Reporte de la Industria de la Reparacion de Mitchell en EEUU

Industry Trends

ReportVolume Ten Number Four

Q4 2010Published by Mitchell International, Inc.

Quarterly Feature:

The Trend in Estimate Severity is Part Inflation and Part Parts.by Greg Horn Page 3

Feature in this issue:

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Table of Contents

3 Quarterly Feature: The Trend in Estimate Severity is Part Inflation and Part Parts.

6 The Economy & Short-Term Energy Outlook 8 Current Events in the Collision Industry 15 Motor Vehicle Markets

New Vehicle Sales Used Vehicle Sales

17 Mitchell Collision Repair Industry Data Average Appraisal Values Collision Losses Facts At-A-Glance: Automobile Sales Comprehensive Losses Third-Party Auto Property Damage Supplements Parts Analysis Paint & Materials Labor Analysis

Adjustments

23 Procedure Page Updates 24 Total Loss 25 Canadian Collision Summary

Canada Appraisal Severity Canada Parts Utilization

Vehicle Age and ACV’s

30 Collision Casualty Statistics 31 About Mitchell International, Inc.

News Releases Q2-2010 Mitchell Brand Advertising at Work

The Industry Trends Report is a quarterly snapshot of the auto physical damage collision and casualty industries. Just inside—the economy, industry highlights, plus illuminating statistics and measures, and more. Stay informed on ongoing and emerging trends impacting the industry, and you, with the Industry Trends Report!

Questions or comments about the Industry Trends Report may be directed to:

Greg Horn Editor in Chief, Vice President of Industry Relations [email protected]

For distribution and circulation questions, or requests for back issues, please contact:

Regina Merkey Managing Editor, Sr. Marketing Communications Specialist Distribution and Circulation (858) 368-7790 e-mail: [email protected]

For data analytics, please contact:

Gail Sloan Vice President of Licensing and Corporate Accounts (858) 368-7869 e-mail: [email protected]

Additional Contributors:

Manheim analytics provided by Thomas C. Webb, Chief Economist at Manheim Auctions. Webb has been associated with the used vehicle market for more than 26 years, including serving as Senior Manager at a professional services firm’s global automotive practice, and Chief Economist for one of the industry’s largest national trade organizations.

The Industry Trends Report is published by Mitchell International, Inc.

The information contained in this publication was obtained from sources deemed reliable. However, Mitchell International, Inc. cannot guarantee the accuracy or completeness of the information provided.

Industry Trends

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Mitchell Industry Trends Report 2

Mitchell International, Inc., founded in 1946 and headquartered in San Diego, California, is a leading provider of information and workflow solutions to the Property & Casualty Claims and Automotive Collision Repair industries. The company’s comprehensive solution portfolio streamlines the entire auto physical damage, bodily injury and workers’ compensation claims processes. Mitchell enables millions of electronic transactions between more than 30,000 business partners each month to enhance partner productivity, profitability, and customer satisfaction. For more information on Mitchell International, please visit our website at www.mitchell.com.

Volume Ten Number FourQ4 2010

Published by Mitchell International, Inc.

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Quarterly Feature


The Trend in Estimate Severity is Part Inflation and Part Parts.Study Reaffirms Unexpected: When OEM part prices increase, estimate severity decreases.

By GReG HoRNVice President of Industry Relations, Mitchell International

In last year’s Q4-2009 issue of the Industry Trends Report, we explored different slices of parts pricing data by vehicle origin and part type via a new mechanism—the Mitchell Collision Parts Price Index (MCPPI). As you may recall, we created the MCPPI using the Consumer Price Index (CPI) as our model since the CPI is a widely recognized gauge used by many consumers to monitor the general rate of inflation. It is one of the most closely watched economic indicators because it tracks the rate of inflation for a wide sampling of goods we routinely buy like food and clothing and services we regularly use such as transportation and medical care.

Just in the same way the CPI measures a vast “basket” of goods and compares the prices month to month, our collision parts basket measures the average collision parts inflationary trends. This array ranges from the inexpensive to pricier items and represents the top 20 most replaced collision parts for categories including hoods, fenders, headlamps, turn signals, and side marker lamps.

How did we get everything into our basket? We pulled data from 2003 through the first half of 2010 and used the results to create weighted average prices for these parts in aggregate, setting the base year at 2003 and equal to 100. Data for all OEM part types reflects retail prices, and in the case of LKQ/used parts, markups are included in the pricing. This technique allows us to compare inflationary trends by part type.

By once again looking at the top 20 part types replaced—as we did last year—we are able to not only reaffirm the relationship between parts prices and inflation, we can also get a clear picture of how the recession continues to affect alternate part selection behavior. Parts repair also needs to be included in the basket, so to assess how a tough economy is affecting parts repair, (a less expensive alternative for insurers and a larger margin operation for shops) we revisited the notion of “substitution”—selecting to repair a part rather than replace it.

Chart 1 on the next page shows some rather positive findings, indicating that the overall inflation rate for the first half of 2010 is a modest 1.21 compared to the steady increase from 2005-2009.

Continued…

About the author…

Greg Horn Vice President of Industry Relations, Mitchell International

Greg Horn joined Mitchell International in September of 2006 as Vice President of Industry Relations. In this role, Greg assists the Mitchell sales force in providing custom tailored business solutions to the Property and Casualty Claims and Automotive Collision Repair industries.

He provides guidance to Mitchell’s Product Management and Business Analytics teams, playing an important role in shaping Mitchell’s solution portfolio to ensure that it meets the evolving needs of current and future clients. Greg also presents Mitchell’s Industry Trends Updates at conferences across the country.

Prior to joining Mitchell, Greg served as Vice President of Material Damage Claims at GMAC Insurance, where he was responsible for all aspects of the physical damage claims process and the implementation of a unique vehicle replacement program along with serving on the GM Safety Committee. Prior to GMAC, Greg served as Director of Material Damage Processes for National Grange Mutual in Keene, NH.

Just in the same way the CPI measures a vast “basket” of goods and compares the prices month to month, our collision parts basket also measures the average collision parts inflationary trends.


Breaking out the MCPPI by vehicle country of origin in Chart 2 below shows us that the value of European cars has increased by 5.20 points respectively from the previous year—a dramatic increase compared to Domestic and Asian parts indices, which each increased less than one point. If you look at the 2008-1H10 time span, you might suspect that exchange rates are responsible for some of this hike, but the dollar has an almost direct inverse relationship to the yen against the euro exchange rate, so the Asian parts manufacturers barely registered an increase. The most likely cause is pricing actions. Use of new OEM parts is much higher for European vehicles than it is for Asian, so any pricing action taken by the European OEM’s would have a greater effect on the market basket of defined parts in the MCPPI.

When we take it to a more granular level and split the data out by part type in Chart 3 on the next page, we see a continuation of the trend first noticed when we initially created the MCPPI. The LKQ/used parts price index has actually decreased and has continued to do so in the 2009-2010 time span, with the aftermarket price index continuing to increase at a rapid rate. However, the increase of market basket prices for new OEM parts slowed in 2009-2010 from 2008-2009’s pace, increasing only 3.02 points.

Quarterly Feature: Revisiting the Mitchell Collision Parts Price Index (con’t.)


125

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2003 2004 2005 2006 2007 2008 2009

Chart 1MCPPI by Year (all part types)

100.00 100.84

104.64107.78

111.92114.46

117.50118.71

1H10

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Chart 2MCPPI by Vehicle Origin

137.43

120.73

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asian

european

domestic


Quarterly Feature: Revisiting the Mitchell Collision Parts Price Index (con’t.)


If we leverage the data further, there are also a few more conclusions that we can draw from the newest look at the MCPPI in terms of LKQ/used parts. For one, the increasing number of overseas buyers of salvage vehicles has not restricted the use of salvage parts, nor has it caused the price of those salvage parts to increase as evidenced by Chart 3 (see page 21 for the latest US parts trends data). Secondly, LKQ/used parts index performance has softened the overall inflation rate of all parts, keeping the index for 2010 at 94.29 when the most used part type, new OEM parts, came in at 126.39.

With parts representing approximately 42 percent of the average repairable estimate dollars, you better believe they have a significant influence on the overall cost of a collision repair estimate. If you take the time to understand parts use and how inflation affects this rate, you will also understand where estimate severity is trending and why—another critical element that impacts your business.

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Chart 3MCPPI by Part Type

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remanufactured

YOUR KEY TAKEAWAY: If you take the time to understand parts use and how inflation affects this rate, you will also understand where estimate severity is trending and why—another critical element that impacts your business.


The Economy & Short-Term Energy Outlook

The EconomyACCoRDING To A STATeMeNT ReLeASeD oN oCToBeR 12, 2010, THe FeDeRAL oPeN MARKeT CoMMITTee decided to maintain the target range for the federal funds rate at 0 to 1/4 percent, anticipating that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.

The labor market situation continues to improve only slowly. The unemployment rate ticked up in August and remained close to the level that has prevailed since the beginning of this year. Initial claims for unemployment insurance remain at an elevated level. In addition, other indicators of labor demand, such as measures of hiring and job vacancies, have not improved.

Industrial production increased solidly in July and then rose more moderately in August. Manufacturing production was boosted in July by a pickup in motor vehicle assemblies as automakers replenished lean stocks at dealers. However, the production of motor vehicles was pared back in August. More broadly, the output of high-technology items and other business equipment expanded at a solid pace in July and August.

Real personal consumption expenditures rose modestly in July, similar to the average increase over the preceding two months. Data for retail sales and the sales of light motor vehicles pointed to a moderate gain in real consumer spending in August. Real disposable personal income declined a bit in July after increasing at a solid pace in the second quarter of this year. The personal saving rate edged down in July but remained near the high level registered in the second quarter. Indicators of household net worth are mixed; home prices moved down in July, while equity prices inched up. After falling back in July, consumer confidence remained downbeat in August and early September, with households more pessimistic about the outlook for their personal financial situations and general economic conditions.

Housing activity, which had been supported earlier in the year by the availability of homebuyer tax credits, softened further in July. Sales of new single-family homes remain at a depressed level. Sales of existing homes fell substantially in July, and the index of pending home sales suggests that sales were muted in August. Starts of new single-family houses in July and August were below the low level seen in June, and the number of new permits issued in August appeared to signal little improvement in new homebuilding. House prices declined modestly in July after changing little, on net, in recent months.

Inflation is projected to remain subdued, with headline and core inflation little changed from previous expectations. The current and projected wide margins of economic slack are expected to contribute to a small slowing in core inflation in 2011, which is anticipated to be tempered by stable inflation expectations. Inflation is projected to change little in 2012, as considerable economic slack is expected to remain even as economic activity is anticipated to strengthen.

The U.S. international trade deficit narrowed in July after widening in June. The rise in exports in July more than offset their decline in June, as overseas sales of capital goods rose sharply. Most other major categories of exports were little changed in July, although exports of automotive products posted their first decline since May 2009. The narrowing of the trade deficit in July also reflected a broad-based decline in imports following their large increase in June. Imports of consumer goods fell substantially in July, while imports of industrial supplies, capital goods, and automotive products also moved down. In contrast, imports of petroleum products remained about flat in July.


Information on the economy and short-term energy outlook was obtained from the US Federal Reserve Board, Federal Open Market Committee (FOMC) and the US Department of Energy, Energy Information Administration (EIA). For more information, or to view original source materials, visit: www.federalreserve.gov/FoMC or www.eia.doe.gov


The Economy & Short-Term Energy Outlook (con't.)


Increases in foreign economic activity appear robust, on average, for the second quarter of 2010. In particular, gross domestic product (GDP) grew strongly in the emerging market economies, even though gains in China apparently moderated. Among the advanced foreign economies, Europe posted a notable rise in economic activity in the second quarter; rapid expansion in Germany more than offset weaker outcomes in other euro-area economies, particularly those experiencing financial stress related to concerns about their fiscal situations and potential vulnerabilities in their banking sectors. In Canada and Japan, the rise in real GDP slowed noticeably in the second quarter. Recent indicators of foreign economic activity for the third quarter, including data on exports, production, and purchasing managers indexes, generally pointed to a slowing in the pace of expansion in economic activity abroad. Headline inflation rates in foreign economies generally were restrained in the second quarter by a deceleration in food and energy prices, but prices appeared to be rising a bit more rapidly of late.

