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FINDING Opportunity AMIDST Challenge

Optimistic experts provide perspective to navigate the current landscape
of change at the ARA 75th Annual Convention & Expo in Orlando.
By Caryn Smith

Training. Technology. Momentum. Certification. Quality. Consistency. Mentoring. United. OEM Statements. Employee Recruiting & Retention. Growth Potential. Automatics.

These are some buzzwords that were heard at the anniversary gathering of ARA’s 75th Convention & Expo in Orlando in November 2018. With fast industry technology advancements and changing business landscapes, the venue offered a refreshing contrast with its central location at the Walt Disney World Swan & Dolphin Resort minutes from Epcot and Hollywood Studios. Many attendees took advantage, and brought family to enjoy the theme park experience.

The most evident format change was the introduction of the “ARA Mentoring Program” pilot and peer-to-peer panels. With mentors and mentees who agree to work one-on-one to gain new perspective, ARA is facilitating this new program for those who want help and accountability.

Programming with a Purpose
The State of the Industry session attendees got right down to business, analyzing where things are and where they could go. It was expressed that the industry and the Association have faced many challenges in its 75-year history, from its earliest days as NATWA, to ADRA and then as ARA. “Change is not a bad thing, change brings success,” said Herb Lieberman, a longtime industry veteran, and an ARA Past President. “We can’t look in the rear view mirror, we must look through the front windshield.”

The next generation sees the car as a mobility device, Lieberman noted, with having transportation as the priority, whether they own the car or not. As evidence, it was noted that car leasing is up 27 percent in the last 5 years. The connected car will continue to be in the center of discussions, with OEM collision repair guidelines “dictating how our customers should repair a vehicle. Liability is now on the back of repairers, and we have to address this issue in the near future,” Lieberman says, citing the John Eagle Collision Center 31.5 million settlement to a Dallas couple for negligent repairs. Add in accident avoidance, it leaves us wondering, “who is the driver?” Finally, the decline of repairs is also imminent, and the auto recycling industry must be prepared for the opportunities that recycled electronic parts can offer for the future.

Getting to the nuts and bolts, many session panels offered nuggets of advice from leading recyclers.

“As an industry we must demand better systems in our business, bringing in IT mindsets, people and paths to automation for success,” says Eric Schulz, AAA Auto Parts, Rosemount, MN. “As owners, sometimes we need to get out of the way, know where we are strong, and not strong.” He noted that now is the time for more participation from the industry, as one single united voice, to be the backbone to make real impact and progress. “We need to better share our importance to the general economy.”

The industry is getting smaller, with Amazon and eBay selling parts all over the world, noted Dan Marks, Marks Auto Parts, Buffalo, NY. The six deadly words are, “that’s how we’ve always done it.” Rick Morrow, M & M Auto Parts, Inc., Stafford, VA, concurred. “We all wish we could keep doing things the way we had, but that’s not the way it is.” Change is heading straight for the industry, and those recyclers who embrace it, finding opportunities inside the challenges, will prosper.

The 3rd annual Recyclers Roundtable brought together a packed ballroom from around the world again to discuss issues and opportunities.

That there is no overall certification and standardization in the industry was discussed extensively, with the viability of ISO 9001 compliance and NSF International certification as possible standards. “The challenge is where to start,” said Chris Daglis, Managing Director, PARTnered Solutions. “Any momentum to get everyone moving forward is hard … but we must take it to the next level. Keep driving forward; the risks take care of themselves. We must forget the challenges.”

“Valuing certification in a dollar for dollar return on investment never made sense,” noted Scott Robertson, Robertson’s Auto Salvage, Wareham, MA, and roundtable facilitator. “We need to focus on the results it brings,” referencing Pam’s Auto Inc, St. Cloud, MN, who recently adopted the NSF Certification. Business policies, practices and procedures should be the focus. “NSF spoke to us as leaders and to our management and employees, and that translates into sales,” said Mike Meyer, Pam’s CEO. “It was really wonderful. It improved recruitment, retention, and employee onboarding, with safety at the highest level highlighted.”

According to its website, NSF International addresses industry-wide concerns about identifying high quality automotive aftermarket collision parts through an Automotive Parts Certification Program. They compare aftermarket parts to their OEM service counterparts to ensure that the aftermarket parts meet the OEM parts in form, fit and function. Certified parts that bear the NSF mark signifies that the part and the facility have met the program’s stringent requirements.

