Talk about skewed data, CAPA’s response to the California Autobody Association’s survey on aftermarket parts is nothing but smoke and mirrors and ‘new math’.  Let’s set the record straight.  The CAA survey was consistent and impartial.  In fact, many experts would hold the opinion that the data reported in the CAA survey was somewhat conservative and that the ratings given to aftermarket parts manufacturers were much less critical than deserved.
CAPA’s response discounts the credibility of the CAA survey primarily because (according to CAPA) CAA members only account for about 18% of the shops in California.  The fact is that shops all over the state, and all over the nation for that matter, are using plenty of aftermarket parts, whether they are CAA members or not.  Don’t shoot the messenger, just because the CAA used its member list to collect the data.  Anyone with two neurons clickin’ would agree that the CAA membership is a good representation of many shops throughout the state, and they all suffer the grief that goes along with using aftermarket parts.
CAPA’s response to the CAA survey, defending the attributes of their counterfeit products and giving themselves a stellar scorecard, is no different than a restaurant’s management personnel filling out customer survey cards themselves.
Look, most shops are very committed to maintaining high levels of customer satisfaction, otherwise they couldn’t stay in business.  Delivering the vehicle in a timely manner is a big part of achieving this objective.  The benefits of a satisfied customer translate to repeat business, renewed policies, reduced claims costs, reduced administration, and a smoother claims & repair process.
The use of aftermarket poses some unique challenges from an availability standpoint.  Every vendor says ‘Yeah, we’ve got it’; only to find they don’t have it and can’t get it.  Yet the most significant hurdle we are faced with is the huge ratio of rejected parts.  These rejects range from poor fit, incorrect application, to damaged parts, just to name a few.  Below, I’ve illustrated the data collected in our shop for just a one-month billing cycle. I've changed the names but the data is spot on.
1.    ABC Corporation  -  22 Invoices  -  15 Returns  -  68% Failure Rate
2.    Beta Distributors  -  14 Invoices  -  8 Returns  -  57% Failure Rate
3.    ABC Parts  -  25 Invoices  -  12 Returns  -  48% Failure Rate
The average for these three examples is a whopping 57% failure rate. These deficiencies result in costly production delays, decreased cycle time, added administration costs, and most importantly, reduced customer satisfaction.  Because we are graded on all of these areas by our insurance partners, I think it’s important to share this information.

In anticipation of the “Well you’re the only one….” response, I counter with the obvious rationale, that we’re the only one that has taken the time and effort to collect and share the data.

You want the truth about what’s really going on with aftermarket parts?  Ask the soldier in the trenches.  And that would be the bodyshops all across the country, guys like you and me.
Joe Hinkens

As many of you already know, some of the OEM parts manufacturers are cutting their list prices to be more competitive with the aftermarket parts manufacturers.  The problem is that in many cases, the list price is lowered while the bodyshops' cost remains the same, thereby seriously eroding the profitability on the part.

An Open Letter to the OEM Manufacturers
Counterfeit Parts and OEM Competitive Pricing Structures
Sirs,
Obviously, the aftermarket parts industry has placed a huge burden on vehicle manufacturers and collision repair shops.  The data we collected in recent months revealed that 57% of the aftermarket parts we received were rejected due to poor fit, incorrect application, or damage.  These deficiencies, along with a long list of others, are part of the many compromises collision repairers must endure when using aftermarket parts.

Speaking on behalf of the majority of the collision repairers, we would much prefer to use OEM replacement parts.  For years, when the price of an OEM part was close to that of an aftermarket substitute, we purchased the OEM part and absorbed the additional cost.  This benefited the customer, the technician, and our sanity.  It was simply less painful to pay a bit extra than to suffer the pitfalls of using aftermarket parts.

The logic of OEM’s cutting list prices to compete with the aftermarket parts industry makes sense.  The objection that I, and many of my colleagues share, is the practice of cutting the list price but not the wholesale cost.  This practice often leaves the repair shop with a meager 8% margin (or less) on many of the most common collision replacement parts.  Knowledgeable collision industry experts agree that a minimum of 25% GP is required on all parts to maintain an acceptable level of profit overall.

In spite of our preference to utilize OEM parts, this practice of stripping the gross margins only encourages our industry to tolerate the deficiencies of aftermarket parts.  We understand the economic pressures that OEM’s are experiencing at the hands of foreign parts counterfeiters.  But we can’t understand how collision repair shops should be expected to suffer the financial burden of this problem.

We propose that the OEM’s immediately restore the gross margins on all parts to a respectable level of 25% or more for wholesale purchasers, i.e. collision repair shops.  Not doing so will only result in promoting counterfeit parts usage and further diminishing OEM parts sales. We also propose that the OEM’s put their efforts toward legislation and other strategies that would guarantee the motoring public replacement parts of “like kind and quality”, delivered in an organized and timely manner that the counterfeiters obviously cannot accomplish.

