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Where’s the “Party” in Third Party?

I had an incident this week where a third-party administrator (TPA) suggested very strongly to an insured client that she have her windshield installed by a particular glass company. When the insured told me the name of that company, I was confounded. I simply had never heard of them. The customer said that the CSR had assured her that the company was one of their “most favored vendors and was very well established.”

When placing an order with a glass distributor, within the hour of hearing those words, I had to ask, “Who are these guys?” The reply came quickly that they ordered glass from several of their outlets and had various installers come and “will call” the orders. The fact was, this company was not a “real” brick-and-mortar corporate entity but a recipient of insurance glass claims that farmed out installs to a select group of self-employed installers. The “company” paid for the glass centrally and processed claims as well. So with a certain amount of irony, installing auto glass is also evolving into business models that use the third-party definition as well. Like so many things in the AGRR business, it is a sad trend for both customer and installer.

Why is it sad? For one, it is a sure sign of a disconnect. How much real responsibility (as in legal liability) does a cyber-company actually have and retain? How much is a consumer protected in the event of a rust issue that was created three years earlier by a lazy or incompetent sub-vendor?

I acknowledge the economic truths of contract workers and sub-vendors. I just don’t like them installing auto glass. If a company wants to compete against the giants of our industry or one-man mobiles, there has to be a better way rather than farming out installs (most likely to the lowest bidder). Some call it capitalism. I call it cowardly. Building a brand or company should involve people that have something more invested than a service fee remuneration, a keyboard and a fax number.

No doubt, what we do in the auto glass business is not on par with brain surgery but it does require some technical expertise and physical skill. Having a conscience and personal pride in your accomplishments certainly helps in making a technician a complete package. Yet why does this industry keep embracing practices that encourages a death spiral in quality and accountability?

I “get” pay for performance. If you do more, you get paid more. It’s an easy concept to understand. Yet, what does that do for the overall quality of our practice? We have invented all sorts of labor and health-saving devices that either will shorten removal or install times. What kind of pressure exists on technician employees to maximize installation numbers? For me, that is the weakness in the method.

The independent contractor system used in the AGRR business is a hoary dodge against paying benefits, insurance and taxes. One pays a person a fixed amount to do installs. In my area of Central California, this practice is evolving into a fine art and has grown significantly due to the maturation of the Internet. We have companies that exist in a living room that offer quick and low prices quotes on auto glass that use a network of freelance installers. We also have brick-and-mortar companies that have built up a clientele of body shops and car lots based on low prices that would not be able to compete unless they evaded the employer mandated responsibilities of workman’s comp and social security taxes by calling their techs “independent.” Now we have third-party installers making deals.

The question I want answered is: where is this trend going? I would want myself and my company name associated with quality workmanship. How can I do that if I lack control and oversight over people associated with that brand? I have and remain critical of several of our largest corporate installation companies with their preoccupation with numbers and metrics but at least they actually have real employees

The cost of maintaining a workforce is substantial as any owner knows. Taxes, insurance and ancillary benefits add substantial costs to doing business. What I find reprehensible is the ongoing and evolving method of evading such costs by some and attempting to gain a pricing edge by skirting the law or in some cases purposefully ignoring it.

California (along with many other states) has a substantial underground economy. Under-employment, high taxes, cultural acceptance and an ineffective, overworked, politically neutered regulatory system are just some of the reasons that make such a situation so conducive for growth. I am motivated by self-interest to buy business liability insurance that costs more $3,000 a year. I wonder how many installers I see waiting by a distributor’s fax for a new job carry such coverage and are saddled with just that cost of doing business. What do they have to lose if sued? A 15-year-old mini pick-up? What about the “company” that sent them the job? Claim the person’s laptop as the most viable asset in the event of a judgment? All in all I have witnessed several cases where an owner or an installer has gone out of business one day and re-started the next under a different name or credit source.