“We need all auto recyclers to embrace some level of certification. ARA is positioned to guide the industry through the next phase,” says Robertson.

Included in advancing parts certification as an industry standard, the concept of understanding the customer was another topic raised. “An idea for the future that we should evaluate is incentive pay for a repairer to use our parts,” said Lieberman. “We need to analyze what is the ‘profit motive’ for our customer.”

ARA in the News
Significant news from ARA was announced by Executive Director Sandy Blalock, who reported that the mortgage on the ARA Headquarters in Manassas, VA is paid in full. She thanked the group of Past Presidents who made purchasing it a possibility, and celebrated that the note had been paid off earlier than expected. She also shared that the ARA leadership is exploring new programs and benefits to streamline productivity and provide enhanced member benefits.

In the coming year, the ARA Technical Committee is presenting ongoing webinars, in order to create a training library for ARA members and their teams.
“There will be single topic monthly podcasts or webinars, presented by experts and directed toward the techs and employees of facilities,” says Andy Latham, chair. “We recognize that owners and managers attend conventions and conferences, and they need help getting the information to their teams at the facility, who should also benefit from ongoing training. This will help take the load off the top level management to do it.”

The ARA Educational Foundation (ARAEF) will also focus more on cutting-edge training and enhanced content with the announcement that ARA University (arauniversity.org) will be a Direct Member benefit to all members, not operating under the ARAEF. This allows the ARAEF to focus on content and less on recruiting participants to the platform.

As a pilot program, the Virginia Automotive Recyclers Association signed a contract with ARA to manage their state association affairs in order to make it more viable for state members. It is hopeful that this test might allow smaller Affiliate Chapters to combine resources with ARA to thrive in the future.

Along those lines, the Gold Seal Certification program will merge with the Certified Auto Recycler (CAR) program, and a new Certification Committee has been assembled to “restart” the certification programs in general. The Committee is looking for new members, and new ways to offer certification, such as the NSF Standard mentioned earlier. Chair Shannon Nordstrom, Nordstrom’s Automotive Inc., says, “These ARA standards have been important to our facility, and its growth.

We are looking for ways to tie it all together to have a greater impact for the entire industry.”
As a way to build industry awareness, ARA has launched a cooperative advertising agreement with the 10 Missions Media, who produce Fender Bender, Rachet + Wrench and other publications. ARA is creating a customized 20-page insert about auto recycling in an the April issue of Fender Bender. It will highlight the benefits of working with automotive recyclers and using recycled auto parts in repairs. This is a first step to create industry awareness directed at the collision repair industry.

“With everyone’s combined effort, we are as strong as ever,” Blalock says. “The only constant going forward is change. Some of it we can control, some of it we cannot. Through effective dialogue, idea-sharing, collaboration and partnerships, we can get to the next level as an organization that is ready to help professional automotive recyclers benefit from change.”

It’s All in a Session
The ARA educational track was full of insight, discussion and mentoring that left attendees with plenty to take back home to consider. Here are some highlights from various sessions.

Global Industry: As an industry concern for auto recyclers, Andy Latham reported that what should be end-of-life vehicles are being refitted and sent to other countries to be put back in service. “There are massive movements of these vehicles around the world. They are repairing end-of-life vehicles from major markets, even changing the driver orientation from right to left, or visa versa, and reselling them in smaller market countries. In one case, it was tracked that a written-off car in New Jersey landed in another country as a drivable vehicle. Russia is a large recipient of these cars. They flow through the Middle East, India and Asia.”

What makes this especially dangerous, beside the safety issue, is if these cars end up again in the auto recyclers’ end-of-life product pool around the world, with significant liability attached to them in general.

Full-Service Panel: In running a successful full-service operation, there are many variables that must determine standards of operation, but one thing is common among the most successful: Quality, Service and Price. “The customer has expectations, we must meet their expectations,” says Marty Hollingshead, Northlake Auto Recyclers and ARA’s Secretary. “Teach your people not to lie by omission, meaning that you must be upfront about all aspects of the part and sale. Fully describe all the damage to the part, deliver on set realistic expectations … send the part as promised,” he advices.

“Grow through efficiency, and deliver above what is expected,” echoes Dan Marks, Marks Auto Parts. “Grow your business through exceptional customer experience.”

