A Look at the Business of Collision Repair Your voice is needed to help meet the challenges we face. by Denise Caspersen "I don't really think in terms of fate; I think in terms of purpose, and of following a purpose that one really cares about and believes in." - Kurt Listug, CEO, Taylor Guitars, in that firm's Wood & Steel magazine, Vol. 65, Fall 2010 The pressures of poor economic conditions in 2010 continue to hamper body shop financials and growth. There has been a notable decline in the number of body shops and an increase in constraining financial pressure. Having endured multiple years of economic decline and financial constraints, the collision repair industry is independently responding with greater uniformity, advanced business processes, increased shareholder investment and improved technology. Combining skill and craftsmanship, the collision repair industry is resilient and adaptive. A characteristic of many body shop owners I've encountered is that they have purpose, meeting and even surpassing their day-to-day goals of generating enough dollars to cover costs and profit, culminating in a path to provide the best possible repair for the motoring public - an honorable path with purpose. Collision shops have adapted to the times with greater implementation of standard operating procedures, a reduction in overlapping tasks, increased participation in both management and technical education, and increased adoption of "repair standards." The successful body shop owner of today acts within a long-range, futuristic plan. Within the past year, the conversations of aftermarket parts quality and safety, the possible adoption of a repair standards model and responses to software technologies exemplify a path of purpose - the purpose of providing the safest, highest quality collision repair and receiving appropriate compensation. As aftermarket parts certification, quality and safety continue to be discussed within the body shop community, collision repairers act as advocates for the consumer in relation to the best possible repair based on circumstances. Although studies show Automotive Service Association (ASA) collision members have consistently elected to use a majority of original equipment parts, as the landscape changes - be it financial constraints, third-party pressures, consumer constraints, etc. - purpose-driven shops are implementing additional parts sourcing opportunities, including online sources. Shops are also paying close attention to newly developed aftermarket certification programs from the Certified Automotive Parts Association (CAPA), Diamond Standard and NSF International. As collision repairers continue to walk their paths with purpose, this year has also produced greater conversation, input and action relating to shop "certification." ASA, the Collision Industry Conference standards committee, Verifacts Automotive and others in the industry have engaged the community on the possible development, adoption and implementation of body shop certification, similarly described as repair standards. A successful standards model, developed by Thatcham in England, is a basis for the current conversations. Advantages of adopting such standards include consistently providing the best possible repair to the motoring public, communicating the abilities of collision repair facilities to the industry and the public, reducing the friction between collision repairers and insurers, increasing professionalism and improving processes. If current economic conditions continue through 2011 and potentially into 2012, it remains vital for the collision repair industry to better define its path. One way to stay engaged in the industry is through your membership in ASA. ASA can help you better define the path your body shop needs to take and help you walk that path with purpose. We wish you the best in 2011 as you walk your path with purpose. Denise Caspersen is ASA's Collision Division manager. She can be reached at denisec@ASAshop.org.

With 2010 coming to a close, the Automotive Service Association has found there has been little change in the number of shops in the U.S. collision industry from 2009 to 2010, which is estimated at 34,956 (compared to 34,954 last year). ASA also estimates little change in the number of employees in the industry, with only a slight decrease from 225,417 in 2009 to 225,400 in 2010. These collision specialists are responsible for fixing the estimated 42 million vehicles involved in collisions in 2010 that result in repairs.

There are approximately 248 million vehicles in operation and the estimated average age of cars is 10.6 and trucks, 9.6 years of age. In June, the U.S. Department of Transportation reported travel on all roads and streets was an estimated 263.8 billion miles for that month. From January to June of this year, the cumulative estimate was 1,469.8 billion. In June 2009, the miles traveled for that month was recorded at 260.4 billion miles; and collectively, 1,468.2 miles.

Travel, employment rate and the economy affect the automotive service and repair industries. The Bureau of Labor Statistics (BLS) reports "nonfarm payroll employment continued to decline in September (-95,000), and the unemployment rate (9.5 percent) continued to trend up." See the chart above for unemployment rates by region for 2010, compared to 2009.

The BLS Household Survey Data states, "Since the start of the recession in December 2007, the number of unemployed persons has slightly decreased to 14.8 million, and the unemployment rate has steadied at 9.8 percent."

In today's economy, individuals may request to make the vehicle driveable, but not be in the position to repair it back to pre-accident condition. This reluctant decision 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 $27.9 billion. This figure is based on the actual annual sales listed by the U.S. Census Bureau for 2008, as 2009 figures are not yet available. These figures do not include the approximately 6,285 franchised dealerships with body shops generating an estimated $7.2 billion in 2009, according to the National Automobile Dealership Association.

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Business Profile

ASA collision member participants are mainly independently owned (94 percent) collision repair businesses and continue to be family owned (96 percent). Shops have been in operation, on average, more than 33 years and currently operate 14 to 16 bays per business. See the adjacent chart for an estimate of bay counts, years in business and average collision ticket by region.

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Participant Demographics

ASA collision member participants possess many skills and extensive industry experience. Survey participants include owners (73 percent), managers (37 percent) and 16 percent are employed as office staff. Ten percent claim they carry out duties at all staff levels. Members were allowed to select more than one title; therefore the total was more than 100 percent.

