Life outside the DRP model
Denver—Even before Rickenbaugh Automotive Group distributed an open letter in October committing to OEM parts and repair procedures, it had begun transitioning away from DRPs in favor of OEM certification programs, procedures, and parts.
“From the beginning of 2018 to the end of the year, we started with six DRPs and ended with two,” said Collision Center Manager Christopher Hudson, who credits his team of 48 staff members with the shop’s success. “And we grew our business by $1.1 million in 2018 — and we’re doing it right. There is life outside the DRP model.”
The collision center repairs about 300 cars a month, with an average R.O. of more than $3,000. One of the DRP agreements, with Geico, was worth $4 million a year.
“But our profitability with Geico was abyssmal. So we were working very hard doing a lot of numbers for them for not a whole lot of money. It looked great from a gross sales perspective, but from a net perspective, it didn’t look so great.”
The remaining DRPs, State Farm and Chubb, have agreed to the shop’s insistence on OEM repair procedures and parts.
Paradigm shift pushes OEM processes and parts
The October letter, to which Hudson refers as “The Manifesto,” was written by Nick Pacifico, general manager and vice president of Rickenbaugh Automotive Group, with Cadillac and Volvo dealerships in Denver and an Infiniti dealership in Dacono, with input from Hudson. Pacifico has the unusual practical experience of having worked in the collision center for three years, including as an estimator, Hudson said, as part of a decade spent working in each department to fully understand operations.
“He understands where the collision industry is going,” Hudson said. “We are in the middle of a paradigm shift, and a lot of people don’t realize that.”
In the letter, Pacifico explained the dealership met with its garagekeepers insurance company to discuss liability for collision repairs following the $42 million court decision of the John Eagle Collision Center case, which found that OEM repair procedures were not followed.
The insurer explained that, “should there be an incident and we were found to have not followed and documented the OEM repair procedures, they could deny coverage,” he wrote in the letter, and that because of that concern, all Rickenbaugh businesses will follow OEM repair procedures for all makes.
“Please remember that we are in the business of saving lives, not cutting costs,” he continued. “If your company will not comply with the recommended and required OEM repair procedures, we will not be able to fix the vehicle.”
The collision center had OEM certifications for its franchise nameplates when Hudson took over operations in December 2016, and it now has nine: FCA, Ford, GM (including the aluminum CT6), Hyundai, Kia, Nissan, Subaru, Tesla, and Volvo.
The shop’s new policy is not without friction, Hudson noted, especially for first-party claims.
“I don’t want to create enemies. I just want to repair the car correctly,” Hudson said, adding that the shop explains to the customer why OEM procedures are important, including for proper ADAS functionality.
“We educate our customers up front that if they have a particular issue with their insurance carrier, and the carrier says they don’t want to fix it the way Subaru wants to fix it or the way Volvo wants to fix it, they could be on the hook for additional charges.”
At the moment, though, “nine times out of 10,” the collision center pays the difference in, say, an aftermarket vs. OEM cover.
“Our vision is as a customer service concierge,” he said, “and not to be intrusive to the guest. It has nothing to do with profit; it’s about doing the right thing. Nick is always about, “Do the right thing, and people will come back.”
Interest builds for statewide collision association
As news of the “Manifesto” spread, Hudson said he’s heard from a number of “OEM repair-specific” collision repair shops interested in forming a statewide auto body repair association. He’s now spearheading the effort, and about a dozen shops were represented at the first meeting, at the end of 2018.
“We have been talking to prominent dealerships and strong independent OEM-certified shops that are doing the right thing.” He said in contrast to some states with robust collision repair associations, “we’ve talked to the director of the DOI quite a bit, and there’s no law in Colorado that says you have to fix a car correctly.”
He pointed to a 2019 Volvo XC90 SUV in the shop as an example of an unsafe repair. It was first brought to the dealership’s service department by a rental car company with the complaint of a hatch not opening and closing properly. Once the service department removed the interior panels to diagnose the problem, it discovered a body shop had glued on the quarter panel instead of spot-welding it; melted parts of the seat belt and pretensioner; set the wiring harness on fire; and burned off the retention strap for the side curtain airbag, tucking it back up with duct tape.
“And they hid that from the customer. That’s a local shop right now in 2019 that fixed that car, and it’s not illegal. I have a wife and kids. What if we had rented that car?”
A goal of the association, he said, would be to use association dues from the shop owners (“We’re not taking money from any of the jobbers or paint companies”) to pay for activities such as customer education and to lobby for better laws. First on the agenda would be to fight the practice of insurers interpreting the Magnuson-Moss Warranty Act as prohibiting an OEM from requiring only OEM parts be used in collision repairs.
“Consolidators aren’t going to do it. So who’s going to get us out of the Dark Ages? There’s no one looking out for the consumer.”
AT A GLANCE:
• Shop size: 30,000 square feet
• 48 employees
• $11.9 M in annual sales
• Nine OEM certifications
• DeBeer 900 waterbase paint, from Specialized Products Supply
• CCC ONE estimating and management system
• OEM repair sites and AllData
• Two DRPs: Chubb and State Farm