Facility to Facility Variables
The full-service facility variables are things like whether or not to broker parts. “I am not a fan of brokered parts,” says Hollingshead. “We have standards for our parts that is difficult to control. We can’t control quality, shipping or profit margins.” Mike Meyer, of PAMs Auto Parts, says, “We broker a lot, but we spend the time to make the part look like ours, including packaging. Our goal is to always say ‘yes’ to the customer.”

Another variable is inventory. “We have a set amount of allotted space for parts. How much money we will make determines the amount of warehouse space we give to a particular part,” says Meyer. Whereas Hollingshead carries a deeper inventory on the shelf, “In my market, the part has to be on the shelf.”

Employee culture was also part of the discussion. Retaining the people you are investing in is a priority as they are the biggest expense and the biggest asset. Paying what a job is worth, making employees feel relevant, and that they are making a difference was the general advice from the panel. They cited paying for employee healthcare, along with dental and vision, as benefits that keep employees content. Educating employees about their benefits, by bringing in the experts to talk with them instead of it coming from management, shows you are invested in their well-being. Sending personal cards also makes your team feel valued.

Driving Down the Return Ratio Panel: The cost of returned parts is a big money-waster according to the panelists Todd Ensworth, CarEggs, Charlie Salter, Impact Salvage Solutions and Panel Armor Products, and Dan Snyder, Snyder’s Certified Auto & Truck Parts.

“Chaotic business practices cause the return rate to be high,” noted Snyder. “You cannot think that well in chaos. Set your goals of what you want and make a plan.” He suggested talking to people involved in the process, running it through in your mind, documenting it, and training your team, and then retraining.

“Be the auditor of your company. If an employee has a better idea, that is your new procedure.”

Another way to reduce returns is to explore if the sales team is asking the right questions. It is estimated that 20 percent of returns are because of a wrong part or an attachment was missing or damaged. The goal is to gather as much information as possible.

Some auto recyclers even send photo confirmations of the sold part so that the customer knows exactly what is coming, and documents the part’s current condition. When the part is originally inspected, that is the condition likely noted in the database. Over time, the part could be moved around and incur more damage.

Photo confirmation also allows the customer to order needed attachments which boost a sale value, or obtain not-included parts while the part is in transit to reduce their cycle time.

Other simple tips included confirming the shipping address and phone number, the vehicle VIN number to ensure the part they requested actually fits the make/model of the car. It is worth noting that proper packaging for shipping was stressed as the most important aspect of reducing returns. Helping the customer in these ways builds loyalty and confidence in your services, while enhancing attention to quality control helps you stand apart from your competitors.

Millennial Keynote: When working with this generation workforce, presenter Yuri Kruman, Forbes contributor and executive management consultant, says, “I can’t emphasize enough how important coaching is, and guiding someone through a career path.” Leadership coaching and helping this generation become a better ‘personal brand’ makes them feel like a valuable contributor to the business. Empowering employees with special projects or sending them to conferences also helps build loyalty.

To support these suggestions, he referenced that employee experience is the new buzzword. According to fellow Forbes contributor Denise Lee Yohn, “Now that, according to Gartner, more than 90 percent of businesses compete primarily on the basis of customer experience (CX), it’s no longer enough to make CX a corporate priority. The next competitive frontier is employee experience (EX) and the signs indicate so strongly that EX will become the next priority for organizations that I’m calling 2018 The Year of Employee Experience.”

This mindset is highly attractive to millennial workers, where the journey of the job is the focus of your organization and the stories of employees become the social media and website stories. From seamless employee onboarding processes (where many businesses fail, and then quickly loose new hires) to providing and explaining benefit packages, to creating a plan for “how to rise up in our company,” all the while providing the best technology and training, these are the ways of the next level of your business.

While this seems like a lot of work to hire and retain these finicky employees, it is all about getting peak performance, and these are things you should provide your team, anyways, says Kruman. Millennials have expectations for these conditions whereas prior generations only hoped for them. “People only remember how you make them feel,” says Kruman, “and as a generation, we are not shy about asking for the things everyone else also wants.”

