Conference Recipe for Success - BAM! BAM!

Keynote Cornerstone of Conference
by: Claudia J. Betzner

As Imeril Lagose would say at his Las Vegas Delmonico restaurant after he has created his very best recipe - Bam Bam! The recipe for SIA Conference 2000 was everything you would ever want to achieve from a conference: Informative sessions, a lot of interaction from the participants, networking, groundbreaking breakouts, 25% larger than 1999, validation that the new focus "Promoting Customer Choices" is our raisen d'etre. 

The conference evaluations reflected the top three priorities of the SIA Board should be Legal/Legislative activity, membership growth and Public Relations for our industry. The majority also rated the conference better than previous years and wanted to see next year's conference back in Las Vegas.

Mr. Charles R. Wright, Chief Agency and Marketing Officer for State Farm Insurance Companies keynoted the Beyond Service 2000 conference this year. Mr. Wright is part of the Chairman's Council at State Farm in Bloomington, Illinois. He was ask to keynote as a result of his resolve and commitment to have freedom and choice of aftermarket parts instead of government dictated monopolistic practices. The State Farm case and the negative judgment are more fully discussed by Mr. Katz and Mr. Lapides in this newsletter.

The energy created at the SIA Conference from Mr. Wright and the State Farm case culminated with a SIA Board meeting on Wednesday March 1 generating a recommended action plan to help State Farm in their efforts, which in turn will help all aftermarket parts suppliers and service in general. The plan, which has not been finalized, recommends a six-point plan developed by your Board from the interactive session led by Ron Katz with the conference participants and membership. (1) Development of a Coalition of other Associations for aftermarket products and services to implement a variety of counter measures;(2) File Friend of Court Brief; (3) Distribute information to the membership for letter writing campaigns, etc; (4) Legislation; (5) a Public Relations campaign; (6) and finally, create programs to seek out and disseminate info on specific techniques or concepts that demonstrate the potential to make aftermarket products or services more efficient. The Board further established a Working Committee charged with the responsibility of implementing the plan in conjunction with State Farm made up of Board members and Members which includes: Malcolm Ridgway, Elliot Sloane, Ira Lapides, the General Counsel and the Executive Director.

Mr. Wright's presentation discussed the history of the State Farm case and how they came to utilize generic parts beginning in 1987 to save the policyholders lots of money while ensuring quality parts were being installed on their cars. They established an organization to test parts and certify them - called the Certified Auto Parts Association. He further demonstrated the value of generic auto parts beginning with a sheet of metal and the difference in the costs of the OEM's version and the generic part created from the sheet of metal. In his example a savings of over 50% passed directly onto the policyholder though reduced premiums and dividends. There was a lot of discussion about the principles of free enterprise, choice and consumers, which is the cornerstone of this association.

Mr. Wright concluded with "Like any good story, I hope this one does have a happy ending… not just for State Farm and our policyholders, but for all of the businesses like yours fighting for fair competition and for American consumers who ultimately deserve to have a choice in the products and services they buy."

Editors Note: - Like most American consumers who have been bombarded by the Press, I always thought generic products must be inferior because they were cheaper - Folks, it just ain't so as we say in the South. I was given a wake up call the week of the conference when I went to my friendly corner drugstore for sinus and allergy relief - Atlanta in the spring - the city of trees - plays havoc on those of us who suffer with allergies so I ask him was there an over-the-counter product that could help me get through the annual Conference without coughing and sneezing at the podium. He recommended Tavist-D and Sudafed so I picked up the products and was about to pay for them when the Pharmacist told me I should buy the generic brand and save half. I replied, like any American consumer that watches too much TV "but isn't the original product superior," and he replied, "young lady it is time for you to be educated on generic products." He then turned the original product and it's generic version over and read the ingredients which not only were the same but one product was actually made by the same company, just different packaging. I am now a believer - and if I would do this just think about the every day consumer that is not affiliated with an aftermarket service group.

