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The true cost of refinishing

The end of this month will see the publication of the annual changes in paint prices by the paint manufacturers, and the outlook doesn’t look promising for bodyshops.

Industry experts are predicting some of the biggest price hikes ever with some products increasing by up to 12% and an average rise of around 4%.

The upcoming volatile organic compounds (VOC) legislation is no doubt having an impact on prices with the manufacturers increasing prices on solventborne products to encourage, although some would say force, bodyshops to switch to waterborne paints.

Paint companies are never keen to lay down the reasons for the price rises but the UK body repair industry has become accustomed to greater-than-inflation increases in the price of paint for some time now.

Paint prices on the increase

This year’s increases first need to be set in context with worldwide paint price rises that have been brought about by heavier petroleum and other raw materials costs. They are also due to a growing move to switching markets over to more costly, environmentally-friendly materials.

These are the official reasons given by the paint companies but in the UK, as is so often the case, things are not quite as simple. Last year, Thatcham commissioned a report by consultancy firm Autopolis, on behalf of the UK insurance industry, to examine paint price differentials between this country and the rest of Europe. While the report was never published outside the insurance industry, it is thought that it highlighted significant price differences across EU countries, but none of this was ever broadcast.

“Could it possibly be that one of the contributing factors to the price of paint here are the huge rebates that some paint manufacturers pay to motor manufacturers and insurers for the privilege of being nominated as approved suppliers?” asks industry expert Robert Hadfield, consultant to the ABP Club.

“Perhaps participating insurers could be left without a lucrative revenue stream if the true cost of servicing the UK market is ever investigated? Given that certain manufacturers who, shall we say, ‘appear to be co-operating most closely with insurers’ have increased their prices this year by more than double those who don’t, lends weight to the speculation that it’s not just the cost of servicing UK bodyshops that finds its way into the cost of a can of refinish paint.”

Hadfield has a point. Surely an 11%+ increase by a market leading manufacturer cannot have escaped the attention of those insurers who do not enjoy rebates.

Profits for repairers decreasing

As paint companies increase their prices it is the repairers who are invariably being asked to price support these increased costs. Not for the first time, repairers find themselves squeezed between two big corporate entities and as headline prices become the focus for work providers, many bodyshops are beginning to see them request increased discounts from repairers.

“The paradox is that while headline prices may be increasing, repairers’ net prices are also rising in the same proportion. Furthermore, work providers are requesting additional slices of that margin, reducing repairers profits further,” says Chris Oliver, managing director of Essex-based bodyshop AJC Wilson.

Oliver explains that the current paint prices reflect the increasing complexity demanded by the vehicle manufacturers to produce more and more imaginative colours and effects for consumers, but he has reservations about the knowledge gap between repairers at the sharp end, software houses and work providers.

“Some level headed, sound, commercial business decisions need to be taken by repairers if their organizations are to have any reasonable longevity. If a collapse of the repair industry is to be avoided, a much more rounded approach needs to be taken with the involvement of all stakeholders,” warns Oliver.

#AM_ART_SPLIT# Service is as important as price

As major brands merge and the overall market consolidates, the industry is likely to continue to see a rationalization of paint prices and this is where service will become increasingly more important.

“The strength of paint companies, in my view, is the delivery partners they work with. While the paint companies do undoubtedly add some value to the business proposition, it is the factors who have to deliver in a quality and consistent fashion, day in day out, across a broad number of key indicators,” says Oliver.

“If the factor fails to do so, then the best product in the world will not prevent meltdown in the relationship. The factor is the glue that holds the relationship between paint company and repairer together. They also have an opportunity to add value at every level and the very best ones do this in seamless fashion without missing a beat,” he adds.

The cost of the environment

As expected, most of the paint companies we contacted were ‘unavailable’ for comment; presumably they were busy finalizing their prices for this year. However, a few did agree to speak to us about the price increases.

