New England Automotive Report May 2019

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2 May 2019

New England Automotive Report

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CONTENTS

May 2019 • Volume 17, No. 5

DEPARTMENTS

AASP/MA FEATURE

VICE PRESIDENT’S MESSAGE By Kevin Gallerani

34 | How Did We Get Here?

8 | Our Biggest Problem

The History of a Labor Rate Gone Wrong

By Joel Gausten

EXECUTIVE DIRECTOR’S MESSAGE

By Evangelos “Lucky” Papageorg

10 | Let’s Talk about Labor Rate!

AT-LARGE DIRECTOR’S MESSAGE

By Adam Ioakim

16 | Want to Bill Correctly? It Starts with Knowing Your Numbers

LOCAL NEWS 24 | AASP/MA to Ride to Defeat ALS By Alana Bonillo 24 | What’s Going on at the ADALB?

GUEST FEATURE By Fred Jennings President, EconoLogistics 28 | Who Determines Your Labor Rates?

Take Control of Your Business!

ALSO THIS ISSUE 11 | WHERE’S LUCKY? 19 | AASP/MA VENDOR AFFINITY PROGRAM SPONSORS 20 | AASP/MA 2019 ANNUAL GOLF OUTING INFO 40 | AASP/MA MEMBERSHIP APPLICATION

ADVERTISERS’ INDEX Accudraft Paint Booths ................................OBC Audi Group ....................................................7 Axalta ............................................................4 Best Chevrolet/Best CDJR ..............................IFC BMW Group ..........................................................18 BMW/Mini of Warwick ..................................26 Colonial Auto Group ........................................6 Empire Auto Parts ..........................................41 Enterprise ....................................................23 First Chrysler-Dodge-Jeep-Ram......................23 First Ford ......................................................23 First Hyundai ................................................23

Ford Group ....................................................31 Honda Group ................................................36 Hyundai Group ..............................................27 Imperial Ford ................................................31 Ira Subaru......................................................13 Ira Toyota of Danvers ......................................12 Kelly Automotive Group ................................IBC Kemperle ......................................................39 Kia Group......................................................27 Linder’s, Inc. ................................................42 Long Automotive Group ..................................9 Mazda Group ................................................14 McGovern Chrysler Jeep Dodge Ram ................11 Mopar Group ................................................25

Nissan Group ................................................33 PPG................................................................3 Reliable Automotive Equipment ......................21 Sarat Ford Lincoln ..........................................27 Sentry Group ................................................17 Sherwin-Williams ..........................................15 Subaru Group ................................................37 Tasca Group ..................................................22 Toyota Group ................................................30 Volvo Group ..................................................32 VW Group ....................................................38 Wellesley Toyota/Scion ..................................16 Wheel Collision Center ..................................42 Yesterwreck ..................................................13 New England Automotive Report May 2019 5

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CITY SIDE SUBARU 790 Pleasant Street Belmont, MA. 02478 Phone Number: 617-826-5005 FAX Number: 617-489-0733

COLONIAL FORD 147 Samoset Street Plymouth, MA. 02360 Phone Number: 800-233-8109 FAX Number: 508-830-1658

NORTH END SUBARU 757 Chase Road (Rte. 13) Lunenburg, MA. 01462 Phone Number: 800-548-8887 FAX Number: 978-582-9843

COLONIAL CHRYSLER JEEP DODGE-RAM 24 Coolidge Street (Rte. 62) Hudson, MA. 01749 Phone Number: 978-568-8000 FAX Number: 978-562-1213

COLONIAL FORD OF MARLBOROUGH 428 Maple Street Marlborough, MA. 01752 Phone Number: 888-460-1125 FAX Number: 508-460-3464

COLONIAL SOUTH CHRYSLER JEEP DODGE-RAM 42 State Road (Rte. 6) Dartmouth, MA. 02747 Phone Number: 508-984-1900 FAX Number: 508-996-5801

COLONIAL CADILLAC 201 Cambridge Road Woburn, MA. 01801 Phone Number: 781-935-7009 FAX Number: 781-933-7728

NORTH END MAZDA 757 Chase Road Lunenburg, MA. 01462 Phone Number: 800-322-1241 FAX Number: 978-582-9841

COLONIAL VOLKSWAGEN COLONIAL SOUTH CHEVROLET 89 Turnpike Road (Rte. 9) 361 State Road (Rte. 6) Westborough, MA. 01581 Dartmouth, MA. 02747 Phone Number: 888-322-6570 Phone Number: 508-996-6266 FAX Number: 508-616-0445 FAX Number: 508-979-1219 COLONIAL VOLKSWAGEN OF MEDFORD 162 Mystic Avenue Medford, MA. 02155 Phone Number: 781-475-5200 FAX Number: 781-391-3506

WELLESLEY VOLKSWAGEN 231 Linden Street Wellesley, MA. 02482 Phone Number: 800-228-8344 FAX Number: 781-237-6024 Contact: Dan Bettencourt / Wholesale Parts Manager

COLONIAL CHEVROLET 171 Great Road Acton, MA. 01720 Phone Number: 800-787-2787 FAX Number: 978-263-8587

COLONIAL WEST CHEVROLET 314 John Fitch Highway Fitchburg, MA. 01420 Phone Number: 978-345-5532 FAX Number: 978-345-1152

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Audi dealers strive to make you an Audi Genuine Parts fan •

Audi Parts professionals are your subject matter experts on collision parts, replacement components and mechanical items.

•

Many Audi dealers offer technical service support hotline access that can reduce your repair times and help you meet an on-time promised delivery.

