What is ahead in 2015

The coming year could be a raucous one for the collision repair industry between lawsuits, accelerating consolidation and the non-stop pace of change in the new  technology and materials the automakers are forcing shops to confront. As 2015 begins, here’s our annual preview of what to look for in the coming year.

A judicial battlefield
Lawsuits between shops and insurers have been a regular part of the collision repair landscape, but they may have reached a new level in recent months. As 2014 came to an end, there were at least 19 similar lawsuits in 17 states in which shops and their trade associations accuse insurers of conspiring to manipulate labor rates and other shop charges to reduce costs.

It’s far too early to know where those lawsuits may go. A U.S. District Court in Florida last year dismissed one of the first such suits filed – though it did give the shops a chance to resubmit an amended lawsuit (which they did). Now that same court may end up overseeing all 19 of those lawsuits if efforts by insurers – largely unopposed by the shops – to consolidate them there pan out.

That could mean a quick end to the lawsuits if the judge dismisses them with prejudice (meaning they can’t be amended and refiled). Or 2015 could be a long year of the suits making their way through a judicial process that will extend far beyond the coming 12 months.

Needless to say, there will be a lot of eyes on that U.S. District Court in Florida as 2015 progresses.   

States eye insurer activity
If the end of 2014 is any indication, shops won’t be the only ones in 2015 putting some pressure on insurers for activities that regulators or other government entities view as questionable.

In addition to two lawsuits filed against insurers by shops in Louisiana, similar charges are being levied against State Farm by Louisiana’s Attorney General James “Buddy” Caldwell. His state filed suit against the insurer last August, contending that State Farm’s practices and its Select Service program result in manipulation of shop labor rates and compensation, and strong-arm shops into using unsafe parts. 

“State Farm has created a culture of unsafe business practices in which consumer vehicle repairs are performed with cost-savings as the primary goal rather than safety and reliability,” Caldwell said at a press conference announcing the suit.

State Farm has said the allegations in the suit are “not in line with State Farm's mission to serve the needs of its customers, and our long, proud history of achievements in advancing vehicle safety.” It also is working to have the suit moved to the same U.S. District Court in Florida handling the shop suits, something Caldwell is opposing.

Other regulators are also calling out insurer activities. Oklahoma Attorney General Scott Pruitt in November issued a warning in his state about the practice of “steering” by insurers, in which “insurers strongly push consumers to autobody repair shops that may provide substandard service to consumers.”

Pruitt said some insurers “may be crossing the line, making dishonest statements” that lead some consumers to use a shop they might not otherwise – or not even realize the choice of shop is their own.

Shops in at least a handful of other states are in concerted talks with insurance commissioners and attorneys general. Those shops say they expect to see in 2015 more of these strongly worded messages to insurers about obeying the spirit as well as the letter of the law.

No big swings in the numbers
Don’t look for any dramatic changes in the volume or average repair cost of claims in 2015, nor a big shift in the percentage of vehicles being declared total losses. Analysts see some conflicting trends that make projections difficult, but also limit how much swing there likely will be one way or the other.

Aside from what may happen weather-wise, economic issues and the continued shift toward higher deductibles should continue to keep claims flat or down slightly, Rick Tuuri of AudaExplore predicts.

“This has been the trend and will remain so,” he said.

Susanna Gotsch of CCC Information Services also foresees a continued trend toward fewer but perhaps higher-dollar claims. With more car-sharing, telecommuting and other alternative to traditional notion of transportation, she said, vehicle miles traveled has still not returned to pre-recession levels.

But the continued rebound in new car sales will have several impacts on shops.  The growing number of these more complex vehicles may boost average repair costs somewhat, Gotsch predicts. The recession’s impact on new-car sales drove the average age of repairable vehicles up from 5.1 years in 2006 to 6.4 years in mid-2012. But it has plateaued there ever since, and may even start trending down in 2015, Gotsch said. That would be a good thing for shops, she said, because “younger” cars are more likely fully insured and repaired after an accident.

But with 70 percent of all vehicles in operation now being seven or more years old, Gotsch doesn’t foresee much decline in the rate of total losses. If new car sales continue to be strong, the percentage of total losses may drop one or two points, she said, but that decline will take several years.

Used car prices are another key indicator of what to expect in terms of total losses, Tuuri said.  If a wrecked vehicle had a lower pre-accident value, repairs are more likely to reach the total loss value. The growth of new-car sales has been among the factors that led used car values to drop during much of 2014. But Tuuri said that could change over the next 12 to 18 months, tempering any slight near-term rise in total loss percentages.

New trade show premiers
For a number of years, the industry had one destination for a national tradeshow: Las Vegas in the fall, when both NACE and SEMA took place, if not in the same week, then only less than a month apart. That changed in 2014, and will change again in 2015.