Commodities 201: This informative session paired Benny Cunningham, Cunningham Brothers Used Auto Parts, and ARA President Jonathan Morrow, M & M Auto Parts, Inc. They spoke about the value of an automotive recycling facility based on its sellable parts assets. “Your customer’s perception will become your reality, whether we think it’s right or not,” Cunningham says, “we need to listen to the customer, and solve their problems. I asked my customer, what problem keeps you up at night? Then, we developed solutions to solve them. Therefore, we won General Motors Supplier of the Year in 2015 and 2016,” notes Cunningham. “Meet your customer on a level they want to be met.”
The automotive recycling industry is not even close to evolving as fast at the auto industry is, the pair emphasized. Overall, automotive recyclers own commodities of the entire auto industry, and the collision repairers and others who service vehicles are also part of that big picture. Everyone is being squeezed hard for cycle-time reduction, higher quality parts for less profit, and keeping up with new vehicle repairs and technology.

“The way to the competitive edge isn’t to villainize other parties, but to humanize them,” says Cunningham, emphasizing that when you find your value to these other parties, and work on consistently providing service to them, you can maintain your edge.

When it comes to commodities and profits, they recommend having one employee as a point person. “Potentially, this role is your most important employee,” Morrow emphasized. “The more that person analyzes your scrap channel, the more successful they are. They are the final decision-maker and hold the line of what happens to your product,” says Cunningham. “They should scour your inventory, determine what parts go on shelves with supply and demand, understand the commodity market, have real-time information, and make decisions on a vehicle when it goes into production. This allows parts to start flying where they can generate profit. When you integrate this across all channels and culture of your business, everyone looks out for potential profit.”

Auction Efficiency: “Purchasing, processing and product is what makes profit,” says Marty Hollingshead, a member of the auctions panel. This highlights the importance of buying cars at auction and having trust and confidence in the process. “I recommend you have a relationship with your regional or area manager at the auction,” notes Neil Harrow, GreenStar Auto Recyclers, Orlando, FL. “Having this established helps when issues may arise. This and being a smart buyer, knowing what product you need, and creating a system that works for your organization helps to buy efficiently.”

The panelists differed between preferences of live and internet auctions, and day or night auctions. One helpful tip was to consider the cash value, distance traveled, and fees associated with buying a salvage vehicle, and not just the car type and price. Using technology, such as Bid Buddy, also helps. Ultimately, knowing your own salvage data is critical to knowing what your best purchases will be.

Europe & Auto Recycling: Keynote Speaker Olivier Gaudeau, CEO, INDRA, noted the European Directive as being a help, not a hindrance, to auto recycling in Europe. It involves the carmakers in the process, with a clear role to be responsible from cradle to grave. (INDRA is a large automated multiple facility automotive recycler in France. See Nov.-Dec. 2018, p.12).

“We have 95 percent of the car that has to be recycled by law,” he said. “It’s huge. There has to be a design for recycling and design for dismantling future vehicles. This is why Renault decided to get involved with our company. Ultimately, if automotive recyclers are not profitable, it will be up to the carmakers to fund.”

“In Europe, as of January 2017, the consumer has to be offered the possibility to fix their car with reused car parts.” “INDRA has high levels of attention to quality. The parts are clean, photos are used in packaging the parts … We store all the parts, none are left on the car. Each of our teams dismantle about 5,500 cars per year.”

“Each country must find their own balance,” he says. “There are new problems to face with the electric car, hybrid, carbon fiber, and advanced technology.”

Disney Leadership Magic: A benefit of being at a Disney® property was a keynote presentation from the Disney Leadership Institute. “It’s not the magic that makes it work, it’s the work that makes it magic,” declared Katie Sanchez, presenter.

“Leaders establish sustainable operational values and vision by which organizations thrive. The values are the beliefs and ideas. The vision is the ambitious view of the future,” says Sanchez. “Every leader tells a story about what he or she values and envisions by their behaviors. We judge ourselves by our intentions, and we judge others by their actions. The question as a leader is to ask yourself, ‘What story am I telling?’ Having vision isn’t enough.”

“When someone shows you who they are, believe them,” Sanchez recommends. “There is an inherent connection between a leader’s personal and organizational values.” With Walt Disney’s many accomplishments, she says, “The best legacy is not one that is fondly remembered, but one that is actively emulated.”

Breakfast of Champions
The Ladies of the Automotive Recycling Association (LARA) annual gathering included breakfast, networking and an empowering speaker, Betsy Finnell, CEO, Hotlines, pictured right, who shared her journey that led to her 20-year industry business.

