Legislature(2003 - 2004)
05/06/2003 01:35 PM Senate L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 32-INSURANCE FOR MOTOR VEHICLE REPAIRS
CHAIR BUNDE announced SB 32 to be up for consideration. He
announced an at-ease from 2:47 to 2:53 p.m.
MS. ANNETTE SKIBINSKI, staff to Senator Cowdery, sponsor, said
SB 32 deals with two different types of automobile repair parts,
original and aftermarket. Senator Cowdery believes that
consumers are often unaware of the crash or collision parts that
are being used to repair their vehicles. He believes that
customers have a reasonable expectation to have their vehicles
repaired after an accident to the same condition they were when
they purchased them and they should have a choice on whether
original parts or other parts that are certified or not
certified are used. The insurance that car owners rely on to
cover the parts should not dictate what they can or can't have.
MR. KEN MILLER, owner of an auto body shop in Anchorage,
provided two Ford fenders that look almost identical, but were
very different in quality; one was certified and the other was
aftermarket and obviously was not as strong.
MS. SANDY BASS CORS, Coalition for Auto Repairing Quality,
representing NAPA, Car Quest, Chets, Jiffy Lube and Midas,
opposed SB 32. She explained that aftermarket parts are
manufactured by the same companies that manufacturer car dealer
parts. The only difference is the price and the better
aftermarket warranty. Aftermarket parts cost up to 50% less than
the car dealer parts and most come with lifetime or long-term
warranties, which car dealer parts do not. The description in SB
32 that an aftermarket part must meet the equivalent or better
standard is based on the wrong premise.
She did not think that any car part manufacturer would purposely
manufacture inferior aftermarket parts. SB 32 is also in
violation of the Magnus-Moss Warranty Act, a federal law that
prohibits a warranty from being tied to repairs. Motorists are
intimidated when they read that using aftermarket parts can
invalidate the remainder of their vehicle's warranty.
MS. CORS said that SB 32 is also dangerously close to
interfering with first amendment rights by stating an insurer
may not require directly or indirectly that a shop install
aftermarket parts. A few years ago, the state of Montana lost a
court case on constitutional grounds because of first amendment
rights based on what an insurer could recommend and on
interference with interstate commerce laws. By mandating that
motorists must give consent only for the use of aftermarket
parts, but not the use of car dealer parts, SB 32 discriminates
against certain Alaska industries and intimidates motorists by
planting doubt in their minds about the high quality of
aftermarket parts. Aftermarket shops do business in low and
fixed income neighborhoods because people depend on them for the
high quality and the lower pricing. After a warranty has expired
on a part, the aftermarket gets 80% of repeat business because
of the high quality.
MS. CORS said that car dealers and manufacturers have had a long
history of trying to dismantle the aftermarket part industry and
restrict the use of those parts. They do not believe this issue
is about the quality of parts, but about car dealers and
manufacturers getting a higher profit margin through
legislation. Car dealer parts cost up to 50% more, so this will
be at the expense of the working people. A recent GAO study
concluded that there were so few problems with aftermarket parts
that no further action was necessary.
MS. CORS said that Ms. Skibinski mentioned that when a car is in
a crash, it should be restored to its pre-crash value. MS. CORS
believes that a car cannot be restored to its pre-crash value or
condition by virtue of having been in a crash. People buying a
used car request information on whether a car has been in a
crash, not whether it has aftermarket parts.
MR. JACK GILLIS, Executive Director, CAPA, and Director, Public
Affairs, Consumer Federation of America, the nation's largest
consumer advocacy organization, said he is also the author of
The Car Book, a consumer guide to buying cars. NAPA is a non-
profit organization, which certifies the quality of parts used
for auto body repair. He pointed out:
First of all, this bill protects the car company parts
monopoly. Alaskans need more, not less choices. They
need less expensive, not more expensive car parts.
Alaskans need their cars fixed by insurance companies
after accidents, not totaled by them because they cost
too much to repair. This bill would encourage
competition rather than protect car company parts
monopolies....
SENATOR COWDERY asked him if he felt it is reasonable for a
customer to expect that his or her car should be repaired to its
pre-crash condition, not the condition when it was purchased -
and carry all the same warranties.