•

Installing Audi Genuine Parts contributes toward improved cycle time that helps make both your customer and their insurance company happier.

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Mattie Audi 80 William S. Canning Blvd.

Fall River, MA 02721 800.678.0914 Fax: 508.730.1283 www.mattieaudi.com

Hoffman Audi 700 Connecticut Blvd East Hartford, CT 06108 860.282.0191 Fax: 860.290.6355 www.hoffmanauto.com

New England Automotive Report May 2019 7

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VICE PRESIDENT’S MESSAGE

Our Biggest Problem KEVIN GALLERANI

New England Automotive Report features a variety of perspectives on this topic. You will find useful information on the following pages that will perhaps ignite that we as an industry can make a change for the better. AASP/MA is committed and determined to securing a stronger and more realistic future for our repair community. This is not about rolling in riches; this is about ensuring our very survival. Please reach out to Lucky or any one of us on the Board of Directors if you have any feedback on anything presented in this month’s issue.

In closing, I encourage all of the members to spend 10 minutes to take the “Who Pays for What?” Survey available from Mike Anderson’s Collision Advice (collisionadvice.com). The results can help with negotiations and understanding exactly what insurance companies pay for in different parts of Massachusetts and in other states. Too many shops are not contributing to or taking advantage of the valuable information compiles by Mike in these surveys.

For nearly a year now, AASP/MA Executive Director Lucky Papageorg has been making personal visits to body shops throughout Massachusetts. These trips are more than just social calls; they are fact-finding missions to help AASP/MA better serve the businesses that have joined the association to receive the highest level of information and support possible. When Lucky asks these shops to identify the biggest obstacle they are facing in today’s industry, the answer is abundantly clear: The Labor Rate.

It is no secret that Massachusetts has the lowest Labor Rate in the country, and every collision repair facility here is suffering as a result. Our estimators and technicians feel the hurt the worst, as they are the ones who have to deal directly with the advanced vehicles arriving in our bays. Even some insurance appraisers acknowledge the problem, but they end up doing nothing to be reasonable in their negotiations with us.

But the worst thing we encounter is when a customer walks in, sees the posted rate on the wall and asks, “You really work for that? I pay double that to have someone change the oil in my lawnmower.”

There is no doubt that our industry is struggling under the current Labor Rate. How did things get so bad for us? How do we attempt to fix it? This special issue of N

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PROTECTING CONSUMERS AND THE COLLISION INDUSTRY

MASSACHUSETTS

AASP/MA VICE PRESIDENT KEVIN GALLERANI is vice president of Cape Auto Collision Center in Plymouth, MA. He can be reached at (508) 747-0316 or kevin@capeautobody.com

G

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A

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AU M TIVE AUT T TI TIV STAFF

AASP/MA EXECUTIVE COMMITTEE

PUBLISHER

CREATIVE DIRECTOR

Thomas Greco - thomas@grecopublishing.com

Lea Velocci - lea@grecopublishing.com

SALES DIRECTOR

EDITORIAL/CREATIVE COORDINATOR

Alicia Figurelli - alicia@grecopublishing.com

Alana Bonillo - alana@grecopublishing.com

EDITORIAL DIRECTOR

PRODUCTION

Joel Gausten - joel@grecopublishing.com

Donna Greco - donna@grecopublishing.com Christopher Rizzi - chris@grecopublishing.com

PUBLISHED BY: Thomas Greco Publishing, Inc. 244 Chestnut Street, Suite 202, Nutley, NJ 07110 Corporate: (973) 667-6922 / FAX: (973) 235-1963 www.grecopublishing.com

CELEBRATING 30 YEARS New England Automotive Report is published monthly by TGP, Inc., 244 Chestnut Street, Suite 202 Nutley, NJ 07110. Distributed free to qualified recipients; $48 to all others. Additional copies of New England Automotive Report are available at $5 per copy. Reproduction of any portions of this publication is specifically prohibited without written permission of the publisher. The opinions and ideas appearing in this magazine are not necessarily representations of TGP Inc. or of AASP/MA. Copyright © 2019 by Thomas Greco Publishing, Inc. Images courtesy of www.istockphoto.com

PROTECTING CONSUMERS AND THE COLLISION INDUSTRY

WWW.AASPMA.ORG MASSACHUSETTS

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New England Automotive Report

TREASURER Matthew Ciaschini LEGISLATIVE CHAIR Peter Langone IMMEDIATE PAST PRESIDENT Paul Hendricks

PRESIDENT Molly Brodeur VICE PRESIDENT Kevin Gallerani SECRETARY Gary Cloutier

AASP/MA STATEWIDE DIRECTORS COLLISION DIRECTOR Rob DelGallo

AT-LARGE DIRECTOR Adam Ioakim

AASP/MA DIRECTORS Ray Belsito Alex Falzone Rick Fleming

Joshua Fuller Kevin Kyes Frank Patterson

Mike Penacho Dana Snowdale Bill Spellane

AASP/MA ADMINISTRATIVE OFFICE Evangelos “Lucky” Papageorg: AASP/MA Executive Director

Alana Bonillo: AASP/MA Administrative Assistant P.O. Box 212 Marlborough, MA 01752 617-574-0741

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EXECUTIVE DIRECTOR’S MESSAGE

Let’s Talk about EVANGELOS “LUCKY” PAPAGEORG

Labor Rate!!!

For the nearly 35 years I’ve been involved with the collision industry, there hasn’t been a conversation among collision repairers where the Labor Rate was not mentioned, discussed or heatedly debated in one form or another.