With deep roots in auto recycling, growing up in the family business, A & A Auto Salvage, in Topeka, KS, she shared that her mother, Betty, was her inspiration. Finnell remembers that Betty took on Lady Bird Johnson in the “Beautification Era” of auto recycling, insulted that Lady Bird thought salvage facilities were “filthy.”
Betty wrote her a letter and included photos of their “beautiful” yard. Lady Bird was so impressed to hear from a facility like this that it earned Betty a spot on the official White House Beautification Committee.

When Betsy’s father passed, Betty sold the yard and started a parts hotline, Roll Call (a predecessor to Hotlines), and the duo became partners. Watching her mother overcome challenges became the norm. In starting the business, they faced a 6-month equipment back-order. Her mother said, “We will manufacture our own phones!” and then they did it. Once in business, they received a letter from AT&T declaring a 40 percent increase in service fees, threatening all profit margins. Betty, a master negotiator, called them and got it down to 4 percent.

In an “empowering moment,” Betty sent Betsy alone to make a critical presentation to 80 of the best North Carolina salvage yards in the industry. “Mom says, ‘You go.’ I was 24. Mom had mortgaged the house to pay for all this. I have to win this deal for Roll Call. I get up in front of these established men and gave the presentation of my life. … I am pleased to say that all but one of the yards voted to go with us.”

They grew the business to be a successful enterprise that included the best quality yards in the network. Eventually, it was so successful that it was sold to a larger corporation. Betsy went to work for that company, but missed being an entrepreneur. She left to launch Hotlines, Inc. Of course, obstacles ensued, such as three months into business, their communication satellite fell out of orbit that took down service. Their 500 company network were out of connection. But pulling up her boot straps, as her mother did, she managed to find another satellite.

The real lesson she learned from Betty was that no matter what obstacle you face, “You don’t quit. You only loose when you quit,” she says. Paying it forward is her next step. “Ultimately, 20 years into Hotlines, my goal is to work with women in their own businesses, to mentor and help them, just like my mother empowered me.”

Orlando Expo Magic
All in all, the largest annual gathering of vendors to the auto recycling industry was a success. For ARA members, there is still nothing like that face-to-face contact with vendors who offer innovative products and services to meet their ongoing business needs. From applications to equipment to shipping to aftermarket, and everything in between, the gamut of services were available to see, touch and test. Exhibitors visited with current customers and made new connections. “It was good traffic, with good feedback,” says Jake Janowski, ETE Reman, commenting that exposing auto recyclers to aftermarket automatic transmission remanufacturing gives them an opportunity to say “yes” to their customer.

Kelly Furtado, ARS General Manager, says, “We’ve had new contacts and face to face with existing clients. ARA’s show helps us build our relationships.”

The ESD Water booth noted that they have “been busier than we’ve ever been, good show with lots of good feedback.”

Dan Fernandez of APU Solutions summed it all up, saying, “Anytime there is 1,000 people in attendance, it’s a good thing. It is a great time to catch up with clients, give new people some information, and we really enjoyed the host property and our booth space.”

Accelerate in Charlotte
In 2019, auto recyclers will once again take the lead in Charlotte, NC, October 10-12 for the 76th Annual Convention & Expo.

“This year, we responded to ARA members who’ve requested changes to our format. Working with the event team, committee volunteers and the Executive Committee, I believe we met that challenge, which will only continue into the 2019 Convention,” says Sandy Blalock. “This year, we went deeper into applicable information that can help an auto recycler’s bottom line, held peer-to-peer panels, and even matched businesses with mentors to work throughout the year together. Change is here, and ARA will do its best to respond to member requests.”

“The overall feedback on the exposition was tremendous,” says Kim Glasscock, ARA Events Director.  “Many of our exhibitors, both old and new, said they experienced great traffic at their booths and interest in their product(s). Attendees said they felt it was a great show with relevant products and services.

“We look forward to even greater participation in Charlotte,” says Glasscock, “as we plan for more program improvements, and with a majority of our exhibitors already expressing interest in returning.”

“Even with the challenges,” says Blalock, “the industry is uniting. It is an exciting time to be part of ARA.”

Caryn Smith is the editor of Automotive Recycling magazine and has been covering the industry for over 20 years.