Overall, projections for the increase in real economic activity over the second half of 2010 are expected to be lower than previously anticipated. The forecast for growth next year is also slightly lower than initially projected, although a moderate strengthening of the expansion in 2011, as well as a further pickup in economic growth in 2012, is expected. Economic data suggests that the underlying level of demand is weaker than previously projected. Moreover, the outlook for foreign economic activity also appears a bit weaker than originally anticipated. In the medium term, the recovery in economic activity is expected to receive support from accommodative monetary policy, further improvements in financial conditions, and greater household and business confidence. The increase in real GDP is projected to be sufficient to slowly reduce economic slack, although resource slack is anticipated to still remain elevated at the end of 2012.

Short-Term Energy OutlookThe U.S Energy Information Administration (EIA) projects average household expenditures for space-heating fuels will total $986 this winter (October 1 to March 31), an increase of $24, or 2.5 percent, from last winter. The Administration is also projecting higher expenditures in all fuels except electricity, where expenditures are expected to decline by 2 percent. This forecast reflects moderately higher prices for all the fuels, although slightly milder weather than last winter for much of the Nation should contribute to lower consumption in many areas.

EIA expects the price of West Texas Intermediate (WTI) crude oil to average about $80 per barrel this winter, a $2.50-per-barrel increase over last winter. The forecast for average WTI prices rises gradually to $85 per barrel by the fourth quarter of 2011 as U.S. and global economic conditions improve. EIA’s forecast assumes U.S. gross domestic product (GDP) grows by 2.6 percent in 2010 and 2.1 percent in 2011, while world oil-consumption-weighted GDP grows by 3.8 percent and 3.3 percent, respectively, in 2010 and 2011.

Estimated U.S. carbon dioxide (CO2) emissions from fossil fuels, which declined by 7.0 percent in 2009, are expected to increase by 3.2 percent and 1.6 percent in 2010 and 2011, respectively, as economic growth spurs higher energy consumption.

Overall, the economic outlook has softened somewhat, and the risks to the outlook have shifted to the downside. Economic expansion is likely to be strong enough to continue raising resource utilization, albeit more slowly than previously anticipated. Inflation is likely to stabilize near recent low readings in coming quarters and then gradually rise toward more desirable levels.

Information on the economy and short-term energy outlook was obtained from the US Federal Reserve Board, Federal Open Market Committee (FOMC) and the US Department of Energy, Energy Information Administration (EIA). For more information, or to view original source materials, visit: www.federalreserve.gov/FoMC or www.eia.doe.gov



Current Events in the Collision Industry

Small Business optimism Index Remains at Recessionary Level

Excerpted From: CollisionWeek—October 2010

The National Federation of Independent Business Index of Small Business Optimism gained 0.2 points in September, rising to 89.0. The Index has been below 93 every month since January 2008 (32 months), and below 90 for 26 of those months, all readings typical of a weak or recession-mired economy.

“The downturn may be officially over, but small business owners have for the most part seen no evidence of it,” said NFIB Chief Economist Bill Dunkelberg.

Average employment growth per firm was negative 0.26, and has been negative in all but two months since January 2008. Eleven percent (seasonally adjusted) reported unfilled job openings, unchanged from August and historically very weak. Over the next three months, 8 percent plan to increase employment (unchanged), and 16 percent plan to reduce their workforce (up three points), yielding a seasonally adjusted net-negative 3 percent of owners planning to create new jobs, down four points from August, an unexpected reversal in job creation prospects.

The frequency of reported capital outlays over the past six months rose one point to 45 percent of all firms, a point above the 35-year record low.

The net percent of all owners (seasonally adjusted) reporting higher nominal sales in the past three months lost a point, falling to a net-negative 17 percent, 17 points better than June 2009 (the recession bottom) but still indicative of very weak customer activity. Unadjusted, 23 percent of all owners reported higher sales (last three months compared to prior three months, down two points) while 34 percent reported lower sales (up one point). Widespread price cutting continued to contribute to reports of lower nominal sales.

The net percent of owners expecting higher real sales lost three points from August, falling to a net-negative 3 percent of all owners (seasonally adjusted)—a dismal outlook. Not seasonally adjusted, 26 percent expect improvement over the next three months, 37 percent expect declines.

earnings

A net-negative 33 percent of owners reported positive profit trends, deteriorated three points in September and 29 points worse than the best expansion reading reached in 2005. The persistence of this imbalance is bad news for the small business community. Profits are important for the support of capital spending and expansion. Not seasonally adjusted, 16 percent reported profits higher (down two points), but 45 percent reported profits falling, a three point increase.

Owners continued hold the line on compensation, with 7 percent reporting reduced worker compensation and 10 percent reporting gains. Seasonally adjusted, a net 3 percent reported raising worker compensation, only five points better than February’s record low reading of negative 2 percent.

Credit

Overall, 91 percent of small business owners reported that all their credit needs were met or that they were not interested in borrowing. Nine percent reported credit needs not satisfied, and a record 53 percent said they did not want a loan.

“Members of Congress fled with no action on important issues such as extending current tax rates, leaving the cloud of uncertainty larger and darker,” said Dunkelberg. “In response, consumer sentiment fell and owner optimism remained anchored solidly in recession territory. Owners won’t make spending commitments when sales prospects remain weak and decisions such as tax rates and labor costs remain so uncertain.”

AN eDIToR’S NoTe…

These are signs that the recovery may be stalling for the collision business, and business owners need to prepare for such a stall.



Current Events in the Collision Industry (con't.)

Defining Like Kind and Quality


What does it mean when an aftermarket part is said to be ‘equivalent’ to OEM?

The July Collision Industry Conference presentations on various aftermarket parts heightened the call to mandate that aftermarket structural parts manufacturers ensure that they produce safe, quality parts to a standard specification that includes proper material, dimensions and form process. A case was presented at that meeting indicating that the use of material, form and thickness different than the OEM original part could lead to increased damageability or affect the vehicle’s restraint systems. The conclusion to be drawn was that aftermarket structural parts must be manufactured to be of like kind and quality, or “equivalent,” to OEM in order to perform like OEM.

Equivalent to OEM, or like kind quality with respect to replacement parts, is specified in regulations in 20 states, and in defining the term like kind quality, the OEM representative at CIC stated that in order to qualify as like kind and quality, a replacement aftermarket part must be “equivalent” to the OEM branded part. But what does equivalent mean?

“Which parts are being referenced, the original production parts or OEM service parts? These questions are raised by Diamond Standard after a study of four OE manufacturers’ data for front bumper weight, thickness, tensile and yield strength properties to gauge their interpretation of equivalency in creating a certifiable alternative part,” said Mike O’Neal, President of Diamond Standard.

Aftermarket parts manufacturer Diamond Standard has published the results of a series of tests on OEM parts conducted to measure their characteristics including dimensions and material strength, in order to illustrate the variances that exist in OEM factory parts.

In this example, the weight of the OEM part falls within a range that can vary by plus or minus 3.3 percent. The material thickness varies by five percent, and the tensile strength shows a variance of plus or minus 11 percent from average.

The examination of OEM parts shows that there is no single measurement of strength or dimension but there is a definite range in the parts that must be viewed as equivalent or acceptable and would not affect part performance, restraint systems and vehicle safety. Diamond Standard explains that the ranges are the realities of the initial production run on

Weight (lb.) CurrentService PartHigh Low Average

37.78 35.35 36.56 37.75

Material Thickness CurrentService PartHigh Low Average

0.0790 0.0714 0.0752 0.0761

yield (psi) CurrentService PartHigh Low Average

44800 34700 39750 40400

Tensile CurrentService PartHigh Low Average

57000 45400 51200 52300


The term equivalent in the case of manufacturing variances means that the equivalent part should fall in the same engineering ranges as those established by the original equipment parts. The issue is that some of today’s aftermarket parts do not fall in those ranges and then cannot truly be called “like kind and quality.”




the part moving to the shorter runs of service parts or even the use of different tier 2 or 3 suppliers to manufacture the parts. Raw material spot buying, the state of the economy and volatility of the steel market can also contribute to normal and acceptable variances in material.

Equivalency is shown by this study to have a definite range. According to Diamond Standard, these results are not meant to imply that OEM manufacturers or their suppliers are in any way not diligent in their pursuit of safe, reliable and consistent quality replacement parts. Nor does it attempt to defend those aftermarket manufacturers who are knowingly not diligent in replicating the quality or safety of structural replacement parts.

“The charge for Diamond Standard is to follow the criteria built within the original part and fall within the ‘acceptable’ mean values of the production and service parts,” said O’Neal. Achieving that mark of quality through vigorous third party testing provides the industry a true alternative to the part it replaces. “This is our assurance to the industry that Diamond Standard parts are safe and reliable alternatives to use,” said O’Neal.

Download charts that show a sampling of the results obtained by Diamond Standard’s examination of OEM parts across multiple lot numbers, years and manufacturers from production parts to current service parts.

Deer-Vehicle Collision Frequency Up 21 Percent in Five years


While the number of miles driven by U.S. motorists over the past five years has increased just two percent, the number of deer-vehicle collisions in this country during that time has grown by ten times that amount.

Using its claims data, State Farm, the nation’s leading auto insurer estimates 2.3 million collisions between deer and vehicles occurred in the U.S. during the two-year period between July 1, 2008 and June 30, 2010. That’s 21.1 percent more than five years earlier.

The average property damage cost of these incidents was $3,103, up 1.7 percent from a year ago.

For the fourth year in a row, West Virginia tops the list of those states where a driver is most likely to collide with a deer. Using its claims data in conjunction with state licensed driver counts from the Federal Highway Administration, State Farm calculates the chances of a West Virginia driver striking a deer over the next 12 months at 1 in 42.

Iowa is second on the list. The likelihood of a licensed driver in Iowa striking a deer within the next year is 1 in 67. Michigan (1 in 70) is third. Fourth and fifth on the list are South Dakota (1 in 76) and Montana (1 in 82).

Pennsylvania is sixth, followed by North Dakota and Wisconsin. Arkansas and Minnesota round out the top 10.

The state in which deer-vehicle collisions are least likely is still Hawaii (1 in 13,011). The odds of a Hawaiian driver hitting a deer between now and 12 months from now are roughly equivalent to the odds of finding a pearl in an oyster shell.

U.S. map showing likelihood of deer-vehicle collision by state

Chart listing likelihood of vehicle-deer collision by state


Deer hits drive average severity up for comprehensive claims around this time of year, so if you find your comprehensive severity has spiked, do a little research—this may be why.

http://www.collisionweek.com/cw/graphics/DS%20Front%20Bumper%20Testing.pdf

http://www.statefarm.com/_pdf/collision_likelihood_09.pdf

http://www.statefarm.com/aboutus/_images/images/deer_chart.jpg




BRIC countries are developing into economic powerhouses of automobile production

By: Greg Horn

Excerpted From: ABRN—August 2010

I have talked a lot about the looming arrival of Chinese cars in the United States, but there are other countries that could be importing cars here—countries that are developing quickly into economic powerhouses of automobile production.

As a group, the term BRIC refers to the related economies of Brazil, Russia, India and China—an acronym coined by Jim O’Neill of Goldman Sachs back in 2001. Goldman Sachs argues that these countries are developing so rapidly that by 2050 their combined economies could eclipse the world’s current richest countries. Together they account for more than a quarter of the world’s land area and more than 40 percent of its population.

China already is the world’s largest automobile producer, with India hot on its heels. In the U.S., we haven’t seen much from Brazil and Russia. The Volkswagen Fox was the last Brazilian-made car on U.S. roads, imported from 1987 to 1993 as an inexpensive option amid rising costs of Volkswagen’s other offerings.

Outside of that budget-conscious car, Brazil is home to production facilities for some of the world’s largest automakers. General Motors, Ford, Fiat and Nissan/Renault all have significant plants in Brazil – making it the world’s sixth largest vehicle producer. A combination of tax breaks, easier loan terms, and low interest rates have jump-started domestic demand for Brazilian cars this year. Brazil also can play the fuel card. Since most Brazilian vehicles run on “flex fuel,” an ethanol or sugar cane derived alcohol fuel called alcool, U.S. automakers could look here for help in meeting strict CAFE standards.

Thousands of miles away, Russia, even with its existing auto manufacturing infrastructure in a shambles that has not recovered since the break up of the Soviet Union, is a contender. After the dissolution of the Soviet Union, Russia was stuck producing antiquated poorly made cars like Lada, which bravely exported its cars to Europe and Canada where owners inevitably waited to see if the body would corrode before the drive train blew up. Today, a trimmed down Russian car industry is ripe for expansion, making strides by partnering with European and Asian manufacturers and banking on the Russian government’s possible $21-billion investment.