The talks cover everything from how abysmal the rate is currently (and has been for nearly 35 years) to what can possibly be done to finally change the hourly Labor Rate reimbursement amount. There is no easy solution, no magic potion, no one silver bullet and truly no one reason that can be blamed for this situation.

In this and future issues of New England Automotive Report, we will address the Labor Rate from many different viewpoints. We will look at the history of Labor Rate reimbursement in Massachusetts since the Reform Act of 1988 was signed into law. We will look to see what the Labor Rate reimbursement could be if collision repairers were allowed to compete in an open and fair retail marketplace based on the quality and level of service they provide.

Imagine an environment where a customer seeking collision repair services could actually decide for themselves where they wanted to get their vehicle repaired – and where everyone lived up to the contracts governing their responsibilities in the collision repair process.

AASP/MA’s goal will be to provide you with necessary information to make an educated and confident decision regarding your shop’s posted Labor Rate. In this issue, you will hear from a noted authority to our industry: Economist Dr. Fred Jennings. The information in his article will help to point you in the right direction and assist you in substantiating your decision-making process. We will also bring you articles and comments from members of our Board of Directors, who will share their successes and procedures from which you may benefit. You will be given a clear and concise method by which to calculate a fair and accurate posted Labor Rate and how to substantiate it through irrefutable documentation. I say “substantiate” rather than “justify” for a reason. You have no reason to feel compelled to justify anything - especially regarding a fact everyone with any business sense already knows! The current Labor Rate reimbursement is absurd; you know it, the insurance companies know it and, more importantly, your customers know it.

Our sole purpose should be to substantiate what we all know to be the case through documentation and comparisons of industries in Massachusetts and across the country. All one needs to do is compare the Labor Rate currently being collected by our mechanical counterparts. If we were to look at how mechanical Labor Rates have risen since the Reform Act of 1988 was enacted versus collision repair rates, it is clear where one accusatory finger may be pointed. However, it would be unfair to allege that insurers alone are to blame for the current “accepted” rate of reimbursement for collision repair. It would be equally unfair to say that the blame lies only at the feet of referral or “program” shops. “Independent” shops, which truly do not live up to being independent, share in the current state of affairs.

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New England Automotive Report

I know that there is a lot of head wagging going on, and folks may think I have lost my mind. But truth be told, other than the very small portion of independent shops out there that already understand the contractual relationships and the obligations therein, the rest of the so-called independent shops are allowing themselves to be governed by the language in referral and program contracts signed by a very small percentage of the registered repair facilities. We have been “bamboozled” into believing this small percentage dictates a “prevailing rate.” If independent shops do not attempt to collect the true cost of repair based on their posted Labor Rate for all the procedures the shop performed from the vehicle owner, they are doing themselves a huge disservice. They are also falsely considering themselves to be independent. There are many, many examples here in Massachusetts (and in our neighboring states to the south) where shops have calculated and substantiated posted Labor Rates that are higher than the reimbursement rates of insurers, collected the difference and assisted the owners to be reimbursed directly from insurers. In some instances, these shops have also been able to receive Labor Rate concessions directly from carriers. These shops believe in themselves and do not allow themselves to be governed by the practices of surrounding shops that have made the business decision to give up their independence to have work sent to them in return. Some would even say they have made the decision in order to not have work steered away from them. The work is being sent to them, and the shops are forced to make concessions in order to subsidize and mitigate the insurers obligations under the indemnity policy they have sold the insured. As an independent shop, you don’t have to do so.

In the next several issues of New England Automotive Report, our AASP/MA members-only newsletter Damage Report and our website, we will provide you with the tools you can apply to your business to independently determine and substantiate your posted Labor Rate. We will provide you with tools with which you can cultivate this information, apply it to your business and share with your customers and then apply it to your negotiations with insurers. It will be your independent business decision on how to pursue what you determine to be a fair and equitable rate in order for you to achieve what all other successful businesses achieve: The ability to make capital investments, properly train and pay your employees and receive a fair, proper return on your investment. continued on page 13

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AASP/MA Executive Director Lucky Papageorg is on the move!

Read below for his stops this month.

In the third week of May, Lucky will be visiting the Western region and will host a chapter meeting on May 22. (Location TBD.)

3

4

During the fourth week of May, he will be in the Boston/Northeast region and will host a chapter meeting on May 29.

(Location TBD.)

2 41

He will be spending the first week of June visiting shops in the Southeast region and will host a chapter meeting on June 5.

(Location TBD.)

May 20 - June 14

2019 Keep an eye out for future meeting dates and locations!

During the second week of June, he is visiting shops in the Midstate region and will host a chapter meeting on June 12.

(Location TBD.) Lucky can be reached at (617) 574-0741 or lucky@aaspma.org.

PROTECTING CONSUMERS AND THE COLLISION INDUSTRY

MASSACHUSETTS

Lucky can be reached at (617) 574-0741 or lucky@aaspma.org.

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New England Automotive Report

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EXECUTIVE DIRECTOR’S MESSAGE

The

Not one of the tools we will provide is a “silver bullet.” Reversing the tide will not be easy, nor will it happen overnight. We would all be fools if we thought that the insurance industry will easily relinquish the stranglehold it has on our industry – a stranglehold that has successfully kept Massachusetts solidly mired in 50th place with the lowest average last Labor Rate of reimbursement, at $38.28 (according to the Mitchell International Industry Trends Report [2018, YTD]), in a state which is nearly at the top of the most expensive in which to live and run a business. With steady pressure being applied from varied sources, we can break the “rate” chain and snap the wooden stake holding us tethered to the past and the feeling of “learned helplessness.” If my reference to a chain and a wooden stake is unfamiliar (or if “learned helplessness” is a new term), I suggest you refer back to my message in last month’s issue of this magazine.

