Executive Director’s Report
UNIQUENESS OF THE COLLISION INDUSTRY
It was a busy summer for ASRA. The high point was the Canadian Collision Industry Forum (CCIF) in Edmonton on June 21. I had the pleasure of speaking to the 100 plus collision and insurance industry representatives and I want to summarize the issues I raised at CCIF.
First, everyone needs to recognize the uniqueness
of the collision industry. Like most Albertan's, I am a strong proponent of
free markets. But, the collision industry is not a free market! Not when 15 or
so buyers (Insurers) control more than 60% of the revenue available to the
industry. Not when the 15 or so buyers are direct competitors whose
profitability is impacted by how sharp a deal they can negotiate with
individual shops. Not when the 15 or so buyers belong to the same association
and have other reasons for meeting on a regular basis. And especially not when
some of the 15 or so buyers instruct their staff to wring every last concession
out of their collision suppliers.
The unequal relationship between the collision
industry and the insurance industry has resulted in a dramatic improvement in
collision industry efficiency in the last 20 years. The compensation paid to
collision shops has lagged inflation for almost 20 years. In real dollar terms,
no collision shop is being paid anywhere near what they were earning in 1990.
During this period, all of a shop's business costs have increased faster than
the rate of inflation.
How have shops survived? They have improved their
processes and gotten more work out of their employees. They have also squeezed
their employees. Today, autobody technicians are among the lowest paid of all
tradespeople. Alberta is facing a general trades shortage. As you can imagine, the lowest paying trades
are attracting even fewer potential employees. This is causing a shortage of
about 250 bodymen and painters in Alberta right now!
Collision shops are "re-manufacturing"
facilities. The single biggest constraint on how much re-manufacturing they can
do is the availability of trades -- the "manu" in manufacturing.
Since there is a shortage of technicians, shops are
"raiding" each other; driving up manpower costs. The only way to
generate revenue to pay for these increased costs is to
"remanufacture" more cars. But
to do that, you need more trades
people!
In effect, collision shops have become "Fixed
Income Businesses." They are the
business equivalent of a senior on a fixed pension, whose living standard drops
with every price increase in the supermarket. Today's collision shops can't
raise their rates. So they have to become more efficient: fix more cars in
fewer hours. To do that they need more technicians. THEY DON’T EXIST!
A shop that was operating at peak efficiency last
year, and operates at peak efficiency this year, will because it can't raise
its rates--bring in the same amount of revenue as last year. Except that labour
costs, utility costs, insurance costs and general costs have all gone up! Same revenue, higher costs = less profit! And
it's going to get worse. The average bodyman in Alberta is well into his 40's.
The average retirement age for a bodyman is in his low 50's. No one is lining
up to learn the auto body trade! No one is attempting to attract new people to
the autobody trade. A crisis is coming!
Collision shops with their decreasing profitability
are not in a position to promote autobody as a career. The crisis must be
averted and the only one's who can fund what needs to be done to avert it are
the beneficiaries of the uniqueness of the collision industry: Insurance
companies.
Insurance companies, and through them the general
public, have benefited from the pressure they have placed on collision shops.
However, the long term impact of that pressure will be detrimental to everyone
except for the very few super-efficient collision shops that survive. When the
collision industry collapses down to fewer than 100 shops the public and the
insurers won't like the results.
Insurance companies need to get ahead of this
crisis by promoting collision careers! That will take money. First, to raise the pay levels in auto body
to something comparable to other trades and then, to attract new people,
including non-traditional applicants into the trade.
A levy of 1/5 of 1% of the money spent by insurers
to repair cars in Alberta would create an annual fund in excess of $1 million
that could be used for scholarships and promoting the autobody trade to young
people.
It’s a radical proposal: Insurers would increase
their costs by 0.2% to keep the goose that's laying the golden egg alive!
I hope this article gets people thinking and
talking. Something must be done. Insurers and collision shops must do it
together. The alternative is frightening for insurers and for the public.
Victor marciano, Executive director
Ph (780) 463-9292
Fax (780) 440-3065
Toll Free 1-800-282-9909
Email: info@asra-alberta.ab.ca