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Quality. Fit. Price. Availability. These and other issues have defined the debate between aftermarket and original equipment (OE) parts for many years. Many would argue that there have been tremendous strides in resolving these issues. Others would disagree, stating the industry today is where it was 15 years ago on this matter.
The Real Truth about Aftermarket Parts was the title of a NACE panel discussion held Saturday morning. At the conclusion of the 90-minute discussion, one thing was evident -- "truth" as it relates to aftermarket parts has many different definitions.
Robert Redding, the Automotive Service Association's Washington, D.C., representative, moderated the morning's discussion. To open the meeting, Redding provided a brief summary of what has transpired in the state and federal governments relative to regulating aftermarket parts. Since 1995, Redding said, there have been approximately 20 bills considered annually in various state legislatures. Following the State Farm lawsuit, 40 bills were introduced in the states. "Very few," he said, "become law."
At the national level, the National Highway Traffic Safety Administration (NHTSA) is charged with regulating automobile safety. Historically, the agency has exhibited very little interest in ensuring the safety of aftermarket parts, Redding said.
Earlier this year, Rep. Ron Klink, R-Pa., asked the Government Accounting Office to investigate NHTSA's role in regulating aftermarket parts from a safety standpoint. The results of that investigation will be released soon, Redding said.
Turning to the panelists, Redding asked them to discuss where the collision repair industry is today, and where it's going, with aftermarket parts.
Robert Hurns, associate counsel for the legal-legislative staff of the National Association of Independent Insurers (NAII), was the first panelist to speak.
The NAII supports the use of certified aftermarket parts, Hurns said. "We do not support the use of uncertified parts." The NAII also supports consumer notification when aftermarket parts are used in a repair.
There is a perception that insurance companies are grouped as one entity acting alike. That, Hurns said, is an inaccurate perception. "No two NAII insurers are alike. Insurance companies are more competitive today than ever," he said.
Increased competition has resulted in many different auto insurance products for consumers to consider. Some specify the use of aftermarket parts in the repair. Others specify the use of OE parts. When buying insurance, consumers can decide what type of coverage they want for their vehicles, Hurns said.
Jack Billington, founder of Billington Consultants, said the existence of aftermarket parts in the marketplace has resulted in better quality OE parts.
Looking forward, Billington said he sees a lot more changes in aftermarket parts, including more certification. The future of collision repair, he said, is a bright one for everyone and "aftermarket parts are part of that future."
Rod Enlow, a claims business analyst with USAA Property and Casualty Insurance, said everyone involved in collision repair wants parts that fit well everytime. Repairers also need to have a fair profit margin whether they use OE or aftermarket parts.
USAA believes there is a place for Certified Automotive Parts Association (CAPA) certified aftermarket parts in the repair industry, he said. From a repairer's view, it should be important that the part is, in fact, certified because that takes the responsibility of for the quality of a part off the shop.
There has been a great deal of time spent looking at aftermarket parts by individuals representing all segments of the industry, Enlow said. From that, there is an understanding by manufacturers and distributors that the industry wants and needs quality aftermarket parts.
Eileen Sottile, director of government affairs for Keystone Automotive Industry, said the legislative efforts designed to resolve the parts debate have failed. Legislation never provides acceptable solution to marketplace problems, the former New York state legislator said. The marketplace itself will, over time, correct its own problems.
All entities represented in the collision repair process -- body shops, parts distributors, and insurers -- need to work together to ensure the end product that's delivered to the consumer is a quality product, Sottile said.
Chris Dameron, the safety standards manager of True2Form Collision Repair Centers, said, "All we want is good parts."
Most repairers have seen good and bad CAPA parts, he said. "We want consistency. Consistently good parts."
Dameron added that shops have been test fitting aftermarket parts for manufacturers without pay. When the part doesn't fit and has to be removed and returned, all this time and work is done without compensation.
"In my store we never had a care leave in 18 or 20 years with an aftermarket pat," Dameron said. "We tried them, but none met the quality we demanded."
