Posts Tagged safelite auto glass
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.”
“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.
Courtesy of http://www.TomFishburne.com
I recently read the argument that attorneys for Safelite Group Inc. (Safelite) made relating to Connecticut’s Public Act-13-67(c) (2) in a glassBYTEs.com article. They argued that,
“it puts appellants Safelite Group Inc. and Safelite Solutions to a Hobson’s choice….”
“Hobson’s choice” refers to a businessman by the name of Thomas Hobson who ran a livery in Cambridge, England in the 1600’s. Hobson required that every rider asking to hire one of his horses to always take the horse nearest the door. If a patron didn’t want to use that particular horse no other horse could be used. A “take it or leave it” choice. As another source on the origins of the phrase states, “A Hobson’s choice is a free choice in which only one option is offered.” I thought using “Hobson’s choice” in this particular instance an interesting one considering the origins of the term. More on that later.
This link to the summary of the act that was first introduced in the Insurance and Real Estate Committee of the Connecticut House and ultimately signed by the Governor of the State of Connecticut required that in the handling of any insurance auto glass claim in the State of Connecticut that:
“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).”
“The phrase Hobson’s choice goes all the way back to 17th-century England. For 50 years, Thomas Hobson ran a stable near Cambridge University. There he rented horses to students. Old Man Hobson was extremely protective of those animals. He rented them out according to a strict rotating system. The most recently ridden horses he kept at the rear of the stable. The more rested ones he kept up front. That meant that when students came to get a horse, Hobson gave them the first one in line—that is, the most rested. He’d let them rent that horse, or none at all.”
Perhaps you see where I was thinking that Hobson’s choice was an interesting phrase for the attorneys to use in their argument. First, Public Act-13-67(c) (2) is a duly enacted Connecticut law so their client really doesn’t get a choice in deciding whether they wish to follow it or not. As is their right, they can dispute the law which is obviously why the company is filing the appeals to the act which provides Connecticut consumers a choice in what company repairs or replaces their damaged auto glass. It’s just that at his stable Hobson didn’t want the same horse(s) being used each time by his patrons. Hobson wanted his patrons to use only the horse(s) that he wanted them to use. You can understand why Hobson wanted to rotate his horses so that each got equal use. Safelite wants Connecticut consumers to only use the auto glass repair and replacement (AGRR) company that Safelite wants them to use. In this case it would appear that Safelite is Hobson.
By enacting Public Act-13-67(c) (2), the State of Connecticut took steps it deemed appropriate to protect consumer choice for residents of the state. There are any number of AGRR companies operating in the State of Connecticut for consumers to use when they sustain auto glass damage. So is it “A Matter of Self-Interest or Consumer Choice”? Isn’t it Safelite that is attempting to provide Connecticut consumers with a Hobson’s choice?
“Any customer can have a car painted any colour that he wants so long as it is black.”