Repairers speak out against State Farm parts bidding program

July 18, 2012, SAN ANTONIO, TEXAS—Collision repairers grilled representatives from State Farm and PartsTrader for more than an hour July 17 during a marathon discussion on the insurer’s controversial parts bidding program at the Collision Industry Conference (CIC).

The conversation began with presentations from George Avery, auto claim consultant-P&C Claims for State Farm, and Rob Cooper, CEO of PartsTrader, an online parts sourcing, quoting and ordering platform for the collision repair industry. State Farm launched a pilot program earlier this year that requires shops affiliated with its Select Service direct repair network to source parts from vendors through a Web-based process facilitated by PartsTrader. Repairers submit parts orders through PartsTrader and vendors bid for the sale.

State Farm has said the process should improve part availability, process efficiency, order accuracy and create a better experience for customers. But the program, which has been launched as a pilot in four regions, has been met with overwhelming resistance from shop operators who argue it cuts into profits, slows operations and relinquishes to insurers the last segment of business that repairers actually control.

Avery said misinformation about the program is widespread, and much of the concern is based on speculation and rumors from individuals who have not tried the product.

“We only have 158 stores on the pilot that are actually using the program,” Avery said. “So there’s a lot of people out there that are starving for information. That information comes from a variety of sources. It comes from your friends, it comes from associations, it comes from me, perhaps in the press, and of course press release_notess and blogs.”

So, Avery tried to clear the air a bit, driving home that State Farm’s primary interest is improving the experience for its customers, not making short-term gains for its stockholders. Avery said State Farm didn’t expect the parts bidding program to be immediately embraced, but it also didn’t expect the extreme negative reaction, or the loss of 17 Select Service repairers as a result of the pilot’s introduction.

The pilot is still being evaluated and State Farm and PartsTrader are working to correct problems and mitigate concerns, Avery said. He said he’s been in regular talks with industry associations and individuals, clarifying assumptions or incorrect information in nearly every conversation.

“Good businessmen and women need to speculate. They need to look forward to determine what the next step is,” Avery said. “What’s dangerous is to speculate on faulty information, or misinformation.”

PartsTrader CEO Cooper followed Avery with a brief presentation showing how the program works. He said he understood the skepticism of the industry, but wanted to assure repairers that PartsTrader’s interests were in the right place.

“We are 100 percent committed to making PartsTrader the best possible product, the best parts procurement system,” he said.

But repairers weren’t convinced. For more than an hour after the presentations, more than a dozen individuals, most of them shop operators, vented their concerns about the program.

Dave McBroom, president of the Florida Autobody Collision Alliance, who also spoke for the Florida Automobile Dealers Association, said the two groups came together to gather data on the pilot program, speaking with shops and dealerships in pilot areas.

“Without exception, these were their responses: It is inefficient, it is cumbersome, it creates additional work, it causes delays—adding cycle time of one or more days, it requires additional personnel at both the shops and the vendors,” McBroom said.

Dan Hunsaker, owner of Dan’s Paint and Body in Tuscon, Ariz., is a participant in the program, which he said slowed his operation.

“I feel like the donkey that got dumped into the Kentucky Derby,” he said.

He said the biggest problem is that he has to have a parts employee at the computer about six hours a day to manage the program, because Dan’s Paint and Body is a high-volume facility.

“That represents about $50,000 a year out of my pocket to administer the program,” Hunsaker said.

John Mosley, owner of Clinton Body Shop in central Mississippi, wanted to know whether the program was here to stay and moving to other states. Avery has said that though the program is in a pilot phase, State Farm intends to make it work.

"There is going to come a time, my guess is, that when these things are fixed, there’s going to come a time when I will say to you as a businessman, 'Yes, this is the program,'" Avery said. “Then you, as a businessperson that’s on Select Service, will have to decide if Select Service is right for you.”