FUTURE OF OEM CRASH PARTS

[BUCKWHEAT]

WITH THE LATEST DEVELOPEMENTS IN THE AUTO INSURANCE WORLD, DOES ANYONE PREDICT AN IMPENDING SHORTAGE OF OEM SHEET METAL???
IF INSURANCE COMPANIES GO AWAY FROM IMITATION CRASH PARTS, GM WILL REALIZE AN UNUSUALLY HIGH DEMAND FOR THESE PARTS AND WILL NO DOUBT BE SLOW TO RESPOND TO THE INCREASED DEMAND. DO YOU THINK THIS SITUATION IS TEMPORARY OR IS OEM SHEET METAL SALES GOING TO SKYROCKET??

[sallen1]

I think you'll see two things happen:

1) Short term shortage of sheet metal from some mfgs. I don't think It'll be GM but maybe Ford or Toyota (mostly because those products had the most LKQ stuff available)

2) The insured driver will be given the choice between two policies, one with OEM and one without and the insured will 'sign-off' the the use of non-OEM. Obviously, the OEM policy will be more $$ and most people will choose the cheaper policy and that will restore the market for LKQ.

Has anyone come up with a formula to charge for 'upgrading' from LKQ to OEM? There might be a market for these types of contracts.

scott

[Michael McHenry]

We are not going to see any change for many
years to come. State Farm is going to appeal
their loss and that will take years.What I
would like to see is a strong effort by ALL
dealerships to stop giving away the parts
they can sell.I don't know where in the country you are but in the North East(I'm in
New York) the aftermarket is killing us. My
wholesale sales have been cut buy 75%. I
work for a Chrysler Plymouth Dodge Jeep and
Hyundai Dealership. I'm lucky to sell a
headlight bezel on a front end hit.But the
most troubling part is other Dealers are giving discounts so large they can't make a profit...just to make the sale.

Anyone have any suggestions?

[David S]

Michael:

I am not sure if there is a good answer to compete against the dealers that provide such deep discounts. I never ceases to amaze me when I see a dealer that truly does not make a profit on wholesale yet continues to sell. I typically find in these cases that the counter persons and manager are paid on gross and not net. Also, it is not very often that you find a dealer that performs periodic ROIs on their wholesale operation to insure its worthwhile.

The best suggestion I have is to continue to build strong relationships with the wholesale accounts and give your accounts more value for the money with a higher level of service.

As far as the future of crash parts, I have spoken to several people who are a part of the insurance industry (not just state farm) and all are starting to get away from the aftermarket. I dont think it will last forever, but in the short term I think we will see and increase in OEM replacement sheet metal sales.

David S.

[Richard]

I don't know, but here in TN State Farm took some pretty quick action. Our body shop got a call right after the judgement, and told us if we had any cars in the shop at that moment, DO NOT install any aftermarket parts, and until they recieved futher notice, the only LKQ part that could be used was a condenser. WOW.....

[mmylan]

Amen David!

When are these parts managers going to realize that it takes a lot to operate a successful wholesale operation. When you consider handling costs, drivers, trucks, commissions, returns, obsolecence, receivables, advertising, etc, you are lucky to break a little net after it's all said and done!

Also, a wholesale operation is not built on giving HUGE DISCOUNTS, like you said. It's grown slowly, paying close attention to your customers wants and needs. SERVICE AND QUALITY ARE WHAT WE SELL...NOT PRICE!

As far as the State Farm Settlement: I agree with Michael. We will not see any significate change right away. Like sallen has said, I have also heard that we will now see two different policies that will be offered by the insurance companies. One will be a higher premium if you demand OEM parts. The other will be a much lower premium, if you don't mind getting aftermarket parts when you need parts replaced.

Sorry to drag on about the wholesale thing...it's just frustrating competing with parts managers that don't care about the bottom line!

[This message has been edited by mmylan (edited 11-03-1999).]

[This message has been edited by mmylan (edited 11-03-1999).]