Crash Course: 2013 Canadian Collision Industry Forum

Hundreds of repair professionals gathered in Toronto on January 26 as part of the 2013 Canadian Collision Industry Forum (CCIF), an event for the collision repair industry to share information, best practices and a means to develop solutions to common issues and challenges. Attendees were treated to an array of sessions touching on technology, repair challenges and the need to attract and retain qualified people.

MATERIALS, ELECTRONICS A CHALLENGE

Vehicle electronic systems, lightweight materials and collision avoidance systems will be challenging to insurers and the repair shops who fix damaged vehicles, speakers suggested.

Asked if insurance claims and collision repair personnel have “timely, accurate, actionable, technical repair methodology available to properly assess and repair vehicle damage,” 55% of audience members who responded at the 2013 CCIF pressed buttons on wireless transmitters to respond “No.”

“Considering that everybody in this room is in the business of repairing cars and restoring lives… back to their normal flow, that’s a fairly poor assessment,” said presenter Matthew Ohrnstein, managing director of Symphony Advisors LLC in Irvine, California. “If I asked a room of physicians who are all heart surgeons, ‘Does everybody know the proper methodology to do bypass surgery,’ and 45% said yes and 55% said no, that would be a little bit disconcerting,” Ohrnstein offered.

During a panel discussion at CCIF, one collision repair executive noted the increased use of lightweight materials, such as aluminum and carbon fibre, is having a significant impact on repair shops fixing vehicles damaged in accidents.

“I don’t think a lot of people realize what investment is required to participate at this level,” said Flavio Battilana, chief operating officer of CSN Collision & Glass.

Complying with the certification standards of original equipment (OE) manufacturers is a big concern for Prochilo Brothers, owner Paul Prochilo suggested during the panel discussion.

“OE certification is going to be a real game changer,” Prochilo said, adding that “manufacturers are becoming more and more innovative and it’s going to require more specialized personnel to be repairing these vehicles, and that’s going to be a tremendous challenge for pretty much everyone in the business.”

Electronics systems are also increasing complexity for collision centres. “One day, we’re probably going to have to have an (information technology technician) on staff just to deal with the vehicles,” Battilana predicted.

Automobile manufacturers have an “increased propensity” to use lighter materials such as aluminum, plastics and carbon fibre, to provide better fuel efficiency, but that could drive up prices for the raw materials, Mike Anderson, vice president of data and analytics for San Diego-based Audatex, noted during Audavision, a conference organized by Audatex, held at the same venue one day earlier.

INSURER RELATIONS A TOP PRIORITY

Vehicle technology, reparability and OE certification were among the top three priorities identified by audience members at 2013 CCIF. Asked to identify top priorities from eight listed on a presentation slide: 34% cited vehicle technology; 42% noted attracting, retaining and training employees; 47% cited gross margins; and 54% pointed to insurer relations, programs and consolidation.

Symphony Advisors’ Matthew Ohrnstein told audience members “there is some potential conflict” between vehicle manufacturers’ certification programs — which are more prevalent in the United States than in Canada — and direct repair programs (DRPs) available through insurance firms.

One example involved an unidentified OE vehicle manufacturer program that requires its paint to be used, said Ohrnstein. “If you want to be a certified shop for that OE, you have to buy that paint that has their logo on it, pay more for it and charge the insurance company for it. That’s a conflict that we need to work through,” he argued.

Industry players taking part in a panel discussion acknowledged that conflict sometimes exists, but emphasized the importance of working with insurers.

Shops sometimes need to negotiate the different demands of vehicle manufacturers, customers and insurance partners, suggested CSN Collision & Glass’s Flavio Battilana. “Sometimes what happens is, the needs and the wants of the OE in protecting the brand, the vehicle quality, the customer’s expectations and experience, and the insurance partner trying to manage costs, sometimes the shop gets caught in the middle and sometimes we get stuck with a bill.”

Michael Macaluso, chief operating officer of CARSTAR Automotive Canada, said repair shops must work with insurers to figure out how to make a profit and still get vehicles fixed quickly. Citing new procurement models and partnerships with parts vendors, collision centre executives should say to insurers, “We understand your strategy, we want to be at the table. How do we work together for continuous improvement?’” Macaluso suggested.

CONCERN OVER PARTS ORDERING

With investment returns dropping and loss ratios remaining constant, insurance carriers are looking to cut costs on auto repairs, Symphony Advisors’ Matthew Ohrnstein told delegates to CCIF. Citing State Farm’s PartsTrader program — the shop orders parts online in some U.S. markets where its clients’ vehicles are being repaired — Ohrnstein said “State Farm is one of 10 (carriers) that are looking at getting between the collision repairers and the supply chain, and for differing reasons.”

Audience members were asked how many parts ordering systems they have, including those mandated by their insurers: 17% had five or more, 20% had four, 22% had three, 22% had two and 19% had one. “The more processes that you have, the more costly it is to operate your business and the more inefficient you become,” Ohrnstein said. “Think about all the other industries that have standards. We’re lacking that.”

He presented a table listing the market share for replacement parts from the vehicle manufacturers themselves, recyclers and after-market suppliers in the U.S. While the manufacturers have 63.2% market share, the after-market suppliers have about 16.1% in the U.S. and about 13% in Canada.

Recycled parts suppliers have about 13% market share in the U.S., he said, noting that those suppliers get their parts from vehicles assessed as total losses. While total losses account for about 17% of auto claims in Canada, many of these never get dismantled for recycled parts, Ohrsnstein reported.

“They get rebuilt and a huge percentage, somewhere around 40 or 50%, go offshore,” he said. In response, some carriers no longer take the total loss vehicles to auctioneers, but instead to firms that dismantle them, knowing the parts will be available for future repairs.

In North America, about US$33 billion is spent every year on auto repair, while the insurance industry spends another US$20 billion annually on total losses. Ohrsnstein suggested the collision repair industry would benefit if consumers could be persuaded to repair vehicles that would otherwise be assessed as total losses. “A total loss is not good for the consumer, nor is it good for the (manufacturer) because there is a higher propensity for consumers to switch brands,” he said 

SKILLS SHORTAGE IN NEED OF REPAIR

Speakers also reported a problem faced by collision repair centres that is an issue for other industries as well: finding qualified people. In a poll of audience members, Leanne Jefferies, director of the CCIF skills program, asked if they were hi ring technicians, how long would it take to find a qualified, licensed technician? Slightly more than half, 53%, said it would take longer than two months.

“We definitely don’t have technicians beating down our door,” Jefferies said.

During the afternoon panel, Sam Piercey, vice president and general manager of Budds’ Collision Services Ltd. in Oakville, Ontario, suggested some repair centres pay entry-level workers minimum wage and do not offer them sufficient opportunities.

“In a lot of shops, they have to sweep floors and they have to do all the Joe jobs,” Piercey said. “They don’t get the hands on and they get discouraged.”

One organization involved in hands-on training is I-CAR Canada, the training and recognition program run by the Automotive Industries Association of Canada. Andrew Shepherd, director of collision, said I-CAR Canada now has 81 courses and 55 active trainers.