By Jeff Sanford
Toronto, Ontario -- May 12, 2016 -- Welcome to another edition of Friday Fun. This week we look at repairers stepping up to help out the citizens of Fort McMurray, the "crunch" for insurance companies and why Ontario's breathalyzer equipment might be faulty.
- It's good to see some members of the collision repair industry stepping up to help out with the Fort Mac fire. You may have heard about Carrossier ProColor's recent donation (see "Carrossier ProColor donates $10,000 to support citizens of Fort McMurray"), and others are following suit. According to an article in the Hamilton Spectator, Sam's Auto is holding a car wash to benefit the people of Fort McMurray on May 14 from 10 a.m. to 3 p.m. Proceeds from the carwash will be donated to victims of the wildfire. Ottawa Auto Body & Repairs and Hamilton Discount Auto Parts will match the total amount collected.
- Several reports appeared this week abut the need for auto insurance companies to increase their rates to cover rising claims. A report on an SNL Financial study finds that the “largest insurers wrote more premiums in 2015 than they did in 2014.” Nevertheless, insurance companies “paid out unprecedented sums in claims. The result was 14 out of the 20 largest auto insurers actually ran losses last year on their auto insurance premium profits.”
The “crunch” for the companies came in 2015 when low oil prices and low unemployment rates resulted in an increase in the amount of driving among the general population. As “miles driven” increased, so did the number of accidents. The report notes that Warren Buffett's big US auto insurance firm GEICO increased its auto insurance business by 11 percent but managed to lose 43 percent in profits last year. According to the report, “People are getting into more accidents than ever and the companies simply cannot keep up at their current rates.”
Compounding problems at the insurers is the fact that interest rates are at weirdly low levels. No one predicted such a long-term, profound decrease in the interest rate. Some in the financial industry now talk about a new era in market history when interest rates (and stock returns) will be generally lower than they were in the post-war era, furthering the financial woes of insurance companies.
- Another report this week about insurance rates notes that in Ontario auto insurance rates have actually fallen. Benefits paid out to victims of car accidents have been reduced, and that's allowing companies to reduce rates. According to the report, the “$86,000 for treatment for non-catastrophic accidents” insurance companies have to pay falls by “25 percent to $65,000 as of June 1.” The report notes that, “This benefit change is one reason why the average Ontario insurance renewal dropped 3 percent in the first quarter of the year, according to the Financial Services Commission of Ontario (FSCO). That brings the overall decrease since 2014 to 10 per cent.”
- A report on US-based collision repair site Fender Bender included an interview with an analyst from UK firm Thatcham who discussed trends in the industry. According to the report, “Advanced drive assistance systems (ADAS) will impact collision volume but factors such as population growth and urbanization may mitigate the overall effect on the collision repair industry. According to the analyst, “ADAS … will have an effect on claims volume and types of crashes, reducing many impact types, and saving lives and reducing serious injuries ... Head-Up Displays (HUDs) are an ADAS item which may grow in popularity rapidly.” The article went on to note that while, “ADAS will reduce many accident types, trends like population growth and urbanization will have contrary effects,” and that, “it will take a new understanding of how these systems relate to others in the car to complete an effective repair.
- A judge has ruled that “the breathalyzer equipment used in Ontario—the Intoxilyzer 8000C—may be faulty.” A former government scientist testified in court that there is an “uncertainty of measure” regarding the instrument’s accuracy and calibration according to the report. A driver charged with drinking and driving was acquitted on this basis was recently acquitted.
- Carmakers are famous for creating proprietary products, so the idea the industry would adopt a Linux product for connected cars may seem unlikely. Nevertheless, the Linux Foundation recently released “Automotive Grade Linux” for use in cars. In an interview published this week, Dan Cauchy, GM of the Automotive Grade Linux project at the Linux Foundation, said this about the new interest in dashboard software: “Car companies realize they’ve fallen behind consumer electronics companies. Nowhere is that more obvious than in the dashboard experience. Compare an average car’s 'navigation system'—often a touchscreen console—to a modern Android phone or iPhone. It’s slower, clunkier and doesn’t have anywhere near the same app ecosystem. These in-car systems are often $1,000 or more, which actually makes them more expensive than the high-end smartphones they lag behind,” says Cauchy.
- 3D Printing is going mainstream in the auto industry, according to a report in Automotive News: "Carbon3D, a startup in Redwood City, Calif., is supplying production parts made from polymers to BMW and Ford. Some Mini models use a 3D printed decorative trim piece. The Ford Transit Connect uses 3D printed bumper parts. Last September, Alcoa invested $60 million to develop a 3D printer than can make parts from from aluminum, titanium and other alloys. General Electric has begun using 3D printers to manufacture fuel nozzles from powdered metals for jet engines."
- This week the City of Vancouver and BC Hydro, the Province of British Columbia, Natural Resources Canada and BMW announced the first “fast charge” station for electric vehicles in the city. For a small fee electric car owners can plug in and “charge an electric vehicle's battery to 80 percent in about 20 minutes, or about eight to 10 times faster than a typical home charging system,” according to a report.
- The auto industry is doing well on a global basis. Various reports this week noted that India's total domestic passenger vehicle sales were 11 percent in April, Vietnam's April auto sales jumped by 38 percent and car sales in Western Europe grew by 8 percent the same month. China’s passenger-vehicle sales rose for the eighth time in nine months.
- The popular investing website Seeking Alpha this week published a glowing report about the state of business at major U.S. parts recycler, LKQ. The report notes that the company's stock is up a strong 17 percent over the past year. The company has boosted the guidance it has offered to analysts for 2016 (that is, the company thinks it's going to do better this year than they first said). The report also noted the global expansion currently underway at the company, a story Collision Repair magazine has been following. It seems many more in the financial industry are catching on to the good story at LKQ.