IS ANYONE LISTENING OUT THERE?
As the National Director for the Collision Repair Association (CRA), there are a few brief moments when I ask myself if we are making any progress whatsoever in terms of sustainability and profitability within the collision repair business?
South Africa’s Road to Business success continues to stride forward along with some large demands being placed on panel shop owners to accept the constantly changing transformation ideals that have become part and parcel of the financial charter.
We support that change is necessary, but due to lack of skills this confronts an almost empty pool of talent to further promote inclusivity. This is now incorporated by insurance companies that operate in our local collision repair sector and whose development funding may not be applied to best outcomes. Added to this is a lack of collaboration from OEM corporates that leverages a void in progress.
It is all about top-down levels of micro-management to obtain extra profitability for crash control and repair costs. This is always being held at the reduction of company profits that are taken at the expense of the repair trade in our view. Plus, the lack of any type of process understanding in current motor repair methods is a given.
The new insurance initiatives are managed, in many cases, by cost containment controllers at the expense of accredited skill and acumen for quality and roadworthy repair. The lack of knowledge about car repair methodology, protection of the rights of the insured consumer and standards, are not considered, but instead remain hell-bent on a road for in-house increases on insurance profits.
That said, it was a pleasure to be invited to a recent SAIA insurance short term meeting which was cordial, and even informative. However, topics such as, getting to any of the fundamental issues of sustainable margins for continuity, the unauthorised collection and distribution of data privacy to third parties to sell on to various trade concerns, or other key areas like obsessive OEM accreditation levels for approved repair operations at high cost and barring new entrants access to amicable procurement distribution due to crippling cash investment requirement, were not tackled. These are the tough issues that need to be tackled head on for a sustainable future for all.
There continues to be a problem of enforcement of parts procurement direction. There are concerns around paint supply, raising issues of conflict of interest and anti-competitive processes of collusion and price-fixing, which has been raised with the Competition Commission. There is no form of rectification to open market trading and/or local geographic allowance for decentralised business development, growth, and job opportunity.
Reward for repair is a further troubling predicament. How can you nominate one major parts and auto glass supplier for your repairs as this is blatant enrichment to big business to the detriment of other market suppliers of quality product and fitment? It is a clear vertical interaction to grab extra profits by steering work to, at times cheaper, but unscrupulous service providers increasing. Bad workmanship is on the increase and knocks right back into the consumer.
As a reminder, I would just like to reiterate that the CRA was established to protect the free and fair business environment in our industry and provide amicable fair play to the majority of high standard established repairers.
Parts shortages are also another area of contention. Policies are still in place by most major car importers and local manufacturers, to keep on with a just-in-time parts supply concept. In far too many cases this simply does not work when our repair shops are forced to wait for parts of up to six weeks to obtain a new windscreen for example. This causes a situation for reputational damage as repairs and customers become exasperated in all regions. Parts costs have increased annually by close to 20% on average, which also has an effect of seeing ever increasing levels of uneconomical to repair vehicles being noted.
Looking in a crystal ball, the on-going body shop’s lack of profitability will see an increased attrition rate of business failures as things don’t look like changing anytime soon. This is a just deserve. Perhaps the insurers will be forced to write-off vehicles at uneconomical rates as history also shows their inability to run their own panel shops. It has happened in Europe and the US already with dire results and endless problems. The consequent failures are a beacon of failure for going the wrong way in collision repair – and yet we continue in the same direction.
A clear message must prevail to the actuaries and unknowledgeable bean counters at work in the 100 or so short-term insurers that operate currently. Give this trade a profitable working margin or else suffer the in-house financial consequences.
by Steve Kessel