As the mantra of the Auto Body Association of Connecticut (ABAC) states,“Things will change when we make them change!!!” From this point forward the AASP/MA mantra will be, “THE TIME FOR CHANGE IS UPON US!!!”

PROTECTING CONSUMERS AND THE COLLISION INDUSTRY

MASSACHUSETTS

History of the

Collision Repair Industry

continued from page 10

in

America

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Order your copy today. Click on the “Order Here” tab at: AASP/MA EXECUTIVE DIRECTOR EVANGELOS “LUCKY” PAPAGEORG can be reached at (617) 574-0741 or lucky@aaspma.org

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14 May 2019

New England Automotive Report

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AT-LARGE DIRECTOR’S MESSAGE

Want to Bill Correctly?

It Starts with Knowing Your Numbers ADAM IOAKIM

It’s crazy to think that our state is at the bottom of the list when it comes to Labor Rates. The amount of money insurers reimburse for collision repairs has barely moved in 30 years. To understand just how insane that is, attempt to buy your typical week’s worth of groceries at a supermarket today with what you spent for the same food three decades ago. You’d end up pretty hungry, wouldn’t you? We budget for everything in our personal lives, but a shockingly small number of us do the same thing in our offices. Do you base your charges on the Labor Rate someone else is willing to pay without calculating it based on your actual cost of doing business? Do you set your door rate based on what rate the insurers reimburse their insureds on their originals and supplements? If so, it’s well past time for you to take a closer look at reality.

A few years ago, I attended a seminar in Waltham presented by New Hampshire shop owner Tony Lombardozzi and past AASP/MA Executive Director Peter Abdelmaseh on knowing the true costs of labor. It got me really thinking that before I could know what I need to be

charging for my work, I’d have to know what my actual labor costs were. Was I factoring in everything I pay out in employees’ wages and other shop expenses? Was I using my loaded labor cost including all my employees’ benefits? Was I also including indirect labor? Was I even entitled to do this? The answer is YES. There is a lot of misinformation in our industry about us not getting reimbursed for “overhead costs.” This is absolutely false. Any calculation you make to determine how to effectively run your business and what to bill absolutely must include overhead costs. That goes a long way in determining what your true Labor Rate should be.

Everybody knows that the rate insurers use to reimburse their insureds is erroneous and has no basis in reality. It’s not even close to what our industry’s costs are these days. When you really look at your numbers, you’ll see just how far off the mark our industry has become.

Let’s be clear: Our Labor Rates are what we bill the vehicle owners, but the insurance companies’ rate is what they pay to reimburse their policyholders. When this fact continued on page 42

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New England Automotive Report May 2019 17

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New England Automotive Report

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New England Automotive Report May 2019 19

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2019 AASP/MA

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22 May 2019

New England Automotive Report

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Fax Line: 508.316.8397 Parts Hours: Mon-Sat: 7:30-5:00 280 East Washington St. North Attleboro, MA 02760

www.firstchryslerma.com New England Automotive Report May 2019 23

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[LOCAL] NEWS

AASP/MA to Ride to Defeat ALS

To learn more about the Ride to Defeat ALS, and to sign up to ride, visit tinyurl.com/y2fzxupn.

By Alana Bonillo On September 22, members of AASP/MA will trade in four wheels for two as they ride together for a very good cause.

The association has signed on as a corporate sponsor of the 2019 Annual Ride to Defeat ALS and are inviting members and supporters to join their team, which will ride via bicycle or motorcycle in Wayland in support of the fight against amyotrophic lateral sclerosis (ALS), otherwise known as Lou Gehrig’s disease.

Cyclists can sign up for a 10-mile, 25-mile, 50-mile and 70-mile ride as well as a new one-hour motorcycle route. All funds will provide support, research and advocacy for those affected by the disease all across the country.

AASP/MA Executive Director Lucky Papageorg has been participating in the annual ride for the past few years as a member of radio station WXLZ’s team. He has since decided to take his participation up a few notches by bringing AASP/MA on board. Although he personally doesn’t have a connection with the disease, he knows how devastating it is. When he first heard about the ride through the radio station, he signed up as it sounded like fun in the name of a good cause.

“I hope to bring awareness [for ALS] through the membership, which will be great for the Ride to Defeat ALS and I also think it’s good exposure for AASP/MA as well.”

Ashley Corbin, special events manager for the Massachusetts chapter of the ALS Association, is extremely grateful for AASP/MA’s participation as her organization gets ready for this year’s 25th anniversary event.

“For us to grow more every year, it’s important to us to have this kind of support. We always need more people involved to help get the word out. Lucky has already set up the team and is promoting it. It’s a huge help.”

“Our industry isn’t necessarily known for our bike riding skills, but there is a huge involvement of collision repair in motorcycles,” adds Papageorg. “So, the fact that this year is the first we’ve been involved and the motorcycle leg of the course has been added, it will be a big plus toward garnering participation. I can see a lot of our membership participating in that fashion.”