India and China will be neck and neck in the race to the U.S. finish line. Despite several false starts, India’s Mahindra is primed to bring pick ups to 400 U.S. dealers. We’ll see whether our market embraces a $20,000 mid-size turbo diesel pick up. China’s edge is in entry level economy cars, a market segment that launched most of the imported car makers stake in the U.S. from Volkswagen to Kia. China’s major stumbling block is its inability to pass safety crash tests, but with Geely buying Volvo, that problem may be quickly resolved. Brazil is next in line, hard at work leveraging world partnerships with existing major manufacturers and low assembly labor costs to produce competitively priced entry level B segments.

So what should collision repairers expect from the BRIC? Entry level vehicles will hit the West Coast and Southwest first. Depending on their dealer network, the lack of a parts




network infrastructure could cause a collision part shortage. History has taught us that parts stock and delivery are keys to a successful vehicle brand entry. Just ask former Sterling and Daihatsu dealers.

Daihatsu has a great worldwide reputation as a premium Japanese car, but they are a forgotten footnote in the U.S. because of parts availability issues. Sterling, a North American division of the U.K.’s Rover in collaboration with Honda in the late 1980s and early 1990s, also met its demise due to parts issues. Dealers I spoke with at the time said anything Honda assembled was reliable while anything that Rover produced broke, with no replacement parts available.

A lack of reputation will quickly depreciate these new entrants, much like the original Hyundai Excel or Kia Sephia with their dismal resale values. These newbies may be nothing but headaches for repairers because they will be more likely to total, and if they are repairable, you may tie up a bay waiting on parts. Remember this when one of those new brands asks if you want to become their collision repair partner.

Making lean work in the real world

Adopting lean requires more than just process improvements

By: Brian Albright

Excerpted From: ABRN—October 2010

Deploying lean management principles in the autobody repair industry has been a hot topic for years, but some owners struggle with successfully adopting these techniques. That’s because many consultants and managers fail to address the cultural aspects of adopting this approach, says Joe Murli, principal at consulting firm Murli & Associates.

Murli was originally exposed to lean principles when he was working in the aerospace manufacturing industry.

“I was wrestling with the question of, how do we keep making these technical improvements, but we come back a year later and things have degenerated, or there was some kind of backlash to what we were trying to do?” Murli says. “Our Japanese coaches, while they were exceptional teachers on the technical aspects of how you flow work, they were really ill-equipped to talk about the cultural aspects and a human resources strategy.”

One big stumbling block in the collision repair industry is the collaborative nature of lean. Autobody techs are highly individualistic. “This is very much a ‘lone ranger’ type of industry,” Murli says. “You have to get the body techs to collaborate with the front office and the mechanical guys and the painters. How do you get the whole value stream really thinking together and flowing the vehicle through the entire system so you have a satisfied customer on the other end?”

Murli also says that most people tend to minimize problems in their daily work interactions—the opposite of what lean requires, which is a frequent discussion about problems and how to solve them.

“There’s also an issue with leadership modeling,” Murli says. “In autobody shops, the mangers who get promoted have worked their way up through the organization by being seen as a person who can fix problems. In lean, the leadership model is not focused on that, but on how well managers help build the problem-solving muscle of the whole organization. They have to train the employees how to think critically.”

There are misalignments between the lean model and how the typical body shop operates throughout the repair process. Estimates are written before vehicles are torn down, and parts are ordered after repairs have already begun.

“You keep going down the line, and you find that everybody is incentivized to do what’s best for them individually, but there’s nobody really incentivized to take that customer’s car

WASTE


I truly believe that adopting lean practices will make the difference between thriving or just surviving in the next five years.




all the way through the repair process and make it whole, and get them back in their own car again,” Murli says.

To re-align with the lean model, Murli says shops should establish relationships with insurance companies based on credibility. “The insurance carrier needs to know that when the car comes out, the shop will have provided a high-quality repair in the shortest cycle time possible,” he says.

Shops also have to align incentives with their parts suppliers so that repairs don’t begin (and parts don’t arrive) until every part needed is available.

Pay structures also have to be revisited. “You really have to get out of the percentage of pay method of paying the technicians,” Murli says. “That’s a tough one with lot of cultural and historical barriers. One way to go is to establish an hourly pay rate with team incentives, where they get a basic wage for showing up at work, and the entire team gets an incentive based on how well cars are flowing through the process.”

Blueprinting (or damage analysis) is another important step, but Murli emphasizes that other improvements also have to happen, like establishing community tools, providing visual feedback on performance and other tactics.

“You can’t let the major breakthrough of damage analysis overshadow other improvements,” Murli says. “You can’t forget that daily reflection process. Every day the team comes together and spends 15 minutes talking about how you did and where there are opportunities or improvement. Those opportunities are small ones, but there are many of them. That’s what distinguishes mature lean organizations from those that have just put in some basic process improvements.”

New steels, anti-collision systems will impact reparability and total losses

By: Brian Albright

Excerpted From: ABRN—October 2010

Changes in vehicle designs, structural materials and onboard technology will have a significant impact on the way collision shops operate. That’s why Jason Bartanen, technical director for I-CAR, and Bob Keith, co-owner of Silver Hammer Body Co. in Omaha and senior director of education and training at CARSTAR, emphasized the need for ongoing training in their Tuesday session, “Vehicle Technology Influences on Collision Repair.”

According to the presenters, repairers can expect to see more high-strength and ultra-high-strength steels, as well as aluminum, on higher production vehicle models.

New metals have already had an impact on collision repair, since most OEMs have introduced advanced steels into their vehicle frames. Repairers often don’t know these metals are present until they encounter them during a repair.

“You don’t know it’s there, and then you don’t know what to do with it once you’ve got it in front of you,” Keith says. “You can’t cut it or drill it, and heat can affect the strength of the steel. Many of these steels have no potential for reparability, and repairers are still struggling to find out where it’s located.”

Since OEMs recommend that repairs not be made on many of these new metals, that will mean more replacement of structural components. “If you look at something like the new Ford Fiesta, I’m not sure how much that car is valued at, but if you have to replace structural components to make it drivable we’re going to look at more total losses,” Keith says.

While OEs have made information on the placement of these metals available (in some cases, for a price) and the database vendors are doing a better job of providing information


This article mirrors and reaffirms what we have been saying for awhile…advanced steels will continue to be a challenge for this industry—increasing costs and potential total losses.




during the appraisal, Keith says it is the shop’s responsibility to stay on top of these design changes.

“It’s up to use from the repairer side to look at these vehicles and create a repair plan,” he says. “How are we going to repair this thing correctly based on the OE specifications and procedures? You have to do that research before you ever start the job.”

Crash avoidance technologies, like cameras and sensors mounted in the front and rear ends of the car, have pushed up repair prices and total losses, too.

“You get into the job, and you start encountering these cameras and sensors,” Keith says. “There are high-end headlight systems where if you unplug them, they have to go back to the OE to have the codes cleared.”

That also means there may be fewer collisions, which does not bode well for the industry. “You have to think about what that will do to us 10 or 20 years down the road,” Keith says.

Some changes in vehicle design that are meant to improve survival rates in the event of a collision also have created challenges for repairers. “Honda has come up with a design that protects the occupants, but it’s doing some strange things as far as creating secondary damage elsewhere in the vehicle,” Keith says. “Some of these cars are designed to drive the damage completely through the vehicle.”

That’s why education is important; repairers have to be on top of new technologies, and be alert for unexpected secondary damage.

And there are even more changes coming. BMW hopes to develop a vehicle built with carbon fiber, for instance. Shops will need to make an investment in new tooling, scanning equipment and training to continue to provide reliable repairs.

“We need to have our folks out there consistently being trained on these new technologies,” Keith says. “Because that’s going to be a key element, not only to having the right tooling and equipment, but having that knowledge base to know where we are going with this stuff. The slightest misstep might affect airbag timing and who knows what else, the way some of these vehicles are designed.”


0 2m 4m 6m 8m


New Vehicle SalesAccording to Ward’s Auto, total new light-vehicle sales showed a strong increase this September at 28.5% more than September 2009. Year-to-date sales are up over 10.3% from 2009, and that is remarkable since 2009 sales take Cash For Clunkers into account

Motor Vehicle Markets

Ward’s U.S. Light Vehicle Sales SummaryJanuary-September 2010

Number of Vehicles

0 2m 4m 6m 8m

2,917,681

1,376,117

4,293,798

3,647,401

657,301

4,304,702

6,565,082

2,033,418

8,598,500

domestic cars

import cars

total cars

domestic light trucks

import light trucks

total light trucks

domestic light Vehicles

import light Vehicles

total light Vehicles

Ward’s U.S. Light Vehicle Sales by CompanyJanuary-September 2010

Number of Vehicles

816,8241,419,2601,634,884

1,1183,872,086

41,118912,436678,072

1,351174,77041,392

673,701193,61416,97232,037

1,311,3164,076,779

192,052170,38117,6893,233

266,280649,635

8,598,500

ChryslerFordGM

International (Navistar)north america total

Geely (Volvo)Honda

Hyundai GroupIsuzu

MazdaMitsubishi

NissanSubaruSuzuki

TataToyota

asia totalBMW

DaimlerPorsche

Saab SpykerVolkswagen

europe totaltotal light Vehicles

Source is country of manufacture. Domestics are from U.S., Canada, Mexico. Imports are from overseas. Light vehicles are cars and light trucks (GVW Classes 1-3, under 14,001 lbs.). DSR is daily sales rate. Source: Ward’s AutoInfoBank © Copyright 2010, Ward’s Automotive Group, a division of Penton Media Inc. Redistribution prohibited.

8.7

-3.4

4.5

21.2

-3.1

16.7

15.3

-3.3

10.3

Vol % C

hange from 2009 S

ales

14.721.06.8

265.413.4-12.0

3.216.87.59.1

-3.416.122.2

-49.418.41.17.07.2

15.123.6

-53.321.414.410.3

Vol % C

hange from 2009 S

ales



Used Vehicle Sales – Current Monthly IndexBy ToM WeBBChief Economist – Manheim

Manheim Index Declines in August

Motor Vehicle Markets (con't.)

Wholesale used vehicle prices (on a mix, mileage, and seasonally adjusted basis) slipped marginally in August. The Manheim Used Vehicle Value Index reading was 118.8, which represented a 0.1% decline from July, but a 2.1% increase from a year ago.

Given the bleak economic backdrop of the past several months, it is noteworthy that retail used vehicle sales volumes have held up and that dealer margins and inventory turns remain supportive to profits. Although new vehicle sales remain in a stall, manufacturers and dealers continue to practice inventory and pricing discipline. That will serve them well when unit sales begin to recover over the next year.

Ward’s 10 Best Selling Cars and TrucksJanuary-September 2010

Note: Table combines imports and domestics. Source: Ward’s AutoInfoBank. © Copyright 2010, Ward’s Automotive Group,a division of Penton Media Inc.Redistribution prohibited.

Cars

1. Toyota Camry

2. Honda Accord

3. Toyota Corolla/Matrix

4. Honda Civic

5. Nissan Altima

6. Chevrolet Malibu

7. Ford Fusion

8. Hyundai Sonata

9. Ford Focus

10. Chevrolet Impala

250,830

214,827

209,186

198,272

168,897

163,246

161,581

149,123

134,253

133,585

Trucks/Vans/SUVs

1. Ford F Series

1. Chevrolet Silverado

1. Honda CR-V

1. Ford Escape

1. Dodge Ram Pickup

1. Toyota RAV4

1. Chevrolet Equinox

1. GMC Sierra

1. Chrysler Town & Country

1. Ford Edge

385,879

267,715

144,286

142,820

140,889

126,391

99,055

90,235

87,493

87,135

Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept 09 09 09 09 10 10 10 10 10 10 10 10 10

123

121

119

117

115

113

111

109

107

105

103

101

99

97

Manheim Used Vehicle Value IndexSeptember 2009 – September 2010

Source: Manheim Consulting


The following information was assembled from industry-wide appraisal data uploaded from participating insurance carriers, body shops, and independent appraisers, processed by Mitchell International and compiled through Mitchell’s AIM™ (Advanced Information Management) system.

With the obvious exception of the Total Loss section, all data in this section, including ACV benchmarks, relate to repairable vehicle appraisals only.

