04/24/2003 02:05 PM House TRA
| Audio | Topic |
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+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE TRANSPORTATION STANDING COMMITTEE
April 24, 2003
2:05 p.m.
MEMBERS PRESENT
Representative Jim Holm, Co-Chair
Representative Beverly Masek, Co-Chair
Representative Hugh Fate
Representative Vic Kohring
Representative Dan Ogg
Representative Albert Kookesh
MEMBERS ABSENT
Representative Mary Kapsner
COMMITTEE CALENDAR
HOUSE BILL NO. 40
"An Act relating to issuance of a driver's license."
- MOVED CSHB 40(TRA) OUT OF COMMITTEE
HOUSE BILL NO. 99
"An Act relating to insurance for and work on certain motor
vehicle repairs; and providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 217
"An Act relating to driving while under the influence of an
alcoholic beverage, inhalant, or controlled substance and to
presumptions arising from the amount of alcohol in a person's
breath or blood; and providing for an effective date."
- SCHEDULED BUT NOT HEARD
PREVIOUS ACTION
BILL: HB 40
SHORT TITLE:REQUIREMENTS FOR DRIVER'S LICENSE
SPONSOR(S): REPRESENTATIVE(S)LYNN
Jrn-Date Jrn-Page Action
01/21/03 0042 (H) PREFILE RELEASED (1/10/03)
01/21/03 0042 (H) READ THE FIRST TIME -
REFERRALS
01/21/03 0042 (H) TRA, STA
01/31/03 0106 (H) COSPONSOR(S): CHENAULT
04/10/03 (H) TRA AT 1:30 PM CAPITOL 17
04/10/03 (H) -- Meeting Canceled --
04/15/03 (H) TRA AT 1:30 PM CAPITOL 17
04/15/03 (H) Heard & Held
04/15/03 (H) MINUTE(TRA)
04/24/03 (H) TRA AT 1:30 PM CAPITOL 17
BILL: HB 99
SHORT TITLE:INSURANCE FOR MOTOR VEHICLE REPAIRS
SPONSOR(S): REPRESENTATIVE(S)HEINZE
Jrn-Date Jrn-Page Action
02/14/03 0214 (H) READ THE FIRST TIME -
REFERRALS
02/14/03 0214 (H) TRA, L&C
02/14/03 0214 (H) REFERRED TO TRANSPORTATION
04/10/03 (H) TRA AT 1:30 PM CAPITOL 17
04/10/03 (H) -- Meeting Canceled --
04/24/03 1108 (H) FIN REFERRAL ADDED AFTER L&C
04/24/03 (H) TRA AT 1:30 PM CAPITOL 17
WITNESS REGISTER
REPRESENTATIVE BOB LYNN
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As sponsor of HB 40, highlighted the merits
of the bill and urged the members to pass it from committee.
KERRY HENNINGS, Driver Licensing Manager
Division of Motor Vehicles
Department of Administration
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 40 and answered
questions from the members.
REPRESENTATIVE CHERYLL HEINZE
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As sponsor of HB 99, she explained the
purpose of the bill and answered questions from the members.
JOHN CONLEY, Owner
NAPA Auto Parts;
President, Southeast Conference
Ketchikan, Alaska
POSITION STATEMENT: Testified in opposition to HB 99 and
answered questions from the members.
MICHAEL LESSMEIER, Attorney at Law
Lessmeier & Winters
Lobbyist for State Farm Insurance Company
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of State Farm Insurance
Company in opposition to HB 99.
JOHN GEORGE, Lobbyist
for National Association of Independent Insurers
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of the National
Association of Independent Insurers in opposition to HB 99.
SANDY BASS-CORS, Executive Director
Coalition for Auto Repair Equality
(Address not provided)
POSITION STATEMENT: Testified in opposition to HB 99.
EILEEN SOTTILE, Director
Government Relations
Keystone Automotive Industries, Inc.;
Co-Chair, Legislative and Regulatory Committee
Automotive Body Parts Association (ABPA)
Medley, Florida
POSITION STATEMENT: Testified in opposition to HB 99 and
answered questions from the members.
