If you were on vacation or working double-duty to cover for those around you who were, you may have missed the biggest news story in the collision industry in years or perhaps decades. According to an article by industry freelance writer, John Yoswick, Robert Wagman, Senior Vice President for LKQ corporation told an audience of at least 150 people of their efforts to “get out in front of the guys who are coming after the industry” (aftermarket parts). This was in reference to stopping Toby Chess and others from demonstrating key differences between some non-OEM structural parts and the OEM parts using a reciprocating saw as their proof. Apparently, in his failed campaign to be elected to the ABPA board, Wagman advocated that the board should take a more aggressive stance like LKQ has and said as much in the speech he gave at the Automotive Body Parts Association’s 30th annual meeting .
Yoswick attended the annual meeting, and reported the damning comments from both Wagman and the ABPA Treasure, Jim Smith, an industry consultant in his article entitled “Non-OEM Parts Industry Discusses Latest Battle Over Structural Parts.” It ran in several industry publications including his own “Crash Network.” You can find this article in publications such as July 2010 Collision Expert, Autobody News, and on-line with Collision Repair Industry Insight. (see link below)
Yoswick’s article may have exposed the lengths some will go and want others to go in their mission to drive the sale of aftermarket parts. Some feel the push for profit disregards safety. Wagman aurgues otherwise and says they did numerous tests to ensure the safety of their parts and do not sell any of the parts in question. Regardless, the article was certainly prima-facie evidence* that LKQ did in fact manage to stop Toby’s presentation. The presentation was believed by many as revealing an alarming issue of the use of potentially life-threatening parts. On the other hand, perhaps their only real concern was that Toby was using a reciprocating saw to cut through multiple parts as the “test and proof.” If that was their concern, Ford later addressed it.
Once Toby’s demonstrations were stopped, the evidence to support the claim that some of the aftermarket parts used in the industry may be life threatening came in the numerous examples presented by Ford at the last CIC meeting in Chicago. Paul Masse of Ford showed videos of the safety threat and specific evidence including studies and illustrations showing the inferiority and potential hazard of the aftermarket structural parts.
Up to this point, differences between the parts was being exposed by a single individual named Toby Chess, a simple industry guy with decades of practical, hands-on knowledge just doing his part to see cars are fixed right. He is a well-intended, collision repair instructor armed with his handy reciprocating saw being intimidated by the big publicly-traded aftermarket corporation with lots of suit-wearing lawyers. The scene is like a B-movie version of David versus Goliath. But in this real-life version, Toby was stopped in his tracks when he was contact by LKQ Corporation in April just prior to his schedule presentation. That is apparently the type of action that Robert Wagman was inferring when he said the board should “…really get in front of these guys who are coming after the (aftermarket) industry.” Ford did not seem to have the same reservation as poor Toby and stepped in with their technical expertise and test center. The result was a mountain of compelling evidence backed by the Original Manufacturer of the vehicle.
Surprisingly, Jack Gillis of CAPA supplied additional damning evidence related to other aftermarket parts not previously thought to be structurally-critical like a hood and hood latch. His presentation added to the overwhelming evidence presented by Ford and left no doubt for anyone watching that there are unsafe parts and they are being used to repair vehicles. Someone is selling them! Possibly the worse part is that some insurance driven direct repair programs (DRP) arbitrarily demand the use of aftermarket parts regardless of their safety and lack of testing. With the overwhelming evidence now presented, it seems past time to change those insurance company’s DRP policies that call of the use of non-certified aftermarket parts.
Several have already made changes to their DRP policies and procedures. Gieco immediately changed theirs following Toby’s presentation in January, and is expected to announce further modifications related to aftermarket parts. Several other insurers are also expected to announce changes and more are undoubtedly under way because the potential exposure is enormous.
What if the government agencies were enlightened by this information, investigated, and demanded some sort of recall? The impact of failures of these parts could be substantially greater than Toyota’s recently experienced so a recall is not out of the realm of possibilities. If some government agency or AG demanded a recall, how would the industry handle it? How would you determine what parts were on which vehicles because not all aftermarket parts are the same? Some can pass the test while other obviously cannot as illustrated by Chris Northup in yet another presentation at this most recent Collision Industry Conference (CIC). If they did do a recall, how far back would they go? Who would pay for the re-repair? The fact is that thousands of shops have been pressured into using aftermarket parts that may not pass the crash test. Once the car is repaired, the shop is the “manufacturer of record” and would ultimately carry the burden and liability. This is especially true if any of the shops signed special agreements that hold the insurer harmless under their DRP agreement (a prevalent practice).
The potential cost of a recall could be Billions depending on just how far reaching the ramifications might be. A recall could drive thousands of shops into bankruptcy and their liability insurance carriers to run for cover. Eventually, the lawsuits would most likely find the deepest pockets – those insurers that have demanded the use of aftermarket parts without discrimination. Demanding the use of at least CAPA certified parts might provide a veil of plausible deniability, but only a small portion of the aftermarket parts are certified. Jack Gillis of CAPA presented statistics that illustrated that less than 25% of all of the aftermarket parts used are CAPA certified.
Wagman augues that as far as he knows, not one lawsuit has ever been filed for the failure of an aftermarket part “… not even for a stubbed toe,” he said. Perhaps this is all a chicken-little fire drill. Therefore, it is certain that no one really knows what the next shoe is to drop or where all this will end. Regardless, one thing is certain. The exposure for shops and insurers alike is substantial, and all because of efforts to suppress insurance loss severity. Ironically, the exposure could be exponentially higher than the savings. The cost difference of an aftermarket part might be 20% less, but only on a select few parts, and parts are only as much as 40% of the repair bill on average. Do the math. At best, some might have saved a few percentage points in the short term by forcing DRP shops to use aftermarket parts regardless of their functionality, safety, or fit. But, the cost to fix this mistake could be astronomical. This fact alone will force major change upon the industry.
Even if aftermarket parts had to meet standards enabling them to be certified as functionally equivalent, the cost to manufacture, market and sell those parts would raise and make them a closer cost competitor to OEM. Without these savings, their would be far less motivation to demand their use for cost conscious insurers. Would the industry be better off or worse?
No matter what else comes of this, Insurers and Repairers alike can no longer claim they did not know that some of these parts are inferior to the point of being life-threatening. Following the presentations, you could hear many saying over and over again, “I had no idea.” Now, we all do! No matter how anyone tries to suppress the truth or spin it, the genie is out of the bottle and there is now a smoking gun for all to see …Thanks to Toby Chess, and John Yoswick’s excellent reporting.
*PRIMA-FACIE, EVIDENCE, Latin for “at first view.” Evidence that is sufficient to raise a presumption of fact or to establish the fact in question unless rebutted. A prima-facie case is a lawsuit that alleges facts adequate to prove the underlying conduct supporting the cause of action and thereby prevail.
John Yoswick article in Autobody News:
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