Sections included in the Mitchell Collision Repair Industry Data:

• Average Appraisal Values • Collision Losses • Comprehensive Losses • Third-Party Auto Property Damage • Supplements • Parts Analysis • Paint & Materials • Labor Analysis • Adjustments • Total Losses

Development explained

The following data points are dynamic and subject to change from on-going supplement and total loss designation activities amending original appraisal values. Average appraisal values submitted in June, for example, will likely increase by several dollars over the next few months, then stabilize as all supplements are factored into the final value for the period. Raw values are provided, and then adjusted based on the observed six-month change behavior from prior data to produce a projected final or “developed” value. Adjusted values may therefore be considered reliable approximations of the eventual, industry value for any given datum. As supplement frequency and severity, as well as total loss designation activities vary by carrier, we suggest that each company isolate their own development factors to apply to their own unique data sets.

Average Appraisal ValuesThe initial average appraisal value, calculated by combining data from all first- and third-party repairable vehicle appraisals uploaded through Mitchell systems in Q3-2010, was $2,450—$43 less than the previous year’s Q3-2009 appraisal average of $2,493. Applying the prescribed development factor of 2.16% to these data produces an anticipated average appraisal value of $2,503.*

Mitchell Product Solution:

AIMAIM™ features immediate online data access, custom report construction, ad-hoc query capabilities, weekly updates, and the ability to accept and consolidate detailed appraisal data from all major estimating platforms. For more information on AIM, visit Mitchell’s website at www.mitchell.com.

*NOTE: Values provided from Guidebook benchmark averages, furnished through Mitchell UltraMate®.


Mitchell Collision Repair Industry Data


UltraMateUltraMate® is Mitchell’s advanced estimating system, combining database accuracy, automated calculations, and repair procedure pages to produce estimates that are comprehensive, verifiable, and accepted throughout the collision industry. UltraMate is a central component of Mitchell’s all-in-one estimating, imaging, and claims workflow management solution, UltraMate Premier Suite. For more information on UltraMate and UltraMate Premier Suite, visit Mitchell’s website at www.mitchell.com.

$14,000

$12,000

$10,000

$8,000

$6,000

$4,000

$2,000

q1 2008

6.00

q3 2008

6.20

q1 2009

6.28

q3 2009

6.53

q1 2010

6.72

q3 2010

6.83

Average Appraisal Values, ACVs and AgeAll APD Line Coverages

appraisals acV’s

$2,531

$12,736

$2,490

$12,315

$2,529

$11,630

$2,493

$11,503

$2,544

$12,335

$2,450/2,503

$12,696

avg. unit age


Collision LossesMitchell’s Q3-2010 data reflects an initial average gross Collision appraisal value of $2,748—$69 less than this same period last year. Applying the indicated development factor of 2.4% suggests a final Q3-2010 average gross Collision appraisal value of $2,814. The average Actual Cash Value (ACV) of vehicles appraised for Collision losses during Q3-2010 was $13,417—up significantly from the same quarter in 2009, reflecting strong used car values.*

Comprehensive LossesIn Q3-2010, the average initial appraisal value for Comprehensive coverage estimates processed through our servers was $2,505—compared to $2,521 in Q3-2009. Applying the prescribed development factor of 2.2% for this data set produces an adjusted value of $2,561—a $40 increase from this same period last year. Q3-2010’s average appraised vehicle value (ACV) for comprehensive losses was $13,404—an increase of $1,562 over vehicles appraised during this same period in 2009.*



Mitchell Collision Repair Industry Data (con't.)

$14,000

$12,000

$10,000

$8,000

$6,000

$4,000

$2,000

q1 2008

6.18

q3 2008

6.37

q1 2009

6.39

q3 2009

6.55

q1 2010

6.77

q3 2010

6.79

Average Appraisal Values, ACVs and AgeComprehensive Losses

appraisals acV’s

$2,241

$13,164

$2,356

$12,386

$2,349

$11,791

$2,521

$11,842

$2,357

$12,921

$2,505/2,561

$13,404

avg. unit age

$14,000

$12,000

$10,000

$8,000

$6,000

$4,000

$2,000

q1 2008

5.63

q3 2008

5.78

q1 2009

5.88

q3 2009

6.10

q1 2010

6.25

q3 2010

6.34

Average Appraisal Values, ACVs and AgeCollision Coverage*

appraisals acV’s

$2,906

$13,422

$2,825

$13,017

$2,902

$12,249

$2,817

$12,193

$2,944

$13,021

$2,748/2,814

$13,417

avg. unit age

Hybrid: Facts At-A-Glance…• While the Chevy Volt has both an

electric power train and a gasoline engine, it is not a gas-electric hybrid in the traditional sense. The Volt is a plug-in electric vehicle (EV) propelled only by a powerful electric motor. The small gasoline engine works strictly as a range-extending generator to recharge batteries and provide current to the electric motor.

• In the Volt’s current configuration, a full charge from household current will provide a maximum EV range of 40 miles. So, if your commute is shorter than that, the gasoline engine may not need to run at all.

• The Chevy Volt has a 400-mile total range after battery power is depleted. The Volt should offer another 360 miles of range with the gasoline engine/generator providing the juice, for a total of 400 miles.

• Nissan’s Leaf is unique in its innovative use of multiple stacks of laminated compact battery modules integrated beneath the floor. These lithium-ion batteries can be readily configured in ways that accommodate the needs of different vehicle platforms.

• Nissan says these batteries provide the Leaf a real-world 100 mile driving range. More modules could conceivably provide that same kind of range in a larger sedan or crossover.

• Southern California-based Coda Automotive is also set to bring an all electric car to California in December 2010. This vehicle also features a 100 mile range and is priced competitively to the Leaf.




Third-Party Property DamageIn Q3-2010, our initial average gross Third-party Property Damage appraisal was $2,185 compared to $2,203 in Q3-2009—reflecting an $18 initial decrease between these respective periods. Adding the prescribed development factor of 1.64% for this coverage type yields a Q3-2010 adjusted appraisal value of $2,221—an increase of $18 over Q3-2009.*

SupplementsEditors Note: As it generally takes at least three months following the original date of appraisal to accumulate most supplements against an original estimate of repair, we report (and recommend viewing supplement information) three months after-the-fact to obtain the most accurate view of these data.

In Q3-2010, 25.37% of all original estimates prepared by Mitchell-equipped estimators during that period were supplemented one or more times. In this same period, the pure supplement frequency (supplements to estimates) was 47.95%—reflecting a 3.30 pt, or 7%, relative increase from that same period in 2009. The average combined supplement variance for this quarter was $566.70—$71.39 lower than in Q3-2009.


$12,000

$10,000

$8,000

$6,000

$4,000

$2,000

q1 2008

6.24

q3 2008

6.39

q1 2009

6.55

q3 2009

6.79

q1 2010

7.05

q3 2010

7.09

Average Appraisal Values, ACVs and AgeAuto Physical Damage APD

appraisals acV’s

$2,269

$12,047

$2,229

$11,702

$2,241

$11,052

$2,203

$10,863

$2,258

$11,700

$2,185/2,221

$11,986

avg. unit age

Q1/08 Q3/08 Q1/09 Q3/09 Q1/10 Q3/10 Pt/$ Change % Change

35.17 32.84 34.71 32.25 35.06 25.37 -6.88 -21%

49.86 46.38 50.87 44.65 55.55 47.95 3.30 7%

$644.70 $648.41 $617.29 $638.09 $664.95 $566.70 -71.39 -11%

25.47 26.05 24.41 25.59 26.14 23.13 -2.46 -10%

Date

% Est. Supplement

% Supplement

Avg. Combined Supp. Variance

% Supplement $

Average Supplement Frequency and Severity




Average Appraisal Make-upThis chart compares the average appraisal make-up as a percentage of dollars constructed by Mitchell-equipped estimators. These data points reflect a slight decrease in the use of parts, while the percentage of paint material and labor dollars used in the average appraisal have increased between these respective periods.

Parts AnalysisEditor’s Note: While there isn’t a perfect correlation between the types of parts specified by estimators and those actually used during the course of repairs, we feel that the following observations are directionally accurate for both the insurance and auto body repair industries. This segment illuminates the percentage of dollars allocated to each unique part-type.

As a general observation, recent data show that parts make up 41.34% of the average value per repairable vehicle appraisal—5.99 points less than the average allocation of labor dollars. In addition, the overall trend continues to reflect a decrease in the use of OEM parts—due in part to several vehicle manufacturers increasing collision part prices. However, it appears that OEM parts use seems to be seasonally affected in the second quarter of each year, which can likely be attributed to hail storms impacting overall OEM use.

Parts Type Definitions

• original equipment Manufacturer (oeM): Parts produced directly by the vehicle manufacturer or its authorized supplier, and delivered through the manufacturer's designated and approved supply channels. This category covers all automotive parts, including sheet metal and mechanical parts.

• Aftermarket: Parts produced and/or supplied by firms other than the Original Equipment Manufacturer’s designated supply channel. This may also include those parts originally manufactured by endorsed OEM suppliers, which have later followed alternative distribution and sales processes. While this part category is often only associated with crash replacement parts, the automotive aftermarket also includes a large variety of mechanical and custom parts as well.

• Non-New/Remanufactured: Parts removed from an existing vehicle that are cleaned, inspected, repaired and/or rebuilt, usually back to the Original Equipment Manufacturer’s specifications, and re-marketed through either the OEM or alternative supply chains. While commonly associated with mechanical hard parts such as alternators, starters and engines, remanufactured parts may also include select crash parts such as urethane and TPO bumpers, radiators and wheels as well.

• Like Kind and Quality (LKQ): Parts removed from a salvaged vehicle and re-marketed through private or consolidated auto parts recyclers. This category commonly includes all types of parts and assemblies, especially body, interior and mechanical parts.

Editor’s Note: It is commonly understood within the collision repair and insurance industries that a very large number of LKQ “parts” are actually “parts-assemblies” (such as doors, which in fact include numerous attached parts and pieces). Thus, attempting to make discrete comparisons between the average number of LKQ and any other parts types used per estimate may be difficult and inaccurate.


MitchellAlternateParts Program

mitchell alternate parts program (mapp™) offers automated access to nearly 30,000,000 Remanufactured, Aftermarket, and OEM Discount parts from over 2,000 suppliers, ensuring shops get the parts they need from their preferred vendors. MAPP is fully integrated with UltraMate for total ease-of-use. Designated company administrators are also provided the MAPP Matrix Manager application free of charge—allowing clients the ability to manage their MAPP matrices, run four different matrix reports, add new suppliers/parts, all from their local platform without the need for Mitchell support/intervention.


QualityRecycledParts (QRP)

Mitchell quality recycled parts (qrp™) is the most comprehensive source for finding recycled parts. It gives online access to a parts database compiled from a growing network of more than 3,300 of the highest quality recyclers in the U.S. and Canada, covering more than 400 part categories representing access to nearly 44,000,000 parts from recyclers’ parts inventories—updated daily. QRP is fully integrated with UltraMate for total ease-of-use. In addition, for selected QRP parts, UltraMate automatically applies Mitchell’s Assembly Time Guide labor allowances and P-pages specific to LK parts replacement.


45.00 42.62 44.32 41.93 44.38 41.72 -0.21 -1%

44.08 46.10 44.34 46.62 44.08 47.69 1.07 2%

9.63 10.24 10.13 10.50 10.40 10.74 0.24 2%

Date

% Average Part $

% Average Labor $

% Paint Material $

% Average Appraisal Dollars by Type



original equipment Manufacturer (oeM) Parts Use in Dollars

In Q3-2010, OEM parts represented only 67.4% of all parts dollars specified by Mitchell-equipped estimators. These data reflect a 3.0 point relative decrease from Q3-2009. The trend in lower OEM parts use seems to be leveling off in 2010.

Aftermarket Parts Use in Dollars

In Q3-2010, 13.1% of all parts dollars recorded on Mitchell appraisals were attributed to Aftermarket sources—up significantly from Q3-2009. Aftermarket as well as LKQ/Used parts have been the beneficiary of decreased OEM usage.

Remanufactured Parts Use in Dollars

Currently listed as “Non-New” parts in our estimating platform and reporting products, Remanufactured parts currently represent 6.1% of the average gross parts dollars used in Mitchell appraisals during Q3-2010. This reflects a 0.7 point relative increase over this same period in 2009.

Like Kind and Quality Parts Use in Dollars

LKQ parts constituted 13.5% of the average parts dollars used per appraisal during Q3-2010—reflecting a 0.9 point relative increase from this same period last year.

