Posts Tagged auto glass replacements

A Bump in the Road?

D’Ieteren, the parent of auto glass repair and replacement (AGRR) behemoth Belron, offered some insight into the current state of affairs at Belron in a press release last Friday. Even the strong can have some problems. The title of the press release was, “Annual impairment testing and profitability improvement measures / Update on group’s FY 2014 outlook / Early views on 2015” You can download the release via this link. It provides some interesting insight.

When you read the details of the press release pay particular attention to the section titled ”IMPAIRMENT AND RESTRUCTURING CHARGES”. This section provides an in-depth discussion of the non-cash charges and actions that D’Ieteren is taking.

First of all the release states that “Since 2010, Belron has been facing adverse market conditions in the UK with the vehicle glass repair and replacement market down by circa 40% over the period (-12% in 2014) together with price deflation. This has led to an erosion in profitability during the period.”

A “EUR 89 million non-cash goodwill impairment charge is therefore required.” (Definition of impairment charge by www.investopedia.com)

“Belron entered the Chinese market in 2009 and expanded its network to 39 branches through a number of acquisitions, all of the businesses having both a wholesale glass and a fitting activity.”

“Experience to date has shown that Belron’s high business standards were not compatible with the carrying out of a profitable wholesale business in the region. Given the relative size of this activity in many of the existing branches, the discontinuation of the wholesale business means that these are no longer viable in the long term and will be either closed or sold. Following the closure of 31 non-profitable locations, Belron’s footprint in China will be concentrated on 8 branches.”

“This change will result in EUR 7 million unusual costs as well as a non-cash goodwill impairment charge of EUR 9 million, all provided for at year-end.”

“In Italy, following a decline in the vehicle glass repair and replacement market of circa 8% in 2014 and the decision of one of the major insurance partners to cease its collaboration and to establish its own network for fulfilling glass claims during the year, Belron has decided to implement a number of efficiency improvement measures. This will encompass merging the back offices of Carglass Italy and Doctor Glass, its franchise operation, as well as reducing administrative work in several branches thanks to the roll out of the new remote advisor system. The resulting EUR 4 million unusual costs will be fully provided for at the end of this year and will generate savings that should partially compensate for the reduction in sales.”

“In the Netherlands, vehicle glass repair and replacement market has halved in the last 5 years following the roll out of a new road surfacing technology that resulted in the vehicle glass breakage rate reverting to the European average while it was previously significantly higher. Profit improvement measures are currently being implemented both centrally and in the field operations that will require EUR 4 million unusual costs to be fully provided for at the end of this year.”

“In addition to its classical fitting business, Carglass Germany runs a separate activity offering glass repair and replacement for heavy commercial vehicles, notably buses and coaches. The profitability of this business has deteriorated in recent years due to the contraction in this market segment and will be negative by EUR 3.5 million in 2014. The decision has been made to close this business for total unusual costs of EUR 9 million.“

The value of the goodwill allocated to Brazil (EUR 20 million) is still under review.”

In the press release section titled, “TRADING UPDATE FOR THE PERIOD ENDING 30 NOVEMBER 2014” you’ll read the following:

“At Belron, year-to-date sales were up 1.3% on 2013 at the end of November, consisting of a 0.4% organic increase and 2.1% growth from acquisitions, partially offset by a 0.8% negative currency translation effect and a 0.4% decline due to fewer trading days. Total repair and replacement jobs have increased by 1.7% to 10.3 million.”

“In Europe, despite share growth, sales were down 4.8%, consisting of an organic decline of 6.6% due to severe market declines following an exceptionally mild 2013-2014 winter weather in Northern Europe, and a 0.6% decline due to fewer trading days, partially offset by 1.8% growth from acquisitions and a 0.6% positive currency impact.”

“Outside of Europe, sales were up 8.3%, consisting of an organic growth of 8.4% predominantly due to the extreme winter weather in the eastern US at the beginning of the year, and 2.5% growth from acquisitions, partially offset by a 2.4% negative currency translation effect and a 0.2% decline due to fewer trading days.”

