View From The Trenches

I got a real surprise when I opened up and read the latest AGRR™ magazine. Inside were two interviews with two titans of the auto glass industry—one was with Tom Feeney, the CEO of Belron U.S. and the other was with his boss, Gary Lubner, the CEO of Belron International and the scion of the company’s founder. While it is admittedly interesting to read public pronouncements of these two influential leaders, it may also be very revealing as to what they think of us, the common independent and perhaps even more important, what may be in store for us.

The first impression I received after reading both articles was the sanctity that both expressed of Belron’s mission. That company is, of course, the largest auto glass installation company in the U.S. and, in fact, the world. Not bad for a South African AGR manufacturing firm that was fairly local until after World War II. How they have achieved such an atmospheric growth I’m sure would make an interesting read if all of the components of that historical expansion were revealed. It has seemed a rather relentless worldwide progression that has led to its mega-corporate stature.

I guess that it is a real tribute to the free enterprise system. That term “free enterprise” seems to have a rather flexible definition depending on who is using it. To some, it means that anyone can engage in commerce of any kind, thinking there is a level playing field and keep the profit from those efforts and prosper. That can mean lemonade stands, medical practices, manufacturing and yes, even auto glass installation services. Then, on the other hand, there are others who place the mantle of pure intentions on the shoulders of their company’s corporate behavior as they attempt to resist any sort of regulatory restraint that is attempted to be imposed upon them. We can see that in real life as Wall Street, mining companies and (oh my) auto glass companies, to use just three examples, salute the flag of the free, yet may conduct themselves in a very predatory self-absorbed manner.

To wit, in Mr. Feeney’s interview, he says when speaking of anti-steering legislation, “We think this legislation is from competitors whining as opposed to something being wrong. We (Safelite) don’t think there need to be laws on the books to intervene with the free market. It is against the capitalistic structure of the United States to go at it this way.”

Mr. Lubner states in his interview (sic), “I am frankly and slightly amazed that a group of competitors attempt to change the rules or the dynamics of a market.”  The curmudgeonly part of me asks, “And Belron doesn’t already do that now?”

I wonder what they would say if I owned the dominant third party administrator in auto glass claims and made sure that my company received the bulk of the installation work at the expense of theirs and anyone else’s.

Let me remind the reader that building a better mousetrap is one thing, creating a golden funnel to the cheese is an entirely different concept.

Let’s pose a question. Allstate Insurance just awarded Safelite Solutions the contract to manage its glass claims. Would anyone out there be surprised to find out Safelite Auto Glass’s penetration level for doing glass installs for Allstate claims rose in the first half of 2012?  Before the switch on Jan. 1, 2012 away from Lynx Services, I’m sure that, based on Safelite’s size and marketing, they performed a significant number of installations nationwide for Allstate. How many more did they do under the new contract? From what I hear around the country, other shops that previously signed Allstate O&A’s through Lynx have had substantial drops in referrals. I suppose that they are the ones cited whining about free market dynamics.

Let’s jump to what Mr. Feeney was talking about—the South Carolina anti-steering bill that would have limited glass companies from ownership of TPAs. The bill also tried to prevent other abuses that appear to occur when such a close financial relationship exists between administrator and parent glass corporation.

Tom won’t need to whine about restrictions in South Carolina anymore. The bill was so watered down after insurance and paid lobbyists worked to render it ineffective. For the most part, it is business as usual. Nationwide Insurance, for instance, will still most likely have Safelite performing 80 percent of its glass claims in the state and the remaining 20 percent will be divided between the other 280 shops that exist in the land of the Palmetto. I wonder how much that free market costs Belron each year in order to keep up that penetration level? There are unsealed court documents in Nebraska that provide insight that the price does not come cheap.

The real fact is that when it comes to insurance glass claims, there has never been a level playing field. It was common practice that agents or their employees used to benefit greatly for suggesting certain glass vendors, whether locally-owned or regionally based, by accepting all sorts of favors and kickbacks from those companies. By centralizing claims, much of that nonsense has been kicked well up the corporate ladder.

One notes with a certain irony that Mr. Lubner touts the growth of his company in two of the most ethically challenged world economies—China and Russia. Would I be impudent to suggest that the corporation is probably morally well-equipped to compete in those locales?

It is clear to me that Belron will play by its own rules and continue to push whatever limits it feels impinges on their own economic freedom and certainly not upon others. Hearing both CEO’s wrap themselves around the mantle of being the true keepers of the flame of capitalism and free enterprise makes one’s digestive system churn with acid reflux. If they could each corner any market in auto glass using robotic TPAs or any other means, they would do so in a nanosecond and with impunity. Their idea of free enterprise, I surmise, means free of any restraints. They want the freedom to act in any manner that benefits their company’s bottom line, thereby the shareholders and I’m sure their executive pay structure.

Please don’t forget Safelite has done some pretty loud whining themselves when their status quo has been challenged. When Arizona attempted to restrict TPA ownership and behaviors, who threatened to pull their regional call center out of the state? That’s pure hardball politics and it is a game they seem to play very well along with their insurer allies.

The question I would like to pose is how much does Belron trust the free market?  Would they ever chance selling off their TPA and compete for each and every insurer glass claim with local firms? One certainly accepts the premise that Safelite, with its advertising and promotional budget, would be able to convince large numbers of consumers and agents to use their services, at least for the first time. However, the answer for divestiture I would presume would be no.  Having to process a large pool of passive and compliant lemmings under their administration is much too lucrative of a franchise to dismiss. After all, free choice is a bit of a different concept than free enterprise. But I am not whining …