Several chapters of the American Automobile Association (AAA) own repair shops, and this fact doesn’t sit well with aftermarket insiders who view AAA-branded repair facilities as a threat.
“In my mind, there’s little distinction between (AAA-owned shops) and insurer-owned shops on the collision side of the business,” says Ron Pyle, president of the Automotive Service Association (ASA). “There’s definitely reason to be concerned about it, but I’m not sure what can be done to slow their approach.”
In this year’s Top 100 Report, we mentioned AAA-owned facilities as a potential prospect for new business. It recently came to light through an Associated Press report that AAA state chapters own repair shops. A total of 18-20 locations in six states are AAA-owned. Approximately 7,400 service facilities display the “AAA Approved Auto Repair” sign and agree to provide special benefits to AAA members, including a 12-month/12,000-mile warranty on parts and labor, a written estimate, return of replaced parts (if requested) and a courtesy safety inspection if the owner arranges to have maintenance or repairs performed on the vehicle. Sixty-five clubs in 48 states and the District of Columbia participate in the Approved Auto Repair program.
The issue at hand is whether AAA’s ownership of shops conflicts with independent repair businesses. One point of concern is that AAA makes roadside assistance calls and tows consumers to repair facilities. It’s possible AAA could implement a towing program that favors the shops it owns by adding incentives that steer vehicle owners to those locations.
“There is a potential for redirection of business, and that may not necessarily be good for traditional distribution and the independent repairers,” argues Pyle. ASA has received calls from its service dealer members and from other associations. All callers wanted more details and were concerned about the potential negative effects on their businesses, he says.
One of those callers, Ron Meyer President of the Automotive Service Councils of Michigan, agrees with Pyle that the move is identical to insurer-owned bodyshops. ASC of Michigan and other groups are fighting to end the practice of insurer-owned shops in the collision industry.
Meyer testified before Michigan’s Senate Banking Committee on Feb. 19, supporting Senate Bill 819, which would prohibit insurer-owned facilities in that state.
“It’s a conflict of interest that’s anti-competitive,” says Meyer, whose members are mechanical repair shops and collision repair facilities. “With insurer-owned repair facilities, they can control the whole thing and run their businesses as loss leaders.” He fears AAA could take the same approach if they broaden their scope of ownership.
For consumers, the AAA brand is strong and valuable. Certainly with years of negative publicity about scam artists among auto repairers (most recently in a Feb. 19 “Prime Time Live” investigative report on ABC TV), consumers want to feel comfortable with the people who repair their vehicles. AAA has long been viewed as a consumer-sensitive organization. Critics argue this brand equity could pose a problem for shops, particularly when trying to attract new customers.
“The potential of lost business could be significant if this is a national agenda,” says Pyle. ASA, at this point, has not contacted AAA to discuss the matter, and Pyle appears willing to wait for a groundswell of grassroots opposition before his group takes an official position.
“We need to see enough grassroots concern,” he says. “At this point we’d rather see our (Mechanical Division Operations Committee) and (Collision Division Operations Committee) bring that to our attention. If they really feel it needs to be addressed, then we will.”
AAA Director of Repair and Buying Services John Nielsen says he’s received numerous questions about AAA-owned facilities, mostly from curious repair shop owners. “Shops are asking, ‘Do I have something to worry about?’ and the answer is ‘No,’” states Nielsen.
From AAA’s national perspective, it’s up to the individual clubs at the local level to decide if they want to own locations.
AAA Carolinas owns the most locations with six. Branded AutoMark Car Care Centers, these shops are in the North Carolina cities of Charlotte, Matthews, Gastonia and Raleigh. AAA Carolinas members receive a 10-percent discount on labor from the public rates in these shops. Other states that have AAA-owned repair shops are Ohio, California, Maine, New Hampshire and Minnesota, says Nielsen.
The first AAA-owned shop actually opened in Ohio in 1988 as an answer to late-night emergency services when other locations were closed, Nielsen says.
“We have 47 million members and make about 30 million roadside assistance calls each year. About 30 percent of those calls require a tow,” he says. With the small number of AAA-owned locations, Nielsen does not see a bunch of repairs heading to those shops as a result of roadside tows. “Clubs can choose to do it if they like.”
Nielsen downplays any comparison to insurer-owned collision shops. “It’s not a closed network where we’re going to pay for the repair,” he says. “We do not approve any club-owned repair facility. We require them to meet certain standards.”
According to AAA’s Approved Auto Repair Facility Criteria requirements, each shop must:
- when requested by customers, offer by appointment a separate diagnosis when repairs are recommended;
- when requested by AAA members, perform maintenance inspections at no additional charge when servicing vehicles on a pay ticket;
- guarantee effectiveness of repairs, parts, labor or components for a minimum of 12 months or 12,000 miles;
- accept the final decision of AAA club representatives in resolving complaints concerning service to a AAA members vehicle; and
- take full responsibility for vehicle repairs, even when subletting repairs.
All of these standards are in place, according to Nielsen, to guarantee consumers receive quality repairs, whether at AAA-owned shops or any of the locations inside the Approved Auto Repair program.
The question moving forward is how AAA-owned locations will impact participation in the Approved Auto Repair network. Shops who become angry over the situation could opt out of the program if they view it as a threat.
