Posts Tagged winter
In the current presidential election season I’ve been seeing several news outlets play clips of Ronald Reagan in 1980 during the presidential election when at the end of a debate with then President Jimmy Carter he asked a question to the viewing audience,
“Are you better off than you were four years ago?”
The question Reagan asked was a seminal moment during that year’s presidential campaign with the majority of voters answering with a strong “NO” catapulting Reagan into the Presidency.
It made me think about how those who compete in the auto glass repair and replacement (AGRR) industry are doing this year compared to the past one, two, three or more years. Are you, your family or the company you work for better off this year than the past few years?
This past week I attended Auto Glass Week 2012 (AGW) in Louisville, Kentucky and while there I talked with a number of attendees who all work in the AGRR industry. I spoke with retailers, wholesalers, distributors, suppliers and networkers; and I didn’t get very many positive answers to the question “are you better off?”..… That’s not to say there weren’t those in attendance who felt that their company was doing better this year than over past years, but since I asked the question at an industry conference even people who aren’t doing better may be trying to put a more positive spin on their own story.
While at AGW I had several retailers tell me that they’ve been looking closely at what they’re currently allowed to charge to insurers for replacements versus their costs to acquire the part to be replaced, cost of labor and benefits, the cost of urethane (and primer cost if needed), fuel costs for mobile vans, insurance costs, etc. Each of them told a story that they had seen profit margins shrink over the last year or years. One retailer told me about a customer for whom he had replaced a windshield for a few years ago and again replaced the windshield in the same car. The customer happened to be insured with the same insurance company and they still had the invoice from the first replacement in the cars glove box. When the retailer looked at that prior invoice and then looked at the current invoice, with the pricing that he’s allowed to charge under the insurance pricing guidelines, he saw that he was getting less money today for the same replacement. More than a little surprised when he got back to his store he went back to look up what he had paid for the part and urethane from a few years ago versus his current costs and found out that he actually paid more for the part and urethane this time around too. So he got less for the sales invoice and paid more for the part and required supplies to install it; and that doesn’t even take into consideration the increase in all his other costs.
He started to question why he’s agreed to the pricing guidelines and was also giving consideration about whether he should pull out of or stay in the pricing/billing mechanism required to bill for work he does for the network that the insurance company uses to manage its auto glass losses. He asked me what I thought about that. His idea which might be beneficial to some, could also be a very risky strategy for others. Still it is an interesting question to ponder don’t you think?
While talking with another retailer he was lamenting the fact that gasoline prices are killing margins. That’s understandable since the price of gasoline has gone up over the past year and depending where you live regular gasoline is up $ 2.00 a gallon since 2009.
As per the American Automobile Association Daily Fuel Gauge Report the average price of regular gasoline today is $ 3.81.
By the way, in 1980 the average price of regular gasoline as per the website 1980sflashback.com was $ 1.25.
The retailer said that the price he’s paying at the pump to fill up mobile vans, along with the delivery surcharge he’s being charged by his auto glass supplier due to the rising cost of gasoline is a killer; with no opportunity to pass those costs along to insurance customers.
One supplier complained about competition from foreign suppliers in the market with goods of “lesser quality and price” putting even further pressure on wholesale prices.
Another supplier talked about the market size shrinking and suggesting that surely some weaker competitors will drop out of the market this year which could certainly benefit the stronger competitors.
One supplier mentioned that this coming winter was going to be a good one (of course meaning a bad one) since acorns are abundant and that woolly worms are darker this year and not as light as last year…. I said, “What?” He went on to explain what he read in the Farmers’ Almanac. I went online and looked up both of these legendary prognosticators of a bad winter and he was right! The Old Farmer’s Almanac says that when woolly bear worms are darker in color it signifies a bad winter coming. I found in the Farmers’ Almanac a story on when there are more acorns than normal it can predict a rough winter as well. I’m not sure about either as true predictors of this coming winter’s weather, but maybe if we all also cross our fingers; find a four-leaf clover or a penny face up; knock on wood; see a rainbow; rub a rabbits foot and don’t step on a crack, break a mirror or open an umbrella indoors……… I think you get the idea.