73.9%

Q1/08 Q3/08 Q1/09 Q3/09 Q1/10 Q3/10

OEM Parts, as a % of Total Parts Dollars per Appraisal

71.7%73.9% 70.4% 67.9% 67.4%

10.7%

Q1/08 Q3/08 Q1/09 Q3/09 Q1/10 Q3/10

Aftermarket Parts, as a % of Total Parts Dollars per Appraisal

10.2% 11.4% 11.7% 13.2% 13.1%

Non-New/Remanufactured Parts, as a % ofTotal Parts Dollars per Appraisal

4.8%

Q1/08 Q3/08 Q1/09 Q3/09 Q1/10 Q3/10

4.8% 5.0% 5.4% 5.7% 6.1%


10.7%

Q1/08 Q3/08 Q1/09 Q3/09 Q1/10 Q3/10

LKQ Parts, as a % of Total Parts Dollars per Appraisal

11.1% 11.9% 12.6% 13.2% 13.5%


Paint and MaterialsDuring Q3-2010, Paint and Materials made up nearly 10.7% of our average appraisal value, representing a 0.2-point relative increase from Q3-2009. Represented differently, the average paint and materials rate—achieved by dividing the average paint and materials allowance per estimate by the average estimate refinish hours—yielded a rate of $29.40 per refinish hour in this period—compared to $28.78 in Q3-2009.

Editor’s note: The chart shown now excludes comprehensive estimates in the calculations to avoid seasonal hail related swings in the data reported.




RefinishingMaterialsCalculator (RMC)

Mitchell’s refinishing materials calculator™ (rmc) provides accurate calculations for refinishing materials costs by incorporating a database of over 10,000 paint codes from eight paint manufacturers. It provides job-specific materials costing according to color and type of paint, plus access to the only automated, accurate, field-tested, and industry-accepted breakdown of actual costs of primers, colors, clear coats, additives, and other materials needed to restore vehicles to preaccident condition. RMC is now also fully integrated with UltraMate and UltraMate Premier Suite for total ease of use. For more information on RMC, visit Mitchell’s website at www.mitchell.com.

q1 2008 q3 2008 q1 2009 q3 2009 q1 2010 q3 2010

Paint and Materials, by Quarter

% of appraisal $ rate = average p&m $/average refinish Hours/estimate

9.6%$26.43

10.2%$27.35

10.1% $27.95

10.5% $28.78 10.4% $29.1110.7% $29.40

Labor AnalysisAverage body labor rates rose in all of our sample states except New Jersey, compared to the same time period last year.

Refinish (33%)

Parts Replacement (26%)

Parts Repair (41%)

% Average Labor Dollars by Type

Average Body Labor Rates and Change by State

$46.46 $48.63 $2.17 5%

$49.16 $50.02 $0.86 2%

$41.57 $41.98 $0.41 1%

$43.41 $43.78 $0.37 1%

$46.76 $47.64 $0.88 2%

$41.44 $42.54 $1.10 3%

$44.75 $44.29 $0.46 -1%

$45.71 $46.32 $0.61 1%

$42.57 $42.86 $0.29 1%

$44.73 $44.76 $0.03 0%

$42.31 $42.55 $0.24 1%

Arizona

California

Florida

Hawaii

Illinois

Michigan

New Jersey

New york

ohio

Rhode Island

Texas

2009 2010 $ % yTD yTD Change Change

AdjustmentsIn Q3-2010, the percentage of adjustments made to estimates decreased 3.56%. The amount of betterment taken decreased slightly while the average dollar amount of the betterment taken increased to $132.13. Appearance allowances frequency decreased by a minor amount with the dollar amount of that appearance allowance increasing to $203.32.

Q1/08 Q3/08 Q1/09 Q3/09 Q1/10 Q3/10 Pt$/Change % Change

3.78 3.19 3.51 3.67 3.56 3.56 -0.11 -3%

3.01 2.34 2.7 2.79 2.72 2.74 -0.05 -2%

0.54 0.59 0.57 0.61 0.61 0.59 -0.02 -3%

4.42 4.76 4.94 5.21 5.26 4.06 -1.15 -22%

110.54 129.72 121.78 124.13 118.66 132.13 8.00 6%

169.5 186.26 177 194.95 189.29 203.32 8.37 4%

Date

% Adjustments Est

% Betterment Est

% Appear Allow Est

% Prior Damage Est

Avg. Betterment $

Avg. Appear Allow $

Adjustment $ and %’s


NEW: Mitchell Procedure Page Updates


In this installment of the Procedure Page (P-Pages) Update, we’ll cover a quickly-emerging repair technology—aluminum repair. With the increased use of aluminum in the manufacturing process to reduce vehicle weight while increasing fuel efficiency, this technology brings with it a number of questions—most importantly, what’s included and not included?

It’s important to understand from a labor perspective that Mitchell’s times are developed with the OEM’s procedures in mind. We may, for overlap purposes, include or not include certain operations in keeping with our already outlined P-Pages, but the steps for replacement of each component are the manufacturers.

Aluminum replacement requires specific procedures that are different than from those used in the replacement sheet steels. Considerations like flame treatment, de-burring rivet holes, aluminum welding equipment set-up, and the use of run-on or cold start tabs are outlined by a number of automotive manufacturers. Because the demand to replace aluminum is rapidly increasing, and aluminum use will only continue to grow, we wanted to clarify the processes Mitchell incorporates in its P-Pages for aluminum Remove and Replace (R&R) times. Under the Labor General Information section of the P-Pages, you’ll find the following with regards to aluminum R&R.

Aluminum

The labor times shown for aluminum panel R&R represent replacement according to the manufacturer’s recommended procedures and guidelines. Within the published labor times, Mitchell has also taken into consideration these commonly asked about items:

Remove and Replace: Rivets, Drill and de-burr rivet holes, EMC screws, Flow drill screws

Body pretreatment: Flame coat treatment, Application of bonding adhesives

Welding (if applicable): Welding equipment set-up, “Run-on” or “Cold start” tabs.

NoTe: In addition, Aluminum panel replacement follows the guidelines outlined in specific applicable panel P-Pages. (e.g., Aluminum Quarter Panel replacement follows Procedure 20, Quarter Panel R&R).

IMPoRTANT ReMINDeR: The cost of aluminum panel replacement materials is not included in panel replacement R&R times. (example: Rivets, Panel bonding, Adhesives, Bonding primer, EMC screws, Flow drill screws etc.).

Why the Need For a Procedure Page uPdate SectioN:

The PROCEDURE PAgE (P-PAgE) UPDATE section is a feature we’ve added to the Industry Trends Report as a way to bring important changes to your attention. In order to achieve our goal of always providing best-in-class solutions—and equally as important—responding to the voice of our customers—our Content Management Group is dedicated to addressing top-of-mind issues for the collision repair industry. In doing so, the Group conducts extensive research and rigorous time studies that often lead to changes in the P-Pages. In upcoming additions, we’ll be highlighting these changes as well.

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Total Loss



WorkCenter™ Total LossWorkcenter™ total loss is a state-of-the-art, loss vehicle valuation system designed to: 1) Improve policyholder satisfaction with the settlement process, 2) Automate Department of Insurance regulation compliance, and 3) Improve efficiency, reduce settlement time, and manage settlement costs. WorkCenter Total Loss’s valuations are reliable and easy-to-understand. They’re reliable because they’re based on vehicles recently sold or advertised in the same area as the vehicle owner. Valuations are easy-to-understand because they are intuitive, and reports include details on comparable vehicles used in a valuation. WorkCenter Total Loss incorporates a leading-edge analytic model developed through a partnership with J.d. power and associates®—widely recognized and respected for their expertise and impartiality. You and your policyholders can be confident that valuations are fair and accurate.

The charts below illustrate the total loss data for both vehicle age and actual cash value of Total loss vehicles processed through Mitchell servers. They reflect an older vehicle totaling out, but most vehicle types increasing in value.

Q1 Q3 Q1 Q3 Q1 Q3 Vehicles 2008 2008 2009 2009 2010 2010

Convertible $10,270.07 $10,613.47 $ 9,118.86 $ 9,055.25 $ 9,748.87 $ 9,217.26

Coupe $ 6,195.66 $ 5,991.94 $ 6,018.66 $ 5,852.99 $ 6,229.73 $ 6,278.97

Hatchback $ 5,625.60 $ 5,740.75 $ 6,011.09 $ 5,952.06 $ 6,464.55 $ 6,522.02

Sedan $ 6,177.79 $ 6,092.28 $ 6,048.94 $ 5,979.02 $ 6,306.39 $ 6,440.42

Wagon $ 7,470.91 $ 7,207.46 $ 7,255.43 $ 6,964.85 $ 7,226.39 $ 7,466.61

Other Passenger $13,715.01 $14,189.14 $17,811.05 $12,707.58 $15,931.98 $13,374.95

Pickup $ 9,326.85 $ 9,143.95 $ 8,413.04 $ 8,216.10 $ 9,198.22 $ 8,916.06

Van $ 5,798.56 $ 5,577.81 $ 5,157.33 $ 4,981.87 $ 5,471.17 $ 5,532.67

SUV $ 9,355.35 $ 9,252.42 $ 7,976.14 $ 8,125.52 $ 8,806.50 $ 9,078.79

Other Pickup/ $ 4,494.41 $ 5,185.69 $14,263.38 $11,036.84 $15,954.63 $22,789.32 Van/SUV

Q1 Q3 Q1 Q3 Q1 Q3 Vehicles 2008 2008 2009 2009 2010 2010

Convertible 9.67 10.24 10.01 10.77 10.29 10.86

Coupe 10.09 10.41 10.37 10.71 10.69 10.91

Hatchback 10.10 9.97 9.69 9.83 9.54 9.56

Sedan 9.30 9.48 9.55 9.69 9.82 9.87

Wagon 8.63 8.75 8.50 8.59 8.60 8.63

Other Passenger 11.08 11.10 10.19 11.40 10.64 11.5

Pickup 9.74 10.01 9.77 10.51 10.65 11.03

Van 9.58 9.83 9.68 10.00 10.20 10.34

SUV 8.29 8.38 8.50 8.80 9.16 9.21

Other Pickup/ 17.9 16.58 13.39 15.79 16.26 17.00 Van/SUV

Average Vehicle Age in Years

Average Vehicle Actual Cash Value


At the request of our customers and friends in Canada, we are pleased to provide the following Canada-specific statistics, observations, and trends. All dollar-figures appearing in this section are in CDN$. As a point of clarification, these data are the product of upload activities from Body Shop, Independent Appraisers and Insurance personnel, more accurately depicting insurance-paid loss activity, rather than consumer direct or retail market pricing. Average Appraisal ValuesSeverity overall: The average gross initial appraisal value, calculated by combining data from all first- and third-party repairable vehicle appraisals uploaded through Mitchell Canadian systems in Q3-2010, was $3,295—a $49 increase from Q3-2009. However, applying the prescribed development factor of 2.8% yields an anticipated average appraisal value of $3,385—a $139 increase from Q3 2009.*

Collision LossesThe average initial gross Collision appraisal value uploaded through Mitchell Canadian systems in Q3-2010 was $3,064—a $94 decrease from Q3-20009. However, applying the prescribed development factor of 2.8% yields an anticipated average appraisal value of $3,151—a $7 decrease from Q3-2009.*

Editors Note: All dollar-figures appearing in this section are in CDN$. As a point of clarification, these data are the product of upload activities from Body Shop, Independent Appraisers and Insurance personnel, more accurately depicting insurance-paid loss activity, rather than consumer direct or retail market pricing.


Canadian Collision Summary

$14,000

$12,000

$10,000

$8,000

$6,000

$4,000

$2,000

q1 2008

5.42

q3 2008

5.37

q1 2009

5.30

q3 2009

5.46

q1 2010

5.42

q3 2010

5.32

Canada—Severity Overall

appraisals acV’s

$3,069

$13,140

$3,120

$12,714

$3,079

$12,023

$3,246

$12,608

$3,137

$12,555

$3,295/3,385

$13,963

avg. unit age


$14,000

$12,000

$10,000

$8,000

$6,000

$4,000

$2,000

q1 2008

5.35

q3 2008

5.29

q1 2009

5.26

q3 2009

5.36

q1 2010

5.38

q32 2010

5.33

Canada—Severity Collision

appraisals acV’s

$3,166

$13,207

$3,095

$12,668

$3,182

$12,085

$3,158

$12,470

$3,209

$12,621

$3,064/3,151

$13,492

avg. unit age

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Comprehensive LossesIn Q3-2010, the average initial gross Canadian appraisal value for Comprehensive coverage estimates processed through our servers was $3,857—or $79 higher than in Q3-2009. Applying the prescribed development factor of 2.4% yields an anticipated average appraisal value of $3,951.*

Third-Party Property DamageIn Q3-2010, our initial Canadian industry average gross Third-Party Property Damage appraisal was $3,132—an increase of $432 from Q3-2009 on vehicles that were slightly newer, but with significantly higher values.*


Canadian Collision Summary (con't.)