I understand that the “easy entry” (exit as well) fact of our industry cannot or will not cease any time soon. There are too many powerful forces in and outside the AGRR business that find that condition beneficial to their own interests. With that said, it mystifies me when TPAs give out names of preferred shops which in reality bought their way onto that list with favorable pricing, no matter their status actually is. In short, there is very little background investigation it seems when being approved for vendor status. I presume a TPA (if not the client insurer) wants deniability; after all, one very prominent reason TPAs have come to exist is the fact of separation from a an insurer to the insured’s claim. The onus of liability weighs far more heavily on the referring or dispatching party than the actual insurer.

On a personal note, it just truly bothers me to see this new form of “doing business.” Both a physical and emotional disconnect exists. On one hand, you have a facilitator who gets the jobs and dispatches work, usually all digitally. Some buy the glass or sell the lead. They actually can exist anywhere on this planet. The installer is local and his qualifications are what? His charge for completing the job is the cheapest available? It is the perfect response to a consumer market that is deluded into thinking that having a windshield installed is like shopping for a box of cereal—that everything is equal but the pricing. Most of us who are called into fixing someone else’s butchery can and will attest differently.

So let’s hear it for the employee-less installation company. It the latest devolution within the AGRR business. The Internet has brought so many new twists to auto glass from how it is sold then to being installed in vehicles. There are so many third-party constructs occurring that I am waiting to discover third-party installers farming out work so they can collect a piece of the pie without actually performing the work. If the AGRR business continues in this race to the bottom jettisoning both quality and accountability we are going to find that pie completely inedible due to the crows that have made it so.

 

Posted by on November 25, 2014 in Uncategorized

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Where To Saint Peter?

I’ve been taking a break from writing mainly due to a case of AGR blues. As news filters in concerning the automotive glass industry, there is so little to be hopeful about the way the industry is trending from this observer’s perspective that it is simply too painful and pointless to comment on. Say it ain’t so, Joe!

I view blogs on leadership all the time on this very site. They may be useful to motivate employees but since far too many of us are one- to two-man single point outlets, the advice or homilies aren’t as relevant, or better said, universally applicable to the majority of us.

What we need is real industry leadership. That concept is sorely lacking and even more so desperately needed. Is this writer mistaken in his observation that it feels that AGR is lost in some sort of desert and is condemned to wander aimlessly into mediocrity or worse? Where are the captains of our industry who are willing to act, much less even speak out to improve the product, professionalism and craftsmanship instead of trying to please a stock analyst. I haven’t heard one yet but I should be reminded that miracles do occur as evident by the fact the Kansas City Royals have a winning record and should make the baseball playoffs this year.

What constitutes leadership these days? To me, there are far too many of us that have become either sheep or lemmings and meekly accept the downward spiral that has either been imposed upon us or embraced by us.

Is there a comfort that cheaply made products and hacks that install exists in other trades? My dear wife made a water heater purchase decision six years ago based on price. We replaced that water heater three months ago at almost double the cost of the first one, a fact that I had to mention to the owner/operator of the plumbing business who installed the replacement. Not only was the brand of the old heater a generic one, I was shown the poorly soldered copper joints of the first “plumber” and two other major installer no-no’s were pointed out. The venting system was not to code and since California is seismically active, water heaters are physically strapped in place. The installer secured metal straps to the heater by using sheet metal screws into the heater itself. In short, I told my wife, this was an everyday object lesson that I endure as a shop owner about price shopping a craft service. The public is deserving of a poor outcome when it bases it choices purely on price.

This writer is not aware of a single CEO of a major installation or glass manufacturing company that has been consistently outspoken on the major issues that confront this industry. Those being easy entry for practitioners, poor product quality, monopolistic and incestuous practices that exist in the insurance sector and zero accountability for all of the above.

Why would they speak out? Almost every one of those companies directly benefit from the lack of regulation, oversight and let’s not forget consumer ignorance.