MR. GILLIS agreed 100%.
MS. EILEEN SOTTILE, Director, Keystone Government Relations,
said she also represented the Automotive Body Parts Association
(ABPA). Both oppose SB 32, because they feel that written
consent is discriminatory and would take money out of the
pockets of their employees and place it into the car companies'
pockets. The warranties for aftermarket parts are actually
better than car companies' warranties. In terms of safety, the
Institute for Highway Safety has conducted a crash test of a
Toyota Camry hood, which demonstrated clearly that the
aftermarket hood performed the same way as the car company hood.
Keystone, the largest distributor of aftermarket parts in the
country, has never recorded an injury caused by the use of its
parts and the National Highway Traffic and Safety Administration
has reported consistently that cosmetic non-structural
automotive parts have no safety ramifications.
In terms of quality, the Collision Industry Conference has
tested the quality of their parts against car company parts over
the past years and has found that in some cases, the aftermarket
parts score better in terms of fit and accessibility and in
other cases they tie. The parts manufacturers they use are the
same as those used by the car companies.
MS. SOTTILE said their concerns about competition are great,
because the car companies already have 79% of market share and
the aftermarket share is 15%; the salvage industry has 6%. She
said if car company parts are solely used to repair a vehicle, a
$22,000 1999-Toyota Camry can cost $101,000. She compared the
cost of a Camry rear bumper from the car company at $159 to
Keystone's price of $61.75; a Tacoma grill would be $220 and a
Keystone grill would cost $91.45. She said the car company
fender that was in the committee room cost $192.10 and the
Keystone fender cost $94.00. A Ford Taurus headlight assembly
cost $176.80 and the Keystone price was $94.47.
She said making a consumer consent to using an aftermarket part
and not a car company part gives the consumer the impression
that not only are the parts possibly inferior, but unsafe as
well. Eighty-seven percent of the time, if an insurance company
is paying the bill for the repair, customers will most likely
not choose the aftermarket part because they are not paying for
the repairs. She stated, "This bill is highly discriminatory and
it will deliver a monopoly right to the feet of the car
companies."
MR. MILLER said he provided the fenders in the committee room so
that members could see for themselves that there is quite a bit
of difference between the two. He didn't think they would want
the aftermarket parts on their trucks. It is about 4.5 ounces
lighter, has no rust prevention, and the spot welds were not
even touching and would pop right off.
TAPE 03-30, SIDE A
MR. MILLER said his main concern is the sheet metal fenders,
doors, bumpers and that type of thing - and how they relate to
safety.
SENATOR COWDERY asked him if he is a car dealer.
MR. MILLER replied that he is an independent and doesn't
represent anyone but himself.
MR. JOHN CONLEY, Service Auto Parts, said he is a NAPA auto
parts dealer. He also served nine years on the Borough Assembly
of Ketchikan and a couple terms as vice-mayor. He spoke against
SB 32. He said legislation like SB 32 is being introduced all
across the nation right now and, as an auto parts person who
incorporated in the State of Alaska in 1966, he feels
threatened. SB 32 defines what aftermarket means in section (a)
and that concerns him. It says:
In this section, an aftermarket crash part means a
motor vehicle replacement part that is not supplied or
manufactured at the direction of the original
equipment manufacturer and that is generally installed
as a result of a crash or a collision.
He said that includes a lot of things: screws, belts, light
bulbs, etc. Many of the parts that his firm sells meet or exceed
the original equipment manufacturer specifications and he offers
a better warranty than the original.
He said Section 1 troubles him, as well, and he provided the
committee with a copy of the Magnus Moss Warranty Act. He asked
the sponsor to work with him and others on different language to
protect consumers and businesses.
He added if this bill passes and he went to the Chevy
dealership, which doesn't have a body shop, and said he only
wanted OEM parts, the vehicle could not be legally repaired in
Alaska because some functions that happen at the plant are not
duplicated in the field, such as painting of the vehicle. Body
shops do not use the same process or materials. This bill would
require a person to go to a metropolitan area to have a car
repaired.
MR. CONLEY said he had copies of similar legislation enacted in
other states that the committee could use to improve the bill.
