Sept - Oct 2000: Industry Notes

Industry Notes

MTA calls for action on NRMA
Complaints by repairers to the Australian Competition & Consumer Commission (ACCC) about several insurers has led MTA NSW, with the support of the MTAA, to take a case to the ACCC against NRMA Insurance, citing unconscionable conduct. "Basically there has been a move to reduce margins and returns to body repairers on the allowance to parts purchased," said Geoff Gardiner, deputy executive director of the MTAA. "The justification has been the implementation of the GST amid spurious claims about reduced costs not being passed on. The NRMA is saying if the alleged reduced costs are not being passed on from dealers to repairers that's not their problem. As far as we are concerned that represents price exploitation and we believe we have a strong case," he added.

"The NRMA OEM parts pricing policy effectively reduces the margin to repairers by about four percentage points," said Jim Gibbons, executive director of MTA NSW. "I have been told by a senior member of the NRMA that the company is targeting repairers in order that they are forced to put pressure on dealers and they in turn will put pressure on manufacturers to cut margins and therefore save insurers money. We believe it is intrinsically wrong that a very large company should use its market power to target the weakest link in the supply chain. Let them try doing it to Ford or GM and see whether they get away with it," he added.

The NRMA strongly denies any of its management told Gibbons that the company's policy was to put pressure on repairers. John Bowman, national parts supply manager said: "Repairers ought to be doing the best they can for themselves in terms of obtaining the best discount structures from their dealerships, but this is something we would say to anyone."

Gibbons met with NRMA chairman Nicholas Whitlam and management in early July to discuss the insurance giant's pricing policy. A subsequent meeting three days later, minus Whitlam, on 12 July saw the NRMA unequivocally reject the MTA's stance and MTA NSW lodged a complaint with the ACCC on 13 July. Many other insurance companies have followed NRMA's example and have refused to pay a margin on OEM parts, but 20 per cent of work providers, according to the MTA, including AAMI, have agreed to pay the MTA's suggested four percentage points margin.

In defence of the NRMA's position, Bowman said the decision to lower the company's maximum payment for parts from list price plus 17.5 per cent to list plus 10 per cent (GST) represented "the application of the new tax system in the most appropriate way".

"This decision is based on looking at the impact of the removal of the wholesale tax and creating a flow-through of any savings onto the consumer," he said. "If NRMA Insurance has to pay more than list price plus 10 per cent on parts, insurance premiums may have to rise as the current premiums have been set on the basis that it receives the full savings in parts which should arise from the introduction of the New Tax System. The demands being made by the MTAA would, if accepted by NRMA Insurance, add nearly $14 million per year to the cost of repairs, adding nearly $10 to the average individual insurance premium."

Bowman said the NRMA has received a briefing from the ACCC and the Commission had reserved their position until further investigation was undertaken, however, he said he believes the ACCC does not at this stage think the NRMA has done anything wrong and at the time of going to press, was confident the company would not be sanctioned over its actions.

Gibbons disagreed: "We lodged a complaint in early July and it is still under consideration. In a letter from the ACCC they state: The ACCC views such allegations seriously and has commenced an investigation.
"The NRMA is using alleged Government policy that says nobody should profit from GST changes but all repairers want is to maintain their dollar margin."

Bowman replied: "The issue is more that under the GST no-one should profit and if we gave list plus four per cent plus GST, some repairers would profit because of their discount structures with dealerships."

Many repairers have let the NRMA know that they are submitting invoices with no margin on OEM parts under duress and reserve the right of redress should the conduct of the NRMA be deemed unconscionable. "It is very disappointing that the NRMA has been as obdurate as they have been," said Gardiner. Penalties able to be meted out by the ACCC to companies found guilty of price exploitation range up to $10 million.

The NRMA has had no further meetings with Jim Gibbons after the complaint was lodged, and Bowman admitted the situation has gone past the dialogue stage.

