An Analysis of the Collision Sector Your voice is needed to help meet the challenges we face. by Denise Caspersen As 2009 comes to a close, the collision repair industry continues to feel the pressures of the down economy. And there has been no letup of pressure from owners, insurers and consumers to contain costs. Many collision repair shop owners are trying to cope by implementing processes resulting in the repurposing of staff while improving cycle time, increasing "touch time" and producing high-quality repairs on technologically advanced vehicles. The year has seen nearly 4,000 dealerships close and that has produced concern on the part of independents in regard to parts. They're concerned about parts availability, available buying credit, delivery and the overall dealership parts supply channel. Recognizing that 41 percent of the average collision repair ticket equals parts, the volunteer leadership of ASA has put forth a great deal of effort to study the parts situation and see how they could help. Members of ASA's Collision Division took part in many discussions with various layers of the parts industry. To start, the Collision Division Operations Committee met with representatives from the Quality Parts Coalition regarding patent legislation - all the while stressing the need to have quality aftermarket parts beyond the proposed bill. Midyear, operations committee members spoke with manufacturers from the Taiwan Autobody Parts Association about the difficulty in identifying and receiving quality aftermarket parts. Later, ASA board members and members of the Collision Division's Crash Parts Subcommittee toured the test facility of the Certified Automotive Parts Association (CAPA). They discussed the usage of CAPA parts and repairer confidence levels regarding quality. They also discussed the return process for parts not meeting a repairer's requirements. In July, members of ASA's Collision Division team spoke to representatives of LKQ/Keystone in regard to aftermarket parts issues. They also discussed how LKQ/Keystone has changed following various mergers and acquisitions. In October, shop owners from ASA-Ohio spoke with representatives of Diamond Standard, a producer of safety parts, toured a Diamond Standard production facility, and gained information regarding aftermarket parts. Also in October, members of ASA's Collision Division Operations Committee, who also are members of CAPA's Technical Advisory Committee, went to Grand Rapids, Mich., for a meeting of the advisory committee. They continued to address the inconsistency in insurer requirements of CAPA parts. While parts issues have occupied much of the Collision Division's effort this year, it also has kept an eye on legislative issues - not the least of which is the full repeal needed of the McCarran-Ferguson Act. Scores of ASA members flew to Washington, D.C., in July to request its full repeal. Also, ASA understands that the state-by-state complaint system is not working. The opportunity to change that exists in the creation of a federal office of insurance regulation, which must include property and casualty insurance. Your voice is needed to accomplish these goals. All ASA members are urged to write letters on behalf of these goals to their congressional representatives via the ASA legislative Web site, www.TakingTheHill.com. The challenges of 2009 continue. And ASA continues working on your behalf to improve your industry. For a look at how ASA shops fared in 2009, see the "How's Your Business?" survey results below. Remember, many of 2009's challenges will carry over to the new year. So, again in 2010, your voice will be needed if we are to make a difference. Plan now to participate in the next ASA Capitol Hill Fly-in, which will take place May 11-12, 2010. And if you would like to be better informed on the actions taking place in ASA's Collision Division on your behalf, sign up for the ASA Collision Ops ACTIONS by e-mailing me at denisec@asashop.org. We wish you the best in 2010! Denise Caspersen is ASA's Collision Division manager. She can be reached at denisec@ASAshop.org.

Introduction to Collision

With 2009 coming to a close, the Automotive Service Association has found that there has been a decrease in the collision industry from 2008 to 2009 in the number of shops, which total an estimated 34,954. ASA is also estimating the number of employees to be 225,417 in 2009. These collision specialists are responsible for fixing the estimated 43 million vehicles involved in collisions in 2009 that result in repairs.

There are approximately 251 million vehicles in operation and the estimated average age of cars is 10.6 and for trucks it is 9.3 years of age in 2009. In June, the U.S. Dept. of Transportation reported travel on all roads and streets was an estimated 256.7 billion miles for that month. From January to June of this year, the cumulative estimate was 1,446.1 billion. In June 2008, the miles traveled for that month was recorded at 251.7 billion miles; and, collectively, 1,452.2 billion miles annually.

Travel, employment rate and the economy affect the automotive service and repair industries. The Bureau of Labor statistics reports "Nonfarm payroll employment continued to decline in September (-263,000), and the unemployment rate (9.8 percent) continues to rise."

In today's economy, individuals may request to make the vehicle driveable, but not be in a position financially to repair the vehicle to pre-accident condition. As a result, this impacts the industry, and the safety of our transportation. ASA is estimating annual sales for the independent side of the collision industry to be a conservative $28 billion. This figure does not include the approximately 7,204 franchised dealerships with body shops generating an estimated $7 billion in 2008, according to the National Automobile Dealership Association.

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Business Profile

The majority of independent collision repair shops continue to be family owned (95 percent), independent (92 percent) businesses that have been in operation, on average, 32 years. These shops currently operate an average of 21 operational bays per business. Operational bays are defined as those bays in which a tech works that produce revenue. These include paint booths, mechanical bays, metal bays and prep bays. Below is an average of bay counts, years in business and average collision ticket by region.

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Owner Profile

ASA collision repairers possess many skills and extensive industry experience. Survey participants include owners (69 percent), managers (33 percent), office staff (12 percent), service writers (10 percent), and 9 percent who report that they carry out duties at all staff levels.

The average age of survey participants was 47 years with 26 years of industry experience. Forty-four percent of respondents were from the Midwest, 25 percent were from the South, 23 percent were from the West and 8 percent were from the Northeast.

