Important Articles every Auto Glass Shop
owner should read.
Foreword: This essay was written in 1994, during what looked like
"dark days" for the AGR industry. This is why it takes a "dark" view
of future developments. I am happy to be able to write today, in the
year 2000, that things are looking up for this industry. All sorts
of options now exist that were simply unavailable six years ago, such
as some new Independent Glass Association (IGA) programs and other
developments like the recent court decision on the State Farm
"aftermarket parts" case. So one can be optimistic that these
problems are being addressed, and - with the participation of those
with courage - should be resolved in the foreseeable future. It is
with no little relief that I can say that now! - FBJ
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Auto Glass Networks: `Efficiency' or `Market Power'? [Top]
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You've all heard the arguments. The insurance companies say that
their auto glass networks are efficient, that they allow a linkage
of quality standards with lower prices to the consumer.
(Referrals save marketing costs as well.) In addition, networks
serve as a means of fulfilling claims and ordering glass through EDI
systems technology. Sounds like a pretty good deal all round! This
is what `efficiency' means: everyone gains from efficient arrangements
Yet the voices of independent providers are raised in strong
opposition. Are these just the gripes of failing companies faced
with strong competition? The process of institutional change is
never easy or painless. "You can't make an omelet without breaking
eggs." Firms going under rarely "go gently into that good night."
They always squawk and complain, and often ask government to bail
them out. Is that the story here?
Most economists take it for granted that organizational change is
progressive, that markets evolve from less efficient to more
efficient arrangements. From this perspective, the answer is simple.
Progress -- or shifting market demand -- displaces inefficient
providers. Let them bitch and moan; this is part of a growing
economy. As Stewart Brand, formerly of the Whole Earth Catalog and
now a modern technology freak, remarked: "Once a new techno-logy
rolls over you, if you're not part of the steamroller, you're part
of the road." Technology is power. Networks are seen as efficient.
Others argue that autoglass networks serve as a means for exploiting
consumers and shops through insurers' control over claims.
Profitability is not efficiency; anticompetitive actions may enhance
earnings but are not efficient. Taking profits at the expense of
consumers or rivals is anticompetitive, and against antitrust law.
Are networks efficient? Or are they a means to abuse market power?
Can we answer this question?
The `market power' argument -- contrasted to an `efficiency' argument
-- puts a different spin on the facts. Here, insurers are seizing
control, by steering claimants to cheaper repairs while exploiting
their trust. Autoglass shops must `dance or die.' Allstate's deal
with Globe's subsidiary, U.S.A. Glass (the original autoglass network),
involved a five-year plan to direct 100 percent of All-state's
autoglass work into Globe-owned shops. Its network of `independent'
providers was planned only for that transition! States have foiled
this scheme somewhat, through anti-steering restrictions, but the
takeover still advances, flying the flag of networks' `efficiency.'
Efficiency' must be advantageous to all market participants:
sellers, buyers, insurers, etc. But systems can be profitable for
some and not be efficient for all. Taking advantage of others
through an abuse of market power can be enriching if firms get away
with it (like any criminal act)! Private antitrust suits award
treble damages to successful litigants just to prevent such
inefficient, anticompeti-tive ventures. Public agencies are not
equipped -- financially or with the expertise -- to carry the total
burden of enforcing antitrust laws.
EconoLogistics
But how would a hypothetical lawsuit prove `market power' over
`efficiency'? There are at least two issues on which such a case
might be won. The first and foremost is safety. An `efficiency'
argument has to rest on a claim that networks enhance safety and
quality for the consumer. If autoglass safety is being reduced, due
to a price/profit squeeze on suppliers, a `market power' interpretation
of networks is supported.
Another issue is price. The `efficiency' argument also claims that
savings are passed to consumers. The `market power' argument says
that networks serve as a means to mark up prices to the consumer,
thereby increasing insurers' profits. Did you know that auto premiums
outpaced the rise in auto repair costs by over 160 percent between
1982 and 1992? They even outstripped medical costs by almost 20
percent, and healthcare is now a national issue! What is going on?
Are autoglass networks efficient? Or are they anticompetitive?
Safety is either improved or reduced due to these network
arrangements. Auto insurance rates are either increased or decreased
with this system. Do we know? Have we tried to find out? You are
the people out there in the industry, watching these market effects.
Are you becoming "part of the road," or will you retake control?
There are people ready to help, but they need data that you can
provide if you decide to act. Otherwise, winter is coming, and a
coat of macadam will not keep you warm.
© 1994, Frederic B. Jennings, Jr., Ph.D., EconoLogistics
55 Market Street, Suite #1
Ipswich, Massachusetts 01938
1-800-775-4721
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Written by Donovan Trana [Top]
of Express Autoglass, Inc.
