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Volume 7    Issue 2            March/April 2005

Independent State (of mind)
IGA's annual meeting grapples with the issues,
show draws large crowd in Orlando

by Charles Cumpston and Brigid O'Leary

Feeding on the energy of the imminent NAGS rebalancing, its suit against Safelite for alleged steering and the desire for actions by independent companies to take back control of their businesses, the Independent Glass Association (IGA) held its annual meeting at the Rosen Plaza in Orlando, Fla., the end of February.

The three-day event also included a well-attended Spring Glass Show, which included architectural glass exhibitors for the first time.

Marc Anderson, executive director, opened the Independents’ Days and Spring Glass Show™ with blunt words.

“We’re focusing on things that matter most. One of our themes is that you have to pay attention to the big picture in order to survive,” he told an enthusiastic audience of independent business owners who had come to Orlando looking for information, answers and contact with peers.

“You can be driven out of business by illegal practices regardless of how good your employees are and how well you run your business,” he told the crowd. “We have to pool our efforts and resources,” he said. 

“We’re not well organized as an industry, but pooling our resources is not a burden. Sharing information can make a difference. We positively have to work together,” he stated.
And share information they did.

The program opened with an update on the lawsuit filed against Safelite Group Inc.
IGA attorney Tom Goodman pointed out that so far all that had been done is the filing of the complaint. 

“In looking at the industry over the past 35 years,” Goodman explained, “it has a very bizarre structure. Year after year, Safelite has acquired more of the market and now controls 45 percent and they also decide what you are going to be paid for work. You know what anti-trust is,” he said. “It is not talking about price and setting prices. But the network is one big price setter.”

He explained that in investigating the possible suit he found that the government doesn’t know what is going on and the insurance industry is regulated on a state basis “and the state officials are tired of hearing from you.”

Goodman told the crowd, “We also found that glass shops like yourselves have developed a slave mentality. You throw up your hands and say ‘Here’s what they are going to pay us.’ All of your costs are going up and what you are being paid is going down. There’s something wrong here.”

The attorney explained that there were “many tempting choices,” but that each had its pros and cons: What was the chance of success? What was the cost?

He stated that in structuring the suit and filing it the goal was to get a judge to rule on the charges. “There has been a big question of why we didn’t ask for damages,” he stated. “Safelite would tie us up in court forever over damages because there is a lot involved and it is complicated.”

Goodman said that he expects to be buried with motions. “Safelite is not just going to roll over and accept this. They are going to fight it. We are asking the judge to be an umpire and make the call.”

Figuring the NAGS Rebalancing
Ed Fennell, Bartelstone Distribu-tors, brought up the second—and more immediate—topic of the meeting, the NAGS rebalancing. He told the group that he had run the figures on the new list price versus the old one to see if the claim of revenue neutral was true.

The result: By and large yes, but the figures will change based on the mix of the shop, he said.

He explained that distributors are not switching because there is no common denominator in the pricing. “The differences range from .3092 to .5580 for the top 50 percent of parts sold.

You would want to buy the parts that went up at the old price and pay the new multiplier off all the rest,” he said. “We [distributors] need to see what the manufacturers do and analyze their data as they carry a national presence and they will be the base. We are regional so it won’t carry.”

He said that of the manufacturers, PPG is the only one “to step up to the plate. It published 8,002 parts; 5,283 are list and 2,701 are nets (33 percent). That means there are 5,000 parts that there is no list for.” He said that a lot of the Pilkington parts do not have a list. “The manufacturers have spoken. Now distributors need to come up with a unified effort, but it will not be easy or fast.”

Fennell gave this advice to retailers:
1. Check the dealer list before committing to a supplier’s net price;
2. If you can’t make a profit on the glass, just say no;
3. The higher the discount on an O&A, the less likely you’re going to make the gross profit you need to stay in business;

He also explained that there is a list of things on the NAGS ‘f’ page that can be charged for (examples: butyl to urethane conversion; air-bag activation/de-activation), and advised using them.

Is the rebalancing revenue neutral? According to Fennell’s figures for the top 50 parts:
• LYNX is up $15.70;
• Allstate is down $.76;
• Progressive is up $9.62;
• State Farm is up $12.64;

In summary Fennell stated, “The addition of labor is the best thing and remember to just say no if you aren’t sure or aren’t going to make money on it.”

The next day, attendees were able to hear from NAGS officials themselves on the rebalancing when Jesse Herrera and Bud Oliver spoke.