About Mitchell in Canada…

For more than 20 years, Mitchell’s dedicated Canadian operations have focused specifically and entirely on the unique needs of collision repairers and insurers operating in the Canadian marketplace. Our Canadian team is known for making itself readily available, for being flexible in its approach to improving claims and repair processes, and for its ‘second to no one’ commitment to customer support. Headquartered in Toronto, with offices across Canada, Mitchell Canada delivers state-of-the-art, multi-lingual collision estimating and claims workflow solutions (including hardware, networks, training, and more), world-class service, and localized support.

To learn more about Mitchell Canada and its solutions and services, contact:

Mike JerryVice President and General Manager–Mitchell Canadat: 888.209.4338f: 416.733.1633

$16,000

$14,000

$12,000

$10,000

$8,000

$6,000

$4,000

$2,000

q1 2008

5.65

q3 2008

5.44

q1 2009

5.37

q3 2009

5.53

q1 2010

5.39

q3 2010

5.18

Canada—Severity Comprehensive

appraisals acV’s

$2,802

$13,714

$3,425

$13,664

$2,766

$12,550

$3,778

$13,652

$3,022

$13,350

$15,176

avg. unit age

$3,857/3,951

$14,000

$12,000

$10,000

$8,000

$6,000

$4,000

$2,000

q1 2008

6.24

q3 2008

5.78

q1 2009

6.07

q3 2009

6.39

q1 2010

6.34

q3 2010

5.73

Canada—Severity Third Party

appraisals acV’s

$2,610

$11,893

$3,312

$12,279

$2,567

$11,040

$2,700

$11,868

$2,560

$11,437

$13,880

avg. unit age

$3,132/3,194

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Average Appraisal Make-upThis chart compares the average appraisal make-up as a percentage of dollars constructed by Mitchell-equipped estimators. These data points reflect an increase in Paint Materials and Labor dollars, while the percentage of parts dollars has declined.


44.07 39.02 43.92 39.54 44.03 34.53 -5.01 -13%

44.48 49.02 44.44 48.07 44.31 57.3 9.23 19%

8.64 8.97 8.79 8.74 8.78 8.8 0.06 1%

Date

% Average Part $

% Average Labor $

% Paint Material $

% Average Appraisal Dollars by Type

SupplementsIn Q3-2010, 28.86% of all original estimates prepared by Mitchell-equipped estimators during that period were supplemented one or more times. In this same period, the pure supplement frequency (supplements to estimates) was 55.24%—reflecting a 16.46 point or a 42% relative increase from that same period in 2009. The average combined supplement variance for this quarter was $330.82—$85.38 lower than in Q3-2009.

Q1/08 Q3/08 Q1/09 Q3/09 Q1/10 Q3/10 Pt/Change % Change

41.62 39.59 42.41 39.69 44.51 28.86 -10.83 -27%

55.65 44.29 56.97 38.78 105.63 55.24 16.46 42%

371.02 348.6 398.6 416.2 474.61 330.82 -85.38 -21%

12.09 11.17 12.95 12.82 15.13 10.04 -2.78 -22%

Date

% Est Supplements

% Supplements

Avg Combined Supp Variance

% Supplement $

Supplement %’s

AdjustmentsIn Q3-2010, the average times betterment was taken on estimates decreased by 18%—yet the dollar amount increased by 7%. The number of times appearance allowances were given decreased, with the average amount given increasing by 15%.

Q1/08 Q3/08 Q1/09 Q3/09 Q1/10 Q3/10 Pt/$Change % Change

2.98 3.44 2.54 3.81 2.69 3.16 -0.65 -17%

2.59 2.94 2.09 3.25 2.21 2.68 -0.57 -18%

0.36 0.5 0.44 0.53 0.43 0.44 -0.09 -17%

0.11 0.06 0.07 0.16 0.16 0.11 -0.05 -31%

164.11 182.29 171.79 204.22 203.33 218.08 13.86 7%

170.96 193.63 175.1 205.64 194.93 237.41 31.77 15%

Date

% Adjustments Est

% Betterment Est

% Appear Allow Est

% Prior Damage Est

Avg. Betterment $

Avg. Appear Allow $

Adjustment $ and %’s

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Refinish (34%)

Remove/Replace (23%)

Repair (43%)

% Average Labor Dollars by Type

Labor AnalysisAll data reflect the percentage of labor-type dollars utilized in the construction of Mitchell appraisals by Canadian estimators. Labor rates rose or remained flat in all Provinces and Territories except British Columbia, which decreased by 3%.

$67.84 $67.65 $0.19 0%

$61.44 $59.50 $1.94 -3%

$56.11 $57.63 $1.52 3%

$53.90 $55.36 $1.46 3%

$78.36 $78.21 $0.15 0%

$52.06 $53.19 $1.13 2%

$44.67 $45.91 $1.24 3%

$79.21 $81.00 $1.79 2%

ALBeRTA

BRITISH CoLUMBIA

NeWFoUNDLAND & LABRADoR

NoVA SCoTIA

NoRTHWeST TeRRIToRIeS

oNTARIo

QUeBeC

yUKoN TeRRIToRy

Average Body Labor Rates and Changes by Province

Parts AnalysisAs a general observation, recent data show that parts make up 44.9% of the average value per repairable vehicle appraisal, about 0.63 points more than the average allocation of labor dollars. In addition, the overall trend now reflects a slight increase in OEM parts use, an increasing volume of Aftermarket parts dollars used by Mitchell-equipped estimators, relatively constant Remanufactured parts use, and decreasing LKQ (recycled) parts use.

Editor’s Note: While there isn’t a perfect correlation between the types of parts specified by estimators and those actually used during the course of repairs, we feel the following observations to be directionally accurate for both the insurance and auto body repair industries. This segment illuminates the percentage of dollars allocated to each unique part-type.

For Parts Types Definitions, see page 20.

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Paint and MaterialsIn Q3-2010, Paint and Materials in Canada made up 8.8% of the average repairable estimate. Represented differently, the average hourly paint and materials rate was $32.22.

Editor’s note: The chart shown now excludes comprehensive estimates in the calculations to avoid seasonal hail related swings in the data reported.

q1 2008 q3 2008 q1 2009 q3 2009 q1 2010 q3 2010

Paint and Materials, by Quarter

% of appraisal $ rate = average p&m $/average refinish Hours/estimate

8.6%

$30.29

9.0%

$30.36

8.8%$31.73 8.7%

$31.498.8% $32.27 8.8% $32.22

2009 2010 $ % yTD yTD Change Change


original equipment Manufacturer (oeM) Parts Use in Dollars

In Q3-2010, Canadian OEM parts use decreased slightly compared to Q3-2009—the opposite of the trend in the U.S.

Aftermarket Parts Use in Dollars

Aftermarket parts use in Canada rose slightly compared to Q3-2009, again topping 12% for the first time.

Remanufactured Parts Use in Dollars

Remanufactured parts use in Canada was 3.1% for Q3-2010, exactly the same compared to Q3-2009.

Like Kind and Quality Parts Use in Dollars

LKQ parts use in Canada has decreased significantly in Q3-2010, offset by the increase in Aftermarket and OEM parts use.



3.4%

Q1/08 Q3/08 Q1/09 Q3/09 Q1/10 Q3/10

Canada—Non-New/Remanufactured

3.0% 3.4% 3.1% 3.55% 3.1%

10.6%

Q1/08 Q3/08 Q1/09 Q3/09 Q1/10 Q3/10

Canada—LKQ

10.0% 10.4% 10.3% 11.2% 9.9%

11.1%

Q1/08 Q3/08 Q1/09 Q3/09 Q1/10 Q3/10

Canada—Aftermarket

10.7% 11.0% 11.1% 11.9% 12.2%

75.0%

Q1/08 Q3/08 Q1/09 Q3/09 Q1/10 Q3/10

76.2% 75.2% 75.7% 73.3% 74.8%

Canada—OEM

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Personal Injury Protection (PIP)During Q2-2010, the 12-month rolling average for countrywide Personal Injury Protection claims has increased to a historical high (as calculated from the percentage of such claims reported per 100 insured exposures) at 1.46, and the average claim severity was $9,177.

Bodily InjuryAs of Q2-2010, the 12-month rolling average for countrywide bodily injury paid claim frequency was 0.89—down from the previous 12-month rolling total of 0.90 and lower than the other reported quarters. Average paid claim cost, however, rose slightly to a record high level.

Editors Note: All information depicted here is based on the most recent and available ISS (formerly PCIAA) Fast Track data, reported one quarter in arrears.

About Mitchell Auto Casualty Solutions…

Mitchell’s Auto Casualty Solutions division has 20+ years experience delivering successful technology, database, and service solutions for collision-injury claim handling that are accurate and efficient. Mitchell Auto Casualty Solutions is proud to serve many of the top P&C Insurers using both enterprise-wide and standalone implementations.

Mitchell Decision Point® facilitates 1st and 3rd party claim-handling by automating vital tasks—thus streamlining a carrier’s claims processing. Applying carrier-specific business procedures, claimant-specific treatment protocols, and Mitchell’s industry acumen, the majority of claims are handled without human intervention from first notice of loss through payment. Exceptions are handled via automated assignment to the appropriate subject matter expert (nurse reviewer, special investigator, experienced adjuster). Decision Point monitors compliance with federal and state regulations, and includes powerful analytic capabilities for predictive modeling and performance management.

Mitchell Auto Casualty Solution’s extensive customer service infrastructure provides clients with training, plus systems, content, regulatory, and litigation support, process consulting, and outsource service options.

To learn more about Mitchell Auto Casualty Solutions and its casualty solutions, visit www.mitchell.com, or contact:

Jeff Pirino Vice President of Casualty Sales Mitchell Auto Casualty Solutions [email protected] t: 858-368-8381


Casualty Statistics

$12,500$12,000$11,500$11,000$10,500$10,000$9,500$9,000$8,500$8,000$7,500$7,000

Countrywide BI Severity$12,093 $12,147 $12,107 $12,211 $12,240

Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010

Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010

0.96%0.95%0.94%0.93%0.92%0.91%0.90%0.89%

0%

Countrywide BI Frequency

0.910.90 0.90 0.90

0.89

Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010

1.5%

1.4%

1.3%

1.2%

1.0%

Countrywide PIP Frequency

1.371.40 1.42

1.44 1.46

$9,000$8,500$8,000$7,500$7,000$6,500$6,000$5,500$5,000

Countrywide PIP Severity

$8,723 $8,814 $8,943 $9,067

Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010

$9,177



About MitchellMitchell International, Inc.

6220 Greenwich Dr., San Diego, CA 92122 Tel: 858.368.7000

Mitchell International, Inc., founded in 1946 and headquartered in San Diego, California, is a leading provider of information and workflow solutions to the Property & Casualty Claims and Automotive Collision Repair industries. The company’s comprehensive solution portfolio streamlines the entire auto physical damage, bodily injury and workers’ compensation claims processes. Mitchell enables millions of electronic transactions between more than 30,000 business partners each month to enhance partner productivity, profitability, and customer satisfaction.

From the moment policyholders notify their insurance companies of a vehicle claim, Mitchell’s robust solutions take action, transforming the entire claims and repair cycle into a streamlined, end-to-end process using intuitive tools, decision-driven software and shared workspaces that deliver a much improved and efficient experience. From initial damage appraisal to helping collision repairers safely and efficiently return vehicles to pre-accident condition, insurers and collision repair businesses depend on Mitchell to deliver cost savings to their organizations and pleasant and timely claims settlement to their customers.

Mitchell also has a 20-year track record of delivering solutions to help Auto Insurance Carriers and Workers’ Compensation Claims Payers evaluate and settle their medical claims faster and more accurately. With an unmatched breadth of medical data and decision support experience, Mitchell offers a variety of technology, database, and service solutions that enable its clients to control costs and improve consistency throughout the claims process.

Mitchell International is a privately-held company, owned primarily by the Aurora Capital Group. Aurora Capital is a Los Angeles-based investment firm formed in 1991 that acquires and builds companies in partnership with operating management. The firm currently manages approximately $2 billion in capital and is committed to investing in companies with unique, defensible market positions. Aurora is dedicated to generating long-term value principally through investing the time and resources necessary to enhance the fundamentals of each of its businesses.

For more information on Mitchell International, visit www.mitchell.com.

For more information on Aurora Capital, please visit its website: www.auroracap.com.

