagnostics MOST E-MAILED ARTICLES Developing Employee Potential How Critical Thinking Can Help Your Business How to Diagnose the Ford Glow Plug What to Look for When Shopping for the Right Shop Management Software Putting a Price Tag on Complaints

AutoInc. Web Site | ASA Web Site | Safety Inspection: A National Strategy | Stop Chasing Fault Codes When Servicing EFI Systems | Body Shops: Independently Owned, Dependently Operated | Customer Database Marketing | Guest Editorial | Tech to Tech | Tech Tips | Shop Profile | Net Worth | Stat Corner | Chairman's Message