SUMMER 2020
Mike Anderson Addresses
LABOR RATE S E U S S I Supplies
NEW IDEAS WACTAL Member
SPOTLIGHT
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Wisconsin Automotive News
Summer 2020
2020 WACTAL BOARD of DIRECTORS President Larry Terrien, MJ Collision Center larry@mjcollisioncenter.com Vice President Mark Williams, Williams Auto Body mark@williamsautobody.com
Summer 2020
CONTENTS
Vol. 7, Number 4
8
Secretary Ronnie Goss, Goss Auto Body, Inc. ronnie@gossautobody.com Treasurer Sue Black, Dean’s Auto Body suzieq@deansautobody.com Directors Eileen Haberman, Glen's Auto Body, Inc Steve Humblet, Quality Paint & Body, Inc.
COVER STORY Mike Anderson Addresses Labor Rate Challenges, Supplies New Ideas by Alana Bonillo
Ken Kempfer, Fox Valley Technical College Michael Taylor, Zimbrick ChevroletSun Prairie Tracy Black, Dean’s Auto Body, Inc. Executive Director Deb Brunett info@wactal.com 262-542-7707 Lobbyist Jolene Plautz jplautz@aol.com
CELEBRATING 30 YEARS PUBLISHED BY: Thomas Greco Publishing, Inc. 244 Chestnut St., Suite 202 Nutley, NJ 07110 PHONE: 973-667-6922 • FAX: 973-235-1963 ADVERTISING: 973-667-6922 • alicia@grecopublishing.com PUBLISHER Thomas Greco (thomas@grecopublishing.com) SALES DIRECTOR Alicia Figurelli (alicia@grecopublishing.com) GRAPHIC DESIGNER Lisa M. Cuthbert (lisa@grecopublishing.com) EDITORIAL DIRECTOR Joel Gausten (joel@grecopublishing.com) EDITORIAL / CREATIVE COORDINATOR Alana Bonillo (alana@grecopublishing.com) OFFICE MANAGER Donna Greco (donna@grecopublishing.com) www.grecopublishing.com Wisconsin Automotive News is published quarterly by Thomas Greco Publishing, Inc., 244 Chestnut Street, Suite 202 Nutley, NJ 07110. Distributed free to qualified recipients; $48 to all others. Additional copies of Wisconsin Automotive News 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 Thomas Greco Publishing, Inc. or of WACTAL. Copyright © 2020 by Thomas Greco Publishing, Inc. Images © www.istockphoto.com.
What Is Your Labor Rate? by Larry Terrien
PRESIDENT’S MESSAGE..............................................................4
“You Don’t Know What You Don’t Know” by Steve Humblet (Quality Auto Care)
MY TWO CENTS - GUEST EDITORIAL ..............................................6
WACTAL MEMBER SHOP PROFILE ..................................................12 North Shore Collision, Milwaukee by Alana Bonillo
WACTAL MEMBERSHIP APPLICATION..............................................14 ADVERTISER’S INDEX AkzoNobel..............................................17
Morrison’s Auto Parts............................IBC
Body Shop Supply Co. ........................IFC
Reliable Automotive Equipment..........OBC
Buerkle Hyundai....................................18
Sherwin-Williams ..................................11
Dent Clinic ..............................................7
Straight and Square..............................13
Dentsmart ..............................................16
Zorn Compressor & Equipment..........15
Summer 2020
Wisconsin Automotive News
3
PRESIDENT’S MESSAGE
What Is Your Labor Rate? Our Labor Rate is one of the most talkedabout topics in our industry. Why does the guy who cuts the lawn at our shop charge twice as much per hour as we do? Why does the sublet mechanical shop we use down the street charge double what we do per hour while working on the same car? I think we all know the answers to these questions. It is because of third-party involvement between the repair facility and the vehicle owner. The real question is: What can be done about it? In this issue of Wisconsin Automotive News, we will begin to delve into this matter to see if we can come up with some answers.