The last panelists to speak was Lou DiLisio, Jr., a former shop owner and current president of Automotive Industry Consulting, Inc. Aftermarket parts, he said, have come a long way since the 1960s. But, he added, it needs to go a long way more.
One problem is that parts distributors have focused on cost more than quality as a means to sell their product. Positively, that focus has changed in the past three to five years where the focus is going away from cost and more to quality, DiLisio said.
Having visited parts manufacturing plants in Taiwan, DiSilio said they are willing to listen and respond to the concerns of the repair industry.
After the panelists spoke, the audience was given a chance to ask questions. The debate over aftermarket vs. OE parts continued. Those who spoke as representatives of manufacturers, insurers and distributors said the quality of aftermarket parts have improved significantly. Repairers were encouraged to be open-minded and ensure that the aftermarket parts they use are certified.
Repairers said they have had enough negative experiences with aftermarket parts that acceptance of aftermarket parts as like kind and quality will not be immediate.
"If we can get the quality up, we don't have objections to using aftermarket parts," Dameron said.
"Our industry has been somewhat slow to assimilate technology," Turlep said. He was surprised that the majority of the attendees said they have access to the Internet in their shops and illustrated the growth of the Internet by several statistics that included:
Although only 16 percent of small businesses are online, Turlep believes that is important for all collision repair shops to integrate the Internet into every facet of their operations, including administration parts, insurance and estimating. However, he offers caution from purchasing some of the options offered by the many "dot-com" companies exhibiting at NACE too quickly. You should always ask how the Internet systems work, how many people use it and if you can have access to customer referrals. He also stresses that the shop owner does not have to be Internet savvy in order to succeed.. "Partner with companies you trust to get you through the Internet buzz-word bingo," he said. "Find people that have Internet experience."
Turlep believes that the main contribution of the Internet for the collision industry is improving supply chain management. It will bring together a network of suppliers, paint companies, insurers and customers. "This is all going to happen. But, it is not going to happen as quick as everyone thinks it is."
Although the change may not occur too quickly, Turlep suggests that shops begin preparations now by installing phone lines in each bay to be used later for Internet connections. "Whatever made you successful in the past won't in the future," he said. "If you want to be a winner, the Internet is the technology that will drive you there."
Turlep predicts that several entities that drive the collision industry will become obsolete in coming years. The disappearance of "snail mail," FAX machines, printed materials, CD-based estimating systems, imaging systems and management systems, individual resources and printed bills will all yield to Internet applications. Overall, theses new implementations will benefit the industry in a number of ways, including:
He concludes by stressing that early adopters are the most profitable. Collision shop owners must begin to implement Internet technologies in their shops in order to compete in the future. He ends with a quote from Ralph Seferian, vice president of Oracle: "Change the rules before somebody else does."
Harrington's goal was to present enough "nuggets" of information that everyone could leave with valuable tips that could be implemented when they return to their businesses. "If you leave here with just a couple of tips, it's a 'win-win' for both of us," said Harrington.
Harrington, who has a background in behavioral science, used a number of props to deliver his humorous presentation. He shared many specific examples of unique marketing techniques that have worked for other shop owners. He believes the key to success in this area is finding a way to put fun back in your business.
He encouraged attendees to give to the community that gives back to them. "Do some creative stuff in your own community; join civic organizations and be part of your own community," he said.
It's vital that you educate your team on your plan marketing plan. "If you internal market, you'll eventually do external marketing," said Sullivan. You can't expect an unhappy employee to go out to the customers and make them happy.
The big picture, according to Harrington, is that people buy you first, then they buy your company, then they buy your product. "The stink of the fish starts from the head," he said.
Harrington also shared a recommended reading list with attendees that included the following titles: Who Moved My Cheese?, Spencer Johnson, M.D.; Raving Fans, Ken Blanchard and Sheldon Bowles; Gun Ho!, Ken Blanchard and Sheldon Bowles; Tuesdays with Morrie, Mitch Albom; 1001 Ways to Reward Employees, Bob Nelson; and Green Eggs and Ham, Dr. Seuss.
