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.