JACK GILLIS, Executive Director
Certified Automotive Parts Association (CAPA);
Director, Public Affairs, Consumer Federation of America;
Author, The Car Book
(Address not provided)
POSITION STATEMENT: Testified in opposition to HB 99 and
answered questions from the members.
ACTION NARRATIVE
TAPE 03-18, SIDE A
Number 0001
CO-CHAIR BEVERLY MASEK called the House Transportation Standing
Committee meeting to order at 2:05 p.m. Present at the call to
order were Representatives Masek, Holm, Fate, and Kohring.
Representatives Ogg and Kookesh arrived while the meeting was in
progress.
HB 40 - REQUIREMENTS FOR DRIVER'S LICENSE
CO-CHAIR MASEK announced that the first order of business would
be HOUSE BILL NO. 40, "An Act relating to issuance of a driver's
license." She reminded the members that the committee has heard
this bill before and that a proposed committee substitute (CS)
has been prepared.
Number 0089
REPRESENTATIVE FATE moved to adopt the proposed CS, Version 23-
LS0262\H, Ford, 4/16/03, as a work draft. There being no
objection, Version H was before the committee.
Number 0135
REPRESENTATIVE BOB LYNN, Alaska State Legislature, as sponsor of
HB 40, highlighted the merits of the bill. He reiterated
comments made at an earlier hearing by saying that HB 40 is an
important piece of legislation to protect homeland security,
guard against identity theft and voter fraud, and ensure legal
accountability. Representative Lynn said he believes this is a
good bill and asked the members for favorable consideration to
pass the bill out of committee.
CO-CHAIR MASEK asked if members have questions with respect to
the new proposed CS the committee has before them. She also
noted for the record that Representative Ogg has joined the
meeting.
Number 0212
KERRY HENNINGS, Driver License Manager, Division of Motor
Vehicles, Department of Administration, testified in support of
HB 40 and offered to answer questions from the members.
REPRESENTATIVE FATE asked Ms. Hennings if the Division of Motor
Vehicles has any problem with the bill.
MS. HENNINGS told the committee that the Division of Motor
Vehicles supports this bill and as a policy is currently
administering the driver's licenses program in keeping with the
legislation. She explained that about 30 states currently have
this kind of legislation in place, and there is the hope that
more states will adopt this policy as a security measure prior
to the policy's being mandated by the federal government.
REPRESENTATIVE OGG asked if an individual in the United States
and who is seeking political asylum would be allowed to get a
driver's license.
MS. HENNINGS replied that while she is not an expert in that
area, her experience working with ICE [Bureau of Immigration and
Customs Enforcement], formerly the INS [Immigration and
Naturalization Service], has shown that a person in these
circumstances would be able obtain the proper documentation
necessary to get a driver's license in Alaska.
CO-CHAIR MASEK commented that Representative Ogg's question is
addressed in the proposed committee substitute on page 2, lines
17-19.
Number 0398
REPRESENTATIVE FATE moved to report CSHB 40, Version 23-
LS0262\H, Ford, 4/16/03, out of committee with individual
recommendations and the accompanying zero fiscal notes. There
being no objection, CSHB 40(TRA) was reported out of the House
Transportation Standing Committee.
HB 99 - INSURANCE FOR MOTOR VEHICLE REPAIRS
Number 0462
CO-CHAIR MASEK announced that the next order of business would
be HOUSE BILL NO. 99, "An Act relating to insurance for and work
on certain motor vehicle repairs; and providing for an effective
date."
Number 0455
REPRESENTATIVE CHERYLL HEINZE, Alaska State Legislature, as
sponsor of HB 99, explained the purpose of the bill and answered
questions from the members. She explained that HB 99 has two
central provisions. The first is that it requires an insurance
company to provide a warranty for "aftermarket" crash parts when
providing automobile insurance. The second part of the bill
prohibits a motor vehicle repair facility from using an
"aftermarket" crash part on a vehicle that is less than four
years old unless it is with the consent of the owner.
Representative Heinze reiterated that consent under this bill
would state that consumers should have the right to use crash
parts in their cars. Currently, owners do not have to be
notified if [crash parts] are used in repairing their cars.
