AutoMuse®

Now that the auto industry is abuzz with dicussing who will build the next stylish ride for the Pontiff, I thought it was a good time to remind everyone that, not only is the new Pope Benedict XVI a German, he is a Bavarian. This, of course, makes one wonder if the Southern German car companies will be making an extra-strong pitch for building the new popemobile.

Based on this picture a friend sent to me, it looks like the Pope is already showing support for his native Bavaria.

I guess it’s unlikely the new Pontiff will be tooling around in a stretch Hummer. But, you never know. As Joe Sherlock nicely chronicles, papal conveyances have gone through many changes through the centuries.

I will say I’m sorry in advance.

I have had to change the commenting policy on this site due to the repeated and annoying advertising spammers who just won’t quit. I no longer allow automatic anonymous comments to go up directly to the site. Now they have to be “approved” before they will appear.

Please do not let that deter you from making any comments legitimately applying to entries or issues involved with AutoMuse. By “approved”, I simply mean that I have to give the OK to have the comment appear in the comments section. That does not mean that I intend to censor anyone’s comments (obscenities, and the like excluded) or to prevent critical comments from being posted.

I am actually very discouraged that I have to monitor the use of the comment and trackback features of this site. I like the free exchange and the spontaneity that occurs when you can immediately see your post. However, I am tired of removing 250 advertising “comments” a day, and I had to put a stop to that comment abuse.

For those of you who read AutoMuse, I apologize for the inconvenience.

The California Assembly Committee on Business and Professions held a hearing on April 25, 2005 discussing the benefits and detriments of modifying the existing Motor Vehicle Replacement Parts Act as proposed by Assembly Bill 1163. For those of you late-comers to the discussion, A.B. 1163 proposes to modify the existing Act in a way that declares certified imitation crash parts to be equivalent to original equipment manufacture (OEM) parts — irrespective of whether they are truly of the same quality or not. I have commented repeatedly here, here, and here on the illogical, conflict-ridden, and dangerous aspects of passing this bill and how anti-competitive and contrary to American capitalistic ideals it is.

The historical premise about products and competition was “build a better mousetrap”. A.B. 1163’s premise is “build a lousy mousetrap and get legislation enacted that declares it to be a great mousetrap”.

So, here are some of the interesting things revealed via the recent hearing:

We discovered that CAPA, the Certified Aftermarket Parts Association, sponsored this bill. This is interesting in several respects because this legislation would rid CAPA of some of its non-OEM parts competition, while artificially raising CAPA products to the level where they can compete with OEM parts. In other words, CAPA seeks to create an affirmative action program for its parts that cannot, otherwise, successfully compete in the marketplace.

Two consumer groups, Advocates for Highway and Auto Safety and Public Citizen, support the legislation on the basis that it is “good for consumers”. I wonder just how it is good for consumers? Under the current law, consumers have more of a choice as to the parts that will be used on their cars and are guaranteed that the imitation crash parts have to be at least equal to OEM parts in terms of fit, performance, finish, and quality. The amendment would take away this safety/quality standard and replace it with nothing other than a declaration that the parts are OK.

One can analogize this in terms of the social security fund. Once upon a time, we had actual money in the SS fund. Now we just have paper I.O.U.s. Don’t we feel secure about that? So apply that analysis to the current versus amended crash parts law. Once upon a time, non-OEM parts could only be used to repair cars if they were equal to OEM parts. Now, we just say the non-OEM parts are OK, without any empirical evidence that they have met any quality standard.

The Committee noted that passage of the bill could weaken existing law.

Under California Code of Regulations, Title 10, Chapter 5, Section 2695.8 (g), an insurer that requires a policyholder to use non-OEM crash parts must warrant that the non-OEM crash parts are ” at least equal to the original equipment manufacturer parts in terms of kind, quality, safety, fit and performance,” (emphasis added). While this bill does require insurers and manufacturers or distributors to warrant non-OEM parts, it provides that non-OEM certified crash parts ” are of like kind and quality to car company parts,” (emphasis added). This is a less precise standard: “at least equal to” versus “are of like” kind. Further, this is a weaker standard because “safety, fit, and performance” (as provided in existing law) are not included in the provision in this bill mandating the quality of certified non-OEM crash parts.

