How crash parts are defined on shops’ paperwork matters to OEMs, regulators, insurers, lessees
Nashville, Tenn.—Does an OEM crash part have to be ordered through the automaker’s dealership parts channel in order to be labeled as an “OEM part?”
The question may at first seem esoteric, but it’s one that could have significant impact for body shops, insurance companies and state regulators, not to mention consumers with collision damage. That’s why a Collision Industry Conference (CIC) committee that’s working to define parts-type definitions has attracted more than 200 participants to its weekly conference calls.
Here’s one such real-world scenario the committee is looking to resolve: There are now companies selling what are essentially OEM parts, made by or for the automaker, and delivered in OEM packaging. But rather than being sold and delivered by a dealership affiliated with that automaker, they are supplied by third-party companies, and only those third parties, not the automaker, offer any warranty on those parts.
Oregon shop owner Ron Reichen explained at CIC how such a part is described or “coded” on a shop’s invoice can matter for a variety of reasons. Such parts are sometimes described in estimating or online parts marketplaces as “alt-OEM” or “opt-OEM.” But California’s Bureau of Automotive Repair (BAR), which regulates the approximately 4,000 body shops in that state, has said such terms are too ambiguous, and has prohibited use of those terms on shop’s paperwork for consumers. California shops must describe all parts only as new, used, OEM, non-OEM, reconditioned or rebuilt.
But even outside of California, Reichen said that how parts are described matters. A shop on a direct repair program may be required by the insurer to use a certain percentage of “alternative parts.” Those agreements may also designate which types of parts will be discounted by the shop for the insurer. In addition, a customer with a leased vehicle may be expected to use only new OEM parts. A shop certified by an automaker also may be expected to use OEM parts on that automaker’s vehicles. In all these cases, whether a part is described as “OEM” or not has ramifications.
At CIC back in January, the CIC “Parts and Materials Committee” posed multiple choice questions to meeting attendees that indicated there is little agreement within the industry whether the term “OEM” can apply to a part that is not sourced through a dealer. At CIC in Nashville, Tenn., in April, Ken Weiss, who co-chairs the CIC committee, said 10 one-hour conference call meetings of the committee hasn’t helped develop more consensus on the issue. One compromise that has been proposed is labeling such parts as “OEM third-party supplied.”
Why would a shop opt to buy such a part? Weiss said it could be because a third-party supplier has a more robust inventory on hand and can get the part to the shop more quickly than a local dealer.
“That third party may also offer a discount to a small shop that he can’t negotiate on his own,” Weiss said.
But repairers at CIC — most notably board members of the Society of Collision Repair Specialists (SCRS) — argued that any part sold outside an automaker’s supply chain shouldn’t include “OEM” in the descriptor because the automaker no longer “warrants or supports that part.”
Weiss and others argued that unlike a non-OEM part, such parts are made by or for the automaker and come in OEM packaging so have all the physical characteristics as an “OEM parts” and thus could be labeled as a third-party supplied OEM part.
“We are not making business decisions here,” Weiss said. “We’re trying to define the part so people know what’s coming out of the estimating platform or from the parts platform. So they can say, ‘I’m suspicious of that part; I now know clearly it’s an OEM part as far as characteristics are concerned, but it’s delivered by a third-party supplier with a third-party warranty, and I’m not going to use it because I don’t want the liability.’ That’s what a definition is. It gives you a clear understanding of what you’re receiving.”
But SCRS’ Aaron Schulenburg, who co-chairs the committee with Weiss, said parts descriptions also need to be understood by consumers, and most won’t understand how an “OEM third-party supplied part” differs from an “OEM part.” Given that a key difference is how the part is warranted makes it important for everyone involved to understand the labeling.
Fred Iantorno, of CIECA, who is working with the committee, defined “consensus” as developing something each side “can live with,” but Schulenburg said that has been hard to find on this issue.
“There is either a view that the word ‘OEM’ should be included or shouldn’t be included,” he said. “It’s a hard place to find consensus between those two.”
Meanwhile, BAR, weighed in with their view on the topic in a new draft regulation. If adopted, that regulation would require any new part that does not meet BAR’s definition of an OEM part to be labeled as a “non-OEM part.” The BAR’s definition of “OEM” requires that the part be made by or for the automaker that recognizes the part as its own, and that the part is obtained through a distributor authorized by that vehicle manufacturer.
Balancing OEM and insurer relationships
Accurate labeling or descriptions wasn’t the only parts-related discussion at CIC in Nashville. Representatives of two automakers were asked if they had advice for a shop owner trying to balance a relationship they have with an insurance company with one they have with an automaker, given that DRP agreements and OEM certification programs may take different approaches in terms of parts selection.
“The shop has to make a choice of what they want to do, and ask themselves what’s best for the customer,” John Lancaster, of Subaru of America, said. “I think some of these direct repair programs can blend with OE] certification programs, but others may not. So what’s your mix of business, what’s right for your shop, what direction do you want to go?”
Mark Allen, of Audi of America, agreed it’s a difficult question for shops.
“When the repair procedures are developed through service engineering and they are crash-tested, there are no alternative parts used,” Allen said. “So I can’t tell you how they are going to perform. That is a large concern. I think the consumer needs to be made aware that we don’t have the information on how an alternative part will perform. I’m not saying that just in terms of fit, finish and corrosion protection; I’m saying that in terms of protecting your life. Period. It’s a tough place to be. I think maybe in a vehicle’s life cycle there may be an appropriate time for alternative parts, but the consumer needs to be aware to make a fair and honest decision.”