The committee took an at-ease from 2:15 p.m. to 2:18 p.m.
CO-CHAIR MASEK announced for the record that Representative
Kookesh has joined the meeting.
Number 0562
JOHN CONLEY, Owner, NAPA Auto Parts; President, Southeast
Conference, testified in opposition to HB 99, noting that he
owns two NAPA Auto Parts stores. He told the committee that the
Southeast Conference is a regional economic development
organization. He said he spent nine years serving on the local
borough assembly and two years as vice-mayor. Mr. Conley stated
that this bill directly affects his business and livelihood. He
said he is opposed to HB 99 because he believes there are
serious defects in the bill. Mr. Conley offered some background
information about this kind of legislation, saying that several
states have attempted to pass similar legislation, but have
failed.
MR. CONLEY read from a written response to the sponsor's
statement on HB 99, which he passed out to members. It read as
follows [Some punctuation and formatting changed]:
"There are many types of replacement parts used to
repair collision damage to a motor vehicle. 'Original
equipment manufacturer' (OEM) parts are developed by
the original manufacturer of the motor vehicle, and
are designed to meet particular fit, finish, function,
and corrosion resistance specifications. Non-OEM
(also called 'aftermarket') crash parts are reverse
engineered to replicate the original. While some non-
OEM (aftermarket) parts are a comparable low-cost
alternative to the OEM parts manufactured and
distributed by the vehicle's manufacturer,
professionals have found others to be inferior to OEM
parts in terms of fit, finish, and quality."
Not true - many aftermarket parts exceed OEM
specifications; the aftermarket improves poor designs
and offers lifetime warranties. In many situations
the aftermarket and the OEM's part are supplied by the
same manufacture. The aftermarket serves the customer
and creates a competitive marketplace. This bill
clearly attempts to create a monopoly for the OEMs in
the case of collision repair.
"The use of non-OEM parts in the repair of a new
vehicle can affect the vehicle's resale value, the
manufacturer's warranty, and the vehicle's safety."
This is an unproven statement; many OEM dealership
regularly purchase and install aftermarket parts. My
company does a lot of business with both a GM and Ford
dealer. NAPA parts give them the ability to offer
their customers lifetime guarantees on some repair
jobs, a feature not available with the use of OEM
parts. I have spoken with service managers that speak
of the poor quality of some of the OEM parts that they
must use for warranty repairs. They install NAPA
parts on out-of-warranty repairs because of our
improved designs and better warranty.
"I am concerned that many Alaskans are not aware of
the use of aftermarket parts in their vehicles'
repair, or the effect the use of non-OEM parts can
have on their vehicle."
This statement implies that aftermarket parts are
dangerous. The aftermarket has repeatedly improved
poor OEM designs. We offer better warranties, and in
the 24 years I have been in the parts business, NAPA
has not had to recall any vehicles that our parts have
been installed on. Can the OEMS make the same
statement? Our goal is to be the best supplier of
automotive repair parts to our customers. We don't
need the Alaska State Legislature to pass laws that
give us an unfair advantage. We believe in the
quality of our products and support the American
tradition of the consumer voting with their pocket
books.
Number 0664
MR. CONLEY said that there is a section in the bill [page 2,
lines 27-29], that reads:
(e) In this section, "aftermarket crash part" means a
motor vehicle replacement part that is not supplied by
or manufactured at the direction of the original
equipment manufacturer and that is generally installed
as a result of a crash or collision.
MR. CONLEY warned that the members will be told that companies
will be using imported sheet metal parts made in Taiwan or the
Far East. He pointed out that the amazing thing is that the
United States imports cars that are made in the Far East and
people love them, but if automobile parts are imported, they are
viewed as [inferior]. He said that these parts are not sheet
metal; they are light bulbs, screws, fasteners, or paint. Mr.
Conley told the members that for many of the parts that would be
affected by this legislation, his company sells and offers a
lifetime guarantee on the parts. He explained that many of the
parts that would be prohibited under this bill are manufactured
for his company by the same manufacturers that produced the part
for the [original company that manufactured the vehicles].