R-reverdecci R-Parts
Herrera opened his case by pointing out that the ‘r’ parts have been eliminated, labor is becoming a stronger component of pricing for retailers, and there is a more consistent margin on all jobs so that there are less highs and lows.

He also pointed out that a significant portion of the market had asked that the implementation go forward because of the preparation which they had made for it.

He pointed out how the insurance companies have responded, and examples were given of how some parts changed from the old price list to the new one, showing how revenue neutral the change is.

Herrera made the point, and he repeated it a couple of times, that a company has to look at its full mix to determine what the effect of the rebalancing and the O&As will be.

He explained that the two most popular parts, DW01341 and DW01217, represent 5 percent of total sales. The top 10 parts represent 20 percent of total sales, and the top 00 parts 50 percent of total sales. The top 500 parts represent 80 percent of total sales.

Herrera discussed addendums and made the point that more glass is being sold off addendums than off the NAGS list price. “Parts that can’t achieve the targeted selling price using a standard benchmark multiplier end up on an addendum,” he said.

In explaining why the distributors have failed to go along with the new price list, Herrera echoed Fennell’s earlier comment when he said, “A partial adoption among wholesalers could lead to excessive ‘cherry-picking’ among retail buyers.”

He added, “If we all made the leap together, then that effect goes away, but that didn’t happen.” He did add that if retailers value buying off of NAGS list prices, some distributors may eventually offer this option as a means of attracting more business.

In closing his presentation, Herrera went back to one of his main points. “Analyze your part mix and the effects that O&As have on your business and don’t stop at the top 10 parts because you are ignoring 80 percent of your business.”

He also advised companies to “continue analyzing your acquisition costs to understand how you are affected by changes in distributor pricing.”

In the question-and-answer session that followed the presentation, Herrera faced tough questioning from Cindy Ketcherside of JC’s Glass in Phoenix, Ariz., on what methodology is used to determine the NAGS price list.

Ketcherside began by asking Herrera what surveying methodology the company used to determine its list prices. He replied that a number of industry companies provided NAGS with their list prices. He said that the groups, which supply information, are guaranteed anonymity in return for providing the information on their pricing to NAGS.

Ketcherside further pressed Herrera on whether ANSI standards methodology was used in the process or other accepted surveying techniques such as random sampling. Herrera replied that these methods were not applicable in this particular case because only certain parties would have the information and agree to supply it.

Not satisfied, Ketcherside again asked if NAGS uses any kind of recognized methodology to determine the prices it publishes. “Our businesses depend on these prices and we want to know how they are derived and if they are representative.” Herrera again described the method he had given earlier.

With a seeming stalemate and voices getting louder, Debra Levy, publisher of AGRR® magazine and™ who was moderating the session, said that it was time to move on to the next question.

The Chicago Auto Glass Group’s alternative to NAGS as a price list has received extensive attention throughout the industry, and IGA attendees heard Dave Leach give an update on the group’s work, which is still going through the testing stages. Leach explained to the audience that while he would have liked to have seen the Chicago Group’s pricing structure made available sooner rather than later, they are waiting for the results from Grant Thorton, the outside source hired to help run the numbers and ensure the formula works.

“We don’t want to put a paper tiger in place,” Leach said. 

Rounded Program
Other sessions at the conference included a discussion of whether auto and flat glass mix in a single business by Lyle Hill, president of MTH Industries of Chicago. 

Lynette Hartman from Neon Billing Service gave a presentation on how companies can collect short pays and the new program IGA has set up to help its members with this.

Carl Tompkins, Sika Corp., delivered the keynote address on how people can utilize their resources for business success.

Tompkins and Levy provided an update on the activities and status of AGRSS.

Blair Imbody, AGC Automotive Replacement Glass, looked at what kind of technology might be used in auto glass in the future.

In a new feature this year, a number of business owners shared techniques they have successfully used in their businesses. Jerry Mattison, Star Windshield, discussed arbitration; Donna Braden of Jack’s Glass shared unique marketing ideas and strategies; Scott Owens, Excel Auto Glass, spoke about selling safety to consumers; Mark Rizzi, ACR Glass, discussed the glass market versus the body segment; Scott Harkey, Windshield Glass, provided tips for dealing with insurance companies successfully; and Jason Polzin, Polzin Glass, explained how he educates consumers.

Replacement demonstrations were given by Dale Malcolm, Dow Automotive, and Steve Coyle, PAG.

Next year’s IGA meeting will be held in Las Vegas in February. A definite date has not yet been set. 

Report from the Show Floor
Enthusiastic crowds thronged the halls of the Spring Glass Show™, the exhibition component of the Independent Glass Association meeting in Orlando.