Folks, a major PR campaign is needed to re-educate the public on aftermarket products and service. A PR and legal defense fund was established at the conference at the conclusion of an interactive session led by the President, Mark Streety, who challenged the membership and conference participants to come up with $20,000 to start the process. We received pledges totally about half of that at the conference and now put this before you. How strongly do you feel about changing Mr. Consumer's perception? Pick up the phone and make your pledge. Bill Gates is spending millions on prime time television to convince Mr. Consumer he is not a monopolist after last weeks appeal went South for Microsoft, and…. the sad part is a lot of them will listen because there is no one telling them anything different. Many are already out of business. These cases really will affect the industry for years to come. What are you going to do about it?
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Other Highlights

The infamous SIA annual Golf Tournament was held on Sunday and the winners were announced at the welcome reception by Rich Heimann, Past President of SIA and chairman of the tournament. First place went to the Mark Streety team made up of Streety, Cummins, Mitzhelli and Scheving. Longest drive went to our single lady golfer - Terri Thomas -

The new conference format worked better with more time for your specific segment of the Service Industry. We began each day with a couple of primary sessions, and then broke to three tracks, focusing on Computer Service, Medical Service and Business Products (Copier Service). The group then came back together for a final session on day one - E-Commerce and the second day concluded with an overview by the Breakout Chair's of their sessions. The presentations will be posted on the website as soon as they are available.
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Breakouts were breakthrough

For the first time Breakouts received increased focus by the head of each subgroup. Each of the Chairs - Randy Parks, Computer Service, Dave Johnson, Medical Service and Lee Carr, Business Products (NISO Owner's Meeting on day one) focused on what was important to their groups as dictated by each groups membership through conference calls, and meetings with industry leaders in their segments. The Medical Sessions organized by Dave Johnson, Vice President of MedAssets, further broke out to form six subgroups, which will each have their own Board members. Key industry leaders from each of the six groups were invited to the conference to participate in these organizing meetings. The six groups are: Imaging, Laboratory, Anesthesia, In-House Organizations, Biomedical Companies, and Asset Managers. They each affectionately created nicknames for the groups. The meetings were a huge success and will be formalized at future SIA conferences. As a result of Dave Johnson's tremendous effort He was honored with a special award for outstanding service as an SIA Board Member.

Randy Parks, who heads up the Computer Service Group, organized the breakouts and sessions held in the Computer segment. One of the highlights included a presentation by Eric Rocco of Dataquest who gave an overview of the Computer Service Industry, Warranty Service and the effects of Y2K.
Randy was also honored with an outstanding achievement as a Board Member award for his contribution.
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TheProfile

You've read about it. You've seen it demonstrated at our annual meeting. Now all you have to do is use TheProfile and begin taking advantage of this great management tool that will help make a positive impact on your bottom line.
Using the power of the Internet, TheProfile takes only a few minutes on-line to complete with results delivered within minutes - right to your e-mailbox! We are convinced that TheProfile is the fastest, easiest to understand, and most comprehensive profiling tool available.
Right now, you can try TheProfile for free. That's right - FREE! Exclusively for SIA members, you can try TheProfile one time at no cost to you. Experience TheProfile for yourself and see the results first hand. Calls are being made to all members so they may take advantage of this special offer, and an Internet site will be available in a few weeks for SIA members to use on an ongoing basis.
We're sure you will agree that TheProfile provides you with just the type of information needed to make better hiring and management decisions. You will learn what the characteristics of your employees are. You will learn their strengths and restraints. You can even learn about your own strengths and restraints and how to better interact with your employees. With a happier, more satisfied staff, you would find productivity on the rise.
Surveys highlighted in BusinessWeek show that the cost of losing a typical worker is $50,000. Using TheProfile as one of your hiring tools, you can hire with the confidence that you are selecting the right candidate for the right job the first time. You will know the types of characteristics that lend themselves to certain job functions and you will be able to look for those types of characteristics in a candidate. Save money by placing the right person in the right job!
TheProfile! Another way that SIA is providing the best in value added services to our members.
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Special Thanks

A special thanks to the sponsors of the SIA Conference. Tee Sponsors were: RPI, The Thomas Group, Northrop Grumman, MedAssets, American Computer Hardware Corp.

We would also like to thank the Welcome Reception Sponsor - Larry Gashi, President of SATS Technology Support Services and new member of the association. We will surely be seeing more of Larry at future SIA functions.