How do you determine your Labor Rate? Did you calculate your rate based on your costs, or are you just arbitrarily accepting some fictitious “survey” rate that a third party offers you? Remember, you are the seller and the vehicle owner is the buyer, so it doesn’t matter what insurers say they are paying in your area. What they are really saying is that this is the rate they reimburse their insured. So, now the ball is in your court. Where do you go from here? Let’s explore this a little more with our cover story on page 8. Larry Terrien President WAN
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Summer 2020
TO OUR READERS, ADVERTISERS AND SUPPORTERS: THE PAST FEW MONTHS HAVE BEEN CHALLENGING, TO SAY THE LEAST. AS WE ALL LOOK AHEAD TO A BRIGHTER FUTURE, WE WOULD LIKE TO ACKNOWLEDGE THE SUPPORT OF THE MANY READERS AND ADVERTISERS WHO STUCK BY US THROUGHOUT THE PANDEMIC. YOUR LOYALTY SPEAKS VOLUMES. WE APPRECIATE YOUR OVERWHELMING SUPPORT AND FLEXIBILITY - WE QUITE LITERALLY COULD NOT HAVE GOTTEN THROUGH THIS PERIOD WITHOUT YOU. WE LOOK FORWARD TO CONTINUING TO SERVE YOU IN OUR DUTY TO KEEP THE AUTOMOTIVE REPAIR INDUSTRY CONNECTED AND INFORMED. THANK YOU AGAIN - THE BEST IS YET TO COME!
THOMAS GRECO PUBLISHING, INC. PUBLISHERS OF WISCONSIN AUTOMOTIVE NEWS
Summer 2020
Wisconsin Automotive News
5
GUEST EDITORIAL By Steve Humblet
“You Don’t Know What You Don’t Know” It’s an often-heard statement in my circles and used as a polite way to reply to an “apparently stupid” request or question that comes from someone who frankly doesn’t know what they don’t know. (You know who I mean.) And if they don’t know, they don’t even know that…Deep thinking, I know, but that’s not the point. The point is, as a busy shop owner or manager, what we don’t know is that we’ve all fallen way behind in the pay scale of the trades. The skill, knowledge and cost of doing business has more than doubled in the past 10 years; Labor Rates have not! (In case that’s something you don’t know.) As we’ve been busy fighting the battles of
“to DRP or not to DRP,” selling or staying, upgrading equipment, learning or subletting skills, included and not-included, finding qualified technicians or any technicians (the list goes on), what battle is best to fight today? With the challenges of each new day, Labor Rate issues often languish at the bottom of the todo list. Other fires are burning hotter. It can be one of those “important but not urgent” concerns that gets put off until it becomes more important. UPDATE: It’s important now. Don’t just take my word for it. Make a few calls about your town and compare what it takes to fix a
Continued on page 15
We’ve fallen to the very bottom in compensation as the required skillset has easily doubled. Compare the skill level of those trades to what is now required of this industry. Wham! That should wake you up a bit.
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Wisconsin Automotive News
Summer 2020
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Wisconsin Automotive News
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COVER STORY By Alana Bonillo
Mike Anderson Addresses
Labor Rate Challenges, Supplies New Ideas The collision repair industry is surely no stranger to challenges. Even with issues including the COVID-19 pandemic, advances in technologies and systems and keeping up with OEM requirements, one thing that always tends to remain on the minds of most shop owners is the battle for higher Labor Rates. Wisconsin Automotive News chatted with noted industry veteran Mike Anderson (Collision Advice) about many of the questions shop owners from the WACTAL community have in regard to the Labor Rate. We at Wisconsin Automotive News hope you find this following exchange useful, and we encourage you to reach out to us if you have a question for Mike on this or any industry-related matter that he can answer in a subsequent issue. Wisconsin Automotive News: As a man of numbers and surveys, do you know if there have been any comparisons on average Labor Rates in this industry to other trades with equal skill levels? Mike Anderson: When I had my shops, I built a pro forma for my business every year. I would say,
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Wisconsin Automotive News
Summer 2020
‘Okay, here is what I expect my expenses to be next year.’ Every year, I’d reach out to my healthcare provider and find out how much they thought insurance would go up or down. I’d reach out to my IT person and ask how much I may spend next year to replace computers or monitors. I’d do a pro forma budget on what it could cost me to do maintenance on my equipment. I’d bring my employees in and ask what equipment they thought we’d have to buy next year as well as evaluate what training or OEM certifications
