Value in OEM certification

Jan. 1, 2020
OEM certification is not for everyone, but it may present some valuable opportunities for your MSO.

As we strive to differentiate our businesses from our competitors, original equipment manufacturer (OEM) certification is one way to elevate ourselves in standards of equipment, education and process with the endorsement of specific auto manufacturers.

Manufacturer endorsement is nothing new. They’ve been endorsing their dealerships since the beginning, including offering manufacturer-specific training and equipment. However, we’ve seen the number of dealership collision facilities decline, especially in the 1980s and 90s. Currently, the vast majority of collision repairs are performed by independents, 86 percent by some reports. Manufacturers recognize this, as well as understanding the increased complexity of repairs and liabilities for improper repairs. Consumers are increasingly concerned over vehicle safety, as evidenced by manufacturer advertising and consumer purchasing choices.

We will explore the aspects of OEM certification. It’s not for everyone, but it may present some valuable opportunities for your MSO.

Where to start
Most OEM certification programs start with a dealership relationship. In most cases, the dealership must be willing to offer an endorsement of your business, often a specific shop within your organization. As an MSO, you probably have close relationships with dealerships, at the very least through parts purchasing relationships. According to Nissan/Infinity, the purpose of their certification program is to “expand the collision parts activities to further enhance vehicle ownership experience, collision parts sales, and profits through the launch of a Certified Collision Repair Network for collision shops.” Within their documentation they state, “60 percent of people repairing a vehicle in a collision will trade out of that vehicle within 12 months,” as well as “60 percent of vehicle owners will change brands after a total loss.”

A forward-thinking dealership will see the value in a close relationship with an MSO. Through certification, an MSO and OEM can offer the best possible repair experience for their customers and increase the likelihood of maintaining the customer relationship when they elect to change vehicles.

If your dealer partner is willing to endorse you, think in terms of what it will take to not only maintain, but enhance the value of the relationship.

Equipment considerations
Once you get to the point of consideration from the dealer and OEM, they will provide the requirements of their program. Equipment is a big component and will necessitate asking a lot of questions. Some manufacturers may specify where you purchase it. Some may allow any brand; others may specify brand and even models and options. Some may consider equipment you already have; others may not. Many will not only require MIG welders, but also resistance spot welders. Frame and structural repair and measuring system requirements for some OEMs can be well over $100,000. Consider the costs of fixtures for those that require them. Some require specific riveting systems that can be expensive.

Education requirements and costs
Some manufacturers offer, or require, their own training. In some cases, cost can be high, such as for Porsche, as it may necessitate sending staff out of town for multi-day training. Some certifications simply require that the shop attain the I-CAR Gold status. Mercedes–Benz has specific requirements for technicians and estimators currently, and already has higher standards set, beginning in 2015 and 2016, for technicians, estimators, advisors and body shop managers. Again, look at the requirements from the OEM and consider the costs.

Certification fees
An important consideration will be the fees the manufacturer charges, not only for new certification, but for re-certification when required. Again, they vary. Be sure to ask questions about how it is structured and what is covered. For example, in the Mercedes-Benz Elite Program (required for structural aluminum repair) the fee for certification, as well as re-certification (required every two years), only includes certification of one technician. There is a fee of $8,500 for each additional technician.

Paint and material requirements
Ask questions about paint and material requirements. Some may require specific paint products. Others, such as Nissan and Infinity, highly recommend a specific paint line, but provide a list of other brands that are acceptable.

Parts purchasing requirements
Understand the requirements and expectations of the manufacturer, as well as the dealer, in terms of parts purchases. Mercedes-Benz requires that only Mercedes-Benz Genuine Parts be used on their repairs, while Nissan/Infinity maintains that certified shops use a minimum of 85 percent OE parts in repairs with 100 percent for NMAC/IFS leased vehicles.

Other requirements
Carefully read through and understand all of the terms and requirements of the program. Most require many business practice compliances such as local, state, and federal safety and waste permitting and license requirements, customer waiting areas, receptionist/greeter, storage areas, clean restrooms, customer refreshments, customer rides, rental provisions, etc. You may be required to provide evidence of insurance coverage, financial performance and credit requirements. There can be requirements for staff apparel and even name tags. Nissan/Infinity requires that the facility has parking spaces equal to or greater than 2 times the number of production bays inside the building.

The payback
After considering the costs and requirements, the obvious question is how to get a return on the investment. The most significant return on the certification relationship for the shop is the referral business from both the dealer and the manufacturer. Creating a reasonable expectation of the amount of business can be very difficult. How much does the manufacturer promote the program? Do they advertise it on TV, radio or through other media outlets? Do they publicize it in the brochures? Is it mentioned on new vehicle documentation including owners’ manuals? Does the dealer post in in the building, including service areas? Are the sales and service staff trained on it? Do they really talk about it with customers? Is it mentioned on their website? Do they bring it up during new customer orientation? The more of these questions that are answered in the affirmative, the more likely you will see referral business.