Rich Heimann, Chaired the Golf Tournament and Parts Panel and did a tremendous job. A special thanks to him and the Chairmen of the General Session Panels who presented outstanding Speakers, questions and interaction: Frank D'Alessio, President Maintech for the Industry Leaders Panel, Steve Preston, Vice Pres. TFE Technology Holdings, who chaired the E-Commerce session, Ron Katz, the Legal Forum, and Ron Varing, Pres. IBE Digital for the Digital World Crossover session.

Finally, last but certainly not least - To Dave Johnson and Randy Parks who Co-Chaired the 2000 Conference with the Executive Director -BAM! BAM! What a great recipe for success. Thank you.
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SIA's New Location 

Effective May 1, 2000 SIA will be located in California. The new address: 

Sponsors

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No good deed goes unpunished: Why Aftermarket Competitors Continue to Be Threatened By the State Farm
Generic Parts Case
by: Ronald S. Katz

Last December this column discussed the case of Snider v. State Farm Mutual Automobile Insurance Co., in which State Farm lost a $1.2 billion verdict because it required its insured's to use generic rather than original equipment manufacturer (OEM) parts when generic parts were equivalent. I wrote about this case because I felt that it harmed the reputations of all aftermarket competitors for all of the wrong reasons. I mentioned at the end of the article that there were rumors of another case against all of the major insurers for creating an organization to certify the quality of generic parts. That lawsuit has now been brought and, as described below, it broadens and deepens the threat to the reputation of aftermarket competitors.

The case has been brought by an individual, Shannon Hobbs, who represents a class of millions of people described as follows: All persons in the United States who were insured by a vehicle casualty insurance policy issued by any named defendants which required restoration of the vehicle to its pre-loss condition and/or replacement of damaged or destroyed property with property of like kind and quality, who made a claim for vehicle repairs pursuant to their policy and had non-OEM 'crash parts' specified or used in settlement of their claims.

The case was brought against 24 insurance companies, including most of the major ones.
In confirmation of the adage that no good deed goes unpunished, the thrust of the lawsuit is that these insurance companies conspired to create an organization to certify the quality of non-OEM crash parts. The organization is called CAPA, the Certified Automotive Parts Association.
One would think that the creation of such an organization would be a positive. Indeed, the idea is similar to the creation of the well known Underwriters Laboratories, which certifies appliances to keep them from being fire hazards and which was also created by insurance companies. CAPA certifies auto parts to ensure that cars are restored to their pre-loss condition.
By giving the customers of the insurance companies comfort that they are getting their cars repaired with quality parts, CAPA also provides a viable choice to those customers. If it were not for the existence of quality aftermarket parts, the OEMs would have a parts monopoly, prices of crash parts would be higher, and the quality of crash parts would be lower. The lawsuit of Mr. Hobbs, however, alleges otherwise. It states that CAPA was essentially a fraud on consumers.

First, the lawsuit alleges that CAPA was controlled by the insurance companies. Second, the lawsuit alleges that CAPA uses a lower standard than parts of "like kind or quality," i.e., a standard of "functionally equivalent," although the lawsuit does not explain why this standard is lower. Third, the lawsuit alleges that this lower standard was knowingly foisted by the insurance companies on their customers.

In my opinion, there are numerous problems with this lawsuit. The principal problem is one that impacts on all aftermarket competitors, not just on manufacturers of generic crash parts.
That problem is that the lawsuit alleges that generic parts cannot be as good as OEM parts. Paragraph 31 of the lawsuit reads as follows: The obligation to restore vehicles to their pre-loss condition and/or to use parts of like kind and quality … can only be met, in practice, by requiring the exclusive use in repairs of factory authorized or OEM parts …
This allegation is absurd and untrue. It is absurd because many so-called OEM parts are made by contractors to the OEMs. Those same contractors make non-OEM parts as well. Sometimes these parts are the same as the OEM parts except for the label.