Diffusing the Price Quoting Issue
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Many times an insurance customer will ask for the price of auto glass
service work. Often it's difficult to honestly do this due to
constant changes in pricing or even just simply not knowing the total
costs of the job until the work is completed. CSR's know that the
insurance company will only pay what they want to pay, but the
customer does not always understand this. He/She feels they must
"shop around" for the best price to "save the insurance company money" when,
in reality, the price is usually established no matter what quotes
the consumer receives. Unfortunately the downside to this situation
is that the best quality glass shop looses the job and the consumer
winds up unknowingly with an inferior part and installation. Here's
one idea to help you get control of the situation:
Customer: How much is a windshield for a 1998 Ford Taurus?
CSR: "Mr. Jones, auto glass is priced through the insurance company
claims departments and their various billing systems. What we will
do is have our Express Claims Service contact the claims department
directly. They will get the pricing information plus all the other
claims processing details for us. Then, in turn, we will send the
claim directly to your insurance company and they will route the
claim through the comprehensive portion of your policy. . . that way
you'll have no out of pocket expense except for your insurance
deductible, should there be any. . . "
(At this point, continue with the process of scheduling or explaining
the benefits and service you provide).
If they continue to press you for a price, say:
CSR: "Mr. Jones, if you're considering paying for the windshield out
of pocket, I could give you a price for immediate payment, if your
paying with cash, check, or credit card. It'll be a lot more
complicated for you that way. I recommend that you have us run it
through your insurance for you".
Will this work every time? Probably not, but it does change the
issue and could have the potential of eliminating a lost job due to
confusion on both the part of the CSR and the customer.
If you do wind up giving a "price for immediate payment" stamp the
invoice with a bold stamp that says, "ESTIMATE - PRICE FOR IMMEDIATE
PAYMENT-CASH, CHECK, OR CREDIT CARD".
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Written by Carolyn Rack [Top]
from Beyond Parts and Equipment.
Some Advice from Harmon: Just Say No
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As I read internet posts on Safelite's and Carlite's contracts and on
Glass America, I'm reminded of the Indiana Glass Association Expo's
Network Roundtable November 12, 1999. At it, Harmon's Ray Murray said
something all independents should heed: “You folks need to practice
saying no.”
The insurers, one roundtable participant said, had congratulated
themselves on not having to “control” prices at all. Shops’ voluntary
price cutting had done to themselves everything insurers wanted and
more.
You, and you alone, control your business. Many of your peers refuse to
bill through networks. They deal directly with consumers and bill
insurers directly, including State Farm.
Yes, some shops paid a price initially for doing this. One shop that
refused to sign State Farm’s O&A watched all his State Farm-insured
customers vanish for nearly a year due to LYNX’s steering . . . but he
had a systematic plan for getting his business back. He collected
affidavits from his customers on the steering. He began a vigorous
advertising campaign aimed at consumer education, He also visited
insurance agents with his state’s anti-steering law in hand, pointing
out their liability under the law for requiring his customers to use
LYNX (Safelite, Harmon, etc.). He and other owners like him have scripts
they use; they stuck to their guns; and their customers are no longer
being steered away.
It's scary, and you need to prepare systematically for refusing to join
a network or dropping out of one, but if you don't stand up for yourself
and just say no to unreasonable terms, who else will?
Don't complain about needing a profit. That's your problem, not an
insurer’s or a network’s. (Do you worry about a restaurant’s profit when
deciding how much to pay for dinner?) You can tell insurers/networks, or
Visteon they're not paying enough for you to assume the installation
liability they want. You can explain safety and OEM-approved glass to
consumers. You can use educational advertising.
If you keep accepting cuts, cuts, cuts, and installing anyway, you may
wind up where many collision repair shops now are: buying back cars
totaled by their failed efforts to repair vehicles within insurers'
inadequate allowances.
An Iowa windshield popped out over the Thanksgiving holiday due to an
accident. If it was repaired prior, you can bet insurers won't pay. The
shop that did the repair will.
Efficiency and cost-cutting are fine . . . as long as they don't cut
quality and safety. The courts have ruled in favor of quality (see the
story on the facing page); the law of this land is no longer all about
quantity.
Please, look critically at the offers you're made. If you can't
profitably install to OE specs and hold the job until curing is done for
the price you're offered, follow Ray Murray's advice: "Just say no."
If you don't, networks/insurers will keep pushing until your receivables
and cash flow are so far behind your payables they'll never catch up.
You folks matter to us. When we do address corrections this year, we
average nearly 11% loss to failed businesses, up from 4% last year.
