Dan Dutra, co-owner of Sigs Collision, is accustomed to adapting to meet the changing needs of the industry. In the past few years, he and co-owner Lance Bull have focused on OEM procedure-driven repairs, adding an aluminum specialty repair facility and incorporating photo estimating. So when the coronavirus crisis hit, the duo acted quickly to alter how Hawaii’s only MSO – with three locations on Oahu – would conduct business going forward. Just don’t call it “the new normal.”
“There’s no going back to ‘normal’; that’s out the window,” Dutra said. “This is about creating a new paradigm. We’re not hunkered down, waiting for this to pass so we can get back to business as normal.”
While Dutra said he and Bull share the strategic vision for the company, he describes his role in the partnership as the “operations and industry guy,” while Bull manages the financials. It’s an arrangement that’s worked well since the duo, each with decades of experience in the collision repair industry, partnered in 2006 to buy the company.
When the Small Business Administration (SBA) announced its Paycheck Protection Program (PPP) for small businesses, Bull sprang into action and enlisted the aid of one his connections, a senior consultant to the SBA, who hosted daily early-morning webinars for his clients to counsel them on how to collect PPP funds.
“Lance was on these webinars at 2 a.m. Hawaii time, and we were staying on top of our bank, because of course there’s this urgency because of the fear the money’s going to dry up.”
The PPP application had to be done through the local bank, but along with its customers, its loan officers were navigating new territory. So Bull assisted bank personnel with that process, which allowed the company to collect the PPP funds needed to call back most of its laid-off employees.
The pandemic ushered in the need for social distancing. Dutra had already employed the Bodyshop Booster photo estimating app prior to the beginning of the pandemic, so he was primed to capitalize on its use.
“It gave us an opportunity to advertise a ‘touchless claim system’ on the radio, and people flocked to it. They didn’t have to come down here and expose themselves at the height of the crisis. Some of that [concern] is relaxed now, but it has sustained.”
It’s worked. In a down market, Dutra said its assignments in late August were back to January levels, with work now scheduled out a few days to a week, depending on location. At the same time, the company added two new DRP accounts.
“We’re filling the pipeline again. Our sales are not back to where they should be, but we’ve hit break-even and made a few dollars each month.”
At the same time, insurance companies have also ramped up their remote photo-estimating efforts, which has resulted in layoffs in field-based claims personnel. Dutra predicts this change will be permanent, as insurers realize that, after a sizable six-month data set to examine, widespread implementation of photo estimating has been successful, and their loss-adjustment expense has been reduced.
It’s this shift that Dutra suggests is the reason for insurer pushback for repair operations for which he’s customarily charged, even from those with whom he’s had a long-established working relationship.
“They’re looking at a lot of things they didn’t look at before because they have managers above them looking at them and challenging them. We’re getting calls on stuff we’ve never gotten calls on. You don’t want me to charge three tenths [of an hour] to cover connectors? I’ve been doing this for five years, and nobody’s ever challenged me.”
Electrical systems on late-model vehicles can be sensitive to any type of contamination, he explained, including metal-grinding dust in the air, which could possibly change the impedance if wiring harness connectors are left uncovered. It’s a particular concern with Hawaii’s humid, slightly salty air.
“It may not be noticeable now, but in two years, all of a sudden they’re having electrical problems because we didn’t cover the connectors.”
Dutra said he’s been successful in educating claims managers, auditors and upper-level managers why such procedures are necessary, including by sending supporting documentation from I-CAR and VeriFacts.
“VeriFacts is an important support for us. The techs strive to do better and take the information and digest it so they can improve and get to the next level, which also has financial rewards for them. VeriFacts goes much deeper in supporting our conversations with insurers and even with the OEs to get answers and information to do the job right.”
OEM procedure-driven repairs dictate the estimate Such communication with insurers occupies more and more of his day, Dutra said, as the company moves toward more OEM procedure-driven repairs. In the new paradigm, customer-facing estimators capture the basic information, photos and write a preliminary estimate. From there, another estimator drills down into repair procedures to formulate a complete repair plan before uploading the file to the insurance company.
“We can do it on the front end, rather than trying to justify it through a supplement after the fact,” he said.
Dutra plans to retain strong insurer relationships by continuing to educate them about required repair procedures. It is that education, he said, that helps lead to a strong, trusting relationship and the insurer’s confidence in a quality, proper repair at his shops.
“I think the OEs are always getting closer to influencing work,” Dutra said. “When they start getting involved in FNOL [first notice of loss] and we start getting jobs directly from an OE network, it’s going to be business as usual with our insurance partners.”