we would need to renew. After that, I would personally survey other industries. I’d call to find out what it would cost to get my washer and dryer fixed, see what a plumber was charging and what it would cost per hour to get my HVAC serviced or for lawnmower repair/maintenance. I would take those into consideration. I’d also look at my property taxes, as I needed to know what that cost was. I would determine what my rate was going to be, and then I’d notify the insurance companies and say, ‘Here is what my rate will be based on this information.’ In addition, I would also submit a pricing menu as to what my pricing would be for hazmat, solid waste disposal, etc. Lastly, I would survey mechanical rates for dealerships and independent mechanical shops. Now, as for surveys in the industry, obviously I do my “Who Pays for What?” surveys quarterly. I publish and research shops for rates and publish average rates around the country – not by city or town. There’s also the National AutoBody Research Variable Rate Survey. I don’t know a lot about it, but I do know that shops can take the surveys and get the results for their local areas. The other thing I think is important is that when most insurers compare shops regarding Labor Rates, severity or other KPIs, they compare them to what is called their CBSA or ‘core-based statistical area.’ CBSA is an area defined by population, and a lot of insurance companies use that as a basis for their “market area.” You can just Google, ‘What is a core-based statistical area?’ It’s a government pre-defined area by the Census based on the population, so you can know what cities and towns in your area you are being compared to. Some insurers also use the ‘metropolitan statistical area,” but it is my understanding that most insurers use CBSA to determine what cities are in that rate they consider the prevailing area. My collision centers were in Alexandra, VA, where property taxes are extremely high. You can go 10 miles to a different area, and those taxes may be totally different than mine [lower]. So, I think each individual shop needs to determine what their cost of doing business is. If I am an OEM-certified shop for one of the European manufacturers like Audi, I have to understand that the operating costs for my business to purchase equipment and pay for certification costs and training is going to be different than a shop that works on domestic vehicles. Every shop needs to look at its own cost of doing business.
Most of your paint companies have budget or performance tools you can use to figure out what your rate should be. I used to have an Excel spreadsheet to plug all my data into. I’d put in there what I thought I’d need to spend on equipment and stuff like that, and I’d determine what I’d want my net profit to be. That would help me to calculate what my Labor Rate needed to be for the following year. It was never a pulled-out-of-thinair Labor Rate; it was based on factual data. I must admit it is very perplexing to me how people just pick something like $2 an hour to raise a rate with no rhyme or reason. WAN: Are there any studies or information in regard to the cost of cars versus labor cost to fix them? MA: I think that it is different. Manufacturing a car on an assembly line – building a car versus fixing a car – is a different scenario. They are using robotics; it’s a different skillset. They are buying metal and substrates in bulk quantities. There are so many variables. I think it’s comparing apples to oranges. I do think that looking at other industries is helpful. I had a plumber come to my house recently. His rate was $100-something per hour, and his helper was about $55. He charged drive time to come to my home. Four or five hours’ worth of work cost almost $800. When you look at areas like Los Angeles, Florida and Washington, DC, they have some of the highest costs of living and the lowest Labor Rates. If you look at Montana, Iowa and North Dakota, they have higher Labor Rates. They have stronger associations and not as much competition. I think too many shops get caught up in Labor Rate increases versus looking at not-included operations. I think it’s a lot easier to justify and defend not-included operations rather than Labor Rate increases. (I am sure I will get some hate mail over this. LOL!) You can justify Labor Rate increases, but you have to be really savvy and understand economics, the cost of doing business, overhead and things like that. Some states like Minnesota and Rhode Island have laws that if it’s not included, the insurance company has to pay for it. They can’t arbitrarily pick what they can and can’t pay for in the P-Pages. To me, getting paid or reimbursed for notincluded operations is more valuable than Labor Rate increases. That’s not to say that Labor Rate increases aren’t needed, but I think not-included operations is the thing I would focus my attention on.