“Over the past 10 years, annual price rises across all the major automotive refinish paint brands have averaged between 4% and 6%,” says Colin Drain head of customer service at BASF Coatings UK, which produces, R-M, Salcomix and Glasurit brands.

The reason behind this, according to Drain, is the continuing rise in the price of raw materials, particularly now that many of the traditional base ingredients, such as lead, have had to be replaced with alternatives in order to comply with the demands of environmental legislation.

As the price of raw materials continues to increase, so will paint prices, says Drain. But BASF says its strategy is to help bodyshops to become more efficient, reducing material consumption and, therefore, minimizing the effect of rising prices.

R-M is expecting to see an average price rise in 2006 of less than 5%.

Glasurit is also predicting a price rise significantly lower than 5%,“It is important to note that the price rises are genuine, being calculated by actual product used by the end users. We can pass on the benefits of our own efficiency and experience in cutting costs to minimize the impact of price rises to our customers,” adds Drain.

Readily-available paint prices

Meanwhile, Thatcham hopes to stimulate competition in the UK paint market this year by unbundling the aggregating system, which averages prices from leading UK paint suppliers used in Thatcham Time System (TTS) estimates. 

In future, individual paint lines will be shown in TTS estimates and, therefore, bodyshops and insurers should be able to compare which paint lines are most competitive.

If the Thatcham initiative is successful, there is likely to be pressure on German data supplier AZT to provide the UK’s market leading estimating system Audatex with information to highlight individual paint prices.

#AM_ART_SPLIT# Perfection’s in the preparation

When it comes to painting a vehicle, preparation is the key to a successful finish, and yet this is an area where a lot of simple mistakes are made, says Mike Battrick, technical manager for Akzo Nobel.

“First and foremost, paint shop operatives need to make sure that the vehicle is properly washed, cleaned and degreased. They also need to check the panel repairs to make sure they’re in a good condition and ready for the painting operation. Without these basic requirements being met, the sprayer will not be able to achieve an ‘invisible’ repair,” advises Battrick.

To get the perfect finish, sprayers and preppers also need to ensure they choose the right materials for the job. Appropriate sanding techniques and the right selection of sanding grits are fundamental to the integrity of the paint subsequently applied.

It is also important to check the substrate type, build and warranty requirements to ensure the correct primer is selected, and to refer to the technical data sheet. “Adopting guesswork when mixing is a road to disaster,” says Battrick.

“Once preparation has been completed properly, before starting to spray, the sprayer should check the functioning of his spray gun, paying particular attention to pressures to be used and spray pattern achieved. A sprayer should always have in mind where they’re going to start and finish the job, providing equal overlaps, and ensure good coverage on edges and areas difficult to access,” he adds.

The right equipment is also essential, right down to a clean overall. Sprayers should regularly check the air lines and air quality, and make sure that there’s adequate airflow and correct application temperature in the spray booth.

“Without clean equipment in good working order, even the best sprayer will have difficulty in achieving the right result.”

Time to act now on VOC change

2007 is getting ever closer and bodyshops who haven’t already done so need to prepare now for the new European environmental legislation. The new VOC in Paints, Varnishes, & Vehicle Refinish Products Regulations 2005 lay out the rules for compliance.

The new law affects every bodyshop across Europe and comes into force from January 1, 2007.

From this date, all paint manufacturers and distributors will only be able to supply compliant products such as waterborne basecoats, high solids clearcoats and high solids topcoats.

This means that the conventional medium solids solventborne materials will no longer be available for vehicle refinishers to purchase. Consequently, repairers not already using waterborne products or preparing for the change could be forced to close after this date.

Solventborne basecoats, topcoats and clearcoats above 420g per litre VOC will not be allowed under the new legislation.

Bodyshops with a high stock of non-compliant products should use up these stocks before they make the change to avoid expensive wastage and start talking to their paint company for advice on converting. Paint companies can advise you on any equipment and training necessary and will also clarify which products you will need to phase out.

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