Trends That Will Change the Collision Industry

1. “The Waterborne Ultimatum”

Environment Canada has proposed regulations that will change the allowable level of volatile organic compounds. The department has indicated that paint manufacturers can achieve these limits in any way they see fit, but it appears that conversion to waterborne paints, similar to the conversion in Europe and California is the most practical way for paint manufacturers to reach these goals. What would be the impact of such a sweeping change for shops?

What are the advantages of waterborne paint application?

Without a doubt, the major advantage when it comes to application is that basecoat color matching — how the metallic lays and the blend performance — is the same or better than that of solvent-borne basecoats. Also, many waterborne basecoat systems do not settle in the can and therefore don’t require constant agitation, which makes the traditional wall of agitation machines obsolete. Because waterborne is more opaque than it’s solvent-based counterpart, full color coverage can be achieved with less sprayable material. Painters will have to adjust to the different feel of waterborne.

” Color matching has been a short term issue,” Gene Lopez, director of development for Seidner’s Collision Centers in Southern California, said in reference to what his painters were experiencing. “It mostly has to do with learning the characteristics of the color when you need to tint. Once the painter understands how the tint will change the color he becomes more confident in color matching. A bonus is that a high percentage of the prime formulas seem to be close enough to blend.”

Are there any draw backs?

Yes, as with any developing process, there are some new challenges to overcome, but from the shop managers I’ve spoken with, the transition has been smooth. First, waterborne materials are very susceptible to contamination, which means that it is critical to keep both the equipment and parts to be painted extremely clean. Since waterborne paint cannot be mixed with oils and any molded plastic part that has residual mold release agents, all items coming into contact with the paint must be thoroughly cleaned to ensure proper paint adhesion. Steel parts can also retain oils and must be cleaned with an agent that is recommended by the waterborne paint system manufacturer. If proper cleaning techniques are not applied, some signs of improperly prepped parts like fisheyes, craters or lack of adhesion will reveal themselves. Improper paint prep isn’t the only element that can affect a paint job when using waterborne paints. Because of the way the materials fuse upon the water’s evaporation, increased orange peel and application runs and sags can also sometimes surface. One more final caveat: waterborne paints must be protected from freezing and applied at a minimum temperature of 10 degrees Celsius.

Preparing for Conversion

Keep the drying time in mind. “There have been a noticeable increase in basecoat drying time, but I think it may be only a

perceived increase in time because the painter is sometimes having to hold the handheld blower in areas (under body lines,

down along rocker panel) that would normally not take place,” Lopez said.

Equipment considerations: Since water is in fact a highly corrosive material, using stainless steel and plastic parts for spray and mixing equipment is a wise investment to consider. Remember that waterborne and solvent based systems should not be mixed, so separate equipment for each paint type to avoid contamination should be used.

Air movement: In addition to an air movement system in your booth, you can purchase a small hand-held “flash” air unit that helps speed the drying process for small spot repairs. Some units can even run on an air compressor line, making spot drying convenient. After each basecoat spray the flash unit is turned on for several minutes between coats, allowing a high volume of air to be dispersed over the surface of the painted panel and speeding up evaporation process of the water in the basecoat.

Keeping it clean: With increased air movement, along comes the risk of increased dust and dirt circulating and settling in the freshly sprayed surface. Keeping the booth clean and filters changed can greatly reduce this risk.

Cleanup and disposal: You might think that because the paint material is water-based its corresponding equipment could be washed in the sink. But because there are still solvents in waterborne paints, it is crucial to understand that it is illegal to pour waterborne paint and waste down the drain. As with solvent systems, waterborne paint equipment should be cleaned with a specific cleaner that is determined by the supplier of your system, and disposal must be made through a licensed waste disposal vendor. However, you should also be aware that the disposal of waterborne paints by these vendors is a bit more difficult than the disposal of solvent-based paints. Unlike traditional solvent-based paint where the waste can be ‘burned off’ and recycled, waterborne paint is more difficult to properly recycle. Therefore, licensed waste vendors will likely charge more for this type of disposal.

Time, tools and training: The last area of impact of waterborne paints is probably the most important to get right — especially since it can affect your bottom line. The paint department has traditionally been a bottleneck to the production schedule, and with the conversion to waterborne paints, a ‘time’ bottleneck here will make the difference between making a profit and losing money on a job.

Tools and their adaptation to the waterborne paints are also essential to achieving a successful conversion. Any investment in equipment to aid air movement, drying and increased through put overall will be the key to staying out of the red when it comes to waterborne paints.