Take steering, since Connecticut enacted a law that required a certain third-party administrator (TPA) to give out a name of a secondary glass company as well as its usual presumptive practice of handing the glass replacement over to its in-house self, the company has subpoenaed job acquisition records from glass shops in the state as well as other TPA competitors. What’s next? Subpoena car wash establishments that entice ignorant customers to have a chip repair done after the hot wax? One can be very assured that this company will fight like a cornered grizzly bear in order to keep its monopolistic golden funnel intact because it fears that if even a small diversion occurs, more will follow. However one’s ears will burn as the company will howl about its philosophical attachment to the free market as it seeks to retain its stranglehold on its own.

Since a windshield is just glass does that mean all brands are all of the same quality?

This myth (and this is a myth) is one that is embraced by far too many consumers and promulgated by glass shops selling on price or corporate relationships. In many cases, there is a significant difference in finish quality, visual acuity, weight and most likely product longevity meaning; does it crack easier?

I recently ordered a FW2047 from one of our corporate manufacturer/suppliers. When the part arrived, I realized that I had somehow missed that the lite did not come with rain sensor hardware and since this was for an older Mercedes SL, I was uncomfortable about using a replacement pad. I contacted my only independent distributor and for almost three times the price I brought in a Sekurit windshield. My customer was unhappy about the inevitable price change until he saw the actual differences between the two lites. The cheaper glass was far lighter, had a somewhat rippled top line and the customer noted that the Sekurit was “easier to see through.”

Globalization has brought vast changes to our economy and we in AGR are in the catbird’s seat to view and react to these forces. More competition equals more product. More product means the need to expand markets as prices drop and saturation of existing accounts takes place. Sad to say, the craft side of automotive glass requires little proof of proficiency and low demands for licensing and start-up capitalization. Many see the only way to break into the retail marketplace is to price product cheaper and accept lower profit margins. They are encouraged by customer-hungry distributors which offer them pricing factors equal to many long-time businesses. AGR has created a very vicious and self-defeating circle of destruction by demanding lower prices but accepting lower quality as well. On any given day, I have to deal with scratched or distorted glass, mis-bonded parts, mouldings that do not fit, nozzles that won’t thread properly on tubes, etc. Many of these issues start at the manufacturing level where the same economic pressures exist to squeeze profits out for shareholders, Wall Street analysts and executive bonuses, all at the expense of the product itself.

So, I for one, would like to see some real leadership from those who really matter. Improve our products! Increase prices if need be to do so. If TPAs are the way of the insurance future, ban ownership and management of them by anyone that has a remote interest in glass production or installation. Push for ways to improve the craft of auto glazing and those who practice it. Demand a higher entry bar and back it up with continuing education with proof of proficiency.

A gadfly blogger can only raise issues. CEOs have the ability to effect internal changes and attempt to gain consensus from their peers. The lobbying groups they finance can be used to promote laws that can raise professionalism instead of restricting change or oversight. One’s bottom line may hurt briefly but if the, “Please stay on hold. Your business is important to us” really was important, you would hire more people to answer the phone.

 

Posted by on August 13, 2014 in Uncategorized

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OE OH! (It’s not Oz, Dorothy)

I get calls every week from customers asking for “OE” glass. I try to explain that this is a very specious term with some shops because if one takes it in the strictest definition, the glass is almost always logoed with the auto manufacturer’s name or trademark and must be purchased from an auto dealer’s parts department. Glass from a dealer comes usually at a far higher price than everywhere else.

I then go into an explanation that sometimes an equivalent exists. A glass shop may be able to find a supplier who carries the very same brand of glass minus the manufacturer’s trademark or name, but with the same DOT number which signifies that the aftermarket glass came from the identical source as the dealer purchased one.

This past week I became very aware of how loosely the term “Original Equipment Equivalent” can be used and somewhat abused. I had installs on two different Toyota models that had famous glass brand names as suppliers imprinted in the bug. However when I ordered these easily available brands, I found that the aftermarket windshields had different DOT numbers than the OE ones and the quality of the part was nowhere close to the one I was replacing. Both parts I was replacing had USA origins while the new ones did not. The glass had alterations like the location of the frit and heating elements, along with distinct differences in the shape and application of the underlip molding. In one case, the purchase price of a Chinese made OEE windshield was twice as much as a branded competitor one. My customer paid almost $200 more for something we both thought was an identically made product that came in his vehicle. I believe almost anyone would have been able to detect the contrasts between the OE and the OEE ones, I guess I would like to know why? (Is it just the money, Honey?)