CHAIR BUNDE asked if it is true that the same company
manufactures dealer parts and aftermarket parts and, if so,
whether "less expensive" parts are made.
MR. CONLEY replied that is a big issue with a lot of different
components. He said he doesn't sell sheet metal, but sells
chassis and brake parts. Dana Automotive, one of the largest REM
suppliers in the world, manufactures his chassis components. A
company called Brake Parts, Inc., which many REMs use,
manufactures the brake components. He commented:
A whole lot of what we sell is made for REMs and we're
very proud of our quality. To make the statement that
all parts are of equal quality at REM, I would have to
be honest and say that's not true.
SENATOR STEVENS said he wanted to learn more about Mr. Conley's
statement that consumers would have to take a car to a
metropolitan area for repairs.
MR. CONLEY said he would get together with him afterwards.
MR. GEORGE GILBERT, Ford Motor Company, clarified that they are
talking about exterior crash parts like fenders and hoods, not
about shocks or filters. This bill is about giving the consumer
a choice. The reason for this type of legislation is that in
most cases, the consumer doesn't have a choice when insurance
companies pay the bill. This is what led to the national class
action lawsuit against State Farm Insurance who was using these
parts and not informing the consumer that the parts were
different than the OE parts.
MR. KYLE KRUG said he came mainly to answer questions, but also
wanted to ask if Jim Kiley with the Alliance of Automobile
Manufacturers could provide testimony.
MR. JIM KILEY, Alliance of Automobile Manufacturers, said that
SB 32 contains many concepts that benefit consumers and promote
a fair playing field. Consumers should be informed about the
repair options available to them. However, he pointed out that
AS 25.45.95(a) contains language the Alliance cannot support. It
would require consumer consent to a certain time period, three
years. The Alliance believes the consumer should have the right
to consent to using the parts for the life of the vehicle. He
thanked Senator Cowdery for his actions and said the Alliance
would work with the committee to craft legislation that protects
consumers and provides them with choices.
MR. BILL HOLDEN said:
The reason all the studies are around on aftermarket
parts not being of equal quality to the OEM is why
they are around to begin with. Also, they have
degenerated because of consumers complaining about the
use of these parts. So, they may comment at certain
times or lead people to believe that what is being
said or the studies are exactly what's being proved.
The bottom line is that since the early '80s when
these parts came on the market, they were looked at as
a way for the insurance companies to save costs in
repairing vehicles. In the late '80s, the six major
insurance companies formed [indisc.], which is then a
company that would start telling people that the part
that was being put on their car were not aftermarket;
they were being certified parts that were being put on
the car...
When you buy a Fram oil filter, the Fram oil filter is
engineered and designed by people at Fram. They spend
time, they spend money, they go through the
engineering process, they don't do a copy of the DAC
filter. So, there's some credibility to some of the
aftermarket car parts we're talking about.
When I've talked to aftermarket parts people, and the
testimony you've heard, you never hear things like
reengineering and stuff; it's reverse engineering that
you hear. That does not pass the test of quality and
durability and some of the things that go in to the
OEM parts.
The last part I want to touch on is there is no OEM
manufacturer, and I'm talking to the Ford people, the
Toyota and the Honda people on a daily basis. None of
us know a single manufacturer that makes a fender or a
hood and then turns around and sells it as anything
other than OEM. That's just not true....
MR. HOLDEN said that no one makes a hood and then has the money
to go make another dye and make the same hood. He stated, "The
dye is too expensive."
MR. HOLDEN explained:
They'll make a certain number of hoods for production
and off the same line at almost the same time, they're
producing hoods that are then going to be used for
their parts operation. That's what General Motors does
and, as far as I know, that is what other
manufacturers do.
He also noted when people talk about the price of one hood
versus the other, General Motors competes with the other big
companies and the best way to lose a customer is to go to the
dealership, get the car repaired and have the guy at the
dealership tell you:
The hood is $200, but if you bought the aftermarket,
it's $25. That aggravates consumers. Consumers don't
want to be taken and for the most part when things
like that happen, people tend not to buy your brand.
CHAIR BUNDE said the committee needs to be more educated about
this topic and held the bill for further work.
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