PROTECTING CONSUMERS AND THE COLLISION INDUSTRY

MASSACHUSETTS

24 May 2019

New England Automotive Report

What’s Going on at the ADALB? A major personnel shakeup at the Auto Damage Appraiser Licensing Board (ADALB) has led to the dismissal of long-serving Chairman Gilbert Cox and Board members Lyle Pare (Plymouth Rock Assurance) and Joseph Coyne, Jr. (Home & Auto Appraisal Bureau, Inc.) Collision repair industry representatives Rick Starbard (Rick’s Auto Collision; Revere) and William Johnson (Pleasant Street Auto; South Hadley/Belchertown) remain on the Board.

Coyne was dismissed prior to the ADALB January 23 meeting, which saw the first appearance of newly appointed Board member Samantha Tracy (Arbella Insurance). Pare confirmed with New England Automotive Report that he had received a letter in February from the office of Governor Baker thanking him for his time spent on the ADALB but stating that his services were no longer needed. He added that he has not been given an official reason for his dismissal. The February 26 ADALB meeting was later postponed, with no word given by the Division of Insurance as to when another meeting would be held.

Replacements for Chairman Cox and the two removed Board members had not been officially announced as this issue of New England Automotive Report went to press. Calls to Cox, Coyne and the Division of Insurance were not returned at press time.

PROTECTING CONSUMERS AND THE COLLISION INDUSTRY

MASSACHUSETTS

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New England Automotive Report May 2019 25

NEAR0519.qxp_NEAR1014 4/17/19 3:55 PM Page 26

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26 May 2019

New England Automotive Report

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NEAR0519.qxp_NEAR1014 4/17/19 3:55 PM Page 28

[GUEST] FEATURE

WHO

DETERMINES Your Labor RATE$?

Take Control of Your

Business!

By Fred Jennings President, EconoLogistics

According to the Mitchell International Industry Trends Report [2018, YTD], Massachusetts has the dubious honor of being dead last in average collision repair Labor Rates in America. This is in spite of the fact that, in 2017, Massachusetts ranked 16th highest in the nation for the average annual pay of collision technicians and sixth highest for the average annual pay of mechanical repair technicians (based on the US Bureau of Labor Statistics).

In 2018, the average collision Labor Rate in Massachusetts was at $38.28/hour, making it the only state with a rate below $40/hour. The average Labor Rates for the other New England states can be found on page 34.

What’s going on here? Why is Massachusetts last in the entire country? How can this be addressed? One answer might lie in the effectiveness of your trade association.

With AASP/MA in a leadership position, collision shops in this state are in a better position to challenge auto insurers and improve their situation, which includes (but is not limited to) raising their Labor Rates.

But AASP/MA, Executive Director Lucky Papageorg and the rest of the Board of Directors can do little without your support and assistance. This is the key to success. Your organization is powerless without YOU!!!

You also need to remember who your customers are!

You are not working for auto insurers; you have no 28 May 2019

New England Automotive Report

contract with them. Your primary obligation is to the owners of the cars you repair. They are the ones who have contracted with their insurer to pay for proper repairs, and they want your repairs to be of the highest achievable quality. They want to have their autos restored to their pre-crash condition as closely as reasonably possible.

Insurers want those repairs performed as cheaply as they can get away with, as that is the way they increase profits – even at consumers’ expense. Educated and informed consumers are far less likely to be duped into thinking that insurers have their best interests in mind.

Say you are faced with a bully who harasses you every day. It is much easier just to avoid that bully on a daily basis or accommodate him in some way. Then, you don’t end up in a fight and get beaten up in the process. The bully gets to enjoy his power, and you escape unscathed. Or do you?

Isn’t your loss of pride and control worth something to you?

So, how can you stand up for yourself in a collision repair setting? Perhaps a good first step is to look at your shop’s posted Labor Rates and set them to what you need to survive as a business. You may not get this rate every time, but at least you’ll know what you need. Lucky represented the situation very well in his message in the November issue of the Damage Report newsletter, which I

NEAR0519.qxp_NEAR1014 4/17/19 3:55 PM Page 29

recommend you re-read as a companion to this piece.

Perhaps it is worth noting that the 2017 wages for collision technicians in Massachusetts ranged from a high of $1,071/week ($55,706/year) in Middlesex County down to only $503/week ($26,153/year) in Franklin County.

Wages in 2017 for mechanical technicians ranged from a high of $1,102/week ($57,284/year) in Dukes County down to a low of only $663/week ($34,455/year) in Berkshire County (both counties where collision wages were not reported). When wage payments vary so widely, one might expect collision Labor Rates to reflect a similar range of variation across any state. In any event, the point is that each individual collision shop should figure out its own needed Labor Rates based on its own unique circumstances.

Here are five possible methods that I propose for a collision shop to use for setting Labor Rates: Method One: Looking Ahead to Future Sales, Costs and Profit Rates Here, a target net profit margin on sales is used with projections of full business costs (assuming some given parts markup percentage, such as 30 percent) to determine the pre-tax revenues needed to meet your target profits (given expected sales). Your parts markup percentage is then applied to expected parts outlays so parts reimbursements can be subtracted from your required (pre-tax) revenues. Then, divide the remaining revenues by your projected (billable) labor hours to get the Labor Rate you’ll need to reach your target (post-tax) net profit margin. Finally, you will have to adjust that “average” Labor Rate for different types of repairs.

Method Two: Looking Back to Recent Sales, Costs and Profits Here, the procedures in Method One are applied to your recent data to find out what your collision Labor Rate should have been to reach your after-tax target net profit margin. Then, using that information, project your expected future repair volume going forward to calculate what your Labor Rate needs to be to reach your target (after-tax) profits. Examine several prior years and test for varying sales projections for a better-rounded perspective on this important decision.