Certainly other costs of doing business have gone up over the past year or more which most AGRR businesses are bearing with little opportunity for upside revenue to cover them. Many of us have lived through lean years and bountiful years in this industry. It’s always been that way hasn’t it? Hopefully the pendulum will swing back to an improved time for the AGRR industry in 2013.
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”
– Charles Dickens, A Tale of Two Cities 1859
The reality is that the current marketplace demands that everyone in the AGRR industry find ways to deliver or provide a superior product and/or service offering via a low cost model to combat those who are willing to deliver or provide a poor product and/or service via an even lower cost model, if you want to survive.
So if you’re asked the question,
“Are you better off than you were four (or one or two or more) years ago?”
what would your answer be? Obviously you are the only one that can answer that question, but here’s hoping that you’re surviving all the turmoil that’s been experienced by many in the industry over the past few years. And that the upcoming year will have a definite swing to the better for you, your family and your business. Wouldn’t that be a welcomed change? You bet!
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On January 10, 2012 I wrote a blog titled ‘Hopes for the New Year’. In the blog I laid out my hopes that 2012:
“turns out to be a great year for those in the automotive glass repair and replacement (AGRR) industry (or if great is too high a bar to set at the very least better than 2011)”.
Since we’re nearing the end of the first quarter of 2012 I thought that I’d take a quick look at the first hope I listed for this year. My first hope was regarding the 3 key business drivers for the AGRR industry – weather, the economy and miles drive.
Weather – I had asked for ‘good’ weather for the year. ‘Good’ meaning bad of course. That means snow, hail, and especially ice if you happen to be in the AGRR industry.
As I’m writing this blog watching March Madness the temperatures in Illinois are in the mid 70’s and the sun is shining. Farmers in the Midwest have already been in the fields doing prep work getting ready to plant crops in the near future if the temperatures stay this warm. The lack of a winter in 2011-2012 is discussed in an article titled ‘For much of the USA, winter never got off the ground’ . In the article is a graph that details the year-on-year drop-off in snowfall in major cities across the Northern states. the lack of snowfall is blamed on the location of the jet stream this year to last. For those in the AGRR industry, hopefully it will get back to where it belongs in the 2012-2013 winter season. On a personal level I’ve enjoyed the lack of snow this winter, but from the Upper Midwest to New England the mild winter has forced countless companies to take a hard look at costs they can take out of their businesses. Costs equate to people.
There has been welcomed hail this year in a number of states. This obviously brings glass breakage, but sadly much of that hail came with tornado’s that caused death and destruction as well.
I haven’t talked to anyone in the U.S. who is happy with how this year has started or how they’re doing year-on-year. Regardless of whether they’re a retailer or a supplier it appears that everyone is hunkering down in 2012. The only ones who might have a slight smile are insurers.
It’s not only here in the United States, even the venerable Belron keystone subsidiary in the United Kingdom Autoglass® has had to “slash jobs at its head office and axe 16 out of its 101 branches resulting in a large number of redundancies (lay-offs)“ as reported on February 29, 2012 by the Insurance Times – UK.
The Economy – Indications are that the economic environment is moving in the right direction with the February 2012 unemployed rate down to 8.3% from a high of 9.1% in August 2011 as reported by the U.S. Bureau of Labor Statistics. The Wall Street Journal – MarketWatch.com reports retail sales improving in the first two months of 2012 and home prices and sales are beginning to rise seemingly pointing to a turn-around for the housing market.
All of this is good news if you’re a retailer, but the signs of a recovery could be short lived as Bloomberg reported last Friday that the Thomson Reuters/University of Michigan preliminary index of consumer sentiment fell to 74.3, the lowest this year, from 75.3 the prior month. That means consumers aren’t feeling too confident in the recovery quite yet.
What’s happening on the national economic level is important, but even more important is what’s happening in the local economy in which you operate. What’s the unemployment rate in your market, how are retail sales and are you seeing a recovery in the housing markets? How is your business performing so far in 2012? Feeling good or bad about your prospects?
