As we continue with week two of our look at designing a collision industry (assuming their wasn't one in existence) we will look at three meatier subjects. This morning we will discuss labor rates, insurance company relations and equipment requirements of the new collision industry that we are designing.

Before we get into the subjects that I will look at this morning I need to explain something to all of my readers. What I am writing about in this series is not an "action plan" it is purely a look at what "I" think would be an ideal situation for the collision industry. I hope that what you read sparks enough interest that you will respond to my thoughts with thoughts of your own. I don't care if you tell me I am full of it --- just tell me something otherwise my time is wasted even writing this newsletter.

LABOR RATES: Let's start out with the favorite subject of collision repairers across the country, labor rates. Labor rates are a problem that will always be part of the collision business, but our new industry will find obtaining the right rate for the work significantly easier. Since everybody in this new industry will know what it costs to do business, the actual cost of doing business will not vary too much from shop to shop. Insurers of course like to pay one set rate. This rate should be acceptable to most shops because the difference between what one shop charges versus what another shop charges should not be significant. Shops that perform at a higher level than the competition will receive rate bonuses because their efficiency saves the insurer money. Rate increases will consist of an annual cost of living increase plus any unusual overhead increases that the shop has had to bear. In turn the collision industry and repair industry will work together in an effort to look for ways to reduce the cost of repairs without hurting the bottom line of the repairers. An outside company will do an annual survey to determine a fair labor rate to be paid to the industry. This same surveying organization will determine a fair material rate for the entire industry. This rate may vary from one part of the country to another if government regulations in any area increase the cost of materials.

LABOR RATES - TODAY: The way the industry is paid today is a laugh. How can shops in parts of California receive twice as much per hour for labor to do the same job as lets say a shop in Michigan? We are told by insurers that the average claim cost is very similar, but if an estimate is 90% R time it is impossible to come up with the same bottom line. Funny time could have made up a lot of difference on an estimate, but this type of cost shifting is pretty much a thing of the past. Insurers are able to perpetrate this fraud on shops because of shop owners who refuse to know their cost of doing business and charge accordingly. The minority, those that know how to run a collision operation, have their hands tied because there aren't enough of them to make a difference. Insurers know that shops can't get together to discuss rates because it is illegal. This gives them the advantage of establishing rates based on the charges of shops that shouldn't even be in business.

INSURER RELATIONSHIPS: Insurers and Collision repairers will work together to establish the groundwork for the collision industry of the future. Since all shop owners and their employees will have taken business and technical courses, a higher degree of trust will exist between the two industries. With standards of repair many of the arguments that exist today will not even be a factor in the future. There will not be any DRP programs per se because all shops will be part of a nationwide DRP program. Estimators will not be needed although there will still be re-inspectors. Customers will take their vehicle to the shop of their choice and the repair plan can proceed* [*this will be covered in another part of the series].

Should there be any disagreement between shop and insurer a binding arbitration committee will settle it.

INSURER RELATIONSHIPS - TODAY: What relationships? With the rare exception of small groups or individuals who have each other's ear there really isn't any relationship between the two industries. Neither side trusts the other. Insurers tend to think the majority of shops are out to cheat them, and they may be right. Repairers think that insurers will do anything to save a buck, and they may be right. There isn't any mutual respect for what the other side has to go through. To establish a relationship there must be some common ground to start with and I am not sure any common ground exists. I was even surprised lately when some insurance company personnel removed their name from my mailing list because I criticized their company---and these were people who I thought I knew well. This is just an example of how we haven't learned to listen to the other person's point of view. Insurer relationships may be the hardest problem to solve.

EQUIPMENT: A collision shop in the new industry will be required to have certain equipment in order to obtain a license to operate. All shops will be required to have at least the equipment requirements of CIC's Class A shop although equipment may be added to that list. Measuring equipment will require a printout and may not be subcontracted. In fact only mechanical work can be subcontracted in these new facilities. As technology changes new equipment will be added to the requirements and a shop shall only have a short time to obtain such equipment. Shops that do not meet the deadline will have their licenses temporarily suspended until the equipment is purchased.

EQUIPMENT - TODAY: A shop today can virtually have little or no important equipment and be in the collision business. Unibody and frame straightening can be subcontracted as well as all alignment equipment. Without the investment in equipment these shops have a competitive edge as compared to a shop that is well equipped. If all of the collision work is done in-house there is a much better chance that the repairs will be done properly.