We’vemoved……our corporate headquarters to a new location in San Diego. You can find us at:

6220 Greenwich DriveSan Diego, CA 92122

The entire Mitchell team is excited and energized about our new workspace and is looking forward to continuing to bring you engaging information within the pages of the Industry Trends Report.


Mitchell News Releases Q3-2010Mitchell Launches Major enhancements in RepairCenter™ to Increase Shop Workflow efficiency

Integrated estimating and enhanced communication tools deliver comprehensive functionality from a single workspace

San Diego, CA—September 29, 2010—Mitchell International, Inc., a leading provider of information, workflow and performance management solutions to the Property & Casualty claims and Collision Repair industries, today announced the launch of RepairCenter Estimating™ and RepairCenter Carrier Communication™ modules with its upcoming release of RepairCenter™.

RepairCenter is the industry-leading shop Workspace that allows shops to efficiently access accurate vehicle repair data from a single solution, improving vehicle repair workflow and shop efficiency.

The new RepairCenter release reinforces Mitchell’s ongoing commitment to helping shops be more efficient, competitive, and profitable. The most notable enhancement centers on the integration of estimating functionality within the RepairCenter platform to deliver a truly seamless workflow experience.

“We’re pleased to offer a solution that allows our customers to review and complete their estimates all within their RepairCenter application,” states Jason Bertellotti, Vice President of Repair Solutions for Mitchell International. Previously, users accessed estimating independently from RepairCenter. “With estimating integrated into the business management workflow users no longer need to switch between the two applications,” continues Bertellotti. “As a result, the workflow between the estimate and the repair is tightened to provide a seamless user experience and improved customer satisfaction.”

The new RepairCenter platform also offers a communication interface that allows shops to receive new assignments from their insurance carrier partners—all from within the RepairCenter Workspace. “The new Carrier Communication module improves the flow of information between carriers and their DRP shops,” says Bertellotti. “By accessing this information within RepairCenter, shops can more efficiently manage the repair process from carrier to customer.”

“Mitchell’s ongoing goal is to help shops get to the next level by providing them with solutions that fit their business needs today, while also giving them a choice to add capabilities as their business needs evolve over time,” said Bertellotti. “The release of this new version of RepairCenter underscores our commitment to our customers to continually improve our products and services to help shops improve business performance and productivity.”

The latest version of RepairCenter will be showcased in the Mitchell booth (N1523) at NACE 2010 (October 11-13) in Las Vegas, NV, with commercial availability in the first quarter of 2011. Shops can download a free version of RepairCenter using Mitchell’s secure Website http://repaircenter.mitchell.com/. RepairCenter QuickStart provides collision repairers with instant access to vehicle repair web-statusing capabilities, the latest OEM repair data and procedures from Ford, GM, and Chrysler, the ability to convert estimate files from all major estimating systems into repair orders, and a 30-day trial of TechAdvisor Repair, Parts and Labor.

Mitchell to Honor Top CSI performers at 2010 AutocheX Premier Achiever Award Ceremony

Annual award ceremony at NACE recognizes shop excellence in customer satisfaction

San Diego, CA—September 27, 2010—Mitchell International, Inc., a leading provider of information, workflow and performance management solutions to the Property & Casualty claims and Collision Repair industries, today announced that it will continue its tradition of honoring collision repair facilities that have achieved exceptional customer satisfaction ratings at its 9th annual AutocheX Premier Achiever Awards ceremony. This year’s event


Mitchell RepairCenter™ Estimating



Mitchell News Releases Q3-2010 (con’t.)

will be held on October 12—during NACE—at the Mandalay Bay Convention Center in Las Vegas. Mitchell AutocheX is a leading provider of customer satisfaction measurement and performance management solutions to the collision repair industry.

Collision repair facilities receiving a 2010 Premier Achiever Award are among the top performing facilities throughout the U.S. and Canada that use the AutocheX service for customer satisfaction. In an industry of nearly 50,000 shops in North America, qualifying as one of the nearly 500 Premier Achiever Award recipients places the collision shop winners in highly exclusive company.

“Mitchell is pleased to once again honor collision repair facilities that consistently demonstrate a genuine commitment to customer service and satisfaction each and every day,” said Jason Bertellotti, Vice President of Repair Solutions for Mitchell International. “AutocheX is committed not only to measuring customer satisfaction fairly and accurately, but also to promoting a genuine spirit of customer service in our industry. As the market continues to be challenging, this has become even more of a competitive necessity for shops to survive and grow.”

AutocheX measures customer satisfaction and delivers dynamic, customized reports through the Customer Experience Management (CEM) module of Mitchell RepairCenter™—the industry’s first Shop Workspace that helps repair facilities manage the repair, the customer, and the business. In addition, AutocheX collects satisfaction data and provides performance benchmark reports and analysis to many of North America’s leading insurance carriers and service companies.

Mitchell International’s SmartAdvisor™ Implements Partner Bridge With one Call Medical Network

New PPO partnership retrospectively flags unscheduled bills to obtain contracted discounts

San Diego, CA—September 21, 2010—Mitchell International, Inc., a leading provider of information, workflow and performance management solutions to the Property & Casualty claims and Collision Repair industries, today announced that the SmartAdvisor™ Partner Bridge is now available throughout One Call Medical’s (OCM) provider network. OCM is the leading Preferred Provider Organization (PPO) specializing in diagnostic testing and specialty claims services to the workers’ compensation industry. The SmartAdvisor Partner Bridge gives medical bill review organizations the power to conduct instant network contract repricing and enhanced savings audits. The creation of a SmartAdvisor-OCM Partner Bridge provides insurance payers with new opportunities for containing costs and improving claims settlement by retrospectively flagging unscheduled medical bills to obtain the contracted discount.

“SmartAdvisor’s Partner Bridge with One Call Medical demonstrates our commitment to continuously partner with best-in-class firms in an effort to reduce turnaround time, add savings and improve claims outcomes,” said Nina Smith, Senior Vice President and General Manager of the Mitchell International SmartAdvisor Solutions Division.

“One Call Medical shares Mitchell SmartAdvisor’s goal of helping insurers reduce turnaround time and ensure claims accuracy for optimized medical claim management,” said Don Duford, President One Call Medical, Inc. “We are pleased to offer our services as the largest, most experienced provider of advanced radiology and neurodiagnostic testing services for workers’ compensation and look forward to a productive partnership.”

The SmartAdvisor Partner Bridge gives medical bill review organizations the power to conduct instant PPO repricing and enhanced savings audits. Bill review turnaround time is reduced by an average of three days compared to conventional Electronic Data Interchange (EDI), giving payers instantaneous visibility into performance and process benchmarks using only the most current, accurate PPO contracts and repricing data. Built on standard XML file formats, the Partner Bridge enables users to obtain the latest repricing data from

Mitchell SmartAdvisor™




PPOs, negotiation partners, specialty reviewers, and other specialty networks. Mitchell can in most cases implement the standard XML Partner Bridge in under 30 days, compared to the 90-100 days needed for EDI installations.

SmartAdvisor is a comprehensive bill review solution for workers’ compensation that leads the industry in its unique combination of performance software, client services, and best-in-class partnerships. SmartAdvisor’s unique capabilities include customizable workflow modeling, Capstone® business decision rules engine, SmartReports™ data analytics and reporting tools, Claims Examiner Portal for fast, secured, real-time access to bill data, and a proven technology platform that delivers on average 50-70% straight-through processing for improved efficiencies and lower costs. In addition to being a leading workers’ compensation solution, SmartAdvisor provides the same capabilities and benefits to the auto and general liability markets and is ideal for servicing all bodily injury lines in a single platform. Visit www.mitchell.com/smartadvisor for more information or contact Mitchell SmartAdvisor Solutions directly at 1-800-421-6705 to schedule a demo of the SmartAdvisor bill review system.

About one Call Medical, Inc.

One Call Medical, Inc. (OCM) is the leading provider of diagnostic testing and specialty claims services to the workers compensation industry. OCM offers a nationwide diagnostic specialty network of fully credentialed high quality facilities and reduced costs for radiology and neurodiagnostic services. One Call Medicals network includes coverage in all major metropolitan areas across all 50 states. OCM customers realize significant cost savings, receive exceptional scheduling and medical report turnaround services and are confident in knowing that their patients obtain the best quality diagnostic testing in credentialed facilities. OCM recently added STOPS to its organization to offer transportation, interpretation, and other specialty claims services to the workers compensation marketplace. More information about One Call Medical can be found at www.onecallmedical.com.

Mitchell Adds GPS Functionality to WorkCenter™ Dispatch

Industry’s leading end-to-end integrated physical damage solution adds GPS integration with Garmin to improve field appraiser productivity

San Diego, CA—September 20, 2010—Mitchell International, Inc., a leading provider of information, workflow and performance management solutions to the Property & Casualty claims and Collision Repair industries, today announced that Mitchell’s WorkCenter™ Dispatch now includes a Global Positioning System (GPS) capability to help enable insurers to further increase the efficiency and productivity of their field operations. WorkCenter’s new GPS enhancement interfaces with select nvi models available from Garmin International.

WorkCenter Dispatch’s integration with Garmin can improve field appraiser productivity in several ways and is easy to implement. One of the major benefits of the integration is that it eliminates the need for field appraisers to manually enter addresses into their GPS device for each assignment reduces errors and improve timeliness.

Once field appraisers install the Garmin communicator plug-in, they can send their assignments from their mobile itinerary board to their GPS device with the click of a button. Assignments on the GPS device are kept in a separate folder within the Favorite menu for easy retrieval. In addition, the assignments in the GPS device include important information such as claim number, appointment date and time, owner name, address, phone number, and priority—eliminating the need for the appraiser to print out assignments or go back to the mobile itinerary board application.

“We’re really excited to bring this new feature to the market and help insurers further improve efficiency, which in the end is also a benefit to their customers,” said Paul Rosenstein, Mitchell’s Vice President of Claims Solutions. “The GPS integration with Garmin can improve dispatch operations by simplifying the distribution of claims assignment information—

Mitchell WorkCenter™ Dispatch




thereby speeding appraiser workflow, reducing claims cycle time and improving resource utilization.”

WorkCenter Dispatch is an integrated component of Mitchell’s industry-leading WorkCenter solution, an end-to-end, physical damage claims settlement workspace. WorkCenter powers physical damage claims processing needs including assignment, repairable estimating, total loss valuation, review, repair management, and reporting.

Please go to www.mitchell.com to learn more about WorkCenter and Mitchell’s auto physical damage claims solutions, or schedule an appointment to see us at NACE.

Mitchell International Announces ClaimIQ™ SceneDiagram

Solution enhances speed, consistency and control of the claim handling process with state-of-the-art graphical accident depiction capabilities

San Diego, CA—August 31, 2010—Mitchell International, Inc., a leading provider of information, workflow and performance management solutions to the Property & Casualty claims and Collision Repair industries, today announced the general release of Mitchell ClaimIQ™ version 2.19—the latest release of the market-leading expert claims decision support system for property and casualty (P&C) insurance carriers. Dubbed “SceneDiagram” by Mitchell’s customer community, ClaimIQ version 2.19 improves adjusters’ investigative consistency and efficiency by allowing them to graphically depict the chain of events leading up to a vehicle accident. Far beyond a drawing tool, SceneDiagram provides claims professionals and their claim handling partners a clear, concise and accurate visualization of the claim incident across the investigation, evaluation, negotiation, and settlement process.

This latest release expands ClaimIQ’s extensive support for liability claims handlers. SceneDiagram capabilities include:

• Preloaded common intersection templates that help speed diagram completion.

• Integrated satellite image overlay with Microsoft® Bing™ Maps combines diagram with actual photograph of accident location for a clearer representation of the scene.

• Multiple color and labeling options combined with a wide selection of common accident objects to help ensure consistency, clarity and scale of the scene diagram.

• Dynamic animation provides ability to link multiple diagrams together to see the accident happen.

• Exportable diagrams available in a variety of formats allow users to easily share with other claims handling partners, other party’s insurance company, attorneys, or recovery personnel.

• Available as a value added feature of ClaimIQ or as a stand-alone application.

“We actively engage our customers in our software development process, and the enhancements provided with ClaimIQ’s latest release are largely based on our customers’ input and feedback,” said John Gilmartin, Vice President of Product Management & Operations, Mitchell International. “SceneDiagram delivers the new functionality and enhanced flexibility that our customers have requested to assist their efforts to continuously raise the bar around superior claims service delivery to their policyholders.”