MR. CONLEY said that this bill would eliminate competition from
the marketplace and drive up the cost of vehicle repair. He
told the committee passing this legislation would mean that they
would be giving the big car manufacturers a huge monopoly for
four years, and insurance costs would go up. Mr. Conley pointed
out that the big car dealerships do not have facilities in every
community in Alaska. He said his car has been around a whole
lot longer than the car dealerships have. He added that the
automotive aftermarket [industry] takes care of rural Alaska and
does a fine job. There are auto parts in virtually every
community in the state of Alaska, and the automotive industry
has been serving Alaska for years. He said he believes that
this legislation would be a great disservice to the people of
Alaska and that it creates a monopoly for the original equipment
manufacturers (OEMs).
MR. CONLEY explained that when similar legislation was
introduced at the federal level, there was a determination that
it violated the "Magnuson-Moss Warranty Act" [Magnuson-Moss
Warranty - Federal Trade Commission Improvement Act]. He
provided the members with a copy of an interpretation of the
Magnuson-Moss Warranty Act. Mr. Conley said this federal law
will basically prohibit certain sections of this bill from being
implemented. He said that he hopes the committee does not pass
this bill from committee.
Number 0833
CO-CHAIR MASEK asked Mr. Conley how he feels about the language
in Section 1 that requires insurance companies to provide
warranties for aftermarket parts used to repair a vehicle,
regardless of the age of the vehicle.
MR. CONLEY responded that he is a businessman and businesses
fail if they do not provide warranties. He told the committee
that he spoke with several body shops before coming to Juneau to
testify and found that reputable businesses provide warranties.
Mr. Conley explained that the free marketplace does not allow a
business to survive if it does not provide warranties. It would
not take long for the public and insurance companies to see that
the company does shoddy work and would not do business with
them. Requiring the insurance company to provide a warranty
clearly violates the Magnuson-Moss Warranty Act.
MR. CONLEY said the warranty is already in place and he does not
see government doing this to other businesses. For example, it
would be like passing a law that says that if a person buys a
pair of shoes, the seller of the shoes will warrant under all
conditions that the shoes will last three years. He explained
that people take care of their belongings in different ways and
that determining two years down the road what caused something
to wear out would be very difficult. He summarized that
reputable companies stay in business because they provide those
warranties and that is why they are successful.
CO-CHAIR HOLM commented that one statement that has been
discussed is the safety factor of aftermarket parts. He asked
if there is any empirical data that shows that [aftermarket
parts have safety issues].
MR. CONLEY responded that the company he recently purchased,
where he has worked for 24 years, has never had a recall for
safety reasons for any part that has been installed on a
vehicle. He commented that he heard the statement which was
made about a safety factor, but there is no data that
substantiates the claim. There is a GAO [General Accounting
Office] report that was provided to Congress, but there are no
documented cases. He said he can think of many more Ford and
General Motors recalls that affect safety than anything about
the aftermarket [parts] sales.
CO-CHAIR HOLM thanked Mr. Conley. He said he wanted this fact
on the record because he has never seen anything with respect to
safety [issues on aftermarket parts], and it is disturbing to
hear the allegations if there is no [data] to back it up.
MR. CONLEY replied that he is very disturbed too. He said that
his company is a contributing part of the community and at one
time he employed 32 people. The economy is kind of tough in
Southeast right now, so he has sold a couple of stores. Mr.
Conley expressed his belief that this legislation implies that
the automotive aftermarket is a kind of shady, back-street
operation, and that is not true. It is a multibillion-dollar
contributor to the transportation economy of this country, he
said.
Number 1055
REPRESENTATIVE OGG referred to Section 1, lines 9-11, where it
says, "Before issuing or renewing a personal automobile
insurance policy, the insurer shall provide the applicant or
insured written notice of the warranty available under this
subsection." He asked Mr. Conley what that requires.
MR. CONLEY responded that what this means to him is that the
insurance company will either raise rates or quit writing
insurance in Alaska. He said he thinks the sponsor could
probably explain the mechanics of it; however, it is important
to note that this part of the bill violates federal law. Mr.
