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A New Reality

Autosphere » Collision » A New Reality
J.R. Martino is Vice President and Managing Partner of Budds' Collision Services, one of the most progressive facilities of its kind in North America. He can be reached at [email protected] Photo J.R. Martino

Increasing costs, labour shortages, and capacity issues are impacting collision repairs like never before.

In many ways, it could be argued that the COVID-19 pandemic served as a fast-forward button for our industry. It really made us re-evaluate our work, our business and our priorities.

We saw a lot of senior technicians and staff choose to bring forward their retirement plans over several years with the onset of COVID-19. At the same time, government lockdowns—which forced people to stay home—meant that many collision shops saw the bulk of their work disappear.

Smaller staff, lower capacity

As a result, staff had to be furloughed or in the case of more junior hires, often let go, simply to save costs and keep the lights on. Fast forward a few months and the impact of these decisions could be clearly felt. Shops struggled with capacity issues because they couldn’t find enough staff for the work that started to come in again. Compounding this issue was the growing disruption in global supply chains, resulting in a shortage of available parts for many collision centres, meaning jobs couldn’t be taken on or completed. Furthermore, in 2022, rising inflation meant our costs at the shop level kept spiralling upward, everything from parts to labour, to equipment purchases and maintenance, to shop supplies and utility costs like heating and electricity.

Combined with repair volumes that were (and still are) below pre-pandemic levels, the result has been a challenging environment to operate a collision centre. Today, many progressive, proactive shops are seeing their work orders increase and are often booking out weeks and months in advance, so they’re prepared for the work that comes in.

Yet to ensure they remain profitable; collision centres are becoming increasingly selective about the insurance companies they work with. Those insurers that are paying more competitive rates and aren’t trying to download as much of the cost of the repair to the shop are the ones that are now being prioritized. Because in today’s environment, it’s not about repair volume, but repair capacity.

Tougher environment

The reality today, is that operating a collision centre is becoming tougher. Costs continue to rise and in many cases; we’re still dealing with significant labour shortages. This means that collision centres are having to pick and choose which vehicles they repair and the insurers they partner with because these two factors will hinge on their ability to survive and thrive in the months and years ahead.

In order to bring the work to your door on a consistent basis, and to properly process cars through your shop, you need to have the staff available to make it happen, which means you need to pay them properly. Additionally, because (as I write this article) parts and material costs continue to increase, many collision centres simply cannot afford to work with insurers that don’t grasp the current economic climate and continue to penalize shops that don’t meet specific DRP severity targets.

The pandemic has changed the nature of our industry and if this business and the stakeholders within it are to remain viable in the future, there needs to be a consistent and collaborative approach to repairing vehicles. We owe it to ourselves, our employees and ultimately, our customers.

 

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