It looks like the new year ahead will be a great advancement for the Collision Repair Association (CRA). We are about to enter a new phase of expanding the national footprint of the Association with a totally revamped focus on service delivery for our members. It’s going to become a focused approach, with new staff appointed in Gauteng, the Cape province and KwaZulu-Natal. We will be applying one-on-one contact and increased shop visits for member support benefits.
The national increase in wages which was agreed by Numsa and the RMI with MIBCO is now promulgated and this means applying these as staff benefit and trust countered by at least equal offers from work providers. Then there is the frustration of dealing with our insurance process partners who simply don’t seem to understand the immense pressures of the new connected car in repair that is coming our way. Vehicles on South African roads are set to become ever more difficult to return to pre-accident condition. We’re clearly in a situation of more-of-the-same-won’t-do in collision repair on current charge out rates, in support of cost investment of new technology.
The negative inflationary trend
Current procurement offers from insurers have shown the trend towards negative inflationary tendencies which will promote lowering of standards and quality, in both the long and short term. The consumer under protection of legislation has the right of choice of service provider, treatment by provision of fair and factual process and also not subject to inconvenience.
Insurers are currently fixed on providing volume-based deals to a small number of repairers, with the promise of cost saving, but this is to the detriment of treating customers fairly and safely through standards. In a democracy, the right to repair should be provided to qualified and certified business owners and protect current employment on a larger scale.
Labour rates on offer barely cover the cost of wages and salaries with no recovery on cost of investment or overheads. Comparison to service charge out rates at dealers for simple services such as oil changes, command charge out rates four times in excess of what is offered.
The collision repair sector employs professional artisans who need to be compensated for their time in relation to their skill. Reduced replacement part mark-ups and rebate offers being negotiated are taking the food from the mouths of our body shops and we need to protect the interests of the broader spectrum – and not just a select few.
In conclusion, to win the battle is going to require unity in membership. To ensure proper actuarial profitability review with provision of viable commercial terms and procurement offers which can only happen if the sectors stands together.
The reluctance by business owners to commit to signing contracts bearing on commercial suicide is thus an important step in advancing these forums.
The CRA are committed to change and strategy planning in a place with relevant stakeholders from government departments etc to roll out enterprise and skills development initiatives.
These are currently focused on assistance to creating interim measures to support transformation, but not forgetting the strong and long standing existing businesses with track records on delivery via safety through standards.
The insurance industry continues to go in many directions at once and seem content to operate on price alone procurement policies. Their model seems to redeem negative acumen which is not conducive to required value and service provision.
It’s arguable as to how many of our short term visionaries will make it in the business long term in the South African market as they are in some cases losing clients based on experience and satisfaction after the first claim notification. In global market surveys it’s a business model that is proving to be unsustainable across many nations.
This, plus a direction of enterprise development funding to a selected few black empowerment initiatives has also become another diversion to the free enterprise system. In reality volume based procurement direction in the current market has disastrous levels of finished quality and customer CSI satisfaction with offers of quick settlement which are of unsustainable value due to middleman fees, etc.
These operators surrender a number of extra discounts to their work providers which often fail to meet their anticipated volume levels and also take considerably longer to settle their amounts outstanding. These market related interventions make the body shop repair future a very unlevel playing field.
MUTUAL AND FEDERAL DOCUMENT IS A BINDING CONTRACTThe launch nationally of the new service level agreement between CRA member collision repair centres got under way on December 9th last year. Arriving, quite who knows why, just one day before a national year end festive period shutdown. Mutual and Federal have placed considerable effort in to the Direct Repair Programme with a new set of commercial terms and conditions for body shops to adhere to.
Among the standard conditions are a reduction in general term mark ups to a level of just 23% and also the provision of a 2.5% settlement discount on all transactions.
The online link document on offer to repairers now replaces all previous service level agreements with Mutual and Federal – and the system was rolled out last last year in a national road show to the various regions. There is an inclusion for extra rebates which is coupled to volume of work output.
Our observations throughout the email looks like a proposal to be read and understood. It is in fact a full disclaimer document which is binding on the company who enter into this contract or service level agreement. Added to this is Mutual and Federal’s decision to target body shops in front of the national annual shut down in a possible bid to seduce panel shops to sign up early.
Whatever the reason for the Direct Repair Programme (DRP) launch we at CRA feel a great deal of non-transparent business is breaking cover after this DRP initiatives long research gestation period.
Before its recent launch it must now be said that we caution our members to not sign the DRP document until they have fully endorsed all the ramifications to a level of lower operating gross margins that the document lays out.
Approximately 70% of all South African accident repair is carried out by our members in good standing. Please enter into local discussions with fellow CRA top repair shops to ensure that the best possible outcome can be realised.