Australian Automotive industry

Senator Nick Xenophon, Senator Sterling Griff, MTAA CEO Richard Dudley, MTAA NSW CEO Stavros Yallouridis, VACC ED Geoff Gwilym, and VACC Research Manager Steve Bletos (author) today released a landmark report into the Australian Automotive industry titled ‘Directions in Australia’s automotive industry: An industry report 2017’. The official report’s release and associated media event were conducted at Anthony Costello’s Automotive Workshop in Fyshwick ACT with media in attendance. The report reaffirmed the need for the Australian Government to deliver on the recommendations of the 2015 Senate Inquiry. In particular, the report highlighted the need for a coordinated Government and Industry approach to policy development to meet the current and future challenges and opportunities of the Australian Automotive industry. The Senator was passionate in his presentation of the skills shortage facing the industry and critical of the lack of action by Government since the 2015 Senate Inquiry (as was the other presenters). Using evidence provided in the report, including: – the predicted shortage of 35000+ skilled automotive workers in 2018, – the lack of coordinated training/apprenticeship programs, – consumer inconvenience, – the threat to 370,000 Australian automotive jobs, and – the risk to the automotive industry’s $37.1 billion (2.2% of Australia’s GDP) annual contribution to the Australian economy, Senator Xenophon and the MTAA representatives stressed the need for action. Senator Xenophon’s key message was the need to create a Government sponsored automotive task force that includes Industry and Government representatives. This taskforce will ensure MTAA and State and Territory Associations get improved input into policy development and better assist MTAA members with rapid technological change, skills shortages and changing consumer demands. This will mean that the issues facing the automotive industry will be considered in more detail and will result in policies that better incorporate the needs of MTAA members. This event is proactive step to demonstrate to Government that it cannot take the automotive industry for granted and that MTAA is advocating meaningful measures to ensure the sustainability the Australian automotive industry.

Uncovering Unsafe Repairs

It was every new car owner’s worst nightmare. Only three hours after purchasing a brand new Honda Accord, Tim and Mary were in an accident that wasn’t their fault. Another driver ran a red light, and the subsequent collision resulted in major damage to both vehicles.

Unfortunately, wrecking their brand new vehicle was only the beginning, and by the time their Honda was finally declared a total loss, they had experienced most of what’s wrong with today’s collision industry.

Steering

Their insurance company recommended body shops in the area that were part of their referral network, or “DRP” program. Tim and Mary didn’t realize that the shops in this “preferred” network were under contract with their insurance company. “They make it seem like – ‘It’s our preferred body shop,” explained Mary, “We’re gonna put all new Honda parts on your car, you’re gonna get it back perfect.”

Steering occurs when an insurance company directs a policyholder to a specific repair shop. It’s against the law, but insurance companies engage in this practice regularly.

In the state of Maryland: “You are not required to use a specific auto body repair shop; you may have your vehicle repaired at the shop of your choice. Maryland law prohibits an insurer or an adjuster from requiring that a certain repair shop be used or from recommending a particular shop without notifying the claimant or the insured that their vehicle may be repaired by the auto shop of their choice.”

By using language like “preferred” or recommending “a couple shops” insurance companies often skirt the letter of the law. But by only recommending shops with which they have contractual agreements, and using wording like “preferred”, they clearly violate the spirit of the law. Consumers need to be prepared for these tactics (click here to read more about Steering).

Post-Repair Inspection

When their vehicle was first delivered, the owners immediately noticed misaligned panels and gaps that suggested serious problems with the quality and safety of the repair. What they ultimately found after a post-repair inspection was far worse than they could have imagined. “The car was an absolute death trap,” explained Mark Schaech, VP of Operations at Mark’s Body Shop.

Most consumers are unaware of the way even a seemingly minor accident effects the safety and resale value of their vehicle. Collision repair shops are re-manufacturing your car after an accident, taking it apart and rebuilding it the way it was done when it was originally made. With today’s modern vehicles, which have been engineered for safety with complex crash management systems, there are strict technical requirements for proper repairs. Most consumers don’t believe that their car would be unsafe if something was done improperly, and what’s worse is that most shops will minimize the importance of the issue.

The “DRP” Environment

Shops that participate in these direct repair programs are expected to “perform” in exchange for their insurance referral source. These shops keep their insurance partners happy by keeping the severity (how much it costs to repair the car) low, by using aftermarket or junkyard parts, and by turning over jobs quickly and getting them out the door.

If a car becomes a total loss, there are strict limitations on what can be recovered in terms of storage, admin fees, and labor. So, there’s pressure on these shops not to total cars. What you end up with are vehicles that should be totaled, but are “repaired” with cheap parts and put back on the road anyway.

In Tim and Mary’s case, the entire inner framework was compromised. The frame rail of your vehicle is engineered to absorb the energy of a front impact and redirect it around the passenger compartment. Any damage to the framework could mean delayed or premature deployment of airbags. Another collision could have been fatal.

“People aren’t hearing about the safety issues with improperly repaired vehicles, the media isn’t talking about it, and government agencies don’t seem to have it on their radar,” says Mark Schaech. “Most people don’t realize how they end up losing out in terms of resale value when they have their cars fixed this way, not to mention the way we’re all paying by having numerous unsafely repaired cars on the road.”