THE NATURE OF THE AUTO BODY/REPAIR INDUSTRY |
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| OVERVIEW | |
| Most auto body shops are small to medium sized businesses operated as sole proprietorships,
small partnerships, or closely held corporations. They range in size from the corner shop to large franchises
with many locations. Specializations range from domestic or foreign vehicle repair to classic vehicle restorations.
Body shops are interesting in that they are combinations of service type businesses with retailing aspects mixed in. Although they provide the labor and skill, they must also purchase and resell the needed parts. This often creates conflicts in determining whether shops are required to maintain inventories. The industry is extremely competitive as a result of influence insurance companies exert over auto body shops. Since insurance companies pay for most claims, they look for the most cost efficient businesses. A shop that is willing to use less expensive parts as opposed to factory originals will be preferred. This also applies to the labor rates that a shop charges. An insurance company will not hesitate to use a particular shop that charges $27 per hour as opposed to one which charges $28 per hour. A body shop is also regulated by environmental agencies. Because of today's tighter air quality restrictions, the amount of hazardous materials it may emit on a day-to-day basis is limited. Hazardous emissions include paints, toners, and thinners which are used in spray form. Because violations of air quality regulations can bring stiff penalties, these regulations are often closely adhered. Because of the above mentioned influences, competition is fierce in the industry. Accusations abound in the industry that payments are made to service managers in various dealerships to provide referrals. Shops have also been forced to cut costs whenever possible. These costs include employment taxes and worker's compensation insurance which are sometimes bypassed by treating workers as independent contractors instead of employees. |
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Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Glossary
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