Method Three: An Incremental Approach The first two methods above require a fairly elaborate analysis of your costs, sales and potential profits. A simpler approach might be to look at your recent after-tax net profit margins as a percentage of your sales to assess their adequacy (in your opinion). Be sure that you are paying yourselves as owners sufficiently, as your salaries should be distinguished from the profits on your business (even though they both come to you as an owner). What additional revenues would be required for you to achieve

your target profit margins? Take that difference and divide it by your total labor hours to get the incremental amount you need to add to your “average” Labor Rate. Test this method on several prior years to verify the incremental Labor Rate changes, and adjust your posted rates accordingly.

Method Four: A Proportional Approach Based on Technician’s Wages Another rule-of-thumb method that you might use involves the ratio of your collision Labor Rates to the average wages you pay your technicians. The ratio of these two averages – for example, your collision rates might be 2.5 times your average technicians’ wage rates – can be applied to these average hourly wage rates to derive a collision Labor Rate consistent with previous profit margins. Then, adjust this proportion toward whatever you think will meet your target profit margin.

Method Five: A Comparable Approach Using Local Mechanical Rates Mechanical Labor Rates vary widely for different shops, namely for independent work versus standard dealerships or those for luxury automobiles. Collision work is also performed on a variety of vehicles, some of which require more precise methods, tools and skills to repair than others. If the costs of these additional needs are not covered by auto insurers (with longer repair times and/or higher Labor Rates), then you have a problem. You may have to adjust your posted rates to reflect these differences (especially when you must pay higher wages for such specialized skills). In any event, prevailing local or regional rates might be used as a rough benchmark for where your Labor Rates should be.

In general, my recommendation is to use all five of these methods to analyze what your Labor Rates should be in your shop, because they each provide a check on the others in terms of verification. For example, use the first two methods to look at your total picture with respect to your costs, parts markups and collision Labor Rates. Next, try an incremental approach as a check on what you found.

Then, you can look at the ratio of your collision Labor Rates to your technicians’ hourly wages to see if there is a stable “rule of thumb” between these two magnitudes that you might adopt. Finally, you could look at prevailing mechanical Labor Rates in your area on different types of vehicles or repairs and adjust your collision Labor Rates on that basis. A use of these methods should give you a broader perspective – and more confidence – in setting your own shop posted Labor Rates to meet your goals.

If you or your accountant has any questions about this approach, please feel free to contact me at (617) 605-3150 or econologistics@yahoo.com.

PROTECTING CONSUMERS AND THE COLLISION INDUSTRY

MASSACHUSETTS

New England Automotive Report May 2019 29

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WHY GENUINE PARTS? It’s the Right Thing to Do

You lose money when aftermarket parts don’t fit. Toyota Dealers are your best source for Genuine Toyota Parts. All it takes is one call.

For Toyota Genuine Parts please call one of these authorized local Toyota Dealers: Copeland Toyota 970 West Chestnut Street Brockton, MA 02301 Toll Free: 800-856-1172 Fax: 508-559-9264 wholesaleparts@copelandtoyota.com www.copelandtoyota.com/wholesaleparts

IRA Toyota of Manchester 33 Auto Center Road Manchester, NH 03103 Toll Free: 800-828-6076 Direct: 603-657-2410 Fax: 603-657-2419

IRA Toyota Danvers 161 Andover Street Danvers, MA 01923 PH: 800-774-8411 ext.1 Direct: 978-739-8306 FAX: 978-739-8098

Bernardi Toyota 1626 Worcester Road Framingham, MA 01702 Parts Direct: 800-248-3033 FAX: 508-879-7895 www.bernarditoyota.com

www.iramotorgroup.com

Wellesley Toyota 216 Worcester Street Wellesley, MA 02481 PH: 800-734-0006 Direct: 781-237-4042 FAX: 781-237-3481 parts@wellesleytoyota.com www.wellesleytoyota.com

stirrell@iramotorgroup.com www.iramotorgroup.com

ToyotaPartsAndService.com 30 May 2019

New England Automotive Report

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Get it right from the source.

Ford and Lincoln Mercury dealers are the one-stop source for all of your collision repair needs.

When you need fascias, grilles, headlamps, wheels or any other Ford Motor Company Genuine Part, call your local wholesaling dealership. They’re a great souce for technical and repair information as well. Using Genuine Parts can help your body shop reduce cycle time, improve relationships with insurance companies and satisfy customers. So get everything you need in just one call to your one-stop collision repair resource – your local Ford or Lincoln Mercury Dealership.

Contact these Ford or Lincoln Mercury dealers for all your parts needs: Imperial Ford 6 Uxbridge Road Mendon, MA 01756 Toll Free Parts: 877-272-0332 Toll Free Fax: 877-800-6316 Call us for your wholesale parts needs

Sarat Ford Lincoln Mercury 245 Springfield Street Agawam, MA 01001 413-786-0430 Fax: 413-789-3715 www.saratford.com

Sentry Ford Lincoln 4100 Mystic Valley Parkway Medford, MA 02155 Parts: 617-506-6309 Fax: 781-874-9934 E-mail: pnewell@sentryautogroup.com

© 2019, Ford Motor Company New England Automotive Report May 2019 31

NEAR0519.qxp_NEAR1014 4/17/19 3:55 PM Page 32

Quality Repairs Start With Volvo Genuine Parts.

For over eight decades, the Volvo name has been synonymous with unmatched quality and performance. That legendary Volvo quality starts with Volvo Genuine Parts.