Conley asked, if an automobile is repaired and someone goes out
and damages the vehicle, whose responsibility it is. He said
that if a vehicle is still under the original equipment
manufacturer's warranty, it is still under warranty. If, for
example, GM has a parts recall, but the owner does not go in and
have it repaired, a warranty still exists until the warranty
expires, and then there is no warranty. Mr. Conley said that
NAPA sells parts that have lifetime warranties. The car
manufacturers will give a customer a three-year warranty, and
this bill will give [car manufacturers] a four-year monopoly.
REPRESENTATIVE OGG asked why the warranty would be transferred
from the manufacturers to the insurance companies.
MR. CONLEY agreed that he does not understand why this would be
done.
REPRESENTATIVE FATE said he would like to hear from anyone who
can address the language in the bill where it says [page 1, line
6-8], "An insurer ... shall provide the insured a warranty for
... parts." He asked if insurance companies who issue insurance
policies have contributed to the writing of this bill, and
whether they agree with the language where they assume the
responsibility of providing a warranty on parts.
Number 1252
MICHAEL LESSMEIER, Attorney at Law, Lessmeier & Winters,
Lobbyist for State Farm Insurance Company ("State Farm"),
testified on behalf of State Farm in opposition to HB 99. He
told the members that State Farm did not have a part in drafting
this legislation. Mr. Lessmeier explained that this legislation
was before the legislature last year; State Farm opposed it
then, and they oppose it now. He spoke to the issue of
aftermarket parts and explained that they are not using them in
Alaska now. In fact, he said he does not believe [State Farm]
uses them anywhere because of a lawsuit in the state of
Illinois. Mr. Lessmeier said that when State Farm used them,
they provided warrantees for them. If the company is able to
use them again, they will stand behind them and warrant them.
REPRESENTATIVE FATE thanked him for confirming that State Farm
had no part in drafting this legislation.
MR. CONLEY asked the members to use common sense with this bill.
He said he believes that there is no problem that this bill
solves. Mr. Conley expressed the belief that [Section 2,
Subsection (e)] is radical because the debate has been focused
on sheet metal, but this section changes that to "any part"
involved in a crash. For example, if someone is in a "fender-
bender" and the dollar light bulb goes out, the body shop has to
get a hold of the consumer to get consent to use a light bulb
that is purchase by the body shop and that is made by the same
company that provided that same light bulb to the original
equipment manufacturer. He said that seems to eliminate
competition in the marketplace, and it is competition that keeps
things affordable. Mr. Conley told the members he believes if
this bill were to pass, there would be no way the original
equipment manufacturers would not seize the opportunity to raise
prices. There would be no compelling reason for them not to,
because it is a monopolistic opportunity for them, he said.
Number 1390
JOHN GEORGE, Lobbyist for National Association of Independent
Insurers, testified in opposition to HB 99. He told the
committee the National Association of Independent Insurers is an
independent trade association made up of 700 insurance
companies. About 100 of those are registered to write insurance
in the state of Alaska, and they provide about 60 percent of all
the auto and homeowner's insurance in the state. Mr. George
said the association opposes this legislation for a number of
reasons. He told the committee when he was the director of the
Division of Insurance 15 years ago, the complaint from consumers
was always that insurance costs too much. Mr. George pointed
out that there are many things that are being done that raise
the price of insurance, and not a lot to contain the cost.
Mandating the use of original parts, which cost more,
contributes to higher costs of insurance, he said. Mr. George
commented that in another bill with respect to insurance and
credit scoring, Hawaii kept being thrown up as a state to
emulate. When State Farm started looking at Hawaii, it found
that [Hawaii] actually mandates the use of aftermarket parts.
In [Hawaii's] case, if an individual wants to use the original
part, then the individual must pay the difference. This policy
has been implemented as a cost-control measure.