Open both days of the meeting, the show allowed a record number of attendees to find out what was new from a varied list of exhibitors. This included several new companies, such as the appropriately named The New Company Store (a West Concord, Minn., based supplier of auto glass installation and repair tools and supplies). 

The glass manufacturers—Pilkington and PPG—were there, as were the adhesive suppliers and the software vendors. The moldings and tools suppliers were there in force and busy from the opening bell until well after closing time. Window film companies were also prominent on the floor.

Here is some of the specific information provided by exhibitors at the show.

New cutout lubricant, Sika-Slick, is designed to reduce cutout force and extend blade life. It can be used with all reciprocating cutout tools, according to the manufacturer, Sika Corp. It is approved for use with all Sika adhesive systems, and comes in one-gallon containers.

Zero Betaseal O°ne
Dow Automotive introduced an adhesive which is designed for all applications and allows one-hour drive away as low as 0°F. The product enables technicians to safely use one adhesive for all auto glass replacements, standard and high modulus, nonconductive, according to the supplier. It meets all OEM and FMVSS requirements, and is available in cartridges and foil packs. A company spokesman explained that the product is the latest example of its effort to simplify the market so that installers only use one adhesive.

EFTEC was running a $2.95 per 10.5-ounce cartridge special on its Dinitrol 500MW urethane at the show. This was the first time the company has exhibited under its new identity since starting the shift from Dinitrol. The D-500MW is the OEM product for the Ford Focus. The company offers one-component fast curing, high modulus, low conductive polyurethane, humidity curing adhesives for OEM. Two-component adhesives are available for the aftermarket.

All-Weather Velocity
Velocity all-weather auto glass adhesive allows one-hour dual airbag drive-away times, in all weather conditions down to 0°F, the supplier states. The product meets or exceeds all FMVSS 212 and 216 standards, as well as more stringent OEM safety requirements. Distributed by Shat-R-Proof Corp., Velocity is LYNX Services approved.

Deluxe Moldings
Techno Rubber was promoting its new Deluxe Moldings with more butyl. A range of molding shapes and sizes is available for most windshields and back glass. They feature a full butyl liner and are available in 75-foot rolls.

the Resource
What a difference a year makes. 
A year ago, the Independent Glass Association and the repair industry were at odds over what looked to be an IGA assault on repair. Today, the association has embraced repair as a viable practice for its members and even provided a seminar saying so.
“Many people have looked at windshield repair as the competition,” stated Matt Larson, Delta Kits, in a presentation on the subject at the IGA meeting in Orlando. “But as far as resources go, it’s one of your most valuable,” he added.
“It’s a great tool to add to your business,” he added.
Larson pointed out to the audience that right now it’s more common for the larger companies in the industry to be doing repair and that it is being done more often outside the industry by such sources as car washes and quick lubes.
At a show of hands, most people in the room at the Rosen Plaza Hotel already do repair.
Larson asked why it is that these larger companies are doing repair. “It’s profitable, it’s an easy sell and there’s no deductible,” he answered. 
“You have to market it proactively,” he advised. “Your customer base is your growth area. If you can bring customers in for repair then you have added to your customer base.” 
Larson stated that he is concerned independent glass businesses are not taking advantage of repairs the way the larger companies and repair-only operations are.
“You independents are a logical source to do repair because of your skill level,” he stated. “You understand the glass and the need to get the moisture out of the crack.”

He also encouraged everyone with a vested interest to get involved and help in the standards work that is being done.
Larson also pointed out that there is a movement in the repair industry toward quality in much the same way as there is in the replacement industry. “A lot is happening in training. The suppliers are interested in upgrading the quality of installers and are a good source for help,” he stated.
“It’s not competitive with replacement,” he emphasized. “It’s a service for long-term customers who need repairs as well as replacement. I don’t see a conflict between the two,” he said. “There is a good fit.”
“There is an opportunity here for independent glass businesses to compete with the larger companies and offer a service to their customers,” he said.
According to Larson, “The customers we [suppliers] have who are most successful are modeling themselves after others they see in their community that are offering repairs. Look at the car wash, the quick lube and see what they are doing with repair.” Then he added, “And you are the ones with the glass expertise.”
Larson also pointed out that there is a large market in fleet work that has been largely overlooked.

Technological March
He also spoke about technological innovations that are making repair easier and less messy. “Repairs are less labor intensive than they used to be,” Larson stated.

“I see a range in shops from those that will only do a repair if their arm is twisted to those who love it,” he said. “In my opinion, it [replacement and repair] should be one industry.” 

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