Continued on page 10
Summer 2020
Wisconsin Automotive News
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COVER STORY
Continued from page 9
WAN: Some WACTAL shop owners say they sometimes have the car owner pay Labor Rate differences – which is never easy without a lot of upselling. Is this a common practice in most states? MA: I think that there’s somebody in every state who charges the customer the difference. Normally, when they charge the customer the difference, it’s generally for not-included operations and sometimes for the Labor Rate. I’m not an attorney by any means, but I am aware of a shop owner from Ohio who had a Labor Rate 10 percent higher than the prevailing rate. When he went to court against the insurance company, the judge ruled in his favor. The judge ruled that a 10 percent variance was not unfair nor unreasonable because insurance companies have to pay what is fair and reasonable. There are people willing to live by principle, but there are very few people I’ve found who are willing to die by principle. If the insurer didn’t pay what I want to fix the car, I would charge the customer the difference. I would do a lot of upfront work with the customer and educate them in the beginning. I’d educate them about the ‘why’ – why my training and equipment may be more expensive. I was successful with it. Some may argue that it’s because I fixed high-end luxury vehicles, but I did average cars as well. My friend Ryan Taylor of Bodyshop Booster has a saying: ‘People are more afraid of making the wrong decision than they are of spending money.’ Customers will pay out of pocket if they feel they are making the right decision and they feel good about it. So, if you can convince them why it’s worth it to spend that extra money, a lot of consumers will do it. It’s all about educating the consumer. I’ve charged the insurance company the difference. But if you do that, be prepared for the battle when insurers up their steering practices. WAN: Would you consider an insurance carrier not paying the posted Labor Rate a short pay? Do you have a form or suggestion on how shops could attempt to collect that?
MA: If an insurance company doesn’t want to pay what you want, you have a couple of options. Option 1: You can go up the chain of command and try to get a resolution. Option 2: Charge the customer the difference. Option 3: Refuse the job. Option 4: You can make a business decision to say, ‘I will suck it up.’ Option 5: Some states have what is called a Right to Appraisal arbitration clause in the policy that says that if a consumer’s shop of choice and the insurance company
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Wisconsin Automotive News
Summer 2020
can’t agree on a price, you can use an arbitrator to mediate. In most states, shops can’t file a complaint; a consumer would have to. Some states have what is called Assignment of Proceeds and go to court. I’m not a legal expert at all, but that is another option. Every one of these decisions has pros and cons. A lot of shops call me and explain that they have a Labor Rate that the insurance company doesn’t want to pay. They ask me what to do. I’ll look at their estimate and point out that they may be looking for a few dollars more per hour but may have an additional $1,000 worth of notincluded operations missing from their estimate. Sometimes, you spend dollars to pick up more pennies. I’m not trying to discourage raising the Labor Rate, but sometimes that’s just a Band-Aid. What really needs to be looked at is the not-included operations that are missing. WAN: Why is it the insurance industry can select a “prevailing rate” based on some blind survey, but everybody freaks out in regard to price fixing when shops discuss cost of doing business or rates? MA: I know I use a lot of sayings, but as I heard a shop owner up in Massachusetts say, ‘People will only do what you tolerate.’ It’s not just insurance companies – it’s vendors, it’s employees, it’s customers and everybody. So, if you tolerate it and accept it, people will continue to do it. You have to change that behavior. I don’t think there’s a law that says you have to accept what the insurance company says. You have to be willing to invest the time or money – whether it’s legal action, taking the time to educate a consumer or taking the time to build your case to present to the insurer as to what you want to get paid. There are so many variables you can use to impact that decision, but some people aren’t willing to invest the time. If they can’t get paid easily, they won’t invest the time to go the extra mile to try to do that. Before looking to raise the Labor Rate, the first things I’d look at are my average body rate labor hours per estimate. What are my average frame labor hours per estimate? What are my average mechanical labor hours per estimate? If my average labor hours are low, I’d try to bring my labor hours up first before I start to look at the Labor Rate. I will tell you some of the states that have high Labor Rates actually mask or cover the inefficiency and quality of the estimates. Some tend to write poor estimates because they make it up on the Labor Rate. WAN: Considering the complexity of the vehicles that repairers work on, the amount of expertise and
Continued on page 18
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Summer 2020
