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Money and Operators Behavior

The collision repair industry for many years had a reputation of having more than its share of scruffy, low skilled and unscrupulous operators. The bad ones looked the part, and the consumer stood some chance of avoiding these based on appearance. Now there is a different owner of potential concern. These new players in the industry do not give themselves away by outward scruffiness, but they may be just as dangerous.

At the same time that the industry is grappling with unprecedented technological change there is another significant change with a tremendous amount of outside money coming into the industry. The collision repair industry is now seen by private equity firms as an opportunity, made more attractive by the lack of regulation. To these new operators the better repair is the one that generates the most profit. In many cases this may be the safer repair, but if this safe repair is not mandatory and does not generate more profit then it will not be the first objective.

A recent trend of very large multi shop operators is contractual agreements with insurance companies (more in America than Canada to this point) that reward performance through rebates for good performance or penalties for poor performance, with good being lower costs for the insurance company and poor being higher costs.  It is seldom that a good repair will result in a lower cost than a ‘good enough’ repair. In an unregulated industry good enough is a very vague standard.

The front end of the operation will look bright and clean, the advertising and corporate image will be good, but if no one is seriously verifying the integrity and correctness of the repair then ‘good enough’ becomes the core of the business model.

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