The MTA staged an industry rally in Sydney Town Hall on Monday 21 August to protest against the NRMA's actions, including refusing the parts margin, cutting labour charges to $30.90 and instigating a starter motor and alternator roadside service. "The only way to tackle the NRMA is in a public forum. That's all we've got," said Gibbons. Upwards of 2000 people attended the rally and many expressed anger at the way the NRMA is choosing to deal with the motor industry.

Insurers, paint suppliers cut costs
An innovative partnership between an insurance company and paint suppliers in the UK aimed at improving bodyshop profitability will not be replicated in Australia. A partnership between motor insurer Allianz Cornhill, ICI Autocolor and PPG in the UK hopes to increase repairer margins while simultaneously cutting the cost to the insurer.

Under the agreement, the paint brands are offering Allianz Cornhill-approved bodyshops a guaranteed margin on each job. The margin improvement is hoped to be gained through IT-based business support systems and bodyshop management techniques carried out with the support of the paint companies. In turn, PPG and ICI will reduce, by an agreed amount, the materials cost charged to the insurer.

The deal was launched on 1 August and is forecast to be the first of many partnerships between insurers, suppliers and bodyshops in the UK and overseas. Phil Brailey, Allianz Cornhill's approved repairer network manager said, "As the industry becomes increasingly competitive and cost-driven, we have to be more imaginative in the ways that we create and develop partnerships for mutual benefit. This is a partnership between market leaders -- I am sure that others will follow our lead in the industry."

"This partnership meets two key business objectives -- driving up profitability by driving out waste and inefficiency," said Jane Grunseid, market manager for ICI Autocolor in the UK.

The benefits hoped to be gained by the deal will come through a close working partnership between the paint manufacturers and bodyshops. Reduced inventory and materials costs are two of the aims of the initiative. "[This agreement] shows the importance of key players in different parts of the supply chain working together to tackle serious issues like the need for cost reduction," said Kevin Nineham, approvals manager for PPG UK.

Whether other alliances will form in response to this initiative is a moot point, as market forces are different in each country, and PPG and Allianz are not planning to join forces in Australia. "There is no such arrangement locally, this arrangement is something very specific to the parties involved in the UK, we have no proposals to look at anything of the same type here," said Bill Matthews, marketing manager for PPG Australia. "We have in the past been involved with the RACV and the NRMA with their smash repair centres but this [the UK alliance] is a fairly unique situation," he explained.

Infomedia online in UK, Germany
Global parts cataloguer Infomedia is launching a pilot internet parts system in the UK and Germany this month using half a dozen dealers in each country. Richard Graham, chairman and CEO said if the pilot is successful, Australia will see a roll-out in early 2001, followed by entry into the US market a few months later.

Infomedia's system, under the Microcat brand, will set up local dealers as vendors and allow free access to all end-users. "There is going to be a change, and it will be different to what most people think," said Graham. "The internet will allow local guys to be better stocked, and provide a better service to repair shops who in turn will be able to turn around their service faster."

Graham believes the online parts exchange models in the US will soon have their equivalent here but he claims these 'aggregator' models will not be able to serve the market as well as Infomedia's system which utilises the 'localisation' of small independent dealerships. "We want to support the neighbourhood dealer who I believe will be better able to provide fast service than some big warehouse in the middle of nowhere."

In a related development, the initial public offer of Infomedia, which closed early on 4 August, was oversubscribed, said Graham. A full listing on the Australian Stock Exchange on 16 August saw the company's shares open at $1.71 and close at $1.90. Fully underwritten by BNP Paribas Equities (Australia), the $79 million offer received a strong response from the market said Andrew Moffat, BNP Paribas Equities director. "Infomedia has successfully positioned itself as a leading supplier of EPCs [electronic parts catalogues] to the automotive industry worldwide and has a demonstrated history of strong growth."

The prospectus constituted an offer of 79 million shares at $1.00 per share. It comprised new and existing shares representing 25 per cent of Infomedia's post-float capital base, and represented 20 times Infomedia's forecast 2001 net profit after tax of $15.9 million.

The float values the company at $600 million and makes Graham $220 million richer thanks to his 37 per cent stake. Non-executive director Myer Herszberg holds a 27 per cent stake in the company.

