For most, their strategy has been to do all of the above. Yet, even when employing this multi-pronged approach, operating in the refinish market hasn't been easy-especially since the economy has been in the slow lane.
"Mature car refinishes markets, such as North America and Western Europe, have steadily been declining in volume for well over a decade. Accident repair rates are going down, and less paint is used. Other major suppliers have been reducing their costs as a consequence. Due to constant improvements in products and services, we had not felt this in revenue until now, against the backdrop of an economic downturn," said Chris Wall, director of global marketing for Akzo Nobel Car Refinishes, which announced a major restructuring plan on July 1.
"More specifically," Wall continued, "North American sales value in euros has been under pressure due to currency effects while improvement programs in Western Europe were complex to implement and slower than we had wished."
Akzo Nobel's proposed measures-which will be carried out through 2006-involve the reduction of approximately 600 full-time jobs, or 10% of its global workforce. In late August, the company took its first step in making the business more agile, selling its E9 million ACE activities in Germany, Austria, France, Italy, Switzerland and Spain to BASF (see Fresh Paint, page 10, for more on the accord).
Still, Akzo Nobel is committed to the marketplace, according to Wall. "Car refinishes remains core business for Akzo Nobel; there are no plans to exit the market," he said. "We will continue to work on fulfilling customers' needs and being the best possible supplier in the market."
|A UV lamp positioned right over the surface allows European repairers to use Spies Hecker's Permasolid UV Starlight Primer Surfacer 9000, which has unlimited pot life and is immediately ready to spray.|
"The decline is especially evident with small and independent businesses, many of which have difficulty competing with large operations. The trend toward industry consolidation continues and contributes greatly to the decline of small, independent businesses," said Darlene Eilenberger, director, brand marketing for BASF's refinish operations.
Finding Growth Markets
With mature refinish markets idling, paint manufacturers are looking to regions where car ownership is more of a luxury than necessity. Eastern Europe, Asia and India are areas where car ownership is on the rise, and paint suppliers are zeroing in on supplying these markets in an effort to offset sales in mature markets.
"From a European perspective, there is great growth potential in the refinish market," said Eilenberger.
Industry insiders suggest that although these markets are somewhat "green" in terms of the level of refinish technology available to date. But before you know it, they will be on the fast track towards compliant technologies.
"We expect Eastern European countries to catch up fast, especially in the area of legislation," said Wall. Emerging markets, especially China, parts of Europe and India, "are also moving forward rapidly with new technology, although the latest waterborne technology will only be a small part in the foreseeable future."
Coatings manufacturers will have a number of compliant technologies at the ready for those emerging markets, thanks in part to the work being done to enable customers to meet more immediate regulatory deadlines in the U.S. and Europe.
"Regulatory issues continue to be at the forefront of the NAFTA market," said Eilenberger. "Product development is not only focused on innovative technologies, but also products that will meet the increasingly important regulatory pressures."
"The whole European Union needs to switch to VOC-compliant coatings-in our case Sikkens Autowave or Lesonal WB and VOC compliant clears and primers-before 2007," said Wall.
The move to waterborne technologies is ongoing, and while there is still substantial market growth and revenue to come from this technology, many coatings manufacturers are anxious to harness the power of UV technology.
"We believe there is a strong future for UV technology in the automotive refinish sector and we have a number of strong products in our pipeline, expected early 2005," said Wall.
"UV-cured products will continue to increase in popularity," said Eilenberger of BASF, which has a competency center in Europe devoted to the development of UV-cured technology.
It's not just the environmental benefits that make UV products so attractive; it's UV's speed that matters most to shop owners. Faster turnaround means more money.
Spies Hecker's new Permasolid UV Starlight Primer Surfacer 9000, a spot-repair product which is available in Europe, is a new UV technology that helps speed the entire repair process. A special photoinitiator contained in the light-grey, 98.6% solids 1K-primer surfacer offers vastly accelerated drying time, according to the company, which is part of the DuPont organization. The product cuts the entire application and drying time by more than 60%, according to the company.
That kind of reduction is music to shop owners' ears. And to make it easier to use, the UV lamp, generator and accessories fit on a trolley, allowing the refinisher to work virtually anywhere on the damaged vehicle. In addition, Permasolid UV Starlight Primer Surfacer 9000 is easy to sand and does not require special pretreatment of the surface, according to Spies Hecker.
|Providing services and systems that can help shop owners improve their operation is part of Akzo Nobel's strategy. (photo: Akzo Nobel)|
Growing Their Business
Across the board, refinish coatings suppliers agree that one of the biggest challenges facing collision shops is finding ways to grow their businesses. As more cars are declared totaled, repair shops are seeking new avenues to expand their sales in light of the overall reduction in repair opportunities. Yet, they don't want to break the bank.
One area is specialty finishes. While custom cars and hot rods have long been popular in select circles, there is growing interest in specialty vehicles among a wider audience, thanks in part to cable TV shows such as TLC's "Overhaulin'" and "Rides" and MTV's "Pimp My Ride, which reportedly garners 2.6 million viewers for an original telecast. It puts a four-wheeled spin on the home improvement show genre, giving broken down jalopies makeovers with everything from swank interiors to custom paint jobs.
Of course it remains to be seen if these sho ws can do for car paint what "Trading Spaces" and "This Old House" have done for house paint. But today's consumer is more accepting of these specialty finishes, due the use of subtle color-shifting and other high-tech pigment technologies at the OEM level, and refinish coatings suppliers are adding specialty finishes to their arsenals.
"Interest in new sources of revenue through specialty coatings and in new trends in stylistic painting is on the rise," said Eilenberger of BASF, which has launched Carizzma custom color dyes. Carizzma enables painters to create a wide range of brilliant non-OEM colors, including popular crystal and candy colors, easily and without special primers, hardeners and reducers.
PPG, too, has recently added a new collection of specialty finishes. Its Vibrance Collection features hot colors, unique pigments and special effect finishes, including primers, clears and detail products.
Of course, skeptics consider hot rods and custom cars just big toys-and PPG obviously agrees. As part of its new Vibrance Collection, PPG has also teamed up with toy maker Mattel to create a dozen anodized-looking Hot Wheels Spectraflame colors.
Custom finishes are one route to added revenue, but shop owners are also looking for more practical ways to squeeze out as much profitability as possible from their business.
BASF offers shop owners the Glasurit Small Damage Repair System, which it contends will provide a new source of incremental revenue. "The Glasurit Small Damage Repair System enables shops to realize additional revenue from small repairs that were previously too time-consuming and costly for most car owners," said Eilenberger.
These offerings, she said, "have the additional market attractiveness of being able to assist the aggressive shop owner in growing sales revenue and entering new markets with limited investment."