The Jury's Still Out: the Debate about Aftermarket Crash Parts - BodyShop Business
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The Jury’s Still Out: the Debate about Aftermarket Crash Parts

Two years after the landmark $1.2 billion State Farm class-action verdict, the debate about aftermarket crash parts still rages. What does the future hold for these OE counterparts? If you thought the controversy ended when the verdict came down, think again.

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Writer Charlie Barone has been working in and around the body shop business for the last 35 years, having owned and managed several collision repair shops. He's an ASE Master Certified technician, a licensed damage appraiser and has been writing technical, management and opinion pieces since 1993.

The arguments are as partisan as presidential politics, with little or no middle ground being staked out by either side. From the perspective of the insurance industry and aftermarket (A/M) crash parts distributors, it’s about choice and freedom from a monopoly, both easily recognized as consumer issues.

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For the opposition, it, too, is about choice – a consumer’s right to choose how his car is repaired and with which parts. It’s about not being told what’s in their best interest, but rather, being allowed to make an informed decision that takes safety, value and circumstances into consideration.

But didn’t the landmark verdict in Avery v. State Farm, in which the insurance giant was found guilty of consumer fraud and breach of contract for its use of A/M crash parts, put an end to all this controversy? To put it simply, no. Though the stakes have been raised to billions of dollars, there are no clear winners at this point. As the case continues its rage on the Illinois court system – State Farm lost its appeal and has petitioned the Illinois Supreme Court for further review of the verdict – the A/M crash parts issue continues to plague the industry.

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How this real-world-problem-turned-courtroom-drama plays out depends on market forces set in motion by consumers, certification agencies, repairers, industry associations and insurers alike. I don’t have a crystal ball and can’t predict exactly how these forces will affect the future of A/M crash parts, but I can tell you that insurance companies alone won’t be calling the shots.

Survival Strategy
When asked about the future of A/M parts, SCRS Chairman Don Keenan – who’s also president of Philadelphia-based Keenan Auto Body, a collision repair business with six locations, and a Certified Automotive Parts Association (CAPA) board member – had encouraging words for CAPA.

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“There will always be aftermarket crash parts,” he says. “They were here before the insurance companies started specifying them, and there will always be a market for them. Some people are driven by quality, others by price and still others by both. In the past, aftermarket parts manufacturers were led to believe it was all about price. Today, they’re getting a strong signal that the driving force is quality. Quality repairers demand quality parts.”

Keenan’s pragmatic approach to the parts issue seems to be the controlling attitude among some major players in the business. And despite sound defeats in the courts, the insurers’ advocacy of these generic parts appears as vigorous as ever, which includes some major public relations moves, such as getting Ralph Nader’s Public Citizen on board.

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Still, the A/M parts issue has bled down to the consumer level, where A/M parts popularity rates about as well as big tobacco, HMOs and Firestone Tire. The term “aftermarket parts” has even been used with negative connotations in the prime-time Fox Network sitcom “Titus.”

In the other camp, Mark Cobb – CCRE president and owner of Cobb’s Collision Center in Windham, Maine – isn’t nearly as optimistic as Keenan regarding the future of A/M parts.

“Consumer awareness and education will clearly define the viability of imitation parts in the future,” says Cobb. “As consumers become more and more aware of how these parts affect the safety and function of their vehicles, the use of these inferior parts will be so greatly challenged that the value of their use will be nearly diminished.”

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With that said, Cobb adds that it’s important to be completely clear on definitions. “Aftermarket parts encompass all types of parts – batteries, shocks, suspension components, muffler systems and so on,” he says. “In a broad sense, sheet metal would be included in that group, but sheet-metal parts are of a far different character and should be addressed without reaching out for support from parts that have been tried and tested in the marketplace.”

For the Record
We live in a litigious society – a society in which lawyers are challenging big business, including the auto insurance industry and its use of A/M crash parts. Has this boldness forever changed the course of A/M crash parts or simply made a ripple in the waters?

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Earlier this year, an aftershock trembled the A/M crash parts market when an Illinois appellate court upheld the landmark lower court ruling finding State Farm Insurance Company guilty of fraud and breach of contract. Even though State Farm hasn’t shown any signs of cutting their losses and giving up the fight, it’s clear that the more they struggle, the deeper they sink in the A/M quagmire.

Another less publicized but significant case was the class-action lawsuit against Country Companies Insurance, alleging – this should sound familiar – fraud and breach of contract for its practice of mandating the use of A/M crash parts in the repair of their insureds’ vehicles. There were no allegations of a runaway jury in this case, or an admission of wrongdoing on the part of the defendant. The insurer simply settled.