During the early to mid 1990’s I held senior management positions at Windshields America, Belron’s retail subsidiary in the United States. I was fortunate to have worked with the greatest group of people that I’d ever had the opportunity to have been associated; the company grew from 50+ stores to 274 stores with exceptional sales and bottom line performance. Great people make all the difference in any organization. (December 16, 2012 blog post “What’s Your Line-up?”) The growth in store count and profitability was made possible by the performance of Autoglass. The Managing Director of Autoglass rightly boasted at the time that his company was providing the fuel (British pound profits) to help drive the growth of Windshields America and other areas of the world of Belron. True. It wasn’t his choice, but it was his view that he could have used those profits to further the goals that he had for Autoglass in the United Kingdom. Possibly true. Perhaps today Safelite profits could be diverted to help Belron around the world? If that does happen Safelite would have less money to spend in the United States to further their goals. Also a possibility.

So this week when you have a few minutes to consider the “strengths, weaknesses, opportunities and threats” (SWOT analysis) that could affect your business in the upcoming year and decide on what actions you will take to ensure that 2015 achieves the success you desire, know that even the dominate player in the AGRR industry in the world is having their share of problems. Some of their problems are market driven, so not necessarily self-inflicted. But some of them are strategic and tactic driven, so those are self-inflicted. Regardless they are not going away so don’t rejoice, but there is hope.

Just sayin’.

 

EPSON scanner image

Courtesy of http://www.TomFishburne.com

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Help Wanted: Writer Wanted for Social Media Conversation Page on Auto Glass Repair & Replacement

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An interesting email hit my inbox on Monday from a company representing Service AutoGlass, a part of Safelite Group, Inc. The email came from Fun Online Corporation which is headquartered in New York, New York. Mike Schoenback  (and his partner Ron Luks) sent the email and it started with,

“Hi David,

I came across your contact information through Glassbytes.com.  Our company (Fun Online Corp) is working with Service AutoGlass®, a national provider of wholesale vehicle glass products and installation materials, to launch a social media conversation page in the fall of 2014.”

So the wholesale division of Safelite wants to interact with its customers via social networking sites such as Facebook, Twitter, Pinterest, YouTube, along with numerous other social media sites? The email went on to say,

“We are interested in connecting with a person with good writing skills who has technical experience with auto glass repair and replacement and a familiarity with the industry. We are looking to hire such a person on an ongoing (freelance) basis to respond to posts on the social media page and work with us to develop conversation starters. Experience as a blogger is a big plus. This is a paid position.”

I guess I tick a couple of the boxes they’re looking for. I’ve spent my career in the auto glass repair and replacement (AGRR) industry, I am on some social media sites so I’m familiar with how those work and I blog. Even though it looks like the opportunity is being “outsourced” to Fun Online, the fact that it is a paid position is also great to know. The email ended with,

“I’m writing to see if you may be interested or if you have a colleague who may be interested in this opportunity.  We’re happy to have a phone or email conversation if you’d like more information about this.

Thanks very much!

Mike Schoenbach

Ron Luks”

Their email didn’t mention Safelite, just Service AutoGlass. I replied to let them know that I really appreciated the email letting me know about the opportunity, but I didn’t think I would be an appropriate person for the role they were looking at for a variety of reasons and I guess they didn’t look at some of my blog posts. I replied to Mr. Schoenback explaining that I was pretty sure that Safelite wouldn’t want me to fill the role even if I was interested. That being said I was once a part of Safelite filling a number of positions in the mid to late 1980’s leaving as the regional vice president of New England in late 1989; so I do have some familiarity with the company. I just didn’t think I’d be a good person to help “develop conversation starters” for them at this point in time. I’m sure that I could come up with a few “conversation starters” though. Here are some possibilities:

“If an auto glass replacement somehow slips through the hands of Safelite and you’re lucky enough that the opportunity comes to your company would you consider giving us a call so that we could sell you the part?”

“Here at Service AutoGlass we’re your all-in-one source for products and service, even if Safelite is spending countless millions on television and radio ads and is your biggest competitor. Come on…..give us a call. Won’t you?”