Wisconsin Automotive News
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WACTAL MEMBER PROFILE By Alana Bonillo
North Shore Collision,
Milwaukee
Max Jones III, owner of North Shore Collision in Milwaukee, is fortunate to have devoted his life to a profession that serves the two things he loves most: Working on cars and working with people. “We love helping people; that’s what keeps us going.” Jones sincerely empathizes with his customers, knowing full well they are hurting – either physically or emotionally (or both) – when they come to the shop following an accident. “We don’t just repair the car; we help our customers get back to normal again. [An accident] is an upsetting thing; they are in uncharted waters, and they don’t know what to do. We push for that smile and that connection by helping them get their car and their life back on track.” Collision repair runs in his family, as both his father and his grandfather were bodymen. He started working in a body shop at the young age of 11 when his dad, Ferdinand, first opened his business. When he was in his twenties, Jones worked at Alioto Body Shop in San Francisco, CA, which he says “was a big part of [my] growing up” before returning to Milwaukee. Over the years that followed, he worked for some independent shops (including his father’s business) until he decided to go out on his own in 2008. Jones began his business as part of a franchise before deciding to break ties and become independent four years ago. 12
Wisconsin Automotive News
Summer 2020
One of the things that makes North Shore Collision successful is its location, which Jones says is off the beaten path. As a result, the shop relies heavily on word of mouth. The facility is moving away from DRPs and presently only works with two to three. Jones believes strongly in the connections a business can make due to social media and online resources. “Our online presence is pretty good as far as Google is concerned. There is maybe only one other shop that has more reviews, and they aren’t in Milwaukee County.” “We interact with every customer that we can,” he adds. “We walk around the car with them and ask them for a referral. My dad taught me this, and I refined it over the years. We are good at asking them if they like what we did and that we would love it if they can write a review and tell their family and friends about us.” An I-CAR Gold shop with nine employees, North Shore Collision always does its best to keep up with training. One of
Jones’ favorite ways to keep up on industry matters is through various Facebook groups and websites. “Staying ahead of the curve when it comes to getting paid, [I follow] Larry ‘Estimology’ Montanez [P&L Consultants] and Kristen Felder [Collision Hub], who keep everyone in tune. Also, Billy Walkowiak [Collison Safety Consultants] is called the ‘go-to guy’ when it comes to diminished value, which is something many people don’t understand or tell their customers about.” Being in the industry for some time, Jones has experienced the many challenges that shops like his face time and time again. He’s found that educating the customer is key, as most are unaware of the process. “Educating the customer and letting them know what they can and can’t do and what rights they do and don’t have is a big part of this business.” In addition to directly1 experiencing the 1 Straight _ Square_AASP0620.qxp_Layout 5/21/20 1:42 PM Page industrywide technician shortage, Jones has encountered issues with insurance companies
enforcing photo estimating and practicing steering. “The insurance companies try their best to steer to their specific shops. It would seem like that’s a bad thing, but a lot of these shops are doing the work so fast that we wind up redoing quite a bit of their work.” To keep on top of the industry and stay in touch with like-minded business owners, Jones recently became a member of WACTAL. Receiving and learning relevant information in a quick fashion by being part of the association has been a huge benefit. “Most of the time, you are going to find that one little thing that you should have been paying attention to. Someone will bring it up, and it makes it easier [to observe].” Although current complexities surrounding the COVID-19 pandemic have led to some uncertain times, North Shore Collision feels positive and hopeful about its immediate goals and the future. WAN
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Wisconsin Automotive News
Summer 2020
)
GUEST EDITORIAL
Continued from page 6
broken pipe, wire your garage, receive HVAC service, fix the washer/dryer, mechanical automotive service, service your well pump, etc. Just about everything has a higher Labor Rate than collision repair! We’ve fallen to the very bottom in compensation as the required skillset has easily doubled. Compare the skill level of those trades to what is now required of this industry. Wham! That should wake you up a bit. Attracting new talent to this industry has always been a challenge. In the past, I felt part of the issue was the nature of the industry – its dust, fumes, and grumpy owners and the social stigma that continues to dog us. I remember my mom’s reaction when I chose this occupation. Certainly, alcoholism was to follow, but ha! I showed her; I’m only a moderate drinker! I feel this industry is now a much, much better place to be, and we should be proud of it.
