Fixed Ops Journal - June 2018 - F16

FIXED OPS JOURNAL

CONSOLIDATE
continued from Page 14

over dealership body shops under their own
brand names.

Going it alone
Ganley Auto Group, which has 31 dealerships in the Cleveland area, still operates seven of its own collision centers. The company
sees collision repair as another way to keep
customers in its family.
"We don't want to send our customers to
any other facility for any reason," says Bill
Housholder, Ganley's fixed operations director. "Once you send a customer somewhere
else, they're likely to continue doing business
with them. We want all of our customers' collision work in the Ganley organization, and
we also want to keep all of our service customers in our dealerships."
When a customer asks about collision repair
at a Ganley dealership that doesn't have a
body shop, Housholder says employees follow a simple strategy: "The ones that don't refer them to the ones that do."
Those customer referrals from Ganley's
Ohio dealerships, which sell nearly 20 vehicle
brands, help keep the shops busy, Housholder says. But the bulk of the business comes
from direct-repair relationships with insurers,
which he says have been cultivated over decades and are key to a profitable operation.
"I don't think you can run a collision center
strictly on referrals from your own store," Housholder says. He estimates that 60 percent of Ganley's collision work comes from direct repair and
85 percent overall from insurance work.
"You've got to have direct repairs and insurance business, and if you don't, you're probably not going to survive," he says. "There's a
certain amount that you can do based on your
reputation, but the insurance companies really control the business."
Housholder says the big consolidators are
well-managed, formidable competitors, but
he notes that dealership groups such as Ganley have advantages. One is the loyal base of
sales and service customers from which they
draw business. Another is their close ties to
automakers.
"We have direct access to all the manufacturers on their technology and how to repair
their vehicles." he says. "We don't have to go
through third parties like I-CAR and others.
For example, we have to run different tests after repairs to make sure we haven't triggered
any sensors, and we have all that technology
in house."

PAGE 16

JUNE 2018

Big 4 consolidators' body shop scorecard

ollision industry analyst Brad
Mewes calculates that two of the
Big Four body shop consolidators, Caliber and Boyd, have aggressively added locations in the past three
years (see chart). ABRA and ServiceKing
have slowed acquisitions, Mewes says.
 ABRA, whose majority owner is Hellman &
Friedman, lists 351 locations in 27 states on its
website. Mewes says that by his count, ABRA
has closed a few locations, and had 346 at the
end of the first quarter. The company did not
respond to repeated requests for information.
 Boyd, headquartered in Winnipeg, Manitoba, said it had 512 locations in the United
States and Canada at the end of the first
quarter; Mewes counts 516. Boyd operates
393 Gerber Collision & Glass centers in the
U.S. and 119 locations under the names
Boyd Autobody & Glass and Assured Automotive in Canada. It acquired the 68-unit
Assured operation last year.
 Caliber, whose majority owner is OMERS
Private Equity, announced its 500th location
in June 2017. The company did not respond
to requests for an update, but Mewes calculates that Caliber had 559 locations at the end
of the first quarter, the most of the Big Four.

Ganley is adding 20,000 square feet to a
10,000-square-foot building for a new standalone collision center; it is scheduled to open
next month. Housholder says the new building "will cost in excess of seven figures" and
that Ganley is committed to staying in the
body repair business.
"As long as it's a viable business, we're going
to continue competing in it," he says. "If it
starts to slip, we're going to try to find ways to
make it better and streamline our operations.
You have to be the best of the best, or [customers will] go somewhere else. There are too many people who want that business who don't
have it."

Get big or get out
Fewer than 40 percent of U.S. new-vehicle
dealerships operate body shops. Mewes says
dealers "oftentimes don't fully grasp or understand" the collision repair business. He estimates that the average body shop labor rate is
$50 to $60 an hour - about half the labor rate
in the service department - and dealers
don't see the potential for as much return on
investment, he says.

Location count: Number of collision
repair centers operated by Big Four
chains, in U.S. and Canada

Source: Supplement Advisory

 ServiceKing, owned by Blackstone Group,

said that as of April, it had 337 locations in the
U.S. in 24 states.
- Rick Popely

But Mewes insists "there is a big opportunity
for dealerships to generate attractive returns
in the auto body space."
"As the influence of OEMs continues to impact the industry, as vehicles continue to become more complex and expensive to repair,
those trends are going to benefit the dealer
and the dealer-owned body shop," Mewes
says.
But he warns that dealers will have to put
more skin in the game to compete with the big
multishop operators and large dealership
groups such as AutoNation and Berkshire Hathaway Automotive, which he says are investing heavily in collision repair.
"The companies that win will continue to
grow and invest in their business, whether
you're a large repair operator or a dealership
chain," Mewes says. He predicts the collision
repair industry will continue to consolidate,
with fewer dominant players.
"You will probably see a consolidation of
consolidators, one of the larger Big Four players merging with another one," he says. "That
makes a lot of sense for a lot of different reasons." 

Table of Contents for the Digital Edition of Fixed Ops Journal - June 2018