The tough economy and cautious outlook for 2011 are shaping an overwhelming theme that shops need to prepare for – more, more, more – as in more money. Equipment, education and apparently some parts all will cost more in 2011.
• Required investments in tools and training for advanced materials
I routinely educate insurers and collision repairers on metallurgy changes in newer vehicles. With the revised Corporate Average Fuel Economy standard requiring new vehicles sold in the United States to achieve an average 35.5 mpg, automakers are pressured to use lightweight, complex alloys in vehicle construction.To keep pace, shops must invest in higher output welders and investigate purchasing inverter based squeeze-type resistance spot welders. The investment won't stop there. You'll also need to stock up on high-speed carbide drill bits to drill panels and drill out these welds. These harder alloys will wear out the expensive drill bits quickly, and this will stop your job progress mid-stream if you run out.
Investing in training and reference materials for technicians and estimators is as critical as equipment investments. Understanding OEM requirements for vehicle-specific repair is a must for technicians but also is important for shop estimators who need to properly assess the steps listed on the appraisal.
Increasingly, estimators are not only tasked with gaining this knowledge but with educating vehicle owners, and in some cases, the insurance claims representatives. Giving estimators access to OEM requirements while they are writing an appraisal or discussing repairs with vehicle owners and claims staff will be a key to efficiency. Imagine the impression you will leave on the vehicle owner when you print out specific repair instructions and explain how you will repair their vehicle in accordance to the manufacturer's repair specifications.
• Small car + powerful engine = bigger claims
As my teenage son comes closer to getting his driver's license, he spends a lot of time dreaming about what car he wants versus the reality of driving our trusty 1993 Volvo. He complains about how slow it is, but it's faster than any car I drove as a teenager.
Automakers have been in a quiet horsepower race. Today's Honda Civic LX has a faster 0-60 time than the Aston Martin DB 5 used in the film Goldfinger. With fuel injection and multi-valve heads, economy cars are incredibly fast. Fast cars from the 1970s would be embarrassed by today's minivans.
Check out the website www.zeroto60times.com for a comparison. Yet we entrust our young, inexperienced drivers to handle these quick cars. The increase in horsepower is not slowing down.
• Strong yen and higher costs for Japanese parts
With the yen at nearly a 15-year high against the dollar, (experiencing a 7 percent climb in 2010) Japan's automakers are panicking and moving quickly to protect the profitability of cars and parts made in Japan.
The exchange rate issue also surfaced back in the mid-1990s. At that time, Japanese automakers raised parts prices only modestly to offset U.S. exchange rate issues because they enjoyed a strong exchange rate with other currencies, like those in Europe. Now that the euro is falling rapidly against the yen, profits are evaporating.
Not all Japanese automakers will be affected equally. The key is to understand which collision parts are manufactured in Japan and which are made here. Knowing where a specific car model is made can help determine this because collision replacement parts will be manufactured at the same locations as the vehicle's production.
For example, Toyota will build Corollas in its new Blue Springs, Miss., plant to offset the model's low profit margin, which makes it costly to export to the United States given the rising yen.
So that's my list of what shops need to prepare for in 2011. This is not a comprehensive list, rather a few items to help you think about what could affect your business. I encourage you to act now and think your list through.
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