Please consider our position.  For those of us in the collision repair business, if there is no profit in OEM parts, there is simply no reason for us to use them.  Sincerely,
Joe Hinkens

I just read a great article by Mike West on refinishing unprimed bumper covers.  Mike is an expert with over 40 years in the collision industry.  His report will educate you on all the details and mystery surrounding the process of painting new, unprimed bumpers. Click here for the full report.

We're making good progress on our web version of the MIS Materials Invoicing System.  We expect to launch in September.  Lots of folks ask how it works and what it's all about.  I can't divulge all the proprietary details but I can tell you this, it's fast, accurate, and simple.  Take a look by clicking here for a printed overview or here for a video overview.

I can't believe my ears!  I shouldn't be surprised.  This nonsense has been shoved down our throats for decades.  I spoke to a good friend of mine recently from Salt Lake City.  He runs production for a big store doing $700K a month.  He said they've been bombarded lately with DRP accounts forcing their hand on used quarter panels.

The argument is short and bitter. It goes like this:  "I'm giving you 4 hours clean up time.  If you're not happy with the program, we can find another shop."

I remember years ago negotiating a repair where the adjuster had written for a used quarter panel on the estimate.  Finally, to keep the peace, I conceded with some conditions.  I insisted on an additional 25 hours of labor and $75 to dispose of the carcass remaining after the used quarter panel was harvested from the rear clip the junk dealer would provide.  

Here we go again.  Why we end up discussing such nonsense escapes me.  As most of you know, many insurance companies have determined that tinting AND blending on the same repair is not necessary.  The reality is that this is just another way of saying 'You're going to eat this, and you're going to like it'.

C'mon folks! Let's come together in the same galaxy for cryin' out loud.

Here's an excerpt from the refinishing manual of one of the most respected paint manufacturers in the world.  Last I checked, these guys were pretty knowledgeable about paint.  For goodness sakes, they make the paint!!!!  Here's what they have to say:

It is baffling to me that the data providers continue to get away with blend times listed at 50% of the panel's base refinish time.  Most of you have heard the story before, but let's go through it briefly once again to see if I'm a kook or just one of many who see things for what they are, no smoke and mirrors involved.

1 - PREPARATION

Is there any difference whatsoever in the time it takes to prepare a panel for a blend versus refinish?  Remember, we're not talking about preparing repaired panels or damaged panels.  Read the ‘P-Pages'.  "Published refinish times are for one color applied to new, undamaged OEM replacement components..."  So the answer is obvious.  No there is no difference.  Some experts take the position that it actually takes longer to prepare a panel for blending than basic refinishing.

I've watched our margins deteriorate  significantly over the past year or two as the insurance companies react to this changing economy.  Some of the stuff they come up with and the manner in which they justify it is baffling to me.  I guess they figure that shrinking labor times in the database just aren't enough.  They've set out to rewrite (ignore) the p-pages to fill the void. 

One of their tactics  that they've used for years is to simply make the billing process so difficult that shops just won't bother.  Here's an example:  One insurance company began insisting that no 'color sand & polish' be  added to the estimate.  They argued that it must only be added as a supplement.  Now they've raised the bar a notch by insisting that any supplement for color sand & polish must include photos of the operation actually being performed.   And to make matters worse, we've got a long list of insurance 'experts' arguing that if we knew what we were doing, we wouldn't have to buff anything.

Who knows where this will go but it's surely not moving in the right direction.  The slumping economy has placed a lot of shops in a position of desperation, taking anything they can get even if it means working for nothing.  Today I prepared the following letter for my staff, trying my best to be 'diplomatic'.   I trust that you'll understand the message behind the message.

It appears that counterfeit (aftermarket) parts are here to stay.  Insurance companies in our market are pushing them harder than ever before.  The latest craze seems to be pitting the counterfeiters against one another.  In the meantime, we're watching profitability continue to erode.  To make matters worse, as the competition among aftermarket manufacturers heats up, the failure rate continues to increase.

 We recently conducted an internal survey with the three most common aftermarket suppliers in our market.  LKQ, Alpha, and Dynacorn.  In a one month period here were the stats:

 LKQ Corporation:    22 invoices    -    15 returns   -   68% failure rate

We'll be introducing our new Materials Invoicing System at NACE this year in Las Vegas. The dates are Thursday, November 5th through Saturday, November 7th.  So make a point to stop by and see us at booth #  N8602.  If you can't find us there, you might want to check the craps table at the Mirage.  YO eleven!