MR. GEORGE shared a personal experience that he had with his
wife's car, which is a Toyota Camry, all-track and all-wheel
drive. He said Toyota did not make a lot of these cars, so the
aftermarket parts for it are not made for the specific four-
wheel-drive [model]. He told the members he wanted to buy parts
from aftermarket places, [but the manufacturers do not make
them], so they had to go to Toyota. The cost was $350 because
they are the only ones who make [the parts]. Mr. George
commented that this is a good example of why it is important to
support aftermarket parts where appropriate. He clarified his
comments by saying that it is not that he believes using
original parts is inappropriate, but that the competition will
keep parts reasonably priced.
CO-CHAIR HOLM acknowledged that Carl Krag, from Toyota Motor
Sales USA, was available for questions.
Number 1590
SANDY BASS-CORS, Executive Director, Coalition for Auto Repair
Equality, testified in opposition to HB 99. She told the
committee that the coalition is a national organization that
represents aftermarket companies throughout Alaska. She said
the coalition represents companies in Alaska such as NAPA,
Midas, CAR QUEST, Jiffy Lube, and Schucks. Ms. Bass-Cors said
the coalition believes that this bill discriminates against low-
and fixed-income motorists by steering them into purchasing
identical, but higher priced, car dealer parts, which would then
require motorists to pay higher insurance premiums. Ms. Bass-
Cors went on to say she believes this bill also hurts jobs in
the independent repair industry because without the business,
there is no profit and people are laid off.
MS. BASS-CORS commented that HB 99 does violate the federal law
known as the Magnuson-Moss Warranty Act. She told the members
that the aftermarket parts are manufactured by the same
companies that manufacture car dealer parts, so the parts
already meet, and often exceed, the original equipment
manufacturer parts for fit, finish, and quality.
MS. BASS-CORS pointed out that aftermarket parts come with
extended or lifetime warranties, and the automotive aftermarket
[industry] has an 80 percent market share, which is a repeat
business that shows that people come back to the companies
because they receive quality products. She said that the reason
car dealerships promote this legislation across the country is
that aftermarket parts do cost up to 50 percent less than car
dealer parts. She pointed out that the car dealers' interest is
not in the quality of parts provided, but in the profit margin
that is made in higher markups which further hurt low-income
motorists. Ms. Bass-Cors told the members that it is true that
some of the parts are made in Taiwan, but that is true of the
original parts as well.
MS. BASS-CORS told the members that in 1991 the car
manufacturers introduced a bill in Congress called the "Design,
Innovation, and Technology Act," which would have given a 10-
year monopoly on all parts. That bill was killed in committee.
She said that because that battle was lost in Congress, the car
manufacturers have turned to the states. She said [car
manufacturers] believe they will have easier access picking off
the states one by one, but have not had success in doing that.
MS. BASS-CORS concluded her testimony by telling the committee
that a recent congressional study was done by the GAO [General
Accounting Office] which found that there were so few problems
that exist with aftermarket parts that no further action was
necessary. She offered to send a copy of this report to any
legislator who would like to review it. Ms. Bass-Cors said the
Coalition for Auto Repair Equality believes that anything that
is required of the aftermarket [industry] should also be
required of the manufacturers.
Number 1762
EILEEN SOTTILE, Director, Government Relations, Keystone
Automotive Industries, Inc. ("Keystone"); Co-Chair, Legislative
and Regulatory Committee, Automotive Body Parts Association
(ABPA), testified in opposition to HB 99. She provided a brief
history of Keystone by telling the members that Keystone has
been in business for 50 years, services 25,000 collision repairs
across the country, has over 3,200 employees, and is the largest
distributor of crash auto parts in Alaska. She told the members
that the company that she works for sells parts for the "skin"
of the vehicle or the hood, fenders, panels, sheet metal, et
cetera.
MS. SOTTILE told the members that the ABPA has 210 competitor
members and she is speaking in opposition to this bill on their
behalf. She said she has read the sponsor statement and there
is a serious violation of the Magnuson-Moss Warranty Act in this
bill. She pointed out that when a part is replaced there no
longer is a warranty on the original part because it has been
removed; however, Keystone will provide a warranty on the
aftermarket [part]. She told the committee the standard
warranty for the aftermarket part for Keystone Automotive
Industries is a lifetime warranty. So consumers are better
protected by having a Keystone part on their cars because they
have a lifetime warranty. Keystone provides quality parts with
affordable prices, which is great consumer benefit in terms of
the safety issue.