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While the monetary figure wasn’t earthshaking ($6.2 million), the court ordered the company to radically change their habits in terms of how they settled claims for collision damage with policyholders. Not only does Country Companies have to discontinue its practice of limiting claims settlements to the use of A/M crash parts, the insurer has been enjoined from participating in CAPA.

Examined at face value, this court order might appear unreasonable, such as a court telling a local business that it can’t be involved in the chamber of commerce. However, this penalty goes to the heart of the consumer fraud question that was the foundation of the State Farm case. That is, it wasn’t so much what the parts were as it was how the parts were represented to the policyholders – and CAPA certification was part and parcel of that representation.

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But what long-term affect have these cases really had on the future of A/M crash parts?

Shortly after the State Farm verdict, almost all insurance companies (with the exception of some uncompromising carriers like USAA) quickly withdrew from the practice of mandating A/M crash parts in the repairs of policyholders’ cars – as if they suddenly realized they were standing too close to an out-of-control fire. But no sooner had the smoke cleared when a number of companies, excluding State Farm, reverted to their old ways. Others claim that many shops are also reverting to their old ways.

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According to Crash Fax, Brian Sullivan – of the Auto Insurance Report – spoke at a recent conference in Washington, D.C., and predicted that “non-OEM parts will start to creep back into the market. In fact, it’s already happened. Some of them will come from insurers. But what’s also happening is that the body shops are bringing these parts back.” (Sullivan’s referring to the fraudulent practice of shops substituting A/M crash parts for OEM parts and then pocketing the difference in cost.)

“One of the purposes of the $600 million punitive damage award against State Farm was to deter other insurance companies from cheating their insureds the same way State Farm did,” says attorney Tom Thrash, one of several lawyers representing the plaintiffs in the State Farm case. “I guess $600 million wasn’t large enough. We’ll certainly bring this to the court’s attention in the pending cases against these other … insurance companies. You can’t cheat people and get away with it.”

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Still, the now-legendary State Farm class action has had its effects on the marketplace, especially, some say, on A/M parts manufacturers. “The behavior of a number of insurance companies [in changing] their policies regarding aftermarket crash parts after the State Farm class-action verdict has devastated the aftermarket industry,” says Karen Fierst, president of KerenOr Consulting and Taiwan Auto Body Parts Association (TABPA) liaison to the U.S. market. “While I believe most of the litigation will eventually be resolved in a way that enables the independent aftermarket to flourish in the future, it’s causing a serious setback to the industry.”

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Despite Fierst’s claims of a devastated A/M crash parts market, not all OEM suppliers credit the verdict for OEM sales increases. Art Garner, spokesman for American Honda, dismisses the case’s effect on his company’s parts sales and credits the strong economy of recent years for any increase. “We’ve had an across the board increase in sales, including our captive parts where there are no aftermarket competitors,” says Garner.

The Changing Face of Certification
Is there any hope for CAPA ever gaining recognition as a credible, independent testing organization? It depends on whom you ask. Keenan, a CAPA board member, says the organization has only begun to prove its value in the marketplace.

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“In my opinion, CAPA has made more headway in assuring quality aftermarket parts in the last year or so than they have in their entire history,” he says. “The vehicle test fit program has provided manufacturers with an accurate, real-life opportunity to see just how their parts fit on a vehicle.”

If you’re unfamiliar with recent changes at CAPA, the test Keenan is referring to is an actual vehicle test fit of parts performed by real-life technicians on actual cars – a process previously deemed unreliable by the certifying organization. CAPA had always asserted that OEM vehicle-build quality was too inconsistent to serve as a means of testing replacement parts. With the test fit now a part of every certification process, that argument has apparently lost its supporters within the organization. Perhaps with good reason: The parts are designed and intended for installation on those supposedly unreliable OEM vehicles, as opposed to a test fixture developed in a laboratory.

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Was this change made in a last-ditch effort to give the association credibility? Until now, CAPA never tested anything, though they could’ve been doing these vehicle test fits for years. But the offshore, voluntary in-house testing at the point of manufacture bounced fewer parts, and members were happy with that. CAPA is, after all, an association of manufacturers.

As you might suspect, not everyone is impressed with CAPA’s so called “progress.” “To quote State Farm, CAPA is a joke,” says Thrash. “If their past is any indication of their future, CAPA has none. CAPA hasn’t worked in the past. What on earth would make [anyone] think CAPA can work in the future?”

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How is CAPA handling such industry negativity?

In an apparent effort at damage control in the wake of CAPA Executive Director Jack Gillis’ gaffes both in and out of court, the association took on some new blood early last year. General Henry “Butch” Viccello of USAA was appointed president of the CAPA board.