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Staff Profile

There are various levels of frame or body technicians employed at collision shops.

For example, the apprentice technician has two years or less of experience, the entry-level technician has two to four years of experience, and the most common employee is the experienced technician with five or more years of experience. The Bureau of Labor Statistics reports employment of automotive body repairers is expected to grow 12 percent over the 2006-2016 decade, as compared to 10 percent for all occupations.

On average, ASA collision shops employ two or three experienced technicians, each earning approximately $58,656 annually and averaging 19 hours of training. Forty percent of repair shops indicate they do not employ apprentice or entry-level technicians. For the 60 percent that staff those employees, there is approximately one per shop and earnings range from approximately $18,041 to $23,845, respectively, per year. ASA members report an average of 41 hours of training for apprentice techs and 24 hours for entry-level technicians.

Painters with two to four years of experience are considered entry-level, and experienced painters have five or more years of experience. ASA members tend to employ one to two experienced painters, and report annual earnings of $65,291 for an experienced painter and an average of 19 hours of training annually. For the 56 percent of shops staffing (one) entry-level painter, the salary is approximately $22,382 annually and he/she has an average of 18 hours of training.

Ninety-six percent of ASA members typically staff two estimators who earn, on average, $44,494 per year and receive 21 hours of training. Shop, production and parts managers are staffed to oversee various stages of the business. Office staff is knowledgeable in the processes of administration fundamentals, insurance filing procedures and developing customer service skills. Shop managers are trained approximately 26 hours per year.

Staffers get hired and promoted and, sometimes, leave. The adjacent chart takes a look at staff movement.

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Sales Profile

The average number of estimates written so far in 2009 is 144 per month. Of those, approximately 11 percent are labeled "total losses." The average number of repair orders is 113 per month and 23 percent are customer pay, not filed as an insurance claim.

The average ticket for ASA members so far this year was $2,081, with parts capturing 41 percent, labor (44 percent) and paint and materials (15 percent). ASA members report participating in an average of four direct repair programs (DRPs) that drive approximately 39 percent of the business.

Customers electing to pay out of pocket spend an average of $1,010 per repair order.

Members were asked to compare current sales to those in 2008. In 2009, 27 percent of collision shops said they experienced an average 15 percent increase in sales due to increased customer service (85 percent), marketing and advertising efforts (54 percent) and better management skills (31 percent). Twenty-three percent link better sales to economic conditions and technician training/education (15 percent).

Fifty-four percent of shops cited an average 17 percent decrease in sales compared to last year. All participants cited economic conditions (100 percent); 19 percent attribute the decline in sales as weather related and 15 percent state parts profits as a factor in declining sales. Among other reasons for weakening sales: claims and accidents are down. Also, because of an increase in sales tax and insurance steering.

Respondents were asked about their gross annual sales for 2008. Thirty-one percent of polled members reported their annual sales ranged between $1 million to $2 million.

Sixty percent expect 2010 sales to increase and 31 percent expect sales to remain the same as last year. A sales decrease is anticipated by 9 percent of survey contributors. Looking back at 2008, sales expectations for 2009 were predicted to increase by 49 percent of the participants and 27 percent actually experienced an increase in 2009.

Many collision shops offer additional products and services to entice new and returning customers. Detailing (67 percent), mechanical services (51 percent) and glass repair/replacement services (55 percent) are among the most popular services. Forty-three percent offer custom paint and tires, and 32 percent offer wheel sales. In the "Other" services category, 39 percent offered fiberglass and motorcycle repair and towing.

Paintless dent repair (PDR) is another service offered by collision shops. Of the hail damage repair, 34 percent offer this method of dent repair. Seventy-eight percent of those using PDR use a vendor of their choice, 16 percent use multiple vendors and six percent use insurance-recommended vendors.

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Parts Profile

Collision part sources include OEM (63 percent), aftermarket (20 percent) and recycled parts (17 percent). Of the 20 percent that purchase aftermarket parts, 84 percent are certified. Fifty-five percent of the aftermarket parts that are rejected are non-certified.

Eighty-two percent of participants experience comebacks (includes OEM, aftermarket and recycled parts). See the chart below left for the number of comebacks and the percentage related to defective parts.

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Customer Profile

To reach new and repeat customers, 94 percent of ASA collision members operate a Web site. Repeat customers make up 61 percent of a repairer's customer base. Fifty-two percent of customers are female. Nearly half of ASA members have adjusted their marketing efforts to attract more female customers. To attract female customers and make them more comfortable, shops have hired female estimators, invested in more attractive lobbies, bathrooms, landscaping, etc. In addition, shops are hosting educational events to boost their visibility in their communities.

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Conclusion to ASA's 2009 'How's Your Business?' Survey Report This year's report explores the overall success and business practices of ASA member businesses. Through the annual "How's Your Business?" survey, ASA provides an analysis of the independent collision and mechanical industries. Members may use this information as a comparison benchmark and as a platform for developing future business plans. Doug Hawker As incentive for participation, ASA offered a free "Economic Survival Guide," a collection of articles from AutoInc., and a drawing for a $250 gift card. The ASA winner of the gift card was Doug Hawker of Hawker Automotive Inc. in Saint George, Utah. Hawker Automotive performs both collision and mechanical repairs and has been an ASA member since 2005. We look forward to the participation of future contributors to the 2010 "How's Your Business?" survey.

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