08:43 AM CDT on Thursday, May 25, 2006

By TERRY BOX / The Dallas Morning News

RICHARDSON – Eighteen dented and battered cars filled most of the bays at Herb's Paint & Body Shop here on a recent morning.

Considering the challenges facing the collision-repair business, it looked like a good day.

As Herb's enters its 50th year in business in the Dallas area, most of the old dynamics of the business are changing – and not for the better.

LARA SOLT / DMN

Grey Owen works on a truck at Herb's Paint & Body in Richardson, one of five Herb's shops in the Dallas area.

Despite a 53 percent increase in vehicles on U.S. streets since 1980, the number brought in for collision repairs nationwide has declined.

In 2004, the most recent year for industry figures, 17 million cars and trucks were repaired. In 1980, according to industry estimates, 18 million to 19 million were fixed.

"It has not gotten any easier," said Alan Walne, chairman of the company that his father, Herb Walne, founded in 1956 with a service station at the corner of Northwest Highway and Easton Road.

"We had a huge year in '03 because of the storms. But the last two years have been pretty flat."

With five shops in the area, Herb's is well positioned to compete in a business that's more demanding every year.

The privately held company has annual revenue of $15 million to $20 million, is profitable and has 102 employees, many of them veterans, Mr. Walne said.

Nonetheless, challenges continue to mount.

Although most streets and highways don't feel safer today than they did 10 or 20 years ago, they are statistically safer in some ways. The percentage of vehicles involved in accidents each year has dropped from 20 percent in 1980 to 16 percent in 2004, according to industry figures.

The decline is mostly attributable to equipment such as high-mount third brake lights and anti-skid braking systems on cars, as well as stricter enforcement of driving while intoxicated laws and better-designed roads, said Bruce W. Cooley, director of marketing at Sherwin Williams Automotive Finishes Inc.

LARA SOLT / DMN

Robert Walne demonstrates a computer that measures damage to bring vehicles back to the factory condition.

And sophisticated "accident-avoidance" equipment is being added to new cars each year.

"I tell shop owners that it isn't likely that the business will go away," Mr. Cooley said. "But what I've tried to tell them is trends in the industry don't suggest that things will get better, and in fact, things will probably get worse."

While there has been a decline in the percentage of people involved in accidents annually, the number of vehicles totaled in accidents has increased dramatically, as has the number of people who choose not to fix their cars after an accident, he said.

Safety equipment such as airbags has substantially increased the cost to repair cars after an accident, officials said. Consequently, the annual number of total-loss vehicles has increased from 4 percent of the vehicle population in 1980 to 20 percent in 2004.

And as insurance premiums rise – especially in states like Texas – drivers are increasing the amount of their deductibles. After some accidents, they just don't get their cars fixed, Mr. Cooley said.

This all adds up to less work for body shops. In fact, Mr. Cooley said, the number of body shops has declined from about 100,000 nationwide when he began his career in 1969 to about 40,000 today – and that's probably still too many, he said.

Back when Herb Walne opened his first body shop in Dallas, cars rusted and their paint faded. Owners often got cosmetic repairs – something that is rarely done today mostly because it isn't needed.

"I think the industry really has room for about 25,000 shops," Mr. Cooley said.

To complicate matters, the collision repair business today depends more than ever on referrals from insurance companies. And to win those referrals, shops must do high-quality repair work at the lowest possible cost as quickly as possible.

"I tell these owners that you have to get better, you have to get more efficient," Mr. Cooley said.

Moreover, some automakers like Jaguar and Mercedes-Benz are using fairly exotic materials in their vehicles, requiring body shops that want to work on them to get expensive specialized training and certification, said Dan Risley, executive director of the Society of Collision Repair Specialists.

"The way they are manufacturing cars today has changed vastly from just five years ago," Mr. Risley said. "It is changing the repair procedure, and if you're not trained in that procedure, you won't get the business. It will dry up business for some shops."

Alan Walne

Mr. Walne, a 31-year veteran of the business and a former Dallas City Council member, is well aware of all the changes.

"The technician of the '60s couldn't do the work today," said Mr. Walne, 53. "Tolerances are much tighter. In the old days, we used shims to make something fit right. Not today."

In the last couple of years, the older Herb's shops have been refurbished. All have modern, high-tech equipment, which is critical to getting referrals from insurance companies.

And the company is beginning a new valet service to arrange for rental cars to be delivered to customers' houses at the same time their wrecked cars are picked up.

Customer service is becoming a priority throughout the business – for obvious reasons.

The Progressive Group of Insurance Cos. recently announced that it is starting a concierge service where customers can drop off a damaged vehicle at one of Progressive's service centers in the Dallas area and leave in a rental car, a process that should take about 15 minutes.

"It's a very challenging business," noted Denise Caspersen, collision division manager at the Automotive Service Association in Bedford, which represents mechanical and collision repair shops nationwide. "I think there will be a decline in the number of shops, but I expect to see more bays added to existing shops."

Ms. Caspersen sees another shakeout in the next couple of years. State Farm Insurance Cos., the largest insurer in the collision-repair business, wants to renegotiate many of its contracts with body shops.

State Farm has pushed shops to provide the highest quality they can.

But the company is now telling shop owners that it wants the same labor rate as all other insurance companies – some of which put a higher priority on cutting repair costs, she said.

"We will probably see a two-tier system in which the top insurers will work with the top shops, and the second-tier insurers will work with second-tier shops," Ms. Caspersen said.

Mr. Walne plans to be in the first group. As a sign of his optimism about the future, he has welcomed his 24-year-old college-educated son, Robert, into the business.

Herb's is also looking around the Love Field area for a location to open a satellite operation where customers can get estimates and drop off or pick up cars.

"Insurance companies don't want to spend millions on advertising to get new customers," he said.

"They want shops that can do the work right, within the estimate and on time. I think there is an advantage in being the size we are. Our equipment is top end. We can react quickly. And that will matter going forward."

E-mail tbox@dallasnews.com