However, to attract the talent, we need added compensation. To regain lost profits and upgrade equipment, we need better compensation. If you’ve maxed out non-included operations, trimmed where you can on materials and maxed out on overhead with whatever parts profit you can get, that leaves you with Labor Rates – where we should have started in the first place. That’s typically 50 percent of a business, and we should pay attention to it. Every industry is struggling to get entry-level (or any) people involved. We’ll need to up our game if we are to compete for new talent and retain what we have or hang here at the bottom. That is a choice. But to exercise that choice, you need to demand more and quit waiting for the insurance surveys to allow you a better rate. Whose business is it?! Of course, working under suppressed Labor Rates is not necessarily a “choice,” but then again,
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GUEST EDITORIAL
Continued from page 15
it kind of is. Little by little, we let our choices be dictated by outside parties. These include DRP agreements with lopsided benefits, which mean
Of course, working under
suppressed Labor Rates is not
necessarily a “choice,” but then again, it kind of is. Little by little, we let our choices be
dictated by outside parties.
adding here to cover that (a.k.a. cost shifting). We all do it, but even that is no longer covering the legitimate costs that need to be passed on. As an
industry, we need to know our numbers and hold to what’s fair and equitable for the investment we’ve all made. More on knowing your numbers in the next issue. You now know what I know, for what value that has...I recently read a disturbing thread from a technician’s post, which went along the lines of: “If you’re working for an owner unwilling to charge for and compensate you for your talent, you should find a new employer.” If nothing else, as shop owners, we need to find and silence that guy before word gets out. Or charge and be compensated in a fair and equitable manner. That is our choice. We’ll assume this was a grade-A tech, because there are those others…. Steve Humblet is a WACTAL member and owner of Quality Paint & Body of Minocqua, WI. WAN
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COVER STORY
Continued from page 9
continual training that techs require and the liability that shops are required to assume on each and every repair, why does the industry have some of the lowest rates of all the skilled trades? MA: Back in the old days, the ’50s and ’60s, the body rate was always higher than the mechanical rate. I think what happened was that the mechanical rates have grown and obviously are much higher than body rates are now. I think what impacts a lot of areas is the amount of shops. If you have an overabundance of shops, it can tend to bring the market down because there is always someone else willing to do it for cheaper. In more rural areas, there are not as many shops and not as much competition. I can absolutely tell you the states that I’ve seen with the highest Labor Rates also have the best trade associations. It’s a direct correlation. WAN: The medical profession regularly bills the customer the balance of the bill that the insurance company refuses to pay. Why is this not common practice in the collision industry?
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MA: I think it’s because a lot of shops are willing to live by principle and/or die by principle. Some people just live by fear and are afraid that if they [balance bill], the insurance company will steer against them or badmouth them. A lot of shops are DRPs and contractually can’t do that, and that is the business decision they made. I think at the end of the day, every shop has to make the best business decision for them. WAN
Mike Anderson is an Accredited Automotive Manager (AAM) and the former owner of Wagonwork Collision Centers, two highly acclaimed shops located in Alexandria, VA. He has served as a member of many industry organizations throughout his career, including the WMABA Board of Directors, the Mitchell Advisory Board, the MOTOR Advisory Board, the ASE Test Review Committee, the National Auto Body Council, the Collision Industry Conference and the Society of Collision Repair Specialists. Additionally, he is a past Virginia SkillsUSA chairman, serves as a facilitator for Axalta Coating Systems’ highly recognized Business Council 20 Groups in both the US and Canada and facilitates numerous courses for Axalta Coating Systems’ Educational Series. He currently offers expert industry consulting via his latest venture, Collision Advice (collisionadvice.com).
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