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Carmakers poised to seize greater control over repairs

Philip James, Akzo Nobel Coatings managing director, said the decision to approach work providers was part of the paint company's evolution to become more than a product supplier.

“We have moved into offering consultancy services, now we are helping our bodyshop users to get more work and improve profitability,” he said.

“It's a two-pronged approach to insurers and accident management companies either direct or through the ABS Acoat selected network.”

Mr James is mindful of the growing influence of carmakers on the accident repair sector. Several manufacturers have introduced branded insurance products – Jaguar and ChryslerJeep are the latest – which will help them to direct work to their approved repairers.

“Carmakers initially focused on the bodyshop to capture parts sales and improve customer loyalty,” he said. “Now they are becoming more serious about their role in accident repair.

“Their influence will increase and we are having discussions with them.”

The thorny issue of golden hellos – up-front discounts that are rumoured to run into several hundred thousand pounds – is gathering publicity as struggling repairers unexpectedly switch brands after years of loyalty.

Mr James blamed “overzealous managers” who were looking to raise paint sales volumes on an incremental basis. But he believed the trend was now slowing.

“Paint companies specialise in developing new technologies, we are not banks,” he said. “Akzo Nobel has tried to steer clear from golden hellos – it's a dangerous strategy. “The companies that do offer them will feel the affects.

There are huge sums of money involved being offered to bodyshops that are under immense pressure – if they collapse in debt, the money is lost.”

Bodyshops are fighting to survive in the current climate as they largely fail to offer a united front against the high demands of work providers. Overcapacity dilutes their strength as insurers move cars from one bodyshop to a cheaper alternative.

Mr James urged repairers to watch for changes in market demands so they could address their cost bases accordingly.

But he added: “Bodyshops have been put into a position where their break-even point is too high, especially with work levels falling. They can get into difficulties very quickly.”

He predicted that the pressures on bodyshops and insurers would push the two sides closer together, forcing an element of trust.

“They will have to understand each others' goals. There is money to be made for everyone,” he said.

Mr James shrugged aside speculation suggesting Akzo Nobel was the prime candidate for acquisition by the US giant Sherwin Williams, which owns Scott Warren in Italy. He insisted that refinish was a “strong business unit” within Akzo Nobel's coatings division that would continue to expand.

“Sherwin will only get a presence in Europe by acquiring a major player, but I don't believe they have the appetite for this,” he said. “The cultural differences are too large.”

But he does expect “serious rationalisation” of the eight leading paint brands in Europe.

These brands are now owned by four companies: Akzo Nobel (Sikkens), BASF (Glasurit and R-M), DuPont Performance Coatings (DuPont, Standox and Spies Hecker) and PPG (PPG and ICI Autocolor).

“It is harder to sustain a number of separate brands, especially with the fall in volumes, and I don't believe they all have a future,” said Mr James.

“Akzo Nobel will continue to invest heavily in refinish, expanding in Asia as well as our core European market. We consider ourselves a top four player.”

The company's acquisition of Mason Paint, the commercial vehicle paint supplier, was, says Mr James, a strategic move.

“We have doubled volume at Mason, taking a 28% market share,” he said. “It is a different business to car refinish – one that insurers do not dominate. Fleet operators have different needs to insurers who want to minimise costs. They need their vehicles back on the road as soon as possible.” Akzo Nobel views the Mason brand as a key growth area in the UK. The acquisition did not include Mason's Derby plant, so production will move to Holland next year. Mr James is also targeting UK growth for Akzo Nobel's Sikkens refinish division and the Lesonal 'budget' brand, despite falling volumes due to more efficient products. “We believe our strength lies in product technology, customer support and distribution, both owned and independent,” he said.

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