How about the opportunities to promote it? Ask about advertising the certification on your promotional materials and website. Can you use the manufacturer’s logo? If so, with what stipulations? They vary from one manufacturer to another. Can you post it inside the shop? How about outside the shop? How about promoting it to insurers, particularly DRPs?

Ask about exclusivity. Some manufacturers wish to maintain a small group of shops, while others are expanding and thinking big. Some manufacturers, such as Mercedes-Benz, will tow a damaged vehicle free of charge to the nearest Certified Collision Center. Chrysler’s new program currently has more than 1,000 shops that are recognized or are in process. They hope to reach a point of having 1,500 shops, at which point they will provide “network support” (presumably training or technical assistance).

Many manufacturers provide free technical information, such as access to technical and/or parts websites, as part of the certification for the shop.

The application audit and inspection process
Many manufacturers utilize an outside source such as Assured Performance Network, Axalta (formerly Dupont Performance Coatings), or Verifacts to handle the application auditing and inspection process.

Assured Performance has introduced a joint-venture body shop “Certification Recognition Program” for several OEMs — Ford, Chrysler and GM — in addition to Enterprise, says Scott Biggs CEO with Assured Performance.

“Certification by Assured Performance follows a unique approach captured in the slogan, ‘Certified once, recognized by many.’  That means a shop is officially certified by Assured Performance and then recognized or certified by several OEMs and other consumer-facing organizations. This allows all participants to eliminate redundancies and avoid duplicate costs. We are also gaining economies of scale keeping the cost to shops at a fraction of what it would normally cost. The end result of this strategy is that everyone wins and a national network can be created that completely blankets the U.S,” he says.

The program helps shops to gain referrals from the OEM and add credibility to their marketing efforts.

 “As additional OEMs are added, shops will become automatically recognized by them for no additional certification costs,“ Biggs says. Although the company is only in the early stages of this OEM-based program, the potential benefits to a shop are “enormous,” he says.

“The value proposition for becoming certified is obvious.  And through the Assured Performance Certification approach, you don't just get one recognition and sign, you get several OEMs — all of which are leveraging one joint-effort program,” says Biggs.

The dealership relationship
As you may enter into a certification agreement, carefully define the relationship with the host dealership. (Or any area dealerships if the certification program doesn’t require a host.) Will your shop simply be the recommended certified shop in the area? Will there be more of a partnership? If so, define financial requirements such as parts discounts, any possible referral fees, prompt payment discounts, etc. Consider if the MSO can help promote the dealership in any way, such as website listings or shared marketing. Define services that each may provide and utilize, such as glass repair/replacement and Paintless Dent Repair (PDR). Consider the possibility of having an estimator spend time within the dealership to offer prompt and convenient estimating, pickup and delivery, or other services. What about the mechanical repairs on collision jobs? Does the dealership wish to have that work in their service department? If the MSO performs mechanical repairs, how will the relationship be defined so that there is no concern over competing with each other? Are you as a repairer interested in any of the dealership’s used car or other internal body work?

Secondary benefits
As an MSO, you may be able to utilize your size, strength and relationships to enhance the value of OEM certification. Perhaps some equipment can be utilized in multiple certification programs. Perhaps you utilize other shops to feed all of the manufacturer-specific work to a specific shop. Perhaps you can offer to purchase parts for many or all of your shops from a specific dealership to increase your bargaining strength.

Conclusions
While we’ve focused our attention on evaluating the requirements, costs and potential referral business resulting from OEM certifications to assist the MSO in considering the value, there is more to be considered. Obviously the numbers need to work to allow a reasonable payback for the investment. However, one must also consider the long term implications. These certifications may play out similar to DRPs, where it was much easier to get on board while the programs were being rolled out. After a level of capacity is reached, there may not be as many opportunities. In some cases, opportunities may already be limited.

Mike Anderson, industry expert, speaker, and consultant of Collision Advice.com, says, “It is my opinion that for shops in the future to THRIVE not just SURVIVE that they are going to have to give much more consideration to OEM training and tooling and equipment. In the past people have stated that they didn't fix the “High end German cars" so thus there was no need for them to invest in the training or equipment for Aluminum or other OEM training. Well, now we see Ford using Aluminum in the Ford F 150, Acura and Honda are utilizing more Aluminum and thus I think that even if a shop desires to be a DRP shop they are still going to have to send their technicians to OEM training to ensure they are repairing vehicles properly!!  With this said, I think the amount of money spent on training will need to be greatly considered when building budgets or acquiring new locations in regards to equipment improvements. OEM training is no longer going to be OPTIONAL it will be mandatory for thus that want to avoid the liability with not performing a proper repair.”

Also, as our technology changes and continues to be more sophisticated, there is reason to believe that the higher education and equipment requirements of many of the OEM certifications will be basic requirements to repair the vehicles of tomorrow. Communication and training direct from the manufacturer may increase in value. By getting on board soon, an MSO may be positioning themselves to immediately handle new vehicle requirements that the competition is unprepared for.

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