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Study Explores Collision Shop ConsolidationPosted 5/11/2005By Leona Dalavai Scott
Why the decline since there's been a rise in the number of reported collisions? Mary-Beth Kellenberger, senior analyst for Frost & Sullivan's Transportation Group, attributes the decrease to consolidation. "There has been a dramatic industry shift toward consolidation," she said. "Modern vehicles are manufactured to exacting specifications, using higher cost components and require costly equipment and skilled labor to replicate the OE form, fit and function of the vehicle." Kellenberger says consolidation is a result of three things: high cost of equipment, declining availability of skilled workers and a need to concentrate on resources to maximize the economies of scale. AutoInc. asked members of ASA's Collision Operations Committee whether the factors cited in Frost and Sullivan's study match their experiences. Responses from committee members show some of the study's factors hold true for their circumstances while others do not. Almost all of the committee members disagreed that the high cost of equipment has resulted in consolidation. Russ Verona, owner of East Rockford Collision Center in Rockford, Ill., said he doesn't see equipment being the reason why there are less collision shops. Carroll Proctor, owner of A.C. Proctor's Paint and Body in Augusta, Ga., agrees with Verona. "Cumulatively, to start a new shop it would easily take more than $1 million," he said. "However, a currently operating shop that is stable should have the resources to be able to afford to modernize and stay abreast of the trends." Another factor the Frost and Sullivan report cited was that there were fewer shops as a result of the declining availability of skilled workers. Frost and Sullivan reports skilled body collision technicians earn approximately 20 percent less than their mechanical counterparts. But according to ASA's 2004 "How's Your Business?" survey, it found that collision techs in ASA-member shops bring home $51,674 annually versus mechanical techs who bring in $45,632 annually. Ron Nagy, owner of Nagy's Body & Frame Shop Inc. in Doylestown, Ohio, also questioned the salary comparison in Frost and Sullivan's study. "I could see starting mechanical techs making more than collision, but that's not the case when it comes to skilled technicians," he said. An interesting statistic outlined in the study showed that unreported collisions represent about 7 to 8 million collisions annually. In fact, the number of unreported collisions is growing steadily as a result of rising insurance premiums. Drivers involved in collisions are simply not filing claims. Rising insurance premiums restrain many people involved in accidents from making claims. Either they choose not to repair the damage or the parties concerned make private arrangements to avoid notifying the insurance company. Moreover, scrappage rates are rising, further restraining collision victims from seeking repair jobs, the study cited. Darrell Amberson, AAM, director of ASA's Collision Division and general manager of Lehman's garage in Bloomington, Minn., said some insurance companies in his area have reported insurance claim declines of 20 percent to 25 percent in the past year. Amberson added: "If the numbers of collisions are up perhaps many are not being reported to insurance companies and are probably not being repaired. Assuming that is correct, the declining number of shops is probably due to a combination of declining work and increased business going to some shops, many of them consolidators." Most everyone who responded to AutoInc.'s questionnaire agreed that shop consolidation is on the rise and they have witnessed its growth in their areas. One of the by-products of consolidation for independent shops, say members, is that it has made them more competitive. Verona said consolidation has led him to become a better owner. "They [consolidators] have made us become smarter business owners," he said. "You cannot run your business like you did a few short years ago because competition is so tough these days." While several Ops Committee members reported that consolidation is on the rise, its increase has not taken away business from their shops. "We are strong, healthy and getting bigger," said Nagy, who is planning to open a second shop in July, which is about 15 minutes away from his other shop. Nagy said despite the economic downturn of recent years, his shop continues to do more business each year. Nagy is representative of the 75 percent of the collision businesses in the "How's Your Business?" survey who had a positive outlook for 2005 when it comes to annual sales growth. Frost and Sullivan suggests that shop consolidation has made it more difficult to find skilled technicians. Verona said that it is more difficult these days to find qualified techs. "We don't have problems [finding good techs] at this particular time, but that doesn't mean that we won't have that problem," he said. Proctor also said he did not have a problem finding good techs but that his friends in other markets have. Frost and Sullivan's study underscores the need for shops to be educated about the issues and challenges that may impede their growth and progress. But with the right blend of superior customer service, savvy management skills and creative methods for marketing and advertising their businesses, ASA member shops can have an edge over their competition.
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Copyright (c) 1996-2008. Automotive Service Association. All rights reserved.
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A recent study by consulting firm Frost and Sullivan reports that since 2000, the number of reported collisions has experienced a general rise, ranging between 9 and 13 million annually. Unreported collisions represent another 7 to 8 million collisions annually. From 1997 to 2004, the number of body collision repair facilities - either independent or dealer affiliated - dropped by approximately 3.5 percent.