Rely on Volvo Genuine parts to get the right fit, at the right price, right now.

Please contact the following dealers for your Volvo parts needs:

Prime Volvo Cars 1030 Hingham Street Rockland, MA 02370 Parts Direct: 781-927-3520 Fax: 781-927-3592 www.volvocarssouthshore.com

32 May 2019

New England Automotive Report

Volvo of Wellesley 962 Worcester Street Wellesley, MA 02482 Parts Direct: 800-247-3033 Fax: 508-651-1220 www.volvoofwellesley.com

www.volvogroup.com

NEAR0519.qxp_NEAR1014 4/17/19 3:55 PM Page 33

GENUINE NISSAN PARTS

MAKE ALL THE DIFFERENCE.

Only Genuine Nissan Parts deliver the fit, reliability, and performance to meet your shop’s collision repair needs. So keep it original, and keep it real with Genuine Nissan Parts.

Contact these Nissan dealers for all your parts needs: Mastria Nissan 1305 New State Highway Raynham, MA 02767 Direct Toll Free: 800-248-2458 Direct Fax: 508-802-6118 E-mail: parts@mastrianissan.com Web: www.mastria.com

Kelly Nissan of Lynnfield 275 Broadway (Route 1) Lynnfield, MA 01940 Toll Free: 1-800-698-9280 Fax: 781-598-8026 E-mail: BSherman@Kellyauto.com

Kelly Nissan of Woburn 95 Cedar Street Woburn, MA 01801 Phone: 781-835-3510 Fax: 781-835-3580 E-mail: mbosma@kellyauto.com www.kellyauto.com

New England Automotive Report May 2019 33

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[AASP-MA] FEATURE by Joel Gausten

How Did We Get Here?

The History of a Labor Rate Gone Wrong It’s hard to believe now, but there was a time when Massachusetts had

the highest Labor Rate in the country.

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Once the leader in Labor Rates in the late 1980s, Massachusetts now receives the lowest amount in the entire nation.

34 May 2019

New England Automotive Report

The long and frustrating journey from that era to where the state’s auto body industry is today began in the mid ’80s, when a statute was enacted that required insurers to use a “cost containment” model in their filings as part of the ratesetting process. This was a fancy way of saying that insurers had to resist raising their Labor Rates as much as possible. This was followed in 1988 by the arrival of the Auto Insurance Reform Act, which allowed carriers to establish Direct Payment Plans with referral body shops.

Fast-forwarding to 2019, it’s clear that carriers in Massachusetts – who have multiplied in number in recent years thanks to the state’s move to the “managed competition” auto insurance system in 2007 – have done well in achieving “cost containment” and expanding their network of referral shop partners. This reality, coupled with three decades of inflation and cost of business increases, has brought Massachusetts down to the very bottom of Labor Rates in the US in 2019. Additionally, an extensive state review of the appropriateness and effects of the “cost containment” model has not once taken place in the

NEAR0519.qxp_NEAR1014 4/17/19 3:55 PM Page 35

30-plus years since the Auto Insurance Reform Act became law.

While today’s automotive industry is exploring everything from advanced safety technology to the inevitable arrival of self-driving automobiles, the amount paid to shops to actually work on these complex machines is going backwards.

By 2007, the ongoing financial strain placed on shops to produce safe work while remaining solvent under these conditions had reached a boiling point. That year, AASP/MA joined forces with the Central Massachusetts Auto Rebuilders Association (CMARA) in drafting the first incarnation of “An Act Relative to the Fair Payment of Services,” commonly known as the Labor Rate Bill.

The legislation’s launch at the beginning of the 2007-2008 legislative session was preceded by a statewide grassroots effort to connect hundreds of shop owners, managers, technicians and administrative personnel to their individual legislators. Members and non-members alike were invited to a series of special meetings hosted by the associations to inform them of the Bill’s goals and how they could provide individual support towards its passage. While the Labor Rate Bill did not succeed in this first session, a Special Labor Rate Committee was established by the state to further investigate the matter. Hearings in Worcester and Boston drew hundreds of attendees and testimony from nearly two dozen shop owners and industry leaders in support of the Labor Rate Bill becoming law.

Bolstered by growing support within the AASP/MA community and a request from the Executive Office of Consumer Affairs and Business Regulation to refile the Labor Rate Bill, the association returned to the legislative arena for the 2009-2010 session. In 2010, the Massachusetts collision industry’s call for more

realistic rates grew louder when AASP/MA, CMARA and the Massachusetts Auto Body Association (MABA) merged together as one association under the AASP/MA banner.

Since that time, the Labor Rate Bill has maintained a strong and consistent presence at the State House despite not passing in both the House and Senate at the same time in any subsequent session. After a few

“The average age of technicians in body shops right now is over 50 years old. Collision work is laborintensive; shops are having a hard time finding young people who are excited and want to enter this trade.

It’s certainly not for a lack of trying on the repairers’ side; many shop owners support their vocational schools and serve on committees and advisory boards. But on the flipside of that, we can’t really offer [new

The AASP/ma labor rate bill currently calls for massachusetts insurers to develop a labor rate based on the average rates they pay in connecticut, new york, new hampshire, rhode island and vermont. rewrites along the way, the Bill currently calls for Massachusetts insurers to develop a Labor Rate based on the average rates they pay in Connecticut, New York, New Hampshire, Rhode Island and Vermont. These rates would then be submitted to the Commissioner of Insurance, who would set up enforcement and an ongoing review.