"Green Eggs and Ham is the second-best book ever written!" said Harrington. "In this little children's book there are 12 closes!"
"The hidden price game is over," said Sullivan. In the past, insurers were selling a feel-good message to consumers using "warm, fuzzy" agent shots. Now they're selling price, said Sullivan. "Insurance is not a commodity; and people don't buy things on price."
"Price plus product equals value," said Sullivan. Are insurance policies different? Yes. Do consumers know the difference? No. According to Sullivan, insurance companies are experiencing a total failure to communicate the real information on product differences.
"If insurance is sold as a commodity, there's no room to fight for quality," said Sullivan. "Today, insurance companies advertise price, which means that shops are the commodity."
Referencing a J.D. Power and Associates survey conducted in California, Sullivan said GEICO came in first in customer satisfaction. Its selling point to consumers has been price, and consumers listed price as their No. 1 concern. But this doesn't have to be the case, he said.
For businesses today, Sullivan recommends delivering the value that is right for most people. Anyone delivering the absolute highest quality product will end up with a very small customer base, said Sullivan. Rather than the "best" product, your goal should be an efficient product. "It's an art, not a science," he said. "You have to figure out where it is that most people are willing to pay."
Sullivan said insurance companies are struggling with auto repair control. It's not practical to own their own shops. Instead, they want more influence.
Sullivan also said the auto repair costs are killing insurers. "In an increasingly competitive market, controlling claims cost will be critical," he said. "Getting left behind is fatal." He added that innovations, such as direct repair programs, have helped, but fall short of needs and opportunity.
Several challenges for insurers and the collision repair industry were presented. Sullivan said challenges for insurers included:
Sullivan said the auto repair industry needs to remain in its role as "ombudsman," protecting the consumer.
Challenges for the collision repair industry include:
On consolidation, Sullivan asked if it was a friend or a foe. The answer was both. Sullivan predicts that there will be some from of consolidation that will continue to guide the industry. It will shift relationships and also lead to more efficiencies and information. Consumers will revolt, however, if repairer become aligned with providers, said Sullivan.
Sullivan also outlined his views on OEM vs. non-OEM parts. In a nutshell, he believes that when you have no competition, product is overpriced. "Insurers forced the issue before it was economically viable," said Sullivan, who believes that slowly but surely non-OEM parts will come back as branded items ... only if they fit and only if customers like them.
Finally, Sullivan summarized his views on the future trends of several insurance companies, including direct sellers such as Progressive, GEICO and AIG. He outlined which competitors were the "ones to watch," which were among the hottest on the market, who will survive and which have experienced "too much success too soon."
For more information on the insurance industry, visit Sullivan's Web site at riskinformation.com.
A decade ago, the goal of NACE and its sponsor, the Automotive Service Association, was to make the show a truly international event. "A place where the world gathers for collision repair," said Galen Poss, president of Hanley-Wood Exhibitions. Undoubtedly, that goal has been realized.
More than 3,300 international delegates are taking part in NACE 2000 -- a 26 percent increase over last year's international contingent. These delegates represent more than 70 nations, Poss said.
During a Saturday afternoon news conference, it was announced that more than 30,000 attendees will take part in NACE by its 3 p.m. Sunday conclusion. There are 601 companies exhibiting on 277,800 net square feet of floor space -- the largest ever for NACE in its 18-year history.
NACE 2000 could be considered the education NACE. For the first time, individual congress session tickets were available for purchase. Poss said over 1,500 such tickets were sold without any negative impact on full congress registrations. Also for the first time, education courses were held on Thursday morning and were attended by more than 1,000 delegates. There were a total of 30 different sessions this year, up substantially from last year's total of 16.
Among other highlights of the show, Poss said, was the reformatted General Session in which Kevin Caldwell, the NACE chairman, was interviewed in a lighthearted format similar to that of television talk shows. This break from the traditional speech proved entertaining while still allowing the import industry issues to be communicated.
The Exhibitor Showcase Presentations were not as successful as was hoped for, Poss said, placing much of the cause on the location of the showcase areas at one far end of the hall. In 2001, the presentations will be held in an area with higher visiblity, Poss said.