“CAPA isn’t a flawless organization, and while we’ll continue to recruit insurance industry members to participate in the organization, a multi-industry partnership is the only effective approach to a truly competitive marketplace – CAPA’s primary goal,” says Viccello. “This partnership needs to include the collision repair industry, the insurance industry, parts manufacturers, parts distributors and those who promulgate policy through legislation or regulation.”

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But even if A/M crash parts aren’t legislated and/or litigated out of existence, some degree of market forces may come to bear on the parts. Consistently inferior parts will earn a reputation as such, as will better fitting and performing parts. However, this type of brand recognition has yet to surface in the collision repair market due to the generic nature of A/M parts. Most aren’t identified by brand as much as they’re ordered strictly by application. The typical body shop operator has no idea what’s inside that string bikini packaging until it arrives.

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“As an industry, the aftermarket crash part segment realizes that it must brand its products and provide a high level of consumer and repairer confidence in order to turn the image around,” says Fierst.

“Until a few years ago, Taiwanese companies had hoped that CAPA would be the recognized brand for quality parts,” she says. “They put their energies into the program thinking it would provide marketing and brand image support. It’s become clear over the past few years that CAPA, while being a viable certification option, isn’t the answer to the branding issue. … The bottom line is that certification organizations should be invisible, like Underwriters Laboratory in the field of electronics.”

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What Consumers Really Want
While the battle over A/M crash parts has largely been waged on body shop and insurance turf, the party with the most at stake is the collision repair customer. (Though some aftermarket advocates would have us think customers are oblivious to the parts issues.)

Do consumers really demand more affordable auto parts? In general terms, the answer is an unequivocal yes. However, just like with virtually every other consumer product, consumers demand better quality, convenience and service along with the bargain price. This principle is the basis for the success of big box retailers like Wal Mart and The Home Depot.

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But what you have to remember in regard to the A/M crash parts issue is that we’re not talking about the traditional retail scenario. Autobody sheet metal is, at best, an arm’s length transaction for consumers.

The automotive aftermarket has existed on the oversights, errors and excesses of OEMs, which is why we find a non-OEM battery with the most powerful name recognition in the business. But are Diehard batteries and Gordon hoods analogous? The implication that they are could face skepticism.

Even if A/M body parts and hard parts are similar in terms of value, consumers haven’t shown any substantive desire for price consciousness when the repairs to their cars are covered by an insurance claim (threats of premium hikes notwithstanding). The prospect of savings passed along to policyholders in the form of lower rates tends to lose significance when you’re talking about a consumer’s personal vehicle. At that point, he or she typically doesn’t want to compromise. Most times, the only instance a consumer is willing to compromise is in the case of an older vehicle without collision coverage, in which function is stressed over form and appearance. At that point, a generic part could very well be an acceptable alternative to declaring the car a total loss. But in general, the real demand for more affordable collision parts comes from third-party payers.

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“I think most consumers give little thought to the issue of aftermarket parts,” says Fierst. “Those who do have likely been influenced by the February 1999 ‘Consumer Reports’ article or their collision repair professionals. In my opinion, the negative image of aftermarket crash parts, as perceived by repairers, is far more problematic than that of consumers.

“This image is a perception that’s evolved over the past 20 years. There’s some historical basis for the perception, but problematic aftermarket parts aren’t found in the market today as frequently as some people would have us believe. In fact, while aftermarket part quality is continually improving, poor quality OEM parts are more and more evident in the marketplace.”

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The Power of Test Fits
In what has become a regular event (in addition to being a round of ammunition for the A/M parts industry), the Collision Industry Conference (CIC) parts test fit trials are often held up as a definitive measure of the parts’ suitability.

The test fit held in Orlando in December 2000 indicated that a Yung Shine fender made in Taiwan was actually a better part than the OEM replacement fender. Assuming the A/M part was reverse-engineered from the part it was judged against, this raises a question as to the test’s validity: How can a copy of an original be better than the original? This assumes, of course, that the service parts made by the OEM are identical to the ones the vehicle came with, a fact A/M parts makers dispute.

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At any rate, the blind test by industry participants yielded higher scores for the imitation part. However, these types of tests only deal in the illusory qualities of appearance and don’t address the more substantive issues of the part’s construction, long-term durability or effect on the owner’s equity in the car.

When questioned as to whether the steel of the Yung Shine fender was made from two-sided galvanized steel like the Ford fender, CAPA spokesperson Stephanie Ackerman said: “As of Jan. 1, 1999, all CAPA sheet-metal parts are required to be constructed of double-sided galvanized steel. This part was no exception.”

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While her response was precise, it was somewhat ambiguous. CAPA standards may very well require that the Yung Shine part be constructed from two-side galvanized steel in order to be certified, but that in and of itself doesn’t necessarily mean that the OE-grade of steel has made its way into parts inventories. E-mails and telephone calls to Yung Shine to confirm this weren’t returned.

