Use these expert tips to avoid the pitfalls of converting your shop to ‘advanced material’ repairs.
Aluminum repair is more a business challenge for collision repairers than a technical one. Aluminum hoods 1have been in use for years, and even shops that years ago geared up to repair more “aluminum-intensive,” high-end vehicles say the material itself requires different but not-more-difficult repair techniques.
But Ford’s introduction of the aluminum 2015 F-150 has virtually every collision repair shop owner thinking: Is it now time to invest shop space and cash for the equipment and training to take on repair of aluminum vehicles?
Here are some factors that ASA members and industry consultants say should play into your decision.
It will definitely cost you money. Preventing contamination of steel vehicles with aluminum dust – and vice versa – accounts for one key expense in becoming OEM-certified for aluminum repair. It requires a workspace be curtained or walled off from the rest of the shop, with its own hand tools, dust extraction system, welder, rivet gun, etc. Even aside from the cost of the equipment, that’s lost space when there’s not aluminum repair work being done.
As part of quarterly “Who Pays for What?” surveys in late 2015, Collision Advice and CRASH Network asked shops around the country how much they spent to become OEM-certified for aluminum repair. Responses varied, likely based on differing automaker requirements and how much equipment a shop might have already had. At the low end, the
bottom 5 percent of respondents reported spending just $16,000 to achieve certification; the top 5 percent, however, said their expenses exceeded $895,000 in total. But about half of the almost 130 OEM-certified shops reported spending in excess of $84,000 on training, equipment and shop improvements.
“About 13 percent reported spending in excess of $30,000 on training alone,” says industry consultant Mike Anderson of Collision Advice.
In Richland, Wash., shop owner Mike Young estimates he spent about $45,000 to achieve Ford F-150 certification. “We had an old paint booth we were able to retrofit, which saved us a fair amount over building a ‘clean room,’” Young says.
Aaron Lofrano’s family chose to save money by getting only some of its four F. Lofrano and Son Auto Body Repair locations in the San Francisco area Ford-certified for aluminum repair, an expense he pegged at about $30,000 per location. “So far this was a good decision because there’s still a low volume of that work. Having fewer of our techs doing it also benefits them through the repetition,” he says.
Your labor rate might be higher. There are real costs associated with gearing up to repair aluminum, but many shops also report receiving higher labor rates for aluminum repair work as well.
The “Who Pays for What?” survey found a national average structural labor rate of $92 per hour for aluminum repair at OEM-certified shops. That’s nearly double the national average labor rate for traditional collision repair work.
“We do have a higher labor rate, and, to date, we’ve had no pushback on that rate or the estimate line items outlining the additional procedures aluminum repair requires,” shop owner Young says.
The aluminum repair labor rates reported in the “Who Pays” survey did vary by more than $100. At the low-end, $49 dollars per hour is the rate charged for structural aluminum repairs by shops in the fifth percentile. But being in the fifth percentile means that 95 percent of other responding shops are charging more than that – generally, much more. Near the top, shops reported charging more than $145 an hour for certified structural aluminum repairs.
The largest percentages of shops, however, are charging between $86 and $125 per hour for structural aluminum repairs when working on vehicles they are certified to repair.
You should calculate the return on your investment. How long will it take to make a financial investment in aluminum repair pay off? Industry consultant John Niechwiadowicz says the first step is to add up the total cost of the tools, equipment and facility changes that are required.
Next, add in the cost of the needed training, both in terms of registration costs plus the “lost opportunity costs” for the time technicians spend in that training rather than fixing cars. In Niechwiadowicz’s example, which he cautions are strictly hypothetical numbers, training fees for two technicians add up to $2,200; but the lost-opportunity costs add nearly $5,600 to the training expense.
Another potential additional expense is any fees the automaker charges for certification. A shop then has to know its gross profit percentage, determined by dividing the shop’s total gross profit dollars by the shop’s total sales dollars. Divide your total investment cost by your shop’s gross profit percentage to determine how much in added aluminum repair sales are required to break even. Keep in mind that if your shop can charge a higher labor rate, the gross profit percentage could be higher on your aluminum repair work.
The last step is estimating how much aluminum repair work you can expect to roll into your shop (keep reading).
Don’t overestimate the amount of opportunity. Given that the nation’s top-selling vehicle is now aluminum-intensive, it could be easy to imagine an aluminum repair bay never sitting empty. But depending on your market, that may not be the case in the short term.
Doug Richman of Kaiser Aluminum estimates that about 69,000 aluminum-intensive vehicles will need collision repair work this year; there are currently about 4,025 shops equipped and OEM-certified to repair aluminum, so that’s an average of just 17 jobs per shop for the year.
And calculating all vehicles with just aluminum closures (doors, hoods or deck lids) adds 681,000 more vehicle repairs this year, but it’s likely plenty of those won’t end up in aluminum-certified shops.
Richman’s projections extend through 2025, with both the number of aluminum vehicles and the number of shops equipped for aluminum repair increasing. In 2017, for example, Richman projects 4,629 aluminum-ready shops having an average of 24 aluminum-intensive vehicles in for repair during the year, or about two per month.
Even a decade from now, Richman’s projections show an estimated 14,159 aluminum-ready shops will, on average, see less than one aluminum-intensive vehicle per week (just 43 per year, on average). “This isn’t taking over your business,” Richman says of aluminum repair. “This is just going to be a segment of your business.”
Niechwiadowicz’s purely hypothetical example shows a shop adding $10,500 in revenue per month from three aluminum repair jobs. At that shop’s current gross profit percentage, it would take about 26 months before the shop added $280,000 in aluminum repair sales and breaks even on its $112,000 investment.
While crunching those types of numbers is important, he says, “These decisions also are not all about only the quantitative side.” He noted that being able to repair aluminum also might help a shop attract other work or referral sources.
“There’s no one right answer,” when making such investment decisions, he says. But shops should at least do some of this sort of “what-if” analysis before gearing up for aluminum repair, Niechwiadowicz and others recommend.