Survey contributors averaged 51 years of age with 28 years of industry experience. Respondents weighed in from the Midwest (47 percent), the South (21 percent), the West (21 percent) and the Northeast (11 percent).

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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 at 1 percent over the 2008-18 decade, as compared to 10 percent for all occupations.

On average, ASA collision shops employ two to three experienced technicians, each earning approximately $45K to $55K annually and receiving 5 to 10 hours of training. Forty-four percent of members compensate their experienced technicians on a flat rate program. Fifty-four percent of survey contributors indicate they do not employ apprentice or entry-level technicians. For the other 46 percent who do staff apprentice or entry-level technicians, there is approximately one per shop and annual earnings generally range from $15K to $20K for apprentices, and $25K to $35K for entry-level technicians. Apprentice and entry-level technicians are generally paid on an hourly basis, same as painters with less than five years of experience.

Painters with two to four years experience are considered entry-level and experienced painters have five or more years' experience. ASA members tend to employ one to two experienced painters, and report annual earnings of $45K to $55K and average five to 10 hours of training annually. For the 96 percent of shops staffing one entry-level painter, the salary is approximately $15K to $25k yearly and he/she has an average of one to five hours of training.

Estimators are required to have an understanding of vehicles, paint and material to generate an accurate estimate for customers. They need to have technical training, administrative operations and be acutely aware of the value of customer service to deal face-to-face with clientele. Ninety-three percent of ASA members typically staff one estimator, a salaried position that earns, on average, $45K to $55K per year. The average estimator also receives one to five hours of training.

Shop 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. According to survey respondents, shop managers are trained approximately five to 10 hours per year.

When seeking technicians, employers use a variety of outlets.

Training is an ongoing necessity of advanced vehicle technology and progressions in the industry. Eighty-three percent of respondents include training in their budgets and 42 percent use assessment tools to make sure the training time and expenses are efficient. The average amount spent per position, for both technical and nontechnical employees, is between $250 and $500 annually. To maintain high-quality performance, the average ASA member has two I-CAR-trained technicians and two ASE-certified technicians on the payroll.

Technical staff movement in the business is vital to the health of the collision repair industry. Forty percent hired one or more experienced technicians, 14 percent promoted technicians and 57 percent report one or more technicians left their business.

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Sales Profile

To reach new and repeat customers, members use a variety of resources. The average advertising budget for collision members ranges from $5K to $10K annually. The chart below indicates typical sources and percentage of use.

The average number of estimates written so far in 2010 is 133 per month. Of those, approximately 10 estimates (8 percent) are labeled "total losses." The average number of repair orders is 96 per month and 27 percent are customer pay, not filed as an insurance claim.

The average ticket for ASA members so far this year was $2,087, with parts capturing 40 percent of the total, labor averaging 45 percent of the total, and other paint and materials averaging 15 percent of the total ticket. ASA members report an average of six or more direct repair programs (DRP) that drive approximately 46 percent of the business.

For the 27 percent of customers paying out of pocket, the average ticket was $1,373.

ASA members were asked to compare current sales to those in 2009. In 2010, 35 percent of collision shops said they experienced a 5 percent to 10 percent increase in sales. Survey respondents gave several reasons that contributed to a sales increase, including an increase in customer service (71 percent), marketing and advertising efforts (57 percent), better management skills (48 percent), economic conditions (43 percent) and technician training/education (19 percent).

Compared to last year, 41 percent of shops cited an average decrease in sales of more than 10 percent. Participants cited economic conditions (92 percent) as the main reason for the drop in sales. Weather conditions (27 percent), parts profits (8 percent) and marketing and advertising decreases (4 percent) were also attributed to the decline.

When comparing 2009 to 2010 profits, survey participants saw a 43 percent decrease overall in the number of customers and repair orders per month. So far this year, profits have increased for 34 percent of respondents, with 23 percent indicating no change compared to last year.

Respondents were asked about their gross annual sales for 2009. More members (26 percent) responded with an annual sales range of $2 million to $4 million than any other response.

The majority of members who participated in the survey (67 percent) expect 2011 sales to increase over 2010; 26 percent anticipate sales will remain the same; and a sales decrease is anticipated by 8 percent of survey contributors. Looking back at 2009, sales were predicted to increase in 2010 by 60 percent of the participants, but only 35 percent report actually experiencing an increase this year.

Many collision shops offer additional products and services to entice new and returning customers. Other services include boat/RV repair, restorations and fleet account to supplement revenue.

Paintless dent repair (PDR) is another service offered by collision shops. Of the shops that offer hail damage repair, 33 percent offer PDR. For shops offering PDR options, 85 percent say they use a vendor of their choice; 7 percent use multiple vendors; and 8 percent use insurance provider-recommended vendors.

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Parts Profile

Survey respondents said their collision part sources include OEM (61 percent), aftermarket (22 percent) and purchasing recycled parts (17 percent). Of the 22 percent who purchase aftermarket parts, 85 percent of the parts they buy are certified. Sixty percent of the aftermarket parts that are rejected are noncertified.

Seventy-nine percent of participants experience comebacks. See the chart below for the number of comebacks (per month) and those associated to defective parts.

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Customer Profile

Repeat customers range between 40 percent to 50 percent of the participants' customer base, and travel an average of 10 to 20 miles to have their vehicles serviced. Approximately 55 percent of their customers are female.

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