In other news looking toward NACE 2001, Tony Molla of the National Institute for Automotive Service Excellence (ASE) announced there will be a full range of ASE certification tests offered at next year's show. It will be, Molla said, "one more added value for those who attend the show -- to be able to walk away with professional accredidation."
NACE 2001 will be held in Las Vegas.
Keeping it simple (and organized) was the main theme for the Claims Handling: Creative Strategies Management course offered during Saturday afternoon. With Geralynn Kottschade, General Manager of Jerry's Body Shop, Inc., as the moderator, a group of about 150 gathered to learn about simplifying the day-to-day operating systems for collision shops nationwide.
With the theme "A Simpler Time . . . A Simpler Place," Kottschade reflected on the differences between the shops of yesterday and today. Citing differences in vehicle complexity such as design changes, the transition from metal to plastic cars and the danger that exists with today's vehicles for hidden damage, Kottschade remarked that the operating and management techniques that worked just ten or twenty years ago are not up to par for successful operation in today's collision environment.
With handouts and a PowerPoint presentation, Kottschade demonstrated to session attendees the ways in which she and those at Jerry's Body Shop work to eliminate unnecessary paperwork. Further, she presented solutions for antiquated operation systems, by suggesting that the smaller the amount of "paper"work, the better. Instead, she suggested that to keep up with the competition in this day and age, electronic was the way to go.
Randy Stadler, President of Pride Collision Centers, Inc., told sessiongoers that as a multishop owner, the biggest problem he experienced, and the areas in which he made the most mistakes, concerned cooperation and communication. He explained to the audience that his shop prepares and efficient, correct estimate and then presents it to the vehicle owner. He said, "We give the vehicle owner a thorough estimate, explaining it carefully and answering their questions. Then we quote a price and explain to them that we will and MUST call for their approval before changing the price of that estimate one red copper penny." Stadler went on to explain that his shop makes the same promise to his insurers. "Basically, we hold each other accountable. We let each other know that this is the price that has been quoted, and will be the price that is paid, unless the customer agrees beforehand to any changes or increases," he said.
Stadler suggested that to streamline productivity and increase profits and success, shop owners and managers should make the same agreements with their customers and insurers. He stressed reviewing claims and all suggested procedures to the vehicle before finishing a vehicle's repairs and releasing it to a customer or insurer. "The situation no longer exists that we can be satisfied to be collision repairers," he said. "Instead, we are now expected to be claims handlers, and to be efficient in our handling", suggesting that claims handling is an essential and vital part of collision repair, and would continue to be in the future.
Lastly, Panelist Mike Schoonover, of Schoonover Body Works, reemphasized the need for collision repairers to move into the electronic arena. "Our job is to maximize productivity, provide quality customer service and maintain customer satisfaction," said Schoonover. "As managers we bear the responsibility of making sure our customers are happy, our employees are successful and decidedly being willing to make changes."
Schoonover explained that he was thankful for Y2K, the highly anticipated computer virus that was expected to plague computers on January 1, 2000. Because Schoonover's shops had a system from the mid-80s, he reluctantly outfitted two shops with updated, top-of-the-line computer systems, including estimating and management software in the new systems. Despite his reluctance, he was delighted to discover the efficiency that these new systems gave his business. The management system and estimating system were contained in the same program, which eliminated the often-difficult problem of streamlining two programs. Furthermore, the programs eliminated a large amount of paperwork. Now, the paperwork and files that are kept in the shops are there simply because of DRP agreements that at any time, they can enter the Schoonover shops to see the works-in-progress.
Schoonover emphasized to shops, even those that are small, that without technology (and current electronic abilities) it would become harder and eventually impossible to succeed in the coming years. He said, "Foundation is key to shop success. Without a strong foundation in management and estimating systems, strong managerial techniques that ensure customer satisfaction and employee success and organizational skills that include attention to detail and consistency, a shop is doomed to fail." "Success comes with a strong foundation and creative solutions to claims handling," he said.
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