View From The Trenches

It takes no ability to discern what has become the top auto glass story of 2009 and will continue into the coming year. In fact, you could say that Belron US generates the same interest level in our industry as Michael Jackson or Tiger Woods does in the general public. Whatever it does, it is reported on. Rave or revile, very few people in the auto glass sector have a neutral opinion of what Belron US and its minions mean to us.

Let me suggest some very good points. If I had deep pockets, I would be doing many of the very same things Belron US is doing to Safelite and its other companies. They have improved its infrastructure, its IT capabilities and its branding. The company is growing. In a down economy they have feasted on acquisition—some through bankruptcy, some by being a white knight and others by being the only game in town when a chain’s owner wants to retire.

Belron US is a vertically integrated business. It manufactures, wholesales, installs (and repairs) glass, and manages auto glass claims. It can offer a client—whether that client is an insurer, fleet account or just the average consumer—a whole host of inclusive services that involves the entire spectrum within auto glass. Safelite and its other sister stores are striving to become national one-stop shops of sorts.

Size matters. Like a much larger corporate model, Wal-Mart, Belron US buys at a scale that is unmatched by any other auto glass store or chain. It lowers many of its costs by negotiating deep volume discounts by buying directly from support industries like glass manufacturers or adhesive makers, just to name two. Anyone who owns an auto glass concern has to appreciate and respect the accomplishments Belron US has achieved.

The current success of Safelite should be no surprise to anyone who is familiar with Belron Inc., Belron US’s international parent company. In every country it has entered, it has taken the path of least resistance. If entry to the insurer market exists, the company turns its efforts to solidify its position. If that market is closed or its entry resisted, Belron turns its energy to impacting the retail sector. It has been a successful formula in the different countries in which Belron owns companies.

It’s obvious which direction they have used here in the United States after making some initial missteps with Windshields America and a minority position in the “old” Safelite. No doubt, Safelite Solutions, Belron US’s claims administration arm, has contributed to and most likely has been essential to both its growth and prosperity. By acting as a gatekeeper and in many others’ eyes, a funnel, Solutions has had a major impact in making the company’s influence felt in the insurance sector of our industry.

Just last week, John Beyer, a Safelite executive, stated in an interview that Safelite Solutions handles “16 of the nation’s top 20 insurance companies glass claims.” When has a single national glass company ever been able to make that sort of declaration and do it without fear from invoking the interest from a regulatory agency?

One marketing tool and a key to Belron US’s continued growth within the insurance and fleet sectors is the promotion and use of the Guaranteed Average Invoice (GAI). Simply put, Safelite will be paid a certain amount for any claim that is put forth to them.

By itself, the GAI is a boon between the two contract parties. The insurer client’s financial liability is limited along with the assumption of claim administration costs that Safelite Solutions will take over. Belron is paid X amount for each and every glass claim that is generated and processed. The GAI is not a new concept. Glass shops have used a fixed cost for fleet replacements for decades. The GAI is a perfectly legal conveyance to use; however, it underscores one of the industry’s thorniest problems—that of having the nation’s largest installation firm also acting as a claims administrator for the rest of the nation’s retail competition. That unbalanced relationship creates so many potential and actual conflicts between Belron US and all other shops that just are not allowed or exist in other areas of the business world. Can you imagine Toyota approving the MSRP of a GM vehicle, or Microsoft directing Apple or Linux on what is a fair and reasonable rate of return for its operating software?

This market dominance has taken place not just due to a series of calculated purchases that would be considered “organic.” The growth is fueled by a number of what many independent shops would consider unfair business practices that emanate from an installer-owned third-party administrator.

From my perspective, the GAI becomes the source of the abuses that many independents feel that Belron US inflicts upon them. Like Wal-Mart, Safelite’s expenses have to be tightly managed in order to gain maximum profitability. The greater the work volume (whether it is auto glass installation and lately even more so in repair) it can keep “in-house,” the greater the return. From the very first contact by the Solutions CSR, scripts are employed with the purpose of managing—even directing—the claimant’s behavior when it comes to the choice of glass vendors. This is called steering. If a non-Safelite shop is chosen specifically, the matter of “approved” charges becomes an issue. The glass shop is contacted and a script read dictating specific prices and terms. Both the shop and insured are made aware that if those charges exceed the stated figures, financial liability will end from the insurer’s side. If that fails, despite corporate denials, there appears to be mounting evidence that claimant contact data is being transmitted from Solutions’ sources to the installation side in some regions in the hope that either a repair or glass replacement can be recovered when it appears that it may be lost to a competitor.

The new national branding efforts have used windshield repair to attract new business. The ads alert consumers to the value and availability of Safelite’s repair services, particularly with respect to the possibility of a no-cost benefit if insured. The completed repair becomes a very large profit source for Belron US when it is applied toward the GAI for its client insurers, who are literally paying for its marketing campaign and then some.