To learn more about SceneDiagram, please visit us at:https://www.mitchell.com/mitch/products/product2.asp?pf_id=504

Mitchell ClaimIQ™ is a self-contained, 100% web-based claims system used by leading insurers across lines of business to improve the claim process, ensure claims handling consistency and leverage individual carriers “best of breed” claims handling practices. Mitchell ClaimIQ provides investigative and damage evaluation consistency and negotiation and settlement support to more than five million automobile and general liability claims per year.

SceneDiagram




About Mitchell Auto Casualty Solutions.

Mitchell Auto Casualty Solutions (ACS) provides technology, database and service solutions that enable customers to achieve claims operational excellence while handling 1st and 3rd party liability and medical claims in a more timely, efficient, cost-effective, accurate, consistent and fair manner.

For more than 20 years ACS has delivered high-quality products and services to property casualty claim insurers, service providers and TPA customers assisting them to better analyze and adjudicate 1st and 3rd party medical bills and execute complete, comprehensive and consistent liability and injury evaluations and claim settlement strategies and deliver superior claims service.

The Plymouth Rock Group of Companies Selects Mitchell as exclusive Provider of Physical Damage Claims Solutions

Leading insurers sign on to WorkCenter™ to reduce cycle time and increase customer satisfaction

San Diego, CA—August 4, 2010—Mitchell International, Inc., a leading provider of information, workflow and performance management solutions to the Property & Casualty claims and Collision Repair industries, today announced that The Plymouth Rock Group of Companies has selected Mitchell as its exclusive provider of physical damage claims solutions. Under the terms of the deal, High Point Auto Insurance, Palisades Safety & Insurance and Plymouth Rock Assurance Corporation will leverage Mitchell’s WorkCenter™ solution, an end-to-end, physical damage claims settlement workspace, to power all of their physical damage claims processing needs including assignment, repairable estimating, total loss valuation, review, repair management, and reporting.

“The Plymouth Rock Group of Companies conducted a thorough due diligence process that resulted in the selection of Mitchell’s WorkCenter as the single platform solution capable of enabling a more efficient claims process and improving customer satisfaction,” said Rick Adam, Vice President Claims, High Point Safety and Insurance Management Corporation.

He added, “Mitchell’s WorkCenter gives us the ability to leverage scale across all Plymouth Rock companies in terms of cost advantage, efficiencies, central data collection and consistent workflow. The ease of implementing Mitchell’s claims handling technology in such a diverse IT environment was a definite deciding factor in our decision to choose WorkCenter.”

Mitchell WorkCenter will provide The Plymouth Rock Group of Companies with the tools to manage claims efficiency by eliminating the need for claims handlers to log-in to multiple systems and re-key data fields, speeding workflow. The end-to-end solution will also improve customer satisfaction by keeping those involved in the claim informed, including the ability for adjusters to view real-time repair status. In addition, Mitchell’s industry-leading total loss solution will provide a statistically-driven, fully automated, total loss valuation system—generating fair, market-driven values for loss vehicles, helping to assure policyholders that they are being fairly compensated for their loss.

“Mitchell is pleased to contract with The Plymouth Rock Group of Companies and is thrilled to have another leading insurer sign on exclusively to Mitchell’s WorkCenter. WorkCenter clearly meets the industry’s demand for a complete end-to-end integrated physical damage claims processing solution,” said Scott Kozak, Senior Vice President, Insurance Market for Mitchell International.

Please go to www.mitchell.com to learn more about WorkCenter and Mitchell’s auto physical damage claim solutions.

About The Plymouth Rock Group of Companies

The Plymouth Rock Group of Companies writes and manages more than $1 billion in




personal and commercial auto and homeowner’s insurance across the Northeast. The Group includes Plymouth Rock Assurance Corporation, Pilgrim Insurance Company, and Bunker Hill Insurance Company in Massachusetts and Connecticut, Mt. Washington Assurance Corporation in New Hampshire, and Palisades Safety and Insurance Association, Palisades Insurance Company, Palisades Property and Casualty Insurance Company, High Point Preferred Insurance Company, High Point Safety Insurance Company, High Point Property and Casualty Insurance Company, Twin Lights Insurance Company, and Teachers Auto Insurance Company in New Jersey.

Mitchell SmartAdvisor™ Customer Advisory Council Discusses Medical Claims Leakage Technology Breakthroughs

Collaborative forum exchanges ideas about next generation medical bill review quality optimization

San Diego, CA—July 29, 2010—Mitchell International, Inc., a leading provider of information, workflow and performance management solutions to the Property & Casualty claims and Collision Repair industries, today announced the successful conclusion of the second meeting of the Mitchell SmartAdvisor™ Customer Advisory Council (CAC). Members include claims executives from leading insurers, third party administrators and state funds, including EMC Insurance, Federated Insurance Companies, GAB Robins/MedInsights, Intracorp, Paradigm Management Services, Texas Mutual, The City of San Jose and Zurich Insurance. The CAC met in Chicago, IL July 26-27, 2010, and focused on stemming medical claims leakage by leveraging the power of technology.

“The Chicago CAC meeting was a resounding success,” said Senior Vice President and General Manager of the Mitchell International SmartAdvisor Solutions Division, Nina Smith. “Leading workers’ compensation insurance company leaders discussed technology and business strategies aimed at more effectively managing claims and controlling skyrocketing medical costs in this high-level, collaborative forum convened by Mitchell SmartAdvisor Solutions.”

The CAC convenes to generate ideas and offer guidance that will help SmartAdvisor continue its role as the leading medical claim cost containment solution that helps payers of workers’ compensation claims evaluate and settle claims faster and more accurately. The CAC is a collaborative forum where “Voice of the Customer” insights into business requirements and technology needs will be applied to the creation of market-leading medical bill review solutions with superior levels of quality, performance and end-user experience.

“Mitchell SmartAdvisor Customer Advisory Council meetings provide insurance carriers with a significant opportunity to provide real-world insight into the needs and expectations of the insurance industry,” said Karlyn T. Carnahan, Principal, Novarica. “Novarica’s Business and Technology Trends for 2010: Workers’ Compensation report identified stemming medical claims leakage as one of the top business and technology priorities for insurance payors, an industry challenge Mitchell SmartAdvisor Solutions is tackling head-on through CAC meetings. Collaboration with company leaders and industry peers to identify new opportunities for innovation and improvement are some of the top benefits of these meetings.”

SmartAdvisor is a comprehensive bill review solution for workers’ compensation that leads the industry in its unique combination of performance software, client services, and best-in-class partnerships. SmartAdvisor’s unique capabilities include customizable workflow modeling, Capstone® business decision rules engine, SmartReports™ data analytics and reporting tools, Claims Examiner Portal for fast, secured, real-time access to bill data, and a proven technology platform that delivers on average 50-70% straight-through processing for improved efficiencies and lower costs. In addition to being a leading workers’ compensation solution, SmartAdvisor provides the same capabilities and benefits to the auto and general liability markets and is ideal for servicing all bodily injury lines in a single platform. Visit


Customer Advisory Council




www.mitchell.com/smartadvisor for more information or contact Mitchell SmartAdvisor Solutions directly at 1-800-421-6705 to schedule a demo of the SmartAdvisor bill review system.

About Mitchell SmartAdvisor Solutions

A division of Mitchell International, Mitchell SmartAdvisor Solutions is a leading provider of workers compensation bill review solutions. SmartAdvisors unique capabilities include customizable workflow modeling, Capstone business decision rules engine, SmartReports data analytics and reporting tools, Claims Examiner Portal for fast, secured, real-time access to bill data, and a proven technology platform that delivers on average 50-70% straight-through processing for improved efficiencies and lower costs. Visit www.mitchell.com/smartadvisor for more information.

Aon eSolutions and Mitchell SmartAdvisor Solutions™ Form exclusive Partnership to Deliver end-to-end Workers’ Compensation Claims and Medical Bill Review Solution

Single, seamless claims experience to optimize efficiency, deliver optimal workers’ compensation savings

Chicago, IL and San Diego, CA—July 27, 2010—Aon eSolutions, the technology solutions business of Aon Corporation (NYSE: AON), and Mitchell SmartAdvisor Solutions, a division of Mitchell International, a leading provider of information, workflow and performance management solutions to the Property and Casualty claims and Collision Repair industries, today announced that they have established an exclusive partnership to deliver an end-to-end claims and medical bill review solution for the workers’ compensation industry.

Effectively managing claims and controlling skyrocketing medical costs are key challenges in the workers’ compensation industry, problems compounded by having separate claims and bill review systems. This complex technology environment can create workflow inefficiencies, process delays and higher administrative expenses. Organizations have long demanded a holistic approach to the workers’ compensation claims and medical bill review process.

Aon eSolutions has been at the forefront of delivering an integrated solution to address this need with the iVOS system, the industry’s most comprehensive claims technology solution, and now joins forces with Mitchell to dramatically enhance its offering. Mitchell SmartAdvisor is a market leading bill review solution for workers’ compensation, providing a unique combination of performance software and managed care services. As a result of this partnership, Aon eSolutions will replace its existing bill review engine by embedding SmartAdvisor into iVOS, creating an offering that will streamline operations, increase transaction speed and accuracy, enhance productivity, improve medical and administrative savings, and facilitate compliance.

“Aon eSolutions and Mitchell are bringing a best-of-breed approach to bear on today’s most difficult workers’ compensation challenges, resulting in efficiency gains and cost savings that our clients really need in this tough economic climate,” said Kathy Burns, CEO of Aon eSolutions. “With SmartAdvisor, iVOS clients now gain access to an enhanced and broader breadth of bill review options and capabilities from the iVOS desktop.”

“Leveraging the power of both iVOS and SmartAdvisor, organizations gain a single platform that is comprehensive and intelligent,” said Nina Smith, senior vice president and general manager of Mitchell International SmartAdvisor Solutions. “This partnership enables clients to benefit from the complementary strengths of two industry-leading organizations. Mitchell and Aon will continue to focus on respective core competencies, but also invest in an expanded joint offering to include innovations in technology, services and cost-containment capabilities.”

A detailed overview of this seamless claims experience will be unveiled at Aon eSolutions’ Client Conference in September. For more information, visit: www.aonesolutions.com/aoneS/events/experience+Conference.




Mitchell Brand Advertising at WorkIn this year’s Mitchell Industry Suite at NACE, we showcased our single underlying technology platform—the Extended Enterprise—which supports distinct Workspaces tailored to the unique needs of both insurance claims organizations and collision repair facilities. For insurers, it’s the interconnected Mitchell WorkCenter™ that meets the industry’s demand for an open, modular, and end-to-end, physical damage claims settlement solution. For body shops, it’s Mitchell RepairCenter™ that leverages Mitchell’s expertise in the shop management market by improving customer satisfaction for all parties in the repair process. Shown below are examples of some advertising displayed in the Suite.



Brand Advertising at Work (con’t.)

Body shops being able to “control” their repairs, their customer satisfaction, and their business is the clear message in the advertising campaign that coincided with Mitchell’s exhibit at NACE in Las Vegas, October 11-13, 2010. Mitchell RepairCenter™ is a Workspace built to fulfill the needs of every shop, offering over 30 modules to help shop owners and managers choose the modules that fit their unique business goals—making the RepairCenter Workspace flexible, scalable, and affordable. This ad appeared in ABRN and Autobody News.


©2010 Mitchell International, Inc. All rights reserved.

The Industry Trends Report is a quarterly snapshot of the auto physical damage collision and casualty industries. Just inside—the economy, industry highlights, plus illuminating statistics and measures, and more. Stay informed on ongoing and emerging trends impacting the industry, and you, with the Industry Trends Report!

Questions or comments about the Industry Trends Report may be directed to:

Greg Horn Editor in Chief, Vice President of Industry Relations [email protected]

For distribution and circulation questions, or requests for back issues, please contact:

Regina Merkey Managing Editor, Sr. Marketing Communications Specialist Distribution and Circulation (858) 368-7790 e-mail: [email protected]

For data analytics, please contact:

Gail Sloan Vice President of Licensing and Corporate Accounts (858) 368-7869 e-mail: [email protected]

The Industry Trends Report is published by Mitchell International, Inc.

The information contained in this publication was obtained from sources deemed reliable. However, Mitchell International, Inc. cannot guarantee the accuracy or completeness of the information provided.

original Cover PhotographyJennifer Therieau, Senior Graphic Designer, Mitchell International

Layout and DesignLarry Barnett, Creative Director, Mitchell International

Industry Trends

ReportVolume Ten Number Four

Q4 2010Published by Mitchell International, Inc.



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