Miles Driven – Miles driven has shown some minor improvements at the start of the year, but that might be short-lived. In early January Ed Morse, Head of Commodity Trading at Citibank was predicting $ 4 a gallon gasoline as a floor price by the end of May 2012. As of today the average price in the United States for a gallon of gasoline is $ 3.84 as reported by the U.S. Energy Information Administration. A few blocks from where I live in Chicago a BP® gas station is selling regular unleaded gasoline for $ 4.459 a gallon and $ 4.709 for premium.
Recently ExxonMobil’s CEO Rex Tillerson spoke with the TODAY Show’s Matt Lauer and said “Despite rising crude oil prices and threats to stability in the Middle East, the price of gas is unlikely to reach a national average as high as $5 per gallon in the near term”. Well isn’t that comforting news.
Politico recently reported that President Obama’s Energy Secretary Steven Chu was “walking back” his comments in an interview he had with the Wall Street Journal in 2008 when he told the newspaper,
“Somehow we have to figure out how to boost the price of gasoline to the
levels in Europe”.
Really? The prices per gallon in Europe in 2008 averaged over $ 8 per gallon as reported by CNNMoney.com and in 2008 the price for a barrel of oil reached a high of $ 147.27. Today oil is hovering around $ 108 per barrel and the average price per gallon of gasoline in the United Kingdom is over $ 8. Can you imagine what the price per gallon will be if (or when) oil goes higher?
The tensions that continue to build in the Middle East between Israel and Iran obviously add further concern to the price of oil and the gasoline our industry relies so heavily on.
Hopefully all of the key drivers that effect the AGRR industry will all trend positively in the coming months, but with the price of gasoline being such an overriding influencer of both miles driven and the economy even the prospect of future weather events won’t help. What the industry doesn’t need are consumers who become ‘do nothings’ by keeping their hands in their pockets holding onto their cash unsure of what’s coming later this year. If that happens, retailers and suppliers alike will continue to have to make those very hard decisions on what costs to cut next. The first and easiest cuts always involve people.
People are the ultimate key driver to any successful business. Companies that don’t recognize the incredible value that attracting and then keeping the most talented people undoubtedly will suffer when weather, the economy and miles driven have a negative impact on the business. Recognizing that employees are the key driver that helps every organization find ways to innovate, increase customer service levels and create value for all stakeholders will allow it to flourish and remain competitive in the marketplace.
I wrote in a blog earlier this year about the need to ‘Be Smart in 2012’, quoting Coach Pete Carril who said, “The strong take from the weak, but the smart take from the strong”. I hope you’re being smart in 2012.
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There have certainly been a number of events happening since the first of the year that are effecting or may affect the auto glass repair and replacement (AGRR) industry in 2012. Where to start? Well let’s see:
1. First the earth shook on January 2, 2012, when Safelite® Solutions officially took over the responsibilities for administrating Allstate® Insurance auto glass claims from PGW Lynxservices®. By all accounts Safelite® Solutions must be doing a masterful job in this new role administering claims for Allstate® as I’ve heard from a number of you that your auto glass claims from the second largest insurer in the United States are dramatically lower since the administrator change took place. Mild weather could also be a contributing factor. Adding to the pain of lost units, the pricing for those Allstate® replacements are also lower.
Have you seen your auto glass claims with Allstate decline since January 2, 2012?
2. On January 6, 2012, glassBYTEs.com™ reported that Grey Mountain Partners Acquires Binswanger. Binswanger is a truly amazing full-service glass company with its roots going back to 1872 with its first location in Richmond, Virginia. It is certainly great news to hear for all of the Binswanger employees that they have a new owner who is interested in working with them to help build the company. I think that a strong Binswanger is healthy for the glass industry in the United States.
How about you?
3. Neil Duffy recently announced in his very well written blog View From The Trenches that he’s considering a new career by starting a ‘new third-party glass claims administrator’. It sounds as though he’s thought it out pretty thoroughly by looking at all the pros of this new venture and I for one think he should go for it. I don’t see any cons.
What do you think?
