1. Repair vs. Replace The Illusion

2. Many Years Ago … In a Lost Land Cycle Time Was King of the Magic World Cycle Time Was King of the Magic World

3. Kingdom Conditions High Volume of Supply High Volume of Supply Scarcity of Quality Technicians Scarcity of Quality Technicians Supply Chain Strong Supply Chain Strong High Volume of Supply High Volume of Supply Scarcity of Quality Technicians Scarcity of Quality Technicians Supply Chain Strong Supply Chain Strong

4. Many Magicians Thought Higher Labor Gross Profits Meant Higher Labor Gross Profits Meant  Higher Total Gross Profits  Higher Productivity Higher Labor Gross Profits Meant Higher Labor Gross Profits Meant  Higher Total Gross Profits  Higher Productivity

5. Younger Magicians Thought Cycle Time Could Be Reduced if … Cycle Time Could Be Reduced if …  More Parts Replaced  Gross Profit Per Hour Increases  Gross Profit % Decreases  Throughput Increases Cycle Time Could Be Reduced if … Cycle Time Could Be Reduced if …  More Parts Replaced  Gross Profit Per Hour Increases  Gross Profit % Decreases  Throughput Increases

6. 1.5 Underside 3.11.3486.90 Hood 160.00 Paint Materials 1.8 Clear Coat MU Parts PU Other The Magic of Replacement 2004 Buick LeSabre Unit Rate Example $40.00 Paint and Materials Example $25.00/PU

7. 1.5 Underside 3.11.3486.90 Hood 160.00 Paint Materials 1.8 Clear Coat MU Parts PU Other Magical Analysis of Replacement 486.90 52.00 256.00 160.00 Total Cost - 954.90 Repair vs. Replace - 63% Replace vs. Repair - 158%

8. Cycle Time Analysis of Replacement Gross Profit % Gross Profit$ Parts$486.9030.00%$146.07 Metal Labor$52.0060.00%$31.20 Paint Labor$256.0060.00%$153.60 Materials$160.0025.00%$40.00 $370.87 38.84 % Metal Labor Efficiency 150% =.87 Paint LaborEfficiency 200% = 3.2 Materials Only Paint Related $370.87 ÷ 4.07 (.87 + 3.2) = $91.12 Per Hour

9. Replace over Repair Lower Cycle Times Lower Cycle Times Lower Skill Level Lower Skill Level Lower Material Costs Lower Material Costs Less Failures Less Failures Increase Sales Increase Sales Better Discounts Better Discounts Increase Throughput Increase Throughput Lower Cycle Times Lower Cycle Times Lower Skill Level Lower Skill Level Lower Material Costs Lower Material Costs Less Failures Less Failures Increase Sales Increase Sales Better Discounts Better Discounts Increase Throughput Increase Throughput Higher Ticket Lower GP % Planning Issues Staffing Needs Supplier Issues  Deliveries  Unpredictable LKQ  Unpredictable Aftmkt Advantages Disadvantages

10. Management Magical Improvements Gross Profit % Gross Profit$ Parts$486.9035.00%$170.42 Metal Labor$52.0065.00%$33.80 Paint Labor$256.0060.00%$153.60 Materials$160.0040.00%$64.00 $421.82 44.17 % Metal Labor Efficiency 150% =.87 Paint LaborEfficiency 200% = 3.2 Materials Only Paint Related $421.82 ÷ 4.07 (.87 + 3.2) = $103.64 Per Hour

11. Times Changed Frequency Decreased Work Volume Decreased KPI’s Changed Frequency Decreased Work Volume Decreased KPI’s Changed

12. 1.0 Underside 3.18.0 Hood 147.50 Paint Materials 1.8 Clear Coat MU Parts PU Other The Illusion of Repair 2004 Buick LeSabre Unit Rate Example $40.00 Paint and Materials Example $25.00/PU

13. 1.0 Underside 3.18.0 Hood 147.50 Paint Materials 1.8 Clear Coat MU Parts PU Other Basic Analysis of Repair 320.00 236.00 147.50 Total Cost – 703.50 Repair vs. Replace - 136% Replace vs. Repair - 74%

14. Cycle Time Analysis of Repair Gross Profit % Gross Profit$ Parts Metal Labor$320.0060.00%$192.00 Paint Labor$236.0060.00%$141.60 Materials$147.5025.00%$36.88 $370.48 52.66 % Metal Labor Efficiency 200% = 4.00 Paint LaborEfficiency 150% = 3.93 Materials More Materials Consumed $370.48 ÷ 7.93 (4.00 + 3.93) = $46.72 Per Hour

