Fixed Ops Journal - June 2018 - F14

FIXED OPS JOURNAL

"This is an industry whose cost structure
is going to continue to increase."

CHAIN REACTION

BRAD MEWES, Supplement
Advisory

 Biggest body shop consolidators boost spending in battle with dealers

he four largest body shop consolidators have quietly continued to
grow, and appear poised to play a bigger role in the collision repair industry - and compete more aggressively with
dealership-owned shops - as the cost of doing business climbs.
Because three of the Big Four consolidators
- ABRA Auto Body & Glass, Caliber Collision
and ServiceKing Collision Repair Centers -
are owned by private equity firms, they provide only occasional basic information about
the numbers and locations of their shops, little about their strategies and none about sales
or profits. That makes it hard to gauge who's
moving ahead in the game of body shop acquisition.
The fourth consolidator, Boyd Group, is
more transparent because it is traded on the
Toronto Stock Exchange. Boyd, which operates Gerber Collision & Glass stores in the
United States, issues quarterly and annual reports that give clues to where analysts say the
collision repair industry is heading.
The big consolidators are likely to get bigger
because they have the means to invest in new
equipment and training and earn repair certification by automakers. They are forging stronger
partnerships with insurers and some new-vehicle dealerships to provide collision repair.
The major consolidators also will pose a
greater threat to dealerships that retain body
shops but don't invest in and cultivate their
collision repair operations, says Brad Mewes,
principal of Supplement Advisory, a consulting firm in Irvine, Calif.
Mewes says the four major consolidators
have the capital and scale to overcome the
headwinds that face the industry: fixing vehicles packed with advanced driver assistance
systems, meeting automakers' certification
standards and regulators' stiffer environmental rules and dealing with greater legal liability. That gives them the chops to compete
head to head with dealerships, he says.
"This is an industry whose cost structure is
going to continue to increase," Mewes told
Fixed Ops Journal. "It will become more difficult for smaller operators to compete in that
environment, because the larger companies

PAGE 14

The Big Four
body shop
chains offer
ever-tougher
competition to
dealer shops
such as this
one run by
Ganley Auto
Group in the
Cleveland area.

RICK POPELY

foj@autonews.com

JUNE 2018

 Big Four's
body shop
scorecard
I PAGE 16 I

are going to have an investment advantage."
Companies such as Boyd and Caliber, as
well as large dealership groups such as AutoNation, "are investing in certification and
OEM relationships and making all the investments now so that five or 10 years from now,
they have an established network they can
leverage," Mewes adds.

Dealership, insurer ties
Boyd has a goal of doubling its revenue from
nearly $1.2 billion Canadian in 2015 to more
than $2.3 billion ($1.8 billion U.S.) by 2020.
Achieving that target will require annual
growth of 15 percent and hinge on a stable
currency exchange rate, the company says,
Part of Boyd's strategy is to build more relationships with insurance companies for direct repair
programs. Five of the largest U.S. auto insurers -
Allstate, Farmers, Geico, State Farm and USAA
- generate 44 percent of Boyd's revenue.
Boyd also plans to invest heavily in new
equipment and training, earmarking 1.6 to 1.8
percent of its revenue this year for capital expenditures, including equipment, technology
and acquisitions. Boyd reported 2017 sales of
$1.57 billion Canadian ($1.2 billion U.S.).
"Emerging vehicle technologies will require
new, specialized repair equipment as well as
greater information technology requirements," Boyd CEO Brock Bulbuck said during
an earnings call. "We expect that many other
collision repairers will not be making these in-

vestments."
Mewes says capital is "really driving a big
shift taking place in the industry. When you
compare [Boyd's investment] to a smaller
dealership chain or smaller independent collision repair chain, they just don't have the
capital to invest tens of millions of dollars in
tools and equipment," he says.
Like the other consolidators, Boyd also is
building partnerships with new-vehicle dealerships to provide collision repairs. Boyd
opened two dealer service centers in the Chicago area in the first quarter, its first in the
United States. Boyd's Assured Automotive has
33 such centers in Ontario.
Customers referred by dealers take their cars
and trucks to the centers, and the vehicles are
then sent to a Gerber repair operation geared
to fixing their brand. Other consolidators operate similar service centers. Bulbuck wouldn't
say how many more Boyd plans to open.
"It is a highly competitive area of our business, and we don't want to provide extensive
commentary on the nuts and bolts of that strategy," he said during the earnings call. "We think
that the dealer service center strategy gives us
another tool in our toolbox for achieving samestore sales growth. We plan to continue to add
more over the balance of this year."
Other consolidators have partnered with
dealership groups and, in some cases, taken
see CONSOLIDATE, Page 16

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