This is a list of the organizations that support or oppose the legislation.

REGISTERED SUPPORT / OPPOSITION :

Support
Certified Automotive Parts Association (CAPA) (sponsor)
Advocates for Highway and Auto Safety
Keystone Automotive Industries, Inc.
Public Citizen

Opposition

Alliance of Automobile Manufacturers
Automotive Service Councils of California
California Autobody Association
California Motor Car Dealers Association
Toyota Motor Sales, USA, Inc.
United Automobile, Aerospace and Agricultural Implement Workers
of America, Region 5
United Policyholders

The matter has been tabled for now, but there will be an informal hearing to take in additional information sometime in the fall. Any formal matters pertaining to A.B. 1163 are not to come up again until January of 2006.

I had the privilege of chauffering my mother to the airport in my 1999 Lincoln Navigator. It is no joke lumbering around those narrow drop-off spaces in this behemoth with security personnel eyeing you as if you were the next Genghis Kahn.

This vehicle was big, clunky, and unruly from the day it was born. The only really nice thing I can say about it is that it is still running with 80,000 miles on it. Oh, yeah, and it is cherry red — which I like.

Attributes:
Red metallic out
Black leather in
Running boards
No sun/moonroof
80,000 miles

Youch! Gas prices have just become silly.

Here’s a way to combat them. Go to GasPriceWatch.com - The Worlds Largest Consumer Advocacy Gas Price Site where you can enter you zip code and find gas prices of stations near you. You can also sign up to be a price spotter.

If you are wondering how other regions of the country are fairing, check out U.S. Retail Gasoline Prices. It’s good to know the government is tracking the rising cost of gas prices. Now, if they would just do something — preferrably something sensible — to lower them. How about the vapor technologies I discussed months ago? A vapor solution is certainly more environmentally friendly than drilling in Alaskan preserves or in the Great Lakes.

Cars! Cars! Cars! has more sites you can look at, including where to find cheap gas in Canada. See, northern neighbors, we aren’t always Americentric.

UPDATE: The Auto Prophet keeps me honest with his comment debunking my vapor tech. suggestion. Maybe we can use that snake oil as a substitute for petroleum.

GM announced at SAE 2005 that it will be offering new interiors on some products, like the Cadillac STS-V, Pontiac Solstice, and Saturn Sky, according to an Automotive News ($) article this week. Well good, and it’s about time. The impact of expensive GM cars was all too often ruined by cheap-looking, plastic interiors.

What I found extremely interesting about the article was the acknowledgment that GM has heard the complaints about the interiors and is doing something about it. I can hear other car makers thinking, “That blog thing may have real merit after all.” I like to think I had a little something to do with it.

A few months ago, I read that Volkswagen intended to offer a program providing auto insurance to purchasers of a car (only certain models, of course). The press announcements said that VW was seeking to boost sales of particular models and would provide one year’s worth of car insurance to all buyers of those models. When I saw the announcement, I asked a friend who is a risk manager at a large company what he thought of the program. We discussed some of the pros and cons of the program, and I decided to wait for more information on it.

Well, VW has announced that the “free insurance” program has met with great success. As disinclined as I am to cite to the Insurance Journal, I found the comments of posters intriguing.

For one thing, some of the insurance agents wanted to know how VW got away with advertising and providing what was essentially “free” insurance — which is a direct violation of some insurance regulations. Others wanted to know why the the car salesmen were not being slapped for being unregistered providers of insurance.

I would like to know how the car dealerships get away with providing this insurance, too. Unless, of course, the person offering and providing the policy is licensed to sell insurance. Even then, the contract must have some type of provision discounting the car and charging some fee for the insurance — unless the company is offering “free” insurance, which could get it into trouble.

I am interested to see what the loss experience will be for this portfolio of VW insureds.