In follow up communication with Ackerman, she seemed less convincing. “I’m pretty sure that was a two-sided galvanized part,” she said. “If it was certified, it’s a given.”

Asked for his assessment of the significance of the CIC parts trials, George Gilbert – crash parts merchandising manager, Ford Customer Service Division of Ford Motor Company – says, “A lot of flurry comes out of those [CIC] tests. We never agree with the tests, even when we win. The real fit tests are done every single day by body shops.”

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Gilbert also touched on a cost issue in which the OEM part could conceivably have an advantage over its cheaper competitors. In terms of enhanced repair cycle time, which has become the biggest buzzword in the business, OEM parts usage could involve real net savings in repair costs. Because A/M parts have been associated with increased labor time for their installation, delivery time delays and the tedious process of trial-and-error fitting, OEM parts makers have been able to claim the high ground on that basis.

“Where the parts-to-labor ratios change and you start to do more replacement [work] than repair, I see it as an opportunity – anything that can improve value to the customer is worthwhile,” says Gilbert.

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Survival of the Fittest
I can’t predict exactly how these forces will affect the future of A/M crash parts, but I don’t see these parts disappearing … ever. Some will improve based on sales (what a concept, huh?), while the not-so-good parts won’t sell as well and will be used primarily by re-builders of totals. The better fitting, better performing, better looking A/M crash parts will gain recognition as the good brands.

Which brings us to branding. Like in every other business, some brands will be established as better than others. Up until now, A/M crash parts have been generic: You ordered by the application, e.g. hood and fender for an F-150. In the future, however, it may be “Send me a Brand Y hood and fender for an F-150. I’ve had good luck with them in the past. And don’t send me a Brand X hood or fender; they’re bad.”

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Like it or not, the A/M crash parts market will continue to evolve and mature. It may have a long way to go, but understand one thing: It’s not going away. A

He Said …

“Essentially, all the litigation reaching the public has dealt with consumer issues, [ones] we’ve long supported,” says Coalition for Collision Repair Excellence (CCRE) President Mark Cobb. “The State Farm verdict was a landmark, and we hope the ruling stands. But even if it doesn’t, insurers realize business isn’t as usual from now on. Someone is out there watching their practices, so they’re going to have to be more attuned to proper claims handling.”

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… She Said


“The politicization of the issue, the allegations of safety problems and the insistence [on] banning the products or having signed consent is simply anti-consumer,” says Karen Fierst, president of KerenOr Consulting and Taiwan Auto Body Parts Association (TABPA) liaison to the U.S. market, about the activities in both the courthouses and state houses to address the parts issues. “This issue is being used as a weapon for some in the repair segment to hit back at the insurance industry.”

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One Tech’s Thoughts on A/M Parts

Finally, a view from ground zero – that of a flat-rate line technician, an often forgotten party to the A/M crash parts dispute. Barney Slifer is an ASE Certified collision repair tech with more than 25 years of experience. He works at Arnell Paint and Body, a dealer body shop in Burns Harbor, Ind. What’s his first-hand take on A/M crash parts?

“Not that it’s pertinent to the replacement sheet-metal arguments, but A/M inner-structure parts are equally miserable as far as accuracy of fit,” says Slifer.

“At present, I’m doing a Grand Am builder for which [the owner] bought a Taiwanese (Conjoin Key) upper tie-bar and left and right rad-support reinforcements. It’s all flimsy, lighter gauge metal, and it’s terrible when you’re jigging up the parts as per a unibody data sheet. Nothing is accurate.

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“Unlike OEM components, I can’t trust these parts to be dimensionally correct. Once you weld them in, you’re committed. There’s no going back for further adjustments after you’ve jigged them to factory specs, only to find yet another related A/M fit problem later on. This is the same reason I hate CAPA-certified A/M external sheet metal, such as fenders. In addition to the usual reasons most anti-A/M parts critics give, I find them a real handicap to production.

“[Some measuring system manufacturers] recommend using OEM front fenders as the final say-so when it comes to determining front datum measurements. If the fender fits the door, you’re good to go. But I can’t do it on this particular job because I can’t trust the A/M part to be accurate enough to perform this kind of preliminary measuring. Even if I do correct the front datum to the factory height – which it now is – odds are, the Taiwanese fender won’t fit the door without some serious modifications, which, I might add, no one pays me for.”

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Writer Charlie Barone has been working in and around the body shop business for the last 27 years, having owned and managed several collision repair shops. He’s an ASE Master Certified technician, a licensed damage appraiser and has been writing technical, management and opinion pieces since 1993. Barone can be reached via e-mail at ([email protected]).

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