“What this average rate will do is allow us to compete better in our marketplace with our neighboring states,” stated AASP/MA President Molly Brodeur in a 2015 promotional video on the legislation. “It also puts a mechanism in place where this is going to have to be reviewed on an ongoing basis.”

During the association’s most recent appearance before the Joint Committee on Financial Services in July 2017, Brodeur testified that the state’s current Labor Rate does more than severely impact shops’ profitability – it also critically wounds the industry’s hopes of securing a future workforce.

technicians] a competitive wage, so they get lured away from the industry, oftentimes before they even graduate.”

Although the Labor Rate Bill has yet to pass, a piece of legislation taking this long to reach the finish line is far from unusual. In a political world of lobbyists and ever-changing faces in the State House – as well as the presence of an opponent known for incredibly deep pockets – success of this magnitude takes time. The Labor Rate Bill and AASP/MA’s fight for reasonable pay for auto body services are far from over – a point driven home during Brodeur’s industry update at an association chapter meeting in Marlboro last February.

“I think the Labor Rate is just one of those really difficult conversations. Nobody really has a good answer on how to remedy it in the long term, but we have to keep trying.”

PROTECTING CONSUMERS AND THE COLLISION INDUSTRY

MASSACHUSETTS

New England Automotive Report May 2019 35

NEAR0519.qxp_NEAR1014 4/17/19 3:55 PM Page 36

It Takes Genuine Honda Collision Repair Parts To Achieve a Genuine Honda Fit. Honda collision repair parts are engineered and manufactured to Honda standards.

In the collision-repair business, time is money, and you canâ&#x20AC;&#x2122;t waste time on parts that almost fit properly. Use Genuine Honda replacement parts. Your reputation depends on it.

For Genuine Honda parts, contact these Authorized Honda dealers.

Bernardi Honda 960 Worcester Road Natick, MA 01760 Parts Direct: 800-247-3033 FAX: 508-651-1220 www.bernardihonda.com

Lia Honda of Northampton 293 King Street Northampton, MA 01060 Toll Free: 800-369-7889 Direct: 1-413-586-6043 FAX: 1-413-585-0502 www.liahondanorthampton.com

Honda North 382 Newbury Street Danvers, MA 01923 Toll Free: 800-882-9797 FAX: 978-774-9483 e-mail: eadams@iclautos.com www.hondanorth.com

Kelly Honda 540 Lynnway Rt. 1A Lynn, MA 01905 Parts Direct: 800-779-7466 FAX: 781-595-2898 e-mail: mpsomosjr@kellyauto.com

Honda of Enfield 20 Palomba Drive Enfield, CT 06082 Toll Free: 800-222-6632 FAX: 860-253-5419 www.liahondaofenfield.com

Schaller Honda 1 Veterans Drive New Britain, CT 06051 Toll Free: 800-382-4525 Direct: 860-826-2080 FAX: 860-826-2083 e-mail: jkiniry@schallerauto.com www.schallerauto.com

36 May 2019

New England Automotive Report

Lundgren Honda of Auburn 525 Washington Street Auburn, MA 01501 Toll Free: 800-777-2044 FAX: 508-721-0872 e-mail:pmccarthy@lhonda.com www.lhonda.com

NEAR0519.qxp_NEAR1014 4/17/19 3:55 PM Page 37

Genuine Replacement Parts For the Road Ahead.

Avoid problems down the road that will cost you time, money and customers. Choose Genuine Subaru Replacement Parts, engineered to fit better today, and perform better tomorrow.

For Genuine Subaru Body Parts, contact an Authorized Subaru Dealer.

Long Subaru 7 Sutton Rd., Webster, MA 01570 800-982-2298 Fax: 508-879-1212 tschube@longauto.com New England Automotive Report May 2019 37

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2019 - 2020 as provided for in this contract.

REV 5/19 40 May 2019

New England Automotive Report

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FOR SALE Set of 2012 Ford F-150 headlights

Used 27-foot Blowtherm Downdraft Spray Booth

Excellent Condition

$800/pair

$15,000

Woburn, MA

Contact: George

Contact: John Caramis (781) 718-3154

(781) 396-8282 george@hoganandvan.com New England Automotive Report May 2019 41

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AT-LARGE DIRECTOR’S MESSAGE continued from page 16 gets cloudy and the insured isn’t reimbursed for the actual cost of their repairs, we can balance bill the customer, eat the loss (exactly what we need to stop doing) or seek legal action. But before that decision is made, every shop out there needs to figure out the correct amount they should be billing for their goods and services.

Each shop must calculate its own labor and overhead costs and the profit it needs to earn, and divide it by the total hours worked. This is the minimum you must charge to pay your expenses, give yourself a salary and earn a profit. We can’t even begin to bridge the gap between what we’re paid and what we’re worth until we do this.

PROTECTING CONSUMERS AND THE COLLISION INDUSTRY

MASSACHUSETTS

Wheel Collision Center

Excellence in Wheel Sales and Repair

Patent assures

100% WHEEL INTEGRITY • From $77/wheel • Sales/Exchange • Superior Workmanship

• Tested Process • Guaranteed Lifetime Warranty!

NEW 2019

ONLINE OEM WHEEL CATALOG Stocking THOUSANDS of refinished wheels!

7286 Penn Drive, Bath, PA 18014

www.wheelcollision.com AASP/MA AT-LARGE DIRECTOR ADAM IOAKIM is the co-owner of Hogan & Van Auto Body in Medford, MA. He can be reached at (781) 436-0366 or adam@hoganandvan.com.

42 May 2019

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1.800.292.RIMS (7467)

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