Merger mania
Mergers and acquisitions in the vehicle manufacturing sector will speed new car imports to the U.S., and many of these will be small B-segment cars. Chrysler desperately needs to increase efficiency in its U.S. fleet and has confirmed plans to sell small Fiats like the Fiat 500 in the U.S. to help increase its fleet's economy. The 500 is available with a variety of small gasoline and diesel engines, which will eventually be used in the next generation Chrysler-designed products.
Renault-Nissan Alliance and Daimler AG recently announced their partnership as well, which is aimed at pooling small car engine knowledge and manufacturing capabilities to produce smaller cars more efficiently. Dr. Dieter Zetsche, chairman of the board of management of Daimler AG and head of Mercedes-Benz Cars, explains that rising demand for small cars was a key driver behind the alliance. In a press release issued by Renault-Nissan and Daimler, Zetsche says, "Right away we are strengthening our competitiveness in the small and compact car segment and are reducing our CO2 footprint, both on a long-term basis."
In another case of mergers without borders, there's Chinese manufacturer Geely's purchase of Volvo. Volvo fans believe that this ownership will lessen the brand's cache, and don't want to think about a Chinese-made Volvo. This paves the way for Geely to be the first Chinese vehicles to reach the U.S., helping them overcome the major obstacle that has barred them from entering the U.S. – their dismal performance in crash tests. Just do a quick Internet search for "Geely Otaka crash test," and you'll see the car's passenger compartment collapsing in the offset barrier crash test at 40 mph. This purchase opens the floodgate for Geely to leverage Volvo's world-renowned safety engineering and quickly reverse poor safety and potentially score very well in future crash tests – laying the foundation for a speedy entrance to the U.S. market as a formidable competitor.
Not all potential new imports will come from China. Another emerging auto making country is India. There are two automakers to watch from India, Tata Motors and Mahindra. Tata Motors recently bought Jaguar and Land Rover from Ford Motor Co., so they have existing brands that they can leverage, but Tata is probably most famous for the invention and production of the world's cheapest car – the Tata Nano.
This pint-sized car actually sells for $2,500 and has been sold out, with long waiting lists of future buyers. Tata Motors founder, Ratan Tata, has boldly claimed that he wants to sell a version of this basic car in Europe and the U.S. Before you dismiss this as impossible, keep in mind that people laughed at him when he said that he could build and sell a car for $2,500. If he were to sell a U.S. version, even at twice the price, obviously any microcar with that low of a price tag would total in the most minor traffic accident.
Mahindra Motors is another one to watch. With a reputation for building inexpensive and durable tractors in the U.S., the company has tried for the last three years to sell a mid-sized diesel pickup truck in the U.S. but has been plagued by production delays. Mahindra's plan is to produce this pickup in a factory in Mexico and sell through some 400 franchises. The collision repair industry must pay attention to how Mahindra creates its parts supply infrastructure, which many new entrants in the U.S. market in the 1980s failed to do right – causing incredible repair delays and increasing total losses because parts simply weren't available.
Small is beautiful
Carmakers with large V8 offerings in their fleet are acting quickly to adapt to meet the federal government's new corporate average fuel economy (CAFE) standards. Some automakers like GM are doing some strange "downsizing" to some model's power plants, such as offering the future Buick LaCrosse base model in a four cylinder EcoTec engine with a six speed automatic transmission (sounds like it will be doing quite a bit of shifting to keep up with traffic).
Expensive lighting
You can count on increased costs of new high-tech projector beam headlamps and LED tail lamps to drive up repair costs – especially on inexpensive new cars. HID (xenon) headlamp units can cost over $800 a piece, with LED tail lamps in the pricey range as well, costing north of $400 a piece to replace. When manufacturers outfit budget-conscious new cars with these expensive to replace items, there is often little protection from the bumper system – almost guaranteeing their replacement even in a moderate collision – tacking on significant dollars to the cost of repair. As these vehicles age look for an increase in the percentage of vehicles totaling out.
Keep assembly simple
In the auto manufacturing business, the simpler the content, the faster the new car can be assembled and the lower the cost. The more complicated the assembly, the more time it takes to assemble, so manufacturers constantly look for ways to lower assembly costs by simplifying content. Even a simple car like the Chevrolet Cobalt currently has more than 11,000 moving parts. Reducing screws, clips and fasteners lowers assembly costs, but may increase repair costs. Adhesive strips on trim pieces that are destroyed during disassembly and tabs and flanges that break off in collisions are common. These parts usually require replacement because of damage rather than clips breaking during impact or disassembly, all adding to the cost of repair.
Advanced assembly materials and techniques will lead to increased OEM-required certification, or the industry will be required to come up with its own certification process.
Collision repair certification
By now, we're all aware of the aluminum and structural certifications required by BMW, Mercedes and Jaguar, some of which have expressed concerns that their cars are not being properly repaired in all cases. Recently a Porsche executive stated that Porsche doesn't have repair recommendations, rather it has repair procedures because there is only one way to do things right.
As high-volume automakers continue striving to increase fuel mileage by lightening the weight of new vehicles and introducing more sophisticated alloys, they will undoubtedly require technicians to follow specific repair procedures. One way to ensure that this happens is to require repair certification. The industry will benefit from a collision repair shop certification program as a way to guarantee vehicle manufacturers and vehicle owners that shops will competently repair advanced vehicle construction.
The UK recently introduced the Kitemark® certification system to address this exact issue, and the Kitemark program certifies man, method and machine – meaning the technician has the skills, knowledge of proper repair procedures and that the shop has the proper equipment to perform the sanctioned repair. In the U.S., we need to be able to meet the demands of increasing technology by adopting an independent certification process that will be accepted by both manufacturers and recognized as reputable by the consumer. An organization like Consumer Reports could be ideal for performing such an independent certification.
Water-based paints
It's surprising that the Obama administration has not required this "green" move away from solvent-based paints in the collision repair environment. The Canadian and the European Union governments require water-based systems, making the United States the largest repairer of vehicles still using solvent-based paints. Converting to water-based paint systems significantly reduces volatile organic compounds, but to date only a few jurisdictions have required the conversion. This requirement will spread to more states and the EPA is likely to eventually mandate it nationally.
Preparing for the trends
Repairers should be proactive in pursuing the idea of an independent certification that will benefit their business by being able to demonstrate to car manufacturers, insurers and consumers alike that they will perform a quality repair. Being an early adopter of water-based systems when the government requires it is also a wise step. In Canada the rush to beat the deadline meant that training was rushed and shop production was severely interrupted when repairers waited until close to the deadline to make the transition. A major paint manufacturer reported higher shop satisfaction numbers among early adopters than those who waited to make the transition. Keep yourself informed, be aware of the changes that are coming and stay ahead of the game.