Some will argue that Belron US has brought “order” and pricing stability to insurers. By helping insurers reduce claim costs, the company has won both support and political influence by allying themselves with the casualty industry. Any effort to increase vendor choice for consumers has been met with great resistance by insurance lobbying groups underscoring the blurred lines that exist between TPAs, corporate glass and the casualty insurance industry.

What’s ahead for both Belron US and the thousands of other glass shops that dot the country? Belron US wants to be the auto glass equivalent of its Wal-Mart role model and it is well on its way to achieving that goal. The company has worked toward this goal by targeting the most profitable sector of our industry, creating services and products that cater and benefit the insurance industry.

Some independent observers also have cited Belron’s wholesale glass arm, Service, with indulging and marketing its glass to the very price-conscious sector of our industry. It has the effect of sustaining a backside, low-price marketplace that can bleed profits from established shops that Safelite competes against. It becomes a win/win for Belron and the opposite for many others.

Much of this news admittedly sounds bleak for many independents. However, control still remains in their hands. Shop owners have the ability to know, understand and operate in their local markets. Many consumers resent the grasping nature of an international corporation or greedy insurer and once informed of such, many times become sympathetic in using local vendors. While Safelite may be cited in its hometown of Columbus, Ohio, as an appreciated employer, I will wager that a local glass shop has the far greater chance of garnering those awards in such diverse places as Boise, Idaho, Austin, Texas, and Anyothertown, USA.

This is should also be a wake-up call to any shop that keeping up with technology and maintaining and updating infrastructure are important if not mandatory. It’s “March or Die” in these hard economic times with survival of the fittest being the primary law of this jungle we call the auto glass industry.

Yet what is needed most is the ability to act in a concerted effort with many other shops with respect to issues of mutual interest. We simply have lacked any sort of national or even statewide ability to strongly unite into an effective trade group. We fight among ourselves, ignoring the larger more important battles that are being pressed against us. In short, we fiddle like the Roman emperor Nero, while Rome burns. From issues like parts quality to certifications and steering, the independents represent the largest voice—yet it is the most muted and diffused due to its diversity. That has to change and grow into a body of influence in order to hopefully counterbalance the growing power and predominance of a single corporate entity that is feasting on and could be suspected of encouraging our disunity and chaos.

What we need is organization and money. In order to exact reforms, they have to be addressed either politically or legally. Most of all, we require involvement from more independents. There is a huge pool of talent and energy out in this country that is either too busy to see the big picture or too critical of existing associations. That hasn’t changed in the years this column has been written. What also hasn’t changed is the growth and influence of Belron US. That company has a goal—what is ours?

Christmas is drawing near and last year Santa somehow missed this writer’s wish list for our industry. This year, I thought I would publish it in the hope that perhaps Mr. Claus or one of his tech savvy elves will find it on Google and hopefully consider fulfilling a few of my desires.

First of all, I want better product. Auto glass has been manufactured for over 75 years and one would think that the process would practically become foolproof over that length of time. Hardly. With import barriers non-existent and the demand for cheap product coming from retailers, it has become a real gamble in ordering lites and sidelites these days. One finds inherent defects in much of the product lines that are being sold by wholesalers. From bad bends, visual distortions, inadequate or misplaced bonded parts are the most common problems installers face. Many find blame in the flood of inexpensive product that comes from the East. Sadly our domestic manufacturers have gone in different directions in trying to cope with this flat world economy. Some have responded by updating facilities and stressing quality over quantity. Others have sold out to the devil by establishing overseas relationships and sacrificing their repute in order to compete with cheap imports.

Wholesalers are no different than any other business. They attempt to meet the demands of their customers and make a profit. Cheap imported products have allowed many to survive, some to thrive more. Yet, the reality is wholesalers only reflect what the market wants or accepts.

In the end, it is we, the end-point retailer that has to raise our standards of both product and installation. Without that occurring, the downward spiral will continue unabated. Fixing that would make Santa a miracle worker instead of a delivery person.

I wonder what the North Pole can do about the legal issues that plague our auto glass sector? Can Mr. Claus trade his cap and toyshop for an Armani suit and a law library? Some of us look to the courts for relief in the matter of the incestuous relationships of insurers and Big Glass, which create steering scenarios and favorable pricing agreements. Actually what Santa needs to do is to drop off more than a few truckloads of C-notes to help fight that battle. Being in the right is usually never enough because any smart lawyer can delay and delay proceedings bleeding the injured party dry of funding. There is a legal irony that public discussion of pricing among shops falls under anti-trust concerns while a Third Party Administrator dictating specific “allowed charges” does not. While there have been recent cases that independent glass and body shops have won versus insurers and directed claims, this will be a long term struggle that is a very long way from being resolved.

Since this is a significant problem for most independents and small chains, this is fight that has to be won and it won’t be cheap.

There are retailers that dream or have nightmares about legislative reform or relief coming from the imposition of regulations. I’m not quite sure what Santa can do in that situation. While he is known to wear fairly high boots, whether or not he will eagerly wade into the political morass of law making is another question altogether. Whether it has to do with the “easy entry” nature of this industry or even the imposition of product tracking capabilities, Santa would be stepping into an area that he would need or at least appreciate his ability of knowing who is naughty or nice. The amount of coal he would be dispersing to legislators or lobbyists would certainly add to the global warming of this suffering planet.