“Strong conversations” reduce friction with charges
Many shops are either DRP-focused or “they focus on OE and turn their nose up at DRP work,” Dutra said. “But there can be a combination. We’re friendly with all. Sometimes we have to have strong conversations with our partners, but we use it as an opportunity to educate. The tactic I’ve taken with our insurance customers is, ‘Cars are made differently, and we have to pay attention to fixing them differently. I don’t like it anymore than you like it; I wish I could just fix cars the way I used to, but I can’t. Therefore, I’m educating myself in order to make sure I’m putting people back in a vehicle that’s safe. Everything’s calibrated, the lane-departure systems work and the car is repaired properly. And I’ll teach you about that and why I need to get paid for that.’”
First in its market to “set that tone,” Dutra said, Sigs was also first to scan before and after repairs. Steve Davis, a former Sigs manager, is now owner/operator of Collision Technical Services. He rents space within a Sigs building and has six employees who use OEM scan tools to scan and calibrate for Sigs and outside customers.
Although Sigs has long pulled repair procedures for each vehicle, the new paradigm’s roots are from about five years ago, when the company added Tesla’s OEM-certified repair program. The complexity of Tesla’s parts-ordering system, along with parts-delivery delays, required ample research at the start of the repair. As an example, on the Model S, the material of the “carrier,” or what is generally called a radiator support, has been changed four times, with corresponding superseded part numbers.
“You have to spend the time to follow all the hyperlinks to make sure you’re getting all the one-time-use parts and you receive all the right parts. Here in Hawaii, you can’t send anything back. If you made an error, it’s on you. If they did it wrong, they tell you to destroy the part. Either way, you have to wait another two weeks to get something. So we had to learn to do that first.”
OEM-certification programs began with Tesla
Dutra recognized early on that OEM-certification programs were the future of the industry.
“But I had to get it past Lance, who was saying, ‘Where’s the return?’ and ‘When is the return?’
Dutra planned a budget for Tesla to be Sigs’ first OEM program so that when the time was right, they could “pull the trigger.”
“It was at a time when Tesla was not really that profitable, even though you had increased labor rates,” he said. “If you already had Mercedes, Jaguar/Land Rover or Porsche approvals, Tesla would let you use a lot of the equipment you already had to perform those repairs. But for it to be your first, it was quite a capital investment.”
Bull took a look at the Tesla vehicle population on the island and told Dutra it “didn’t pencil.”
“But I said, ‘Lance, you’re missing the point here. There will be [more Teslas], and it’s not about making money on these things right now; it’s about learning how to work on aluminum cars and electric vehicles, because this is coming. And we’ll be ahead of the market and learning and understanding how to work on these types of vehicles and to embrace OE programs.”
OAR subsidiary specializes in aluminum repair
Repairs are load-leveled as needed to an appropriate facility through CCC ONE. The Wahiawa location, at 5,800 square feet, performs only cosmetic and bolt-on repairs (save for a simple weld-on radiator support) and is the most profitable location. The Kaneohoe facility (Sigs Windward) is adding OEM programs as demand dictates and is certified for Tesla and aluminum repairs. Subsidiary Oahu Aluminum Repair (OAR), known as “Oar,” is the next-door neighbor at Sigs’ Waipahu campus and handles aluminum repairs for the Waipahu and Wahiawa locations.
Billing for aluminum repairs is handled one of two ways: insurers who have recognized the increased rates needed for complex repairs are billed through the DRP, while others have given approval of Sigs subletting the specialty aluminum repair to OAR and then marking it up. Either way, Sigs is able to collect a rate appropriate to the cost and complexity of the repair.
In 2018, Dutra and Bull expanded their number of OEM programs, beginning with FCA, Hyundai, Infiniti, Kia and Nissan through Assured Performance. Those were followed by Ford (and Ford Aluminum-capable,) General Motors (including aluminum) and Honda ProFirst. As OEM programs mature and are widely implemented, Dutra predicts there will be increasing fragmentation and specialization of some programs.
Ford announced Aug. 21 it would require its Certified Collision Network centers to be trained on electric vehicles and to obtain safety equipment by early next year. With Sigs’ Tesla experience, it will be primed for the Mustang Mach-E SUV – due for a late 2020 rollout – and the electric F-150, which is expected in mid-2022.
“For me, it’s really about adaptation,” Dutra said. “When we’re evaluating people for specific roles in the company, I talk about ‘the two As’: aptitude and attitude. If somebody’s got the aptitude to learn and they’ve got the right attitude, you can pretty much take them wherever they need to go. That’s one of the things that guides me through this.
“I’ve found that to stay current and to continue to be a leader, not just a manager, I have to continually educate myself, because there’s so much happening so fast. Being in a leadership role in this or any company – while moving it and our people forward – is more than a full-time job at this point.”