Happy workers at AAMI
AAMI has been named as the fifth best employer in Australia (with more than 1000 employees) by management consultancy Hewitt Associates. The company, based in Melbourne, has 1545 employees who each receive on average, 152 hours of training per year. AAMI has the highest percentage of female employees (65 per cent) in Hewitt's top 25 employers list and the longest-serving CEO.

The insurance group is currently looking to recruit staff for its new customer service centre in Haberfield, Sydney.

ERS acquires Plaza
ERS Australia has announced the June acquisition of Melbourne-based Plaza Chemicals. ERS is a principal recycler and supplier of industrial solvents in Australasia and Asia. The company markets a range of spray gun cleaners and operates a waste paint and thinners removal service. Plaza Chemicals manufactures and supplies a range of chemical cleaning products for spray booths in panel shops. The company also operates a maintenance and service division for booth breakdowns and regular maintenance.

The joining of these two firms will allow customers of both to deal with one entity for spray booth cleaning and servicing, spray gun cleaning and waste removal said ERS senior product manager Peter Lee. ERS plans to progressively roll out Plaza's products and services under the ERS brand throughout its national branch network. Plaza currently services Victoria but plans to expand into Sydney and Brisbane.

Hazardous substances
New regulations concerning the storage and handling of hazardous substances came into effect in Victoria on 1 June. Random inspections of bodyshops by the Victorian WorkCover Authority as part of the new regulations commenced at the beginning of September.

A requirement of the new code is for all employers to obtain comprehensive information on all hazardous substances in their working environments. Manufacturers and distributors of these substances must provide customers with a Material Safety Data Sheet (MSDS) on request. The MSDS will give information on exposure prevention and control, health effects and First Aid.

Glasurit launches colour course
Glasurit has launched a new series of colour training courses designed to improve colour exactness and boost workshop profitability. The courses cover all aspects of colour and colour matching, including the use of Glasurit's Color-Profi and ARC (Australian Reference Colour Chip System).

Each course will cover health and safety in the workshop, colour standards in OEM, colour tools and retrieval, spraying techniques and colorimetry -- the effects of light and colour matching. "Apart from a close look at the Profi system, participants will also be given a better understanding of the basic principles of colour theory," said Glasurit technical manager Jamie Panter. "We will also critically review the OEM process and look at the technology and reasons for colour variation within the industry and what we can do to repair it," he said.

The courses will run nationally every two to three months and will be conducted in state training venues in New South Wales, Queensland, Victoria and Western Australia. Contact BASF Wattyl Coatings (tel: 1800 010 010) for more information.

APRAA website aims for growth
The website of the Automotive Parts Recyclers Association of Australia at www.apraa.com has been operational for about three months and contains between 20 and 40 vendors, said Tracey Szepessy, national secretary. The association hopes to have at least half its 330 members online by the end of the year, with the other half joining the initiative next year.

Dealing only in recycled parts, the site allows users to send a parts request online to all APRAA members in the scheme. The vendor sends a confirmation back to the request, which speeds up the search and purchase chain.

Parkland to distribute DuPont in WA
Effective from 30 September, 2000 and until further notice, Parkland Mazda will be the distributor of DuPont Refinish products for the WA region. Parkland takes over the distributorship from Shacks Motors.

Parkland Mazda has been a distributor of DuPont Refinish products for four years. The company has a dedicated team of nine staff in its refinish department with three technical reps who service bodyshops in the region. According to Parkland, the company is expanding its reach in the region.

"We've decided to expand our team of technical reps to five and are currently in the process of looking for two more," said Parkland director Bruce Stocker.

Parkland has recently invested in a ChromaVision unit, which allows the refinish team to provide accurate colour information and increase the company's support to its customer base.

3M Respirator Service Centre Opens
3M has opened a new Respirator Service Centre at the 3M St Marys site in the Western suburbs of Sydney. The facility provides users and owners of 3M Positive Pressure Respirators with an opportunity to have their systems maintained or repaired by trained 3M staff.

