Not So Sly Fox, and Detroit Shoves it up Your Backside

November 7, 2007 by
Filed under: Collision Repair Industry 

Unless you’ve been too busy running yourselves out of business you’ve heard about or read the letter to our industry from Fox Collision Centers. It was a shock to hear a man who owned and operated 18 body shops say “Uncle” and throw in the towel. In fact, it makes little sense. How could a man who was driven enough and smart enough to build an empire like he had suddenly walk away from it all? How could he just hit the light switch on his way out the door and not return? Could he not see the damage piling up? Did he have no other choices? I detect an unpleasant olfactory sensation.

So you’re Todd Fox, and you wake up at 4:30 am every day excited about building your collision repair empire. You own 18 busy (his claim) collision repair shops, yet somehow you fail to leverage your $28 million in annual sales to develop your own client base. Am I missing something here? Did he not track his performance indicators or did he rely on his insurance “partners'” numbers? We’re not talking franchises here, where each store is individually owned and operated. Todd Fox was the owner / operator, CEO, CFO, BF’nD. What was he using as criteria for signing all those DRP contracts? With $28 million in annual revenue you would think he could have hired an accountant or attorney to advise him. Or was he just another mud slinging body man, without the education or business intelligence needed, who wanted to be his own boss ?

How did he afford to grow his empire without making a profit? Didn’t he understand that in the collision repair business volume does not equal profit?

And why did Todd Fox throw in the towel with nary a bloody lip? If it were me, and I was excited enough about the collision repair business to crawl out of a warm, comfortable bed at the gawd awful hour of 4:30 am, and if I finally came out of my insurer induced comma to realize there was a problem with my business model (which is, in fact, the insurance industry’s business model) you can bet that I would start making some changes before I shut down the entire operation, bought some plaid shorts and moved on down to The Villages in Florida to play shuffle board with the old fuddy duddies.

I applaud Mr. Fox for admitting his sins and recognizing that he was the problem. I especially enjoyed his jab at those two girls at CarStar who whined about responsible push backs, when he refuted their excuse that no one is to blame. At least Mr. Fox realizes that he wrote his own epithet. He was man enough to admit his culpability. But I have trouble accepting this sudden revelation that the insurance industry has taken over his empire as the cause or reason for closing 18 shops in one swift motion. It makes no sense. Perhaps Fox has amassed enough of a fortune that he can walk away into the sunset without looking back, and live happily ever after. That’s fine, but why not sell your shops?

Why not close a few and concentrate on building the rest into self reliant businesses? Why put so many people out of work all at once? If his motives are revenge against the insurance companies I can empathize with him, but I do not agree with his actions.

I know nothing of Todd Fox, his business, his situation or lifestyle. This is the first I have even heard of Fox Collision Centers. But with the information I do have, things don’t add up. There appears to be more behind this story. What do you think? Does his drastic actions make sense to you with the information that you have?


So how’s your sphincter feeling these days? Those of you who have fought the onslaught of counterfeit parts and have helped Detroit keep hold of its crash parts business should be pretty upset about the news that State Farm (and soon to follow, all the other big insurers) have struck a back room deal with auto makers to shave a few percentage points from the list price of OEM parts . What a nice thanks we get for helping them to keep their monopoly going.What are these morons thinking? Imagine, you make widgets. They are great widgets. The only other people making widgets are the little yellow communists on the other side of the world. These commie widgets, for the most part, really suck. People love your widgets 3 to 1 over the commie widgets. Anyone who wants real widgets has to buy them from you. You’ve got the great widget market locked up. Then along comes some rich guy who buys lot’s of widgets. He sometimes buys the commie widgets but likes yours better, as does everyone else. He asks for a discount from you because he buys so many widgets. I guess you feel sorry for the rich guy and say “Sure, whenever you buy one of my widgets, I’ll send you a rebate.” So now the entire world now knows you’re a retard.

 I guess this must mean that State Farm won’t force their DRP shops to purchase aftermarket parts. And State Farm is one of the better insurance companies we have to deal with. Things are looking up.

Why would anyone who had a legal monopoly on a product offer that product at a discount to someone who needed that product? Where do you think this discount is going to come from? GM just announced a $39 Billion loss for the 3rd quarter of this year. That’s about $13 Billion per month. Do you think GM is just going to throw money at State Farm?

I refused to sign State Farms new DRP contract because of their part procurement clause. Few people even noticed this clause. Probably because most of the contract signers are illiterate. But that clause told me that State Farm had already made some kind of deal with someone.

State Farm defends its new parts deal by stating that they completely understand the importance of parts profits to the welfare of a collision repair shop. They explained that every bit of those parts profits would remain intact. Shops would not be hurt by State Farm’s deal with the geniuses in Detroit. If you believe that nonsense, you are at least as stupid as the idiots in Detroit who conspired with State Farm to screw you out of your parts profits.

Make no mistake in your analysis about this. This kick back will come out of your pockets. If you’re smart you’ll start buying more aftermarket parts. Yes, you read that correctly. Profit margins are larger on aftermarket parts–about 40% on the average. Compare that to an average of 25% on OEM parts. Do you understand the difference between profit margins and profits? You can still make more profit on OEM parts because they generally cost more. 25% of $200 is more money than 40% of $100. Here is a situation where a body shop can take advantage of volume discounts–on steroids. Sell more aftermarket parts at a higher gross profit margin than OEM parts and make those insurance companies just love you.

