Shop owner Kevin Morse says revenue is down but profits are up since ending the company’s direct repair agreements with insurers.Technician Chuck Gunn works on a repair to a Mazda vehicle.Technicians Ben Ernsdorf (left) and John Robertson install a hood on Kia Forte.

Collision shop owner pivots away from DRPs for increased profit

Axalta 20 group and equipment investments bolster productivity at Elite Collision Center

Battle Ground, Wash.—Kevin Morse points to two significant changes he’s made at Elite Collision Center in the past year: ending all of the shop’s direct repair program agreements with insurers, and joining an Axalta-sponsored “business council” (20 group).

“For at least the last 10 years, we’ve had DRPs, though never a lot, and I’ve been able to make that work,” said Morse, whose family 15 years ago added the 12,000-square-foot body shop adjacent to its mechanical repair shop and quick-lube. “In my mind, it made sense. It was a win-win-win for the customer, the insurance company and the shop. I started looking at the numbers, though, and realized we were working harder, not smarter. I’m kind of in a niche market out here. There’s not another shop offering a lifetime warranty. So why should I give the discount away? It was just turning and burning my equipment, my techs.”

He ended one DRP agreement at the start of last year, and then last fall dropped out of State Farm’s program.

“I think State Farm has a great program,” Morse said. “But it still tries to compare me with other shops that have a different philosophy than I have. We’ve always tried to be the Nordstrom of collision repair. That’s what we’ve been about: Not doing it cheap, but doing it right.”

He acknowledged the first couple of months after the change “were really scary.” Although State Farm did not account for 30 percent of the shop’s business, that’s the drop in sales Elite experienced in those months.

“It was just a bit of perfect storm right then,” Morse said. “But just for couple of months, and then things rebounded some and stabilized. We anticipated losing some business but hoped to get a little more profit from each job. That’s how it’s worked out. My sales are down some from what they were, but my profits are up, and that’s what it’s all about.”

The shop switched to Axalta Coating Systems’ Cromax Pro waterborne paint line purchased through Industrial Finishes about three years ago, and Morse now considers that one his “best decisions.” Last November, he was able to join an Axalta business council led by trainer and consultant Mike Anderson.

“We meet four times a year, all over the United States, and it’s pretty intense,” Morse said. “Man, I thought I knew my stuff and was running a pretty good operation. But surrounding yourself with the most progressive shops out there can be eye-opening in terms of what you can improve. It’s been so fun to meet people who are excited about this industry, and have the same sort of thought mentality that I do.”

A shop tour and discussion at one of the council’s meeting, for example, convinced Morse of the benefits of using a dustless sanding vacuum system. He’d had such a system installed in the shop initially, but hadn’t been using it.

“I came back and bought the entire shop the tools they needed to use it,” Morse said. “The guys didn’t have to purchase anything. We showed them the benefit of using it, and we’re keeping the shop a lot cleaner.”

Other recent purchases are helping the shop shift toward doing more repair work rather than just parts replacement. A nitrogen plastic welder, for example, enables the shop to build its own bumper tabs, and a Revo hand-held infrared system helps repair bumpers that a regular heat gun wouldn’t.

“I’ve seen some bumpers here in the last couple of months that we never in the past would have been able to fix, and they look great,” Morse said.

He has also recently purchased a Flatliner sheet metal repair system, sending a technician down to California for a week of training.

“We were showing a technician here with 20 years of experience what we can fix with that system, and he couldn’t believe it,” Morse said. “With today’s thin metals, you have to use a system like this.”

Adding the Flatliner system is also part of the shop’s effort to work toward OEM shop certifications.

“We’re just getting to that, though I wish I’d started earlier,” Morse said. “If you’re not going to go the DRP route, OEM certifications make sense. The OEMs are going start having more say in where you get your car fixed. That’s where I think the industry is going.”

The other thing Morse says he wishes he’d started earlier was the in-house training program he now uses to ensure his staff of 15 people always includes an apprentice or mid-level technician to help meet future staffing needs.

“We created a program that shows them, ‘Here’s where you’re going to start, and here are the eight steps it takes to become a journeyman body tech, and here’s what I can guarantee you if you meet all these criteria along these eight steps,’” Morse said. “It’s enticing. A young person can look at this program and see, ‘Here’s where I start out, and here’s where I am in four years. And the shop is paying me while I’m learning.’”

When he looks ahead, Morse said he’s more interested in improving processes and production within his shop rather than adding more locations.

“The business council has been a good reminder that there’s always things to learn and improve,” he said. “‘Not knowing’ is not an excuse when it comes to repairing cars. You need to get on board with that, with the investment in tooling and equipment and training, if you’re going to fix today’s cars. You just can’t ‘not know’ anymore.”

 

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