SEMA will continue to be held in Las Vegas in the fall this year (November 3-6), with a large and growing collision repair section in the otherwise massive tradeshow filling the convention center and adjoining spaces.

NACE, however, had a successful move to summer in Detroit this past year, seeing its first uptick in attendance and exhibitors in several years. Many attendees seemed surprised by the vibrancy they found in Detroit’s core, and liked the live product demos on the tradeshow floor that many other venues couldn’t offer. NACE organizers saw that growth and heard the positive comments. It will return to Detroit this July 21-25.

The new option for shops in 2015? Automechanika Chicago, the first U.S. edition of the massively successful European event, comes to McCormick Place West in Chicago April 24-26.  Organizers, which include Advanstar Communications (publishers of ABRN and MotorAge) are predicting 400 exhibitor companies and 8,500 attendees at the premier event.

That gives shops opportunities in spring, summer and fall to see the new products and services available to the industry, and take advantage of the training and networking all these events offer.

Access to OEM information
Though it launched last summer, 2015 should be the year more shops in the industry begin taking advantage of all that I-CAR’s new Repairability Technical Support Portal has to offer. Its goal is to put repair procedures and vehicle information as close to technicians as the nearest computer, tablet or smartphone screen.

“We really want to put this information into technician’s hands,” said Jason Bartanen, director of industry technical relations for I-CAR. “They may not walk up to the front of the shop to ask a technical question. But if they have the answer in their pocket, maybe they are more likely to take a look to see what they can find on the website.”

The website is available through the Technical Knowledge section of I-CAR’s website – www.i-car.com – or directly at http://rts.i-car.com. It feature six primary features, including:

·      An OEM Information section, with a page for each automaker, listing what types of collision repair procedures and information each makes available and how to access it. It offers not just links to the automaker’s repair information websites but often some of the actual procedures, bulletins and information technicians or estimators may need.

·      Other sections, searchable by year-make-model, list what sectioning procedures are available from the automakers, and offer a guide to automaker information on which parts require inspection or replacement following an airbag deployment.

·      The Ask I-CAR section is just that, a way for a portal user to email or call I-CAR with a technical question for which they haven’t been able to find an answer.

Bartanen said to watch for lots more information to be added to the portal in 2015 as many automakers are anxious to use it to put technical information and procedures into collision repairers’ hands, often at no charge.

New parts pricing model
General Motors dropped jaws last November when it announced it was making a switch to a new real-time pricing system for crash parts, discontinuing the publication of traditional list prices. The launch of MyPriceLink was initially set for December 1, but within days GM, while still “committed to the initiative,” had pushed the start to  “early 2015.” Publicly, GM said that “workflow pressures on outside parties have brought to light enhanced solutions and the increased desire for integration opportunities,” necessitating the delay.

As described by GM, the new system means that parts prices will no longer be available within the estimating systems. Instead, shops will need to upload all estimates requiring prices for GM parts to MyPriceLink, which will then return the estimate back with current, competitive prices.

It will mean some change to standard operating procedures for shops, but late in 2014, much of the industry was trying to get their hands around what all it will mean. How it plays out in 2015 will likely impact whether other automakers follow GM down the same road.

Aluminum repair work grows
As the 2015 Ford F-150s start making their way from showrooms to the highways, many shops will get their first experience with aluminum repair this year. During 2015 and 2016, Ford hopes to certify another 1,400 independent shops (in addition to the 750 dealerships and 860 independents already certified) as prepared to repair aluminum. That will mean a lot of shops investing this year in equipment and training.

Ford and aluminum industry executives hope it will also mean a heavy emphasis on safety for shops working on aluminum. Even aside from the risk of galvanic corrosion if aluminum or steel ‘contaminates’ the other, a separate work area and aluminum dust extraction system is required because aluminum dust is potentially an explosion hazard.

“I personally don’t ever want to hear about a shop having a fire or explosion with aluminum dust,” Doug Richman, vice president of engineering and technology for Kaiser Aluminum, said. “I know this hazard isn’t news, but I want to reinforce it.”

The first 500-shop MSO?
This could be the year a multi-shop operation reaches the milestone of having 500 shops. Just like a year ago, two franchise operations, Maaco and Carstar, each with about 450 shops, are the closest to that milestone. Other chains are growing significantly faster, however.

Of those, only The Boyd Group (which also operates shops under the names True2Form and Gerber) is significantly more than halfway to 500 shops. But the next three biggest chains combined have more than 600 shops. With ABRA, Caliber and Service King (like Boyd) all adding dozens of shops each year, a merger or acquisition within these top MSOs – something that is often rumored – could easily launch one over the 500-shop mark.

More than one industry analyst has predicted that 2015 will be the year that happens.

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