The readers of this blog are so much funnier and more cynical than I am. Some of the emails I received on California’s bill to amend its Motor Vehicle Replacement Parts law — the amendment that says certified non-OEM parts are the same as OEM parts — show a common line of thinking:

What’s next? Legislators ruling that Mr. Pibb is like kind and quality to Dr. Pepper?

And, straying into deeper water:

Actually it is worse. In this case what they are saying is Mellow Yellow IS NOW and WILL ALWAYS BE Mountain Dew. Red is now Green. Blue is now Yellow.

“Ahem! We the Legislature of the State of California now declare!!!! Water is Wine!”

Now, why didn’t I think of that?

Professor Bainbridge is ranting because of the treatment he is getting from his insurer, USAA. Seems that some discourteous person cut a hole in his BMW M3’s soft top and stole the ipod and loose change. Now the good law professor is stuck dealing with his insurer, claims representatives, repair shop, and leasing company.

He’s not happy. But then, who ever is when they have to have their cars repaired? Professor Bainbridge is getting the run around from USAA about how the repair check will be made payable, which insurance policy will cover the ipod loss (auto or homeowners), and whether he is going to get stuck with — you guessed it! — non-OEM replacement parts.

Sadly, the good Professor is dealing with the “we only pay for non-OEM parts” even though your lease obliges you to have the vehicle repaired with BMW parts. Hey Prof! Here are a couple things to keep in mind:

1) Check your insurance policy. Claims representatives often graft collision exclusions onto comprehensive coverage. You may very well not have to accept a non-OEM convertible top.

2) Consider yourself lucky that the only thing you are repairing is the convertible top due to theft damage and not collision damage. If Assembly Bill 1163 is enacted, you could be stuck with non-OEM parts which are declared, by legislative enactment, to be the same as OEM parts (whether they actually are or not). Lovely, now we have legislators artificially rating the quality of consumer products.

3) Rearden’s law review note is somewhat interesting, but fails to fully address some of the real issues of Avery v. State Farm. The manufacturer versus imitation part’s warranty is a very big issue which he seems to think is unimportant. One of the significant things you lose when imitation crash parts are used is a fully portable manufacturer’s warranty. BMW is not going to address any future problem you have with the convertible top — nor anything that can be reasonably attributed to the repair. And, yes, the Magnuson Moss Act allows the manufacturer to disclaim the warranty relating to any portion of the vehicle which has been damaged, altered, neglected, abused, you know the drill. In fact, my SLK’s warranty expressly stated that the warranty did not apply to any portion of the vehicle which had been damaged, altered, etc., and “for which an insurance claim has been paid”.

That’s OK you might think from reading Reardon. The insurer warrants the non-OEM parts. But, there is a catch. Typically, insurers tell you to get the parts manufacturer to provide the remedy — claiming they only have an obligation to “warrant” the part if you can’t get it remedied by the manufacturer. So, you get to spend nights awake trying to get the part warranted by the maker who happens to be in Taiwan, South Korea, or China. Good luck. In fact, this was exactly one of the issues that got State Farm in trouble in Avery. The appellate court agreed with the trial judge that this “guarantee” that SF would provide a remedy if problems with the imitation parts arose was illusory, as the company shunted all responsibility for providing a remedy to the parts maker and all responsibility for obtaining it to the insured.

Oh, and there are other sources Rearden could have used that demostrate the converse of findings by the Insurance Institute for Highway Safety. Interestingly, however, while Rearden cites to the Collision Industry Conference (CIC) (which has many insurers involved and sometimes caters to insurer interests), the CIC periodically conducts studies pertaining to the use of aftermarket parts. One of the most recent reflects that the majority of the non-OEM parts are NOT equivalent to OEMs.

4) There is a class action on the use of imitation crash parts currently pending in CA.

By the way, even Korea is worried about the use of non-OEM parts.

As always, I owe my knowledge of Professor Bainbridge’s plight to Professor Grace at RiskProf. Stephen, if you get a chance, you should go hang out with Martin. Not only is he fun, but he bought me a terrific lunch!

