Declining volumes, consolidation and tightening environmental regulations have made for a difficult automotive refinish marketplace in mature markets such as North America and Western Europe. To be successful, coatings companies find they need to offer environmentally compliant technologies, develop specialty finishes for niche applications, sell in emerging markets or provide services that can help their customers compete.
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.
For Akzo Nobel and other companies, being a top-notch supplier means one thing: fulfilling customer needs. From the influence of insurance companies and OEMs to environmental issues and everyday business challenges, shop owners have needs that go far beyond cans of primer and topcoat. As a result, many are finding it hard to stay afloat. Tough market conditions have resulted in a dwindling number of customers, with mom 'n' pop shops giving way to larger, more powerful chains.
"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."
Coatings World asked two of the leading refinish paint manufacturers about the importance of service in their market. Here's what they had to say about providing training and helping their customers better serve their customers.
"Training continues to be of vital importance to the refinish industry. As vehicles become more complex and OEM manufacturers increasingly require technicians to be certified in order to perform quality repairs, BASF has stepped to the forefront with a comprehensive, state-of-the-art training curriculum.
Working with OEM manufacturers to develop a curriculum that meets the high-level of standards in today's refinish processes, BASF has taken a lead role in training designed for certifying collision personnel. A wide range of class offerings has been developed specifically for the collision industry, and the courses are either OEM-certified, Continuing Automotive Service Education (CASE) certified, I-CAR (Inter-Industry Conference On Auto Collision Repair) approved, or AMI (Automotive Management Institute) accredited. Recognition by these collision-industry training organizations adds significant value to BASF's training programs and demonstrates that the company's development process and information transfer methods reach the target audience with successful results."
-- Jay Johnston - manager, training and development at BASF
"Although there is a lot of innovation and technology in products, services perform a key role in enabling bodyshops to extract value from new products. Services also impact strongly on the overall level of customer satisfaction and business profitability. Part of that picture is the preparedness for meeting the needs of work providers, which we specifically address through our Sikkens Acoat Selected program."
-- Chris Wall, director of global marketing for Akzo Nobel Car Refinishes
"The service side is increasing in importance to our customers, and remains a key aspect as we move forward. As collision shops continue to strive for higher customer satisfaction, reduced cycle times, improved quality and greater profitability, they are relying more and more on technology and services provided by suppliers to help them achieve their goals. Examples of such services include VisionPLUS OnLine, which enables shops to better manage the repair process through online vehicle tracking, and to scrutinize their business through online business analysis. VisionPLUS University offers business training for shop managers and owners. VisionPLUS Professional Services provides for one-on-one consultations with customers through Business Development Managers. VisionPLUS 20 Groups allow customers to learn from each other through the sharing of best practices, and to realize continual improvement through the use of benchmarking to compare their business against other top performers."
-- Bob Roewer, manager, e-business development, BASF.
DuPont Refinish has been busy developing new products for repair shops. Here is a look at some of the company's latest launches.
42R and 46R 1K QuickPrime
1K QuickPrime complements DuPont's ValueShade technology with 400ml aerosol spray cans that are fast and easy to use, cost effective and environmentally friendly. 42R and 46R primers correspond to ValueShade VS2 and VS6, and 44R matches ValueShade VS4. All three spray can primers are perfect tools to achieve quality end results of minor repairs on all types of automotive substrates, such as steel, galvanized steel or light alloy surfaces.
Galaxy Blue EFX (1524W)
A new special effect tint-part of the Cromax waterborne range-which is being commercially rolled out across Europe.
800RA Aerosol Spray
The firm has made one of its most popular plastic primers available in a convenient aerosol spray. 800RA provides the same speed of work and reliability of results that the modern HVLP spray gun offers, according to DuPont.
Imron Elite System
Th Imron Elite System is being billed as a simple, versatile system for high-performance, low-VOC commercial and fleet finishing. Two component polyurethane technology also delivers the superior durability Imron is known for-in low-VOC, low HAPS, lead- and chrome-free formulations. The system includes Imron Elite SS polyurethane enamel topcoat, Imron Elite BC polyurethane enamel basecoat and Imron Elite 8840S polyurethane clearcoat.