Can Santa make every installation effort a AGRSS approved one? Can he somehow instill within every installer and owner the desire to “do it right” instead of doing it fast and cheap? Pride and profit could go hand in hand instead of being at odds with each other. What a concept!

What could be Santa’s greatest challenge but most hoped-for present is for him to bring unity and accord to the independent glass sector of our industry. There is simply too much division. There are those that believe that Big Glass actually promotes such division for their own benefit. From price wars to even the creation of Internet based forums, there exists such divisiveness and an unwillingness to act together which is becoming a huge detriment for both long-term growth and sustainability. That has to change or many will not survive in this age of “Wal-Martization”. As attempts for national branding by our largest player are being undertaken, independent shops will be struggling for crumbs or conceding profit margins in order to survive. Owners have to come together and become involved in issues of mutual interest or the future may very well become as bleak as a North Pole winter.

I’m hoping the best from Santa. After all I’ve tried to be good this year. My folks taught me the benefit of setting high goals and working to achieve them. The only worry I really have after writing these requests is will the elves and reindeer want extra pay in trying to conjure up and deliver my wish list? Will Santa impose a delivery surcharge?

One of the most frustrating shifts in American culture over the past 75 years is our nation’s acceptance of mediocrity over quality. It has become such a social disease that has contributed to the historical indicator that the United States may easily become the fastest declining superpower that the world has ever known.

Why is this happening? Can anything be done to halt this slide? Who carries the most blame: the ignorant non-demanding consumer or a fragmented business community wallowing in indecision and generally free from oversight and liability?

Some of the problems started years ago as Americans were brainwashed into thinking “easy” by Madison Avenue. Name a culture that has embraced the term “instant” better than the United States. Tradeoffs in quality have become commonplace in exchange for time. Our eating habits have changed from toiling in kitchens for hours to “nuking” your dinner in minutes or driving through a “fast food” line to acquire your “happy” meal. Your vehicle’s oil can be changed in a “jiffy.” Homeowners buy sod because they want an instant lawn or just lack the time or knowledge to plant seed. Those having windshields installed have even come to demand instant gratification.

Our auto glass industry is no more or less guilty than any other. We for the most part have marketed ourselves to consumers as a service and, being a service, we strive almost always to do anything to please the customer. However, how many times have we used the “no” word to a potential buyer when it involves an actual install?

Take mobile service, for instance. A large number of retail glass outlets offer the customer the ability for on-site replacement and repair. Some of us (myself included) are total mobile businesses, completely free of brick and mortar. Many customers appreciate the convenience; some even expect the service of having their windshields or sidelites replaced at a locale of their choice.

Yet when adverse weather, temperature and install location exist, how many shop owners or installers have the courage to say: “No, not today or not there?” The list of what conditions occur that could or would compromise an install is too long to enumerate, but it is safe to say severe cold or precipitation are the two most likely reasons to terminate mobile service without cover. How many business owners are willing to lose a customer that refuses to understand that his install may be compromised if he demands mobile service in circumstances that don’t support it? How many owners/techs gratefully accept working under adverse conditions that others reject?

How many consumers understand the concept of proper drive away times? How many shops buy and use their urethanes based on that premise or based on cost alone? How many shops make the decision to use certain products on particular vehicles based on the install price since it is a general fact that the lower drive-away time a urethane has, the higher the price of the adhesive?

It is my observation that the majority of consumers are blatantly ignorant at first with this initially vital benchmark. Most assume that once the installer cleans his fingerprints off the new glass, the vehicle can be operated safely. How many technicians stress to the customer the limitations he has for a certain period? Just because you’re using a urethane that has a one-hour or less drive-away time, that still does not necessarily allow the customer the ability to operate his car under normal driving conditions after that time span. In the real world, not all installs are given the time necessary for a proper drive away time.

Temperatures are not always an ambient 60 degrees. Appointments are set late in the day at a person’s workplace. I am aware of the everyday use by some shops of slower curing urethanes for in-house installs whereby the customer is allowed to take his vehicle immediately upon completion of the work. The only concession to “safety” perhaps is the use of painter’s tape to “secure” the glass. Who is at fault here, an impatient or uninformed customer or the shop that should know better?

The point is, we as the “experts” have to act like them as well. All too often the customer will assume that we know what we are doing and accept our actions as what should be good business practices. Sadly too many owners or managers along with bonus-hungry installers will push or ignore those standards for fear of losing a sale to someone else either by price or by inconvenience.

We all want “easy;” easy installs, easy meals, and we all would like to live on Easy Street. Yet, as the wise cinematic philosopher Harry Callahan once opined, “A man has got to know his limitations.” More of us have to inform the customers of ours and remind them of theirs at times. Nancy Reagan’s maxim of “Just say no” can be very good advice to take especially when long-term liability issues can arise. If you’re not careful about such matters, you may find out it is “easy come and easy go” with your assets.