MS. SOTTILE asked if it would be appropriate to show a video
that she provided to the committee at this time.
CO-CHAIR MASEK replied that the committee does not have the
equipment available to show the video at this time.
MS. SOTTILE referred the members to a study in their packets
that was done by the Insurance Institute for Highway Safety
which illustrates the results of crash tests [between original
parts and aftermarket parts]. The test that compares the
results of a crash to a hood and the results of the damage to
both vehicles was somewhat exact. Both [hoods] passed all the
standards for highway safety, and the institute concluded that
aftermarket parts had no impact on safety and that the
aftermarket parts performed well. Thatcham in the United
Kingdom has also done a crash test on hoods, and it came to the
same conclusion.
Number 1918
MS. SOTTILE told the members that Keystone is the largest
distributor of aftermarket parts in the United States and has
never received a report of injury as a result of the use of its
parts. She said she mentioned this fact with respect to
comments made earlier about safety concerns. The National
Highway Safety Administration has repeatedly stated that
cosmetic non-structural auto parts have no safety ramifications.
Ms. Sottile commented that many of their manufacturers also
supply parts to the car companies. Some of these companies are
Ford, Toyota, Isuzu, and Mitsubishi. She explained that the car
companies currently hold approximately 79 percent of the market
share of crash parts. This bill would essentially guarantee a
monopoly for the car companies. She said Keystone's parts
typically cost 20 percent to 50 percent less than what the car
companies are charging. Ms. Sottile said [these lower prices]
help to keep car prices down.
MS. SOTTILE shared a comparison of parts prices for a Nissan
pickup truck, 1989 through 1997. The company price is $192.10,
the Keystone price is $94.00, and the difference is $98.00,
which is a 50 percent savings. She said another example is the
Ford Taurus headlight assembly for 1986 through 1971: the car
company's price is $170.15, the Keystone price is $94.00, and
the difference is $82.33, or a 44 percent savings. This savings
helps to contain claims costs and assist consumers in being able
to afford to have their repairs done.
MS. SOTTILE summarized her comments by saying that car companies
have consistently attacked the [auto parts industry] in
propaganda put out in magazines and by other means. She read an
advertisement that was put out by Nissan which talks about how
to "install a genuine Nissan in your customer's head." It
coaches consumers to ask for an original Nissan part by calling
their insurance companies and demanding genuine Nissan parts.
REPRESENTATIVE FATE asked if the original manufacturers have
agreements with the aftermarket manufacturers or if there are
patent accommodations for these parts.
MS. SOTTILE replied that the parts are reverse-engineered and
there are no patents on the parts, just as it is not possible to
patent a pencil or a pen. Many of the parts are manufactured in
the same plants where the original part was manufactured. Most
of these companies are registered at this time. She explained
that these are the standards the car companies created.
REPRESENTATIVE FATE responded that he does not question the
quality of the part, but wondered if there has ever been
litigation with respect to these activities. He asked if it is
possible for an individual to be drawn into litigation by
installing one of these parts on his/her car.
MS. SOTTILE assured Representative Fate that the auto parts
industry is a generic industry and this practice is widely
accepted, just as supermarket products compete with a well-known
brand-name product and offer it for a lower price. She pointed
out that the practice of encouraging customers to buy parts from
the original manufacturer is often done by implying that the
aftermarket part is of inferior or unsafe quality. This is done
by requiring a sign-off for installing an aftermarket part,
while not requiring it for the original car company. Ms.
Sottile explained that there is no economic incentive to use
aftermarket parts because 87 percent of the parts are paid for
by insurance companies.
Number 2240
JACK GILLIS, Executive Director, Certified Automotive Parts
Association (CAPA); Director, Public Affairs, Consumer
Federation of America; and Author, The Car Book, testified in
opposition to HB 99 and answered questions from the members. He
told the members that CAPA is a nonprofit organization that
certifies the quality of parts used for auto body repairs. He
reiterated that the association does not make, market, or sell
parts; it only establishes standards for competitive non-car-
company parts to ensure their functional equivalency to the very
expensive car-company parts. Mr. Gillis said he is a consumer
advocate who has worked over 13 years on this program to protect
consumers from both poor quality and the ravages of the car-
company monopoly on aftermarket parts.