We’d really rather not lose any more of you!
Articles in the January 2000 issue may be reprinted only with Beyond
Parts & Equipment's written permission, and only with this full notice
attached and printed with the article: Reprinted with permission of
Beyond Parts & Equipment, January 2000, © 2000, Millennium Publications,
Inc. Other use or publication is strictly prohibited.
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Written by Carolyn Rack [Top]
from Beyond Parts and Equipment.
City of Cedar Rapids (Ia.) Terminates Safelite Contract
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In a letter dated January 4, 2000, Cedar Rapids Purchasing Agent Susan Blair wrote Dennis Riffle of Safelite Auto Glass in
Des Moines, Iowa:
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Service Response Time
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Dear Dennis,
The letter is to inform you of another complaint of nonresponsiveness from Safelite Auto Glass. On two occasions in
December, the Street Department had to call another vendor for glass repair because they were unable to reach
someone at Safelite to place their order. On one occasion, the phone at Safelite was not answered at all. The other
time the city employee was subjected to twenty minutes of transfers from person to person until he was finally told
that his point of contact was now Mark Walter who resides in Iowa City. He was given Mr. Walter's cell and home
numbers and instructed to contact him personally in the future. Both of these situations are unacceptable.
The bid states that orders for items are delivered, installed and complete within one (1) business day after receipt of
order (page 5 of 15). However, the response time listed on your bid states that all orders received by 2 PM would be
filled the same day; after 2 PM the next day. That is one of the reasons Safelite was awarded this bid. As you will
recall, our prior conversations have all been concerned with response time. It always takes a phone call to you to get
action/service that even comes close to the stated response time listed in your bid. This should not be the case.
The City of Cedar Rapids awarded this contract to Safelite Auto Glass in good faith based upon your assurance that
city departments would be adequately serviced by a local representative. It does not appear that this is the case.
Should one more complaint be received by this department for excessive response time or no response at all, this
contract will be terminated for cause.
Sincerely,
Susan Blair, Purchasing Agent
When contacted for comment on February 2, 2000, Safelite spokesperson Dee Uttermohlen said:
The City of Cedar Rapids had asked for several specific items as part of their service contract. One was the hiring of a
local Safelite installer. We met that request as quickly as possible. They also wanted an 800 number to call for service.
They used the 800 number that is published in our yellow pages advertising, which is better equipped to handle
consumer calls as opposed to commercial calls. This caused a delay in service to this customer.
We are sorry we had difficulty meeting the service requirements of the city of Cedar Rapids, and will certainly do
everything that we can to re-prove ourselves to this important customer.
When BP&E spoke with Purchasing Agent Blair on February 3 to inquire whether the problem had been resolved, she said the
contract had been terminated and awarded instead to the next low bidder, a local service provider.
The termination letter, also from Ms. Blair, dated February 1 and sent by fax that day to Mr. Riffle:
This letter is to inform you that the above referenced contract between Safelite Auto Glass and the City of Cedar
Rapids will be terminated for cause effective February 2, 2000 at 5 PM.
One was informed today of another complaint of slow response time from our Street Department. They placed a call for
glass replacement on January 6th and were told the glass would not be available until January 10th. On the 10th they
received a call at noon stating the ordered glass was broken and they would try to be there on Tuesday, January 11th.
The glass was finally delivered on Wednesday, January 12th. This service is unacceptable. Safelite Auto Glass has
failed to satisfactorily perform services pursuant to the contract signed on September 9, 1999.
We have allowed one day to let you deliver any outstanding orders you may have with the City. We are sending this
letter by FAX and also through the U.S. Mail. When you receive this FAX, please sign and return by FAX as
acknowledgement.
A DATE SOURCE
Shops take note: all data like this involving city, county, state, or federal governments is public. That goes for glass and vehicle
repair contracts. If you want to know what Safelite, Harmon, First Priority Group or other providers did to win a contract, visit
the appropriate purchasing agent's offices. We acquired not just these letters but the bid submittal sheet as well. Safelite had
bid a 64% discount on windshields, no kits, and no labor charge.
We also learned that Cedar Rapids requires glass equal to or better than original equipment (higher standards than
NHTSA requires). If you lose a contract bid and have reason to believe the winner isn't using OE glass, you might want to
have a friendly lunch with someone in purchasing to discuss the matter since restoring OE preloss condition could prevent
employee lawsuits following a second accident.
[This article have been reviewed by our corporate attorney. It may be reprinted only with permission and this full notice
attached and printed with the article: Reprinted with permission of Beyond Parts & Equipment, March 2000, © 2000,
Millennium Publications, Inc. Other use or publication of this version is strictly prohibited.]
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