4. Then there is that anonymous letter from a ‘Concerned Citizen’ that surfaced yet again last week titled “New Anti-Trust Concerns”. This letter had a postmark from Bloomington, Illinois, and its resurfacing at this time might have some relationship to #1 above.
It does seem pretty obvious that the letter was written by someone in the auto glass industry as no one else would really care about the issue. The letter does raise a number of interesting points, but the conclusion of the ‘Concerned Citizen’ is that:
‘While the relationship between a TPA and its insurance company clients may not be illegal, the abuse of that position could be unfairly excluding independent competitors.’
There are a number AGRR initiatives taking place in various states where attempts are being made to try to restrict the big guy from taking your lunch money day in and day out. If one of them was successful it would certainly be good for independents in the industry.
Are there any legislative initiatives happening in your state that will be of any help to you in your business?
5. For those of you who happen to follow @Safelite on Twitter you may have seen them sending out ‘Tweets’ asking for your input. One ‘Tweet’ poses a question to its followers and directs you to a web page survey question asking ‘How likely are you to recommend Safelite?’ Safelite® gives you the opportunity to answer with a ‘Not Likely’ – 0 score to an ‘Extremely Likely’ – 10 score.
I’m not sure to whom exactly Safelite® is targeting the question, but you’ve got to provide an email address in order to answer the question which is somewhat problematical. If you’d like to offer your view anonymously I guess you could use a fake email address.
I know what my number is in answer to the question. What number would you mark as your answer?
6. And finally there was an article in the Chicago Tribune on January 18, 2012, reporting that the average age of vehicles in the United States has climbed to 10.8 years. The article stated that in 2010 the average age of vehicles was 10.6 years with the average age of vehicles having climbed steadily since 1995 when it was at 8.5 years. Over the past several years low new vehicle sales has certainly been a major factor in the increase in the average age, but with new car sales picking up new car manufacturers are expecting a great year in 2012. That will help to slow the growth in average age and hopefully bring it down. What does average age have to do with the AGRR industry?
One byproduct of an aging vehicle fleet is that you see an increasing number of the ‘do nothings’ (consumers that delay replacements) when auto glass breaks. Consumers obviously will be more accepting of a repair over replacement if the vehicle is older. New vehicles typically provide a higher average invoice value since the only replacement glass initially available to consumers will be auto glass manufactured for the vehicle by the Original Equipment Manufactured (OEM) glass company (i.e. Pilkington-NSG, PGW, Saint-Gobain Sekurit, etc.). The cost for non-OEM manufactures to reverse-engineer a replacement part for new vehicles is initially too expensive due to the low volume of parts needed in the aftermarket. The older the age of the vehicle fleet the more opportunities for non-OEM suppliers to sell reverse engineered replacement parts that are typically cheaper than the OEM’s. Ultimately that can mean less profit for the AGRR industry as a whole. New vehicle sales should mean more profit opportunities for those in the AGRR industry.
What do you think?
I hesitate to mention other things going on so far this year that may have an effect on your business like the lack of a severe winter in the East, the predictions for much higher gasoline prices later this year, a sputtering economy, the price changes that have taken place in the State Farm® Insurance Company auto glass program and various people coming and going from here to there. How you’re dealing with the variety of issues that you’ll face in 2012 will determine how you survive the year. Someone I’ve known for a long time in the industry commented to me last week that, ‘2012 is shaping up to be a watershed year for many in the industry. Survive this year and hope that next year will be a better one.’ That outlook makes sense to me. We’ll see if he’s right.
In closing, a former Princeton University men’s basketball coach by the name of Pete Carril wrote a book titled “The Smart Take from the Strong”. It’s a great book. Pete Carril was 5’6” tall, he was an All-State Pennsylvania high school basketball player, an Associated Press Little All-American in college and he coached at Princeton for 29 years before going on to the NBA to become an assistant coach for the Sacramento Kings. Coach Carril is also a member of the Naismith Memorial Basketball Hall of Fame. When he was young man his father told him:
‘The strong take from the weak, but the smart take from the strong.’
So be smart in 2012!
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