“We know that Pilkington, PGW, Mygrant and other wholesale distributors aren’t in the retail AGRR space installing auto glass in competition with you, but that shouldn’t stop you from giving us a call should it?”

I’m sure that you can come up with a few of your own. I asked a friend in the industry for a social media conversation starter for them and he suggested,

“They say you get what you pay for…. What did you get from us?”

I wished Fun Online success in finding someone to fill the social media role for Safelite…  er’ I meant Service AutoGlass. I found out that they sent the same email to a few other people in the AGRR industry as well. Imagine my disappointment hearing that. Perhaps they contacted you to see if you were interested? If not and you’re interested in the freelance position you can contact Mike and Ron to find out more. The Fun Online web site states:

“At Fun Online Corp. we’re your eyes and ears during business hours, evenings, weekends and holidays. A round-the-clock business infrastructure is expensive and can be a logistical nightmare. We can create a social media team or expand your current team and save you money. You’ll have 100 percent full coverage.”

It seems like a great opportunity.

Just sayin’.

 

 

* Cartoon courtesy of TomFishburne.com/Cartoons

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Just Sayin’ Blog – A Matter of Self-Interest or Consumer Choice

Dominos

 

Last June 3, 2013 Dannel Malloy, Governor of the State of Connecticut signed a bill that was passed by Connecticut’s House and Senate the previous month into law. This link to the summary of the act that was first introduced in the Insurance and Real Estate Committee of the Connecticut House states,

“The act requires that a glass claims representative for an insurance company or its third-party claims administrator, in the initial contact with an insured about automotive glass repair services or glass products, tell the insured something substantially similar to: “You have the right to choose a licensed glass shop where the damage to your motor vehicle will be repaired. If you have a preference, please let us know. ” By law, appraisals and estimates for physical damage claims written on behalf of insurers must have a written notice telling the insured that he or she has the right to choose the shop where the damage will be repaired (CGS § 38a-354).”

This law seems to be a reasonable approach to provide and ensure consumer choice to the residents of Connecticut.

As it appears on the State of Connecticut’s General Assembly bill tracking web site the law – Public Act Number 13-67 – states,

 “AN ACT CONCERNING AUTOMOTIVE GLASS WORK.

To require an insurance company doing business in this state, or agent, adjuster or third-party claims administrator for such company to provide additional disclosures to an insured regarding such insured’s right to choose a licensed repair shop or glass shop where such insured’s motor vehicle physical damage or automotive glass work will be performed.”

Again, this language also seems to be a reasonable expectation for residents of the state. Everyone believes that consumer choice is a good thing right?

The signing of the law was reported by number of industry publications (glassBYTEs.com, Autobody News, Automotive Fleet) due to the dramatic effect that it would have when fully enforced on insurance companies claims management programs, as well as automotive glass repair and replacement (AGRR) industry players (Harmon Solutions Group, NCS/Netcost Claim Services, TeleGlass/Strategic Claims Services, Gerber National Glass Services, PGW Lynx Services, Safelite Solutions)  that provide network and/or Third Party Administrator (TPA) services to the insurance industry. AGRR networks and/or TPA’s tend to steer business to either company owned stores and/or to affiliated network repair or glass shops that conform to the pricing or service requirements of the network and/or TPA. That has been a long standing business practice of networks and TPA’s and it’s not hard to understand the financial benefit to these companies to continue doing so. The passing and subsequent enforcement of this law requires a pivot away from the long-standing AGRR industry practice of placing the decision of which company provides the repair or replacement into the hands of the consumer needing service and out of the hands of a network and/or TPA that has always been heavily involved in the decision. This also seems to be a positive for consumer choice. Again, everyone believes that consumer choice is a good thing right?

In order to protect its network and TPA business Safelite Group, Inc. and Safelite Solutions LLC (the Plaintiffs-Appellants) have gone to court against GEORGE JEPSEN, in his official capacity as Attorney General for the State of Connecticut and THOMAS LEONARDI, in his official capacity as the Commissioner of the Connecticut Insurance Department (the Defendants-Apelles) in hopes of overturning the law. The law clearly prohibits the steering of Connecticut consumers to specific repair shops by TPA’s and/or auto damage appraisers so one can understand the self-interest involved. Connecticut’s “Department of Consumer Protection” web page states that:

“Ensuring a Fair Marketplace and Safe Products and Services for Consumers”

The purpose of this government department is pretty obvious by its title. Public Act Number 13-67 protects the interests of consumers in the state and their “right to choose”; and the State of Connecticut unquestionably is within its rights to enact such a law, right?