MR. GILLIS asked the members to give consumers true choice in
the marketplace and protect them from one of the biggest secret
monopolies in America, and protect them from poor quality. He
explained that 80 percent of the car replacement parts that the
members have heard about are only available from one source and
that is the car companies. They mark up their replacement parts
by as much as 800 percent. Car companies spend millions of
dollars to discredit aftermarket parts and scare consumers, co-
opt body shops, and coerce state legislatures and regulatory
agencies in attempts to protect their monopoly in a thinly
veiled attempt to restrict aftermarket parts. Mr. Gillis told
the members that this bill is a classic car-company bill and
perpetuates that monopoly by discriminating against the
aftermarket parts that Alaskans desperately need. He said what
he finds particularly disturbing about this bill is that
Alaskans need more choices, and more competition; things cost
too much already. He explained that this bill will only drive
up the cost of crash repair.
MR. GILLIS explained that as part of the CAPA certification
process there is a comprehensive vehicle test, which every CAPA
part must go through before it can be certified as a quality
part. Of the 1,900 car-company parts that have been tested,
about 50 percent of them did not meet CAPA standards for fit,
finish, and appearance. He said he would be happy to provide
the committee with the details of the study.
MR. GILLIS commented on the safety issue by telling the members
that he has been fighting for safer cars for 25 years. Some of
the issues he has worked on include air bags, anti-lock brakes,
better crash protection, and rollover protection. Mr. Gillis
said ironically some of the organizations that he has been
fighting hardest against to improve the safety of cars have been
the car companies. He summarized that the parts that have been
discussed today do not necessarily have serious safety
recommendations.
CO-CHAIR MASEK informed Mr. Gillis that the committee is running
short of time, and has a copy of his written testimony. She
asked if he has something to share with the members that is not
included in it.
TAPE 03-18, SIDE B
Number 2380
MR. GILLIS summarized his comments by strongly recommending that
the committee oppose the bill because it will only further
protect the monopoly that is already costing Alaskans too much.
CO-CHAIR MASEK announced that HB 99 will come before the
committee again at another time, and she encouraged Mr. Gillis
to testify again, should he have anything to add.
MR. LESSMEIER said that he thinks back 20 years ago when the
committee was dealing with the issue of mandatory auto
insurance. He explained that at that time State Farm Insurance
Company opposed that legislation because of the cost. He
pointed out that this bill deals with cost and said everyone can
agree that the higher the cost of insurance, the more difficult
it is for everyone to afford it. The situation is such that an
individual cannot buy a car without insurance, or buy a home
without homeowner's insurance, and that is the issue that is
directly presented by this bill.
MR. LESSMEIER told the members that State Farm has been losing
money in Alaska in the auto insurance market for the last four
or five years. For example, the average paid cost for property
damage for 1998 was $2,093; for the year 2002 the cost had risen
to $2,700. Mr. Lessmeier said the question is how it can be
stopped. He said at the moment the auto repair industry is not
using aftermarket parts in Alaska or anywhere else, and this
legislation would prevent their use in the future. It is
important to note that it is not a safety issue. Mr. Lessmeier
told the members that they could go through the legal cases and
find case after case after case against the automobile
manufacturers that deal with safety issues. He said if the
members look at the Alaska Bar Association's publication that
listed the top ten verdicts in the country, three of them were
against automobile manufacturers: two against General Motors and
one against Ford. Mr. Lessmeier said he is not aware of any
cases that deal with safety issues or injuries that deal with
aftermarket parts companies. He said it is important to
understand that this is not a safety issue.
Number 2229
CO-CHAIR MASEK explained that many of the members of the
committee must leave for other meetings, so testimony will end.
She asked anyone who would like to give further testimony to
attend the next meeting on HB 99. [HB 99 was held over.]
ADJOURNMENT
There being no further business before the committee, the House
Transportation Standing Committee meeting was adjourned at 3:00
p.m.
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