If you start using more aftermarket parts you’ll be making fewer dollars at first, but you’ll also be getting a larger return on your investment. And once you’re known as a shop that uses lot’s of aftermarket parts, insurers will be knocking at your door, just begging you to take their money. Start buying more aftermarket parts and show the OEM’s the same appreciation they are now showing you for your past loyalty. Boycott OEM parts and see how fast State Farms little love fest with Detroit ends.

Don’t think it will work? Several years ago MetLife and The Hartford illegally entered into a joint venture where they approached Connecticut’s largest chain of dealers and offered to direct their DRP shops to only purchase parts from this chain in exchange for big discounts. Word got out to this dealer chain’s regular body shop customers. Most shops stopped buying parts from this dealer chain. Needless to say, The Hartford, MetLife venture never got off the ground. D.O.A.

Those of you who think that cooperating with your nannies, the insurance companies, is the only way to stay in business will someday find yourself in the same situation as the Fox Collision Centers empire. And I’m sure you will cry the blues to whoever will listen. Maybe you’ll even do as Fox and CarStar did and write a guilt laden eulogy for all of us to read.

Join hands with State Farm and help them save some money. I’m sure you will be richly rewarded. Maybe they’ll only ask you for 5% off domestic parts instead of the usual 10%.

What will it take for some of you to realize that the insurance industry’s interests are directly opposite those of the collision industry. Both industries can’t maximize their profit potential by “working together.” It is impossible. A compromise is the best you can hope for. You can’t win by compromising with the insurance industry. They deserve to make as much money as they can, and you deserve to make as much money as you can. They are smarter and stronger. They will always come out with the bigger slice of the pie. Stop relying on the insurance industry to supply you with customers and run your business with the object of maximizing your profit potential, like you have a army of cranky stock holders watching your every move.

But you know all this already.

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Comments

11 Comments on Not So Sly Fox, and Detroit Shoves it up Your Backside

  1. mini me on Thu, 8th Nov 2007 7:59 am
  2. I wonder if S.F. threatened to change their fleet of company cars to Toyotas?

  3. Truman Fancher III on Thu, 8th Nov 2007 4:04 pm
  4. John,

    I read Mr. Fox admitted to his sins but I don’t remember him taking the responsibility for it. The letter I read said “the devil made me do it”.

    Great article….. as always

    Truman

  5. Jon on Thu, 8th Nov 2007 8:36 pm
  6. John your article states State Farm uses am parts……when did they start doing this?

  7. John Shortell on Thu, 15th Nov 2007 8:41 am
  8. Thanks for bringing that to my attention. Presently State Farm is not writing many aftermarket parts. But that will change in the future. I have changed the wording a bit to reflect the future tense.

  9. veh on Fri, 9th Nov 2007 5:37 am
  10. This parts deal is just “Detroit”? Not the Euros or Asians??

  11. Some Insurance Idiot on Fri, 9th Nov 2007 11:21 am
  12. What a great website!!! After a long day of dealing with you morons, I get to come on this site and read your whiney posts about how mean we are to you, how you make no money and how unsafe the parts we MAKE you use are. Oh, John, great idea about using nothing but A/M parts for a while. Gosh, I guess they fit well, are safe, and indemnify the customer if it’s the body shop’s idea to use them, huh?

  13. John Shortell on Thu, 15th Nov 2007 8:43 am
  14. Mr. Idiot, apparently you have a reading comprehension disability. You must be a liberal because you don’t seem to be able to recognize satire. You’ve taken a good first step toward enlightenment, though, by visiting this site. I suggest you struggle through my past columns. You might learn something.

  15. OK Resident and Ins Employee on Mon, 12th Nov 2007 11:20 am
  16. I am from OK where Fox Collision was headquartered, this has been all over the news here. Mr. Fox wrote that letter one week prior to all his shops being seized by the government, a lot of the employees have started to complain that their paychecks have bounced and they have not received their last paycheck. I don’t think the Insurance Industry forced him to not pay his taxes. Although I do not agree with everything my employer requires of its DRP shops, times are starting to change, off hand I know that CCC is now removing its bumper overlap question and removing from its database, which I know has been a hot issue with shops.

  17. Tom on Mon, 12th Nov 2007 12:16 pm
  18. I am glad to see someone like this go out. He has been bad for this industry. The sooner more shops realize that it is not profitable to give it all away to the insurance company the better! Serve the customer. Give good customer service. Do the job right. Most importantly, stand your ground with the insurance company and don’t let them shove all this down your throat. You own your business, act like an owner, and just say no! Dealership owners, more than anyone else, you are getting the job anyway, why give all your profits away. The insurance company is already going along with the owner, and sending you the job, why would you give it all away? Downsize your big boxes and demand a reasonable price for your work, and be more profitable. We are in business to make money, profit, not just turn cars! It is rediculous what we are allowing the insurance companies to get away with. Claims are down, big box shops are up, there is not enough demand for the supply of shop space available, the insurance companies are taking advantage of the lack of demand for our shop space, by driving down prices. Say no.

  19. OK Resident and Ins Employee on Mon, 19th Nov 2007 2:37 pm
  20. The Insurance Company’s Taj Mahal | on Thu, 2nd Apr 2009 1:17 pm
  21. […] and think, “boy this guy is successful. He must really know what he is doing.” But like Todd Fox, his success is a house of cards. With all those DRP’s, most of his work is being steered to […]

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