The statement that restoring the car to its pre-loss condition requires OEM parts is untrue because it is quite possible for a non-OEM manufacturer to make parts superior to those of an OEM. Indeed, OEMs can and do make defective parts on occasion.
The point that affects all aftermarket competitors is that the lawsuit bashes their reputation with no justification. This is not just a matter of hurt feelings -- this bashing can have and has had significant economic consequences for aftermarket competitors.
For example, because of the threat posed by lawsuits like this one, some insurance companies have ceased using aftermarket parts. Because the insurance companies are the largest purchasers of crash parts, this cessation of purchases has a tremendous effect on the aftermarket competitors that sold parts to the insurance companies and on the premiums that the insurance companies have to charge their customers if the companies have higher costs caused by OEM parts.
Therefore, in my opinion, it is in the interest of aftermarket competitors in all fields to monitor this lawsuit and to take appropriate action to get the truth out about aftermarket parts. Opportunities for appropriate actions could include public relations or lobbying efforts. Without such efforts, the public will be misinformed about the many quality aftermarket competitors and the benefits that they bring to consumer.
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The State Farm Case
A Medical Service Problem?
By: Ira Lapides, President, RPI

You bet it is! It's what happened in the trial that makes it our problem. First, let's make sure we're all up to speed. A class action suit was brought against State Farm Insurance for using non-OEM (Original Equipment Manufacturer) body parts to repair auto collision damages. The plaintiffs won an unprecedented $1.2 billion awarded. It is now in appeal. Fine, you say. Those dirty insurance companies are always cutting corners and giving us the short end. Glad somebody caught up with them.

Not so fast, please. Look at the details of the case. If you're in the service business, any service business, you've just been put on notice that you're next. After the ruling, these same people have now filed suits against 24 other insurance companies and against the company the insurance companies use to test independent aftermarket parts.

Here's a short summary of what happened: Some people had bad experiences with some parts used in the repair of their cars. Instead of complaining to State Farm, they went to see lawyers. This in spite of the fact that their policies included the use of aftermarket parts, and that all parts were warranted. Six plaintiffs started the suit, but one had never even been in an accident or had any repair done. The lawyers shopped the suit through 11 jurisdictions before they found a court that would take it. The court ignored the policy agreements and warranty. The judge stated flatly in his decision that ALL aftermarket parts are inferior to OEM parts. He did not limit his decision to the automotive industry. Think of what this can mean to your business or department when there is no longer any competition to maintain quality and pricing.

Therefore, a great number of service based trade associations are joining in supporting the appeal. A leader in this is the SIA (Service Industry Association). They have decided to file a "friend of the court" brief. They are also going to begin a public relations program on the value of using aftermarket products
and non-OEM service. A Letter writing campaigns will also be started.

Your involvement is needed, if only for your own sake. Please get in touch with the SIA office and find out what you can do.

They'll need your support, we helped win the Kodak Case, and we'll help win this one.
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New Members

Board Schedule:
(Your participation is welcomed)

Affiliations: AFSMI and IAMERS

Representatives from both of these organizations attended the SIA Conference and met with the Board to discuss further affiliation opportunities including teaming on future conferences, joint discounts and training opportunities. The Board will be formalizing the discussions at the May Board Meeting.
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Warranty Service

Eric Rocco of Dataquest gave a blistering account of Warranty Service as it relates to Y2K and what the next two years will hold for the PC Service Industry. His panel included Jade Systems and PC ServiceSource. According to
Dataquest for the current time almost 64% of Desktops are under Standard Warranty but that will reduce to 59% in 2001. Three years has become the norm, but service levels have been reduced - one year onsite, 2/3 parts-only/carry-in, leaving opportunity for the sale of warranty upgrades. Most of the top PC manufacturers use strategic service partners to deliver most or all of their on-site warranty services. Compaq, HP and IBM are the only majors that have their own field service force and they too rely on an authorized reseller network for part of their service. Dell, Packard Bell NEC, Gateway, Apple, and Toshiba rely solely on their Partners for service. With the technology evolution data shows that 60% of users actually prefer one-year. Authorized reseller support programs are building in pay-for-performance incentives and Warranty Reimbursements still viewed as cost-recovery and a means of getting bigger business. Exclusive strategic warranty service partnerships are critical, but leave smaller players in the cold. The stats also show that less than 20% of users purchase any category of warranties at point of sale.
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