Let’s face it, if you have the tools but your technicians don’t know how to use them correctly, you’ve haven’t fully invested in the transition. Re-training paint technicians to properly work with waterborne paints will also contribute to improving throughput by getting each job done right the first time, and learning to reduce contamination will also help to lower the amount wasted materials.

Make no mistakes about it, the transition will take time and effort, but you can prepare. How can you get ready? The key is to start now by working with your paint system vendor to investigate recommendations for converting your shop. Talk to a production manager and painter in a shop that has made the conversion and listen to their insight. And equally as critical — plan time into your shop’s schedule for your paint and prep technicians and production managers to attend training classes to educate them on avoiding contamination, properly storing materials, and reducing drying delays in waterborne systems. The investment in tools and training may make the difference to the success of your bottom line.

2. Increased Use of Lightweight Special Materials in Vehicle Construction

More manufacturers are producing full aluminum vehicles, and each auto maker has restricted who is authorized to repair these vehicles. Aluminum is now the second most common materi al used in vehicle construction today, and currently in the North American auto market, average content reached 319 pounds –an increase of almost 24 per cent over the past five years. The manufacturers’ motives are understandable — they want to assure the vehicle is repaired properly and that the quality and the customer repair experience are appropriately managed. But, full aluminum constructed vehicles are just one of the products entering the market that will affect the collision industry. Weight-saving alloys, such as boron-infused steel, are also adding

complications to repair methods. The new Volkswagen Passat, whose “B” pillar is boron steel, is a perfect example. At the factory, the two halves of the ‘B’ pillar are laser welded together. But because Volkswagen believes this process cannot be properly replicated in the collision repair environment; the factory approved collision repair method is to use adhesive bonding to attach the inner and outer pillar halves.

So what does this mean for the collision repairer? Gone are the days when a collision technician could look at the original vehicle construction and replicate that process in the repair. In the case of aluminum collision repairs, the manufacturer will require a shop to apply to become a certified repairer of its vehicles and will then require a hefty investment in the manufacturer’s training and equipment. Shop owners will then need to decide if they will have enough potential volume of these vehicles to justify this investment.

The same type of situation also applies to alloy and other component materials. Shops can no longer rely on observing a manufacturer’s assembly

technique and replicating the procedure. More shops, in turn, will increasingly begin to rely on specific manufacturer collision repair information to properly complete their repairs.

For the insurance companies, the migration towards full aluminum constructed vehicles entails several adjustments to their regimens. They’ll need to train their staff appraisers and management on the appropriate repair procedures, educate them on which aluminum vehicles have authorized repair centers and make sure that the vehicle owner receives a top quality repair at a fair price.

3. Parts Procurement Programs

State Farm’s recent announcement that it would be piloting an electronic parts ordering and procurement program in select areas in the United States with its Select Service repair partners formalizes the ideal that several insurers have long wanted to achieve. To date, State Farm has not commented on when or if the program would be adopted in Canada, but the pilot is just beginning in the United States. Shops have been opposed to previous parts procurement attempts either because the insurers required them to use unfamiliar vendors, or the carrier asked shops to sacrifice profits. Shops also shied away from previous programs, indicating that they were not consulted before the programs were launched. The State Farm program is different according to George Avery, State Farm claim consultant. “As this process developed, we asked for and considered input from members of the collision repair industry,” Avery said. “We believe Select Service repairers will have an enhanced ability to obtain quality parts that allows them to provide customers with the best combination of quality, efficiency and competitive price. And as always, our customers are free to choose which repairer will fix their vehicle.”

This program is also different than some of its predecessors because

it does address one of the key objections of collision

repairers — keeping the profit margin in place. If the repair shop orders parts while enrolled in the program, they will not be

required to sacrifice profits and will potentially see a parts-buying process that will build efficiencies and cut cycle time. However, if the shop chooses to obtain parts outside of the program, it will be required to match the price of the retail parts cost to State Farm.

OEM part makers, on the other hand, favor the program because the electronic ordering process is more efficient and reduces misordered parts, benefiting them by easing the parts ordering process and potentially increasing OEM part utilization. The industry has long needed a wide adoption of an accurate, electronic ordering mechanism that will reduce the hours spent ordering and returning parts.

If the program is successful in the test areas, two things are certain. First, State Farm would likely expand the program to Canada through its Select Service Program, and second, other carriers will use State Farm program as a model to craft their own similar programs.

4. The Next ‘Wave’ of Safety Equipment

The next wave of safety equipment is defined as Electronic Stability Control (ESC), Blind Spot Warning Systems, Intelligent Cruise Control, and rearview cameras. While some of these products are optional on ‘high end’ cars, the majority of SUV’s will be equipped with ESC by 2010. The United States National Highway Safety Administration has mandated that all cars sold in the U. S. be equipped with ESC by the 2012 model year. Why is Electronic Stability Control so vital? Although rollovers are the least com- mon type of accident (accounting for only four per cent of accidents), it is the deadliest, with the government estimating that 10,000 of the roughly 43,000 annual auto fatalities happen in rollover accidents.

