Nick Notte Reflects on Sterling and the Future of the Industry
Nick Notte is what some might call a collision repair industry heavyweight: Throughout his career, he’s served as senior director of auto claims at Allstate, chair of the National Auto Body Council, vice president of network development at Mitchell International, director of sales at Nobilas North America (now AkzoNobel), and, finally, president of Sterling Autobody Centers.
Following Service King’s acquisition of all 62 Sterling locations earlier this year, Notte announced his retirement in late July.
Notte recently sat down with FenderBender to discuss his thoughts on the state of the industry, Sterling’s journey and his next move into a new niche.
You’ve been with Allstate for nearly 30 years, on and off. What do you make of Allstate and Sterling’s journey?
When Allstate acquired Sterling in 2001, they were the only insurance company that had a sole ownership of an MSO at the time, and ever since then. I think the industry has been very interested in seeing what happened with that relationship. I think the history shows that other MSOs and independent shops really took offense to insurance company ownership of body shops. They felt that work would be steered to those body shops and even filed a suit against the company in Texas. I think the fact that Allstate bought Sterling stung the industry, and at the time, it was a game changer.
I think there was some apprehension by the industry to Sterling. Because of that, after an initial growth spurt, there wasn’t a lot of additional growth of Sterling. I think the industry was heard loud and clear. That became a factor in halting the growth of Sterling. By realizing they couldn’t grow the company significantly anymore, I think they made a good choice in selling it.
But, I do think it brought Allstate closer to the collision industry. It absolutely gave them a bird’s-eye view into the industry. I applaud Allstate in looking at the company that Sterling became.
We worked pretty darn hard to make it a good company that offered high quality repairs and great service to customers. I think Service King got a great company when they acquired the Sterling business this year.
You announced your retirement following Sterling’s acquisition. What went into your decision to retire?
First of all, I want to say that Allstate has been an absolutely wonderful company and the opportunities they have given me were tremendous. Being given the opportunity to be president of Sterling in 2009 and allowed to grow and improve the business was a heck of a lot of fun.
But when they offered me the position of president, I told the folks at Allstate that if we were ever going to sell the business, I would rather not be part of that deal. I originally planned to just walk away.
But when the Service King deal went through, Allstate gave me the opportunity to retire and I happily did so.
Having been at the head of both a major claim operation and an MSO, what are your thoughts on the state of the industry?
I see the collision repair industry as having grown up over the past five to seven years.
In the early part of the 2000s, we had the wave of consolidation. Everyone said the consolidators would take over. They did buy a lot of shops but they weren’t the best at eliminating overhead. Consolidation happened rapidly for the first year or two and then it really slowed down. Since then, I think the big consolidators have figured out how to take cost out of the equation to reduce overhead and to improve repair quality.
I think things like I-CAR and Verifacts training have brought a lot of recognition and legitimacy, as well. If you make that initial investment, you will differentiate yourself and because of that, more work will flow through those shops. In particular, I think the Verifacts program will really explode in the next few years.
Along those lines, what do you see the future of the industry looking like?
In the past few years, we’ve seen significant consolidation again. Investors have recognized that it is attractive and that the margins are better than they have been in the past.
I think the consolidation will continue, of course, and I think they’re all jockeying to be the biggest. When you see an acquisition like Sterling with 62 locations and then you see a single location announcement, I see those companies as saying they’re still in the game, even if they have to acquire shops one at a time. Because of that, I think we are going to see businesses that we never thought would sell, actually selling.
I also think we will see the big three or four consolidators getting even bigger. I would say that before long, we’ll see some of those big three or four swallow each other and become super MSOs. I think we’re just waiting for that to happen and it will happen fairly soon.
Where does the independent shop fit into the future of the collision repair industry?
I still see opportunity and value for independent shops. I think they originally cracked the code, which is paying cash for the business. They’re able to deliver a better value proposition for insurers. I think the consolidators are working on that and the more they’re around, the better their margins are. They can afford to invest or reinvest in the business, but it’s going to take a while.
The independents cannot underestimate the marketing value that’s out there. I think they’re going to have to market to their communities or participate in organizations like NABC or Recycled Rides. Through that, I think they thrive. You contribute to the community, you publicize it and the next thing you know, you’ve got work.
What are your plans for the future?
There were a lot of people who knew that Sterling was up for sale and as a result, I got a lot of offers from other businesses in our industry. I was approached by International Paintless Dent Repair, a small PDR company in the process of launching. As I listened to the CEO talk about the PDR industry and how much research she had done on the business, I was able to validate everything she was telling me about the needs of the industry.
I believe PDR is in its infancy. It’s a very fragmented industry. It’s almost as the collision repair industry was in this country 25 years ago. There’s still a lot of cutting deals under the table, failing and setting up under a different name, and not running particularly legal companies. It’s not very trusted. I don’t think insurance companies realize they’re trusting their customers to PDR companies that act that way.
I looked at the opportunity for growth and success in this industry and toward the end of last year, I accepted an ownership role in [International Paintless Dent Repair] as executive vice president and COO. We’re trying to launch a very solid, nationwide company that will be recognized as state of the art by the insurers and the dent repair buying public.
We plan on being very transparent to the industry and we’d like to partner with insurance companies. I believe my background is good for this company in that I will be able to make inroads with insurance companies. But that’s only having the door open; we still have to sell the insurance companies a valuable product.
To that effect, we are planning an accredited school for PDR work, which we will offer to technicians. Our target market for that is inner-city folks and the underserved military veterans. We would like to employ roughly 5 percent of the best coming out of the school.
In addition, we also plan to give back to the community. Our plan is not just come into a catastrophe-ravaged community and take from it. Instead, wherever we are, we will give back at the end of our stay.
Our desire is to make such an impact on the community that the next time something drastic happens like a hailstorm, they’ll remember our company and ask for our services.