If the State of Connecticut prevails in its defense of the constitutionality of Public Act Number 13-67 through the appeal process, as Safelite continues to fight to overturn the law, the future landscape of networks and/or TPA’s that provide AGRR services to consumers in the state will forever be changed. And if this law stands it will have an effect on the landscape of the AGRR industry in the entire United States. You can be sure that similar consumer protection bills will be introduced in state assembly’s’ across the country. Is that why Safelite is so strongly fighting this law duly enacted by the State of Connecticut?

If you visit the Safelite web site you will find that the company describes Safelite Solutions LLC as providing:

“….complete claims management solutions for the nation’s leading fleet and insurance companies.

The company currently serves as a third-party administrator of auto glass claims for more than 175 insurance and fleet companies, including 19 of the top 30 property and casualty insurance companies. Safelite® Solutions manages a network of approximately 9,000 affiliate providers and operates two national contact centers in Columbus, Ohio and one in Chandler, Arizona.”

The Connecticut law could serve to undermine a business practice that has existed in the AGRR industry since the late 1970’s. The genesis of call centers (a.k.a. a network or TPA) was when Joe Kellman, former owner of Globe Glass & Mirror, visited an auto glass call center facility in Bedford, England operated by Belron’s Autoglass and brought the idea back to the United States starting the U.S. Auto Glass Network. Since then, the impact, influence and control of consumer auto glass losses by networks and/or TPA’s operating in the AGRR industry has continued to grow each and every day. The networks and/or TPA’s obviously work hard to control and steer auto glass repairs and replacements to either company owned stores or to glass companies that agree to join and follow pricing arrangements that benefit the goals of the network and/or TPA. A business practice worth fighting for right?

The State of Connecticut is interested in protecting consumers in the state, who are in need of auto glass repairs or replacements, from being steered by a network and/or TPA. This law seems like a reasonable next step action in a state where those that are engaged in the AGRR industry are required to be licensed by the state (in my last blog I wrote about “Is it Time for Licensing?” in the AGRR industry). The Department of Consumer Protection oversees the licensing flat glass and automotive glass work.

We will have to wait for the appeal process to work its way through the courts to find out if this law stands, is amended or falls. But whether you believe that the law is a positive development for Connecticut consumers or you believe that the law violates free speech in commerce, the fight will continue as the stakes are too high. If the law passes through the appeal process and stands, it could be the tipping of the first domino and could be the beginning of big changes for the AGRR industry.

So where do you stand on Public Act Number 13-67? Are you on the side of consumer choice or on the side of the networks and/or TPA’s? Perhaps it depends on your own self interest.

Just sayin’.

 

Dominos

 

 

Associated Articles and Reference Material:

Zauderer’s Scope (page 589) https://www.law.upenn.edu/live/files/1566-keighley15upajconstl5392012pdf

http://www.autobodynews.com/news/regional-news/northeastern-news/item/7277-connecticut-governor-signs-anti-steering-bill-into-law.html

http://www.nldhlaw.com/content/uploads/2013/07/UpToSpeed_July2013A.pdf

http://www.glassbytes.com/2014/04/connecticut-officials-file-brief-in-support-of-anti-steering-law-in-appellate-court/

http://www.glassbytes.com/newsConnAutoGlassBillGoestoGov20130523

http://www.glassbytes.com/newsConnecticutSteeringPasses20130606

http://www.glassbytes.com/documents/03192014SafeliteSecondCircuitBrief.pdf

http://www.glassbytes.com/documents/04232014SupplementalIndex.pdf

http://www.glassbytes.com/documents/04232014JepsenBrief.pdf

http://www.cga.ct.gov/asp/cgabillstatus/cgabillstatus.asp?selBillType=Bill&bill_num=5072&which_year=2013

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