Blind Spot warning systems may reduce accidents significantly if widely adopted in the industry. Consider that according to U. S. Department of Transportation accident statistics more than 413,000 accidents are caused by blind spot related problems annually. Those accidents damage more than 826,000 vehicles and injure or kill more than 160,000 people every year.

Auto manufacturers are also testing several more significant products that will give new meaning to vehicle safety when introduced. Prototype “SUV” side impact airbags” are currently being tested and could be installed on passenger cars as early as 2011. These side external airbags deploy on the outside of a passenger car when ‘t-boned’ by a higher stance SUV. The goal is to reduce side intrusion of the SUV — a leading cause of SUV/passenger car collision fatalities. All of these new devices are meant to help drivers avoid accidents and keep vehicle occupants safe, but, believe it or not, these products could be detrimental — at least in the eyes of collision repair shops.

While these advancements in vehicle safety should definitely reduce the 200,000 injury claims that occur in the Canada each year, benefiting drivers and passengers alike, they may not seem as advantageous to some in the industry. For collision repair shops, the downside is two-fold. First, fewer accidents mean fewer opportunities for shops to repair vehicles, and second, the cost of replacing this state of the art equipment can be astounding and could result in increasing total losses rather than repairs. For insurers, the situation is also two-fold, but one they have the opportunity to take advantage of if they play their cards right. The reduced frequency of claims will certainly be an advantage for insurers, but, on the other hand, they will be faced with the challenge of properly assessing the reduction in risk that these advancements will provide. The insurer that balances these factors accurately will be able to provide a lower insurance rate and profitably grow business.

5. Asking the “Ultimate Question”

Most consumers think of auto insurance coverage as a legal requirement and a commodity, oftentimes doing little to differentiate one carrier from another — at least until they are dissatisfied for one of two reasons. Statistics published by JD Power and Associates are speaking volumes about consumer’s auto insurance shopping habits though. These statistics indicate that 33 per cent of auto insurance consumers who shop based on price ultimately switch carriers; while nearly an astounding 75 per cent of those who shop due to a poor customer service experience switch carriers. The JD Power and Associates 2007 National Auto Insurance Study insurance study reveals that the overall service experience matters most to policyholders among all other elements within the model. “Maximizing renewal rates is key to the success of every carrier, as just a one percent shift in market share can represent $1.6 billion in annual premiums, Jeremy Bowler, senior director of the insurance practice at J. D. Power and Associates indicated.

Collision repairers, on the other hand, know that their service is not a typical customer transaction because a collisio n is a relatively rare, unfamiliar experience for many drivers. The collision repair business is therefore driven in large part by word of mouth advertising rather than by price or customer experience as it is in the insurance realm. Since many shops will likely interact infrequently with a customer, they don’t have the same opportunity as insurers to capitalize on the results of a positive customer experience.

How can these two different sides of the industry find a central focus point to improve their joint customers’ service experience? Understanding the difference between satisfied and loyal customers offers a critical path to improving customers satisfaction and increased profitability. Collision repair shops and insurers alike need to understand it is a common mistake to believe that customer satisfaction — measured through survey questions relating to details about the experience within a specific transaction process — and customer loyalty are synonymous. Customer loyalty is more complex because is based on an entire relationship with a business, not a mere specific transaction. It’s almost impossible to have loyal customers without delivering satisfaction, but satisfied customers are not necessarily loyal customers. In fact, Fred Reichheld of Bain and Company indicates that 60 to 80 per cent of customers indicated that they were satisfied or even very satisfied prior to defecting to another company’s offering.

Using Reicheld’s Net Promoter Score metric, which is based on the response to his “Ultimate Question” — How likely is it that you will refer this company to a friend or family member” — provides a very effective means for businesses to measure where they rank in overall customer loyalty. When customers respond positively to this question, it indicates they are willing to put their personal reputations on the line when recommending the company to others. These customers are the key to obtaining positive word of mouth advertising a fundamental driver of profitable growth.

Can asking the “Ultimate Question” in CSI surveys change our industry? Yes! Because measuring your Net Promoter score is not “just another customer satisfaction question.” It is an indispensable tool that not only gauges current customers’ perceptions of your company, it also provides insight into areas where you and your employees can improve customer interactions that will increase loyalty, driving profitable growth–especially in the increasingly competitive business environment.

Greg Horn is the vice president for industry relations, Mitchell International, after 20 years in insurance claims management.