15. Repair over Replace Maximize GP % Maximize GP % Lowers Ticket Cost Lowers Ticket Cost Scorecard Points Scorecard Points Maximize GP % Maximize GP % Lowers Ticket Cost Lowers Ticket Cost Scorecard Points Scorecard Points Increased Costs Defects - Warranties Skill Level Issues Staffing Issues Less Throughput Creates Bottlenecks  Paint Department Advantages Disadvantages

16. Are We to Work Together ? Common Areas to Work Together Common Areas to Work Together

17. Common Goal Vehicle Owner Focused Vehicle Owner Focused  Restore Vehicle Back to Pre-Accident Condition Work to Keep Costs in Control Work to Keep Costs in Control  Allow For Necessary Operations  Perform Necessary Operations  Use Common Sense Vehicle Owner Focused Vehicle Owner Focused  Restore Vehicle Back to Pre-Accident Condition Work to Keep Costs in Control Work to Keep Costs in Control  Allow For Necessary Operations  Perform Necessary Operations  Use Common Sense

18. Common Understanding Take a Holistic Approach to KPI’s Take a Holistic Approach to KPI’s  Not Focusing Only with Blinders On Consistency of Performance Targets Consistency of Performance Targets Lack of Understanding and Consistency … Leads to Nothing But Bad Things … Leads to Nothing But Bad Things … Take a Holistic Approach to KPI’s Take a Holistic Approach to KPI’s  Not Focusing Only with Blinders On Consistency of Performance Targets Consistency of Performance Targets Lack of Understanding and Consistency … Leads to Nothing But Bad Things … Leads to Nothing But Bad Things …

19. Replacement Percentage Labor Indirect Direct Labor Skill Level Paint Department Efficiency Paint Materials Costs Cycle Time Gross Profit Per Hour Hydraulics of the Magical KPI’s Every Action Causes an Equal and Opposite Reaction

20. Common Grounds Fraud Definition Fraud Definition  Abide by State Laws Incorporate CIC Guidelines Incorporate CIC Guidelines  Write it Right Work Together on Definitions   Solutions Fraud Definition Fraud Definition  Abide by State Laws Incorporate CIC Guidelines Incorporate CIC Guidelines  Write it Right Work Together on Definitions   Solutions

21. Definitions to Define Metal Labor Repair Units Metal Labor Repair Units  To 180 Grit …  Not New Undamaged Panel Condition Additional Materials Required Additional Materials Required  Not Paint and Materials … Body Materials Information Systems Information Systems  Allow More Repair Than Part Cost Metal Labor Repair Units Metal Labor Repair Units  To 180 Grit …  Not New Undamaged Panel Condition Additional Materials Required Additional Materials Required  Not Paint and Materials … Body Materials Information Systems Information Systems  Allow More Repair Than Part Cost

22. Definitions to Define Paint Labor Units Paint Labor Units  New Panels = New Panel Units  New Undamaged Panel Condition Paint Labor Units Paint Labor Units  Repair Panels  Need Additional Operations Paint Labor Units Paint Labor Units  New Panels = New Panel Units  New Undamaged Panel Condition Paint Labor Units Paint Labor Units  Repair Panels  Need Additional Operations

23. Definitions to Define Blending Base Within a Panel Blending Base Within a Panel  Paint Labor Units  Repair Panels Need Additional Operations Need Additional Operations Affects Paint Materials Affects Paint Materials Blending Base Within a Panel Blending Base Within a Panel  Paint Labor Units  Repair Panels Need Additional Operations Need Additional Operations Affects Paint Materials Affects Paint Materials

24. Directions Not to Take Repair Operation Cost Shifting Repair Operation Cost Shifting  Bundle R&I to Improve Ratio  Front Bumper Cover  Add Hours to Include Part Costs  Door Skin  Hood (Used) Repair Operation Cost Shifting Repair Operation Cost Shifting  Bundle R&I to Improve Ratio  Front Bumper Cover  Add Hours to Include Part Costs  Door Skin  Hood (Used)

25. Directions to Take Work Together Work Together  Improve Training  Repair is a Lost Art  Smart Repairs Work Together Work Together  Improve Training  Repair is a Lost Art  Smart Repairs Understand the Hydraulics of KPI’s