The largest facility of its kind in Australia, the centre offers repairs and programmed maintenance for 3M Positive Pressure Respirators and systems, including battery analysis. It also plans to play a large role in servicing, developing, warehousing, assembling and analysing product issues in the field.

"The Respirator Service Centre is a new addition to the technical support services we offer our customers," said Glenn Baxter, 3M product manager for Positive Pressure Systems. "The Innovation Centre situated next door is the leader in the field as a facility offering 3M customers the opportunity to see how products are used or applied. This centre also houses our laboratories, test facilities and technical support staff.

"We have consolidated and relocated our Brookvale warehouse and service centre, creating a total servicing approach for our customers' needs.

"At the new centre, we have the advice of 3M's OH & ES laboratory and technical staff readily available for assistance in complex issues, alternatively we can obtain responses from 3M's international resource pool," he said.

Car Bench scores more orders
Melbourne-based crash repair shop Marque Motor Body Repairs took delivery of its first Marlin Car Bench alignment system in 1985 from Tony Rugolo at Prinz Australia. Recently the Mercedes-approved shop purchased its latest Car Bench machines -- three Marlin scissor-lifting systems. The Marlins replace the flat rack floor system at Marque and have the flexibility of being easily moved to any car repair in the workshop.

Marque has plans to install two four-post Octopus systems in addition to the new Car Bench systems and Marque director Kevin Robinson said he uses the Marlin brand not only because it is the best available, but because it is Mercedes-approved.

ITD morphs into Tyres4U
Australia's largest privately-owned tyre distributor, Independent Tyre Distributors (ITD) has announced a name change to Tyres4U.

The name change encompasses all levels of the business, including a rapidly-growing internet presence which the company aims to develop into an e-commerce solution for the tyre industry.

"The primary reason for the change was to give us a more recognizable name, not only within the tyre industry but also with consumers," said Tyres4U chief executive Les De Celis. "We have already set up a considerable number of customers with their own business-to-consumer (B2C) e-commerce solution. They have the added advantage that they can also conduct business-to-business (B2B) transactions."

Research on behalf of the company has shown that 36 per cent of tyre outlets in Australia are already connected to the internet, 36 per cent have indicated they would place orders over the internet and 21 per cent have their own dedicated web pages. "Our strategy acknowledges that consumers and resellers are changing the way they do things," said De Celis.

The company website is www.tyres4u.com.au

No agencies, rules ATO
The Australian Tax Office (ATO) has issued a ruling on the stance taken by the NRMA and several other insurers on tax invoices for excess payments. The NRMA stated that repairers should issue tax invoices to the insurer for the full cost of the repair even if an excess payment was paid by the insured, despite the fact that a separate tax invoice for the excess would be required if the insured party was GST-registered. This made the repairer a de facto agent of the insurer.

The ATO response to the MTA states that there is no agency agreement, either express or implied, between repairers and insurers. The MTA is advising its members to issue tax invoices net of excess payments. A separate tax invoice should be issued to the insured for the amount of the excess if required.

Norton expands
Norton, the world's leading abrasive products manufacturer has opened a new dedicated Queensland warehouse and distribution facility in the Brisbane suburb of Archerfield. Max Mairleitner, national sales manager said the expansion was necessary for the company to maintain service levels. "Our established network of local representatives combined with our new Archerfield complex will give Queensland customers localised service and reliability of supply that only bulk warehousing can provide," he said.

TAFE Health & Safety
Mount Druitt TAFE college is the first college in NSW to present an award for Occupational Health & Safety. The award was won by student David Summerlad who is employed as an apprentice autobody repairer. This inaugural award is part of college policy to encourage students to have a greater awareness of safety at TAFE and in the workplace.

Another chance to win a car from Tenneco goes begging this month -- a purchase of new Monroe shock absorbers between 1 September and 30 November 2000 will gain entry into a prize draw to win an SS Holden Commodore, the street version of the Monroe Safety Car used in the current V8 SuperCars Shell Championships.