Automotive glass manufacturing has become a worldwide endeavor. While it may not rival the labor saving shopping country hopping antics of shoe manufacturers, AGR is not blind to the benefits of operating in countries that offer cheap labor and minimal environmental and other economic restrictions that may negatively affect the bottom line. As China opened itself up to become a center of manufacturing, its move into AGR instigated a tidal wave of change for our industry. Its flood of product that hit our shores drowned a few domestic glass fabricators, but more importantly, it unraveled the profit structure of both the wholesale and retail sectors of AGR.

In fact, a strong argument can be made that it also affected the craft side as well. As imports rose and inventory increased, distributors needed to find more customers and were able to in an evolving easy-entry industry. But I digress …

I have even discovered quality differences between Chinese-made OE and OEE parts. Volkswagen uses a Chinese glass vendor on some models. I have installed several well-constructed dealer purchased windshields that came from that vendor. However, it is another story when buying that same label in the aftermarket. The cowl retainer that comes bonded with a urethane type substance at the bottom of a VW logoed windshield is merely attached with double sided tape in the aftermarket model. Many times, due to shipping and handling, that retainer may already be pulling away or warped by the time a retailer sees it in their possession. In fact, this writer has a hard time recalling an aftermarket glass manufacturer that does not use double sided tape to secure cowl retainers. I would like to challenge those folks to try to explain to their end users why their cowl may not look the same when using their product, but the way I see it, they are just participants in a race to the bottom of the manure pit.

I understand the economics of this industry. The manufacturers want to make a profit. Distributors want to make a profit. Retailers want to make a profit. Auto manufacturers and the dealer networks make a hefty profit selling OE-branded glass. Insurers want to retain as much premium revenue as possible and the consumer wants to pay as little or nothing at all. All this creates a compression factor all the way down the supply chain.

So, OE logoed glass in many ways has become the “gold standard” to the consumer. I would be in the camp of those who believe that an OE glass is made to a higher standard, not much more, but at least the product is not reversed engineered and the tolerances of fit and finish are tighter than with its aftermarket copycat cousins. How much better is a matter of widely diverse opinion but I have told customers, I think it is usually 10 to 15 percent better. This is despite the fact that becoming OE is usually the end result of being the low bid on a contract. However, when a $1,000 difference exists between a dealer-purchased windshield and a generic-branded one, consumers and their insurers balk and demand cheaper alternatives and solutions to get around paying such high (and unjustified) prices.

I am like every other business owner that is looking for an edge to make a sale. If I can find and install an OEE brand of glass over a generic one, I make it a point to say so. From comments made by callers, many of my competitors may be descended more from Pinocchio than from George Washington because of the missing honesty gene. What is being declared OE or OE Equivalent is so wrong or misleading that some regulatory body would call it outright fraud. But what is as worrisome is that legitimate OE glass producers appear to have differing standards as well as plant locations for the very same glass part. The one being made domestically here for the auto manufacturer appears to be much better constructed than the “not made in the USA” one deemed for the replacement sector.

The mythical land of Oz has nothing on the world of AGRR. While we have our resident munchkins, tin men and scarecrows, it is the air of fantasy and illusion that is more disturbing. I can fully understand why a company competing in the aftermarket glass market makes manufacturing choices to improve their bottom line and their ability to sell their product. What I don’t understand is why substantial differences exist within the same company. A manufacturing line is already set for any one run of windshields. Why not just make X amount more instead of sending off the order to a foreign plant? Wouldn’t the increased set-up and shipping costs from a non-domestic plant offset much of any supposed expense increase coming from a U.S. plant? I, for one, would like to say with conviction that in some cases, I can provide a true OEE product to my customers. Then again, one might have a better chance of ordering online a set of FAA-certified ruby slippers that make traveling to Kansas faster and without TSA inspection.

 

Posted by on June 3, 2014 in Uncategorized

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