It could be said that in the last two years the body shop collision repair business has witnessed many new and varied unique challenges. Quite clearly by now any entrepreneur with half a brain can realise that the wave of challenges on the road to profitability and ultimate survival has only just begun in this state of play when many companies are struggling to recover from disruptions caused by the effect of the lockdowns and freedom of movement, increasing pay hikes, above inflation increases of resources and the work in progress dynamic due to draconian destruction of basic rewards for survival.
With all this, sadly our process partners – the insurers – completely dismiss our chronic skills shortage and strategy on green parts as an example in the body shop business which, the CRA feel, will ultimately deliver potentially devastating results for the wellbeing of the accident repair industry.
The trade is still in a state of not being able to control our all-important labour charge-out rate for sustainable continuity because it is seen as being an anti-competitive practice if we attempt conversation on the matter. This remains a point of major contention. The ongoing divide and rule policy of our major motor book insurers continues seemingly unabated in a state-of-play. They, through various autonomies employed by themselves across the small percentage of South Africa’s insured drivers, have developed their own rates with little or no input from trade organisations.
They have developed various levels of labour rate allowances, possibly through collusion, and introduced market rates as an offer on repair work. Labour rates are set by Insurers without any supply of methodology to support the amount. With respect we have no ability to approach an Insurer and tell the agent how much (premium) we want to pay for a policy. So then, how have they the right to come to our facility and decree how much they are going to pay to repair a vehicle in line with road worthiness and accredited service provision?
The bottom line is that we have seen an average flat rate increase in the last 14 years bearing on negative inflation and leaving the motor body repairer out of pocket. Coupled to this Insurers are hell bent on pushing for implementation of reduced mark-up allowances and forcing price fixing through singular supply chain operators.
It is quite clear with all this top-down monetary control that a degree of collusion seems to be permissible for our major insurance companies while we remain in a state of non-compliance within the collision repair owner-operator side of the business. It’s a case of a complete double-standard on devising an equitable form of remuneration where body shops often as not only get paid around half of the charge that a mechanical business is able to enjoy.
A sad fact is that in the last six months or so little or no communication between insurers and repair companies and representative bodies has taken place to engage on the top-to-bottom rates for insurance recommended repairers.
This labour rate part of the business looks to remain unaffected with drastic implications for shops who already have major cash flow problems. A complex issue of substantial replacement parts and glass fitting delays have compounded the late delivery of client’s vehicles which in turn caused a degree of reputational damage for our major repair centres.
This industry has a vital need to come together with current business challenges to address some of the long-term collateral damage that now seems to be heading our way. In a way it seems not to be quite irreversible, so the time is ripe for all the relevant stake keyholders and key players to act. We must address the future sustainability of the collision repair sector where insured vehicles are returned to pre-accident levels.
It’s a long overdue fact that we need a new view on the reality of the bigger picture when looking at things like standards, service performance, labour rates, networks and the ongoing of duplication of costs. Understanding just where we will end up if the industry remains under-skilled and has an under-rewarded skilled workforce incapable of meeting all of tomorrow’s high expectations is a worry – to put it mildly.
For the industry to survive and thrive we need to become motivated about our own business cause and stop being complacent – with the exception of a few astute business people who keep thinking of the long-term future. We tend to hear of closure with shock and wonder what the reason might be – which is all too often – and exit through choice or face bankruptcy.
The only method to ensure industry change is to stand united. The knight in shining armour that you are waiting for is not coming – he’s still toying about in a fairy tale somewhere. We, as a collective, now need – more than ever before – to realise change will occur only if we accept the challenge.
By Steve Kessell