For those interested in what is going on in the legal world (as opposed to the auto world) check out Blawg Review. Initial stuff and excerpts of interesting lawyer-thinking is posted at Evan Schaeffer’s Notes from the (Legal) Underground. If you are the listening type rather than the reading type, you might want to click over to BlawgCast for the voices of lawyers who won’t put you to sleep just by listening.

I thought it couldn’t possibly get worse. As usual, however, I was wrong. Yesterday, (April 5, 2005), the California Assembly amended Assembly Bill 1163. These amendments take a bill that was bad to begin with and make it worse.

As amended, A. B. 1163 would now require collision repair shops and insurance companies to identify all crash parts used in the vehicle repair. This means the estimate must designate OEM parts, certified aftermarket parts, and any other type used, which I presume includes non-certified aftermarket, salvage, and rebuilt parts. (Companies like Mitchell’s and CCC better start making changes to their estimating programs.)

The worst part of the amendment, however, falls in section 9875.4. This section of the bill previously stated, “Noncar company certified aftermarket crash parts used to repair a motor vehicle shall be presumed to be of like kind and quality to car company parts.” Section 9875.4 now reads “Noncar company certified aftermarket crash parts used to repair a motor vehicle are of like kind and quality to car company parts.” (Emphasis added in both.)

This amended legislation would take certified aftermarket crash parts from being presumed to be of equivalent quality to OEM parts, to being irrebuttably established as equivalent to OEM parts. In other words, this legislation would artificially declare that the certified parts are OEM parts in terms of quality. Regulation like this is crazy.

Companies work for decades to establish a reputation for quality. Now, however, with a wave of the legislative wand, a company can have its product quality manufactured (if you will forgive the pun). Not only is legislation of this nature anti-competitive and anti-capitalistic, it is downright un-American.

Most of the non-car company aftermarket parts manufacturers are located in southeast Asia. I don’t think that’s a bad thing. I just want to point our that they are not American companies. In what will clearly be remembered as one of the most anti-competitive legislative proposals, California legislators intend to give non-American companies a fake quality rating so their parts can be substituted for OEM products — which had to earn their quality ratings. We do not market-protect American-made products in this manner. Look at the negative press and market share problems companies like GM and Ford are faced with. But we are not moving to protect them from failing market share or changes in consumer preference. Instead, we let them fight out their market share and press issues with the other car manufacturers. Using A.B. 1163’s thought process, does this mean California will now pass legislation declaring the Chinese-made Chery QQ to be of equivalent quality to the Dodge Neon?

Surely, if we will not protect products manufactured in our own country, we certainly should not be protecting products made elsewhere.

It is contrary to the American capitalistic ideal to artificially declare a product to be of a particular quality. Products command a position in the marketplace because of their reputations, quality, longevity, and good marketing — to name a few reasons. We let quality and value issues be determined every day in the marketplace. Our society claims to have, and prides itself on having, a capitalistic marketplace. If that is the case, let the marketplace decide whether these aftermarket products are truly equivalent in terms of fit, finish, and performance. The mere fact that any legislature is considering passing a law for them tells you that the marketplace has already rejected these parts as inferior. Otherwise, there would be no need for any legislation – the products would stand on their own merits.

As with any change to proposed legislation, there are two interesting additions. The first is that the notice required to be given to consumers has been changed to state, in part: “Certified aftermarket crash parts and crash parts produced by the manufacturer of your vehicle are warranted by the manufacturer or distributor of the parts and the insurer for which the estimate was written.” With this amendment, we now have insurers being forced to warrant OEM parts. This is an interesting twist.

The second oddity with this amendment comes in the preamble. In its initial version, the preamble began by stating: “Existing law regulates the use of motor vehicle replacement parts, and prohibits an insurer from requiring the use of nonoriginal equipment manufacturer aftermarket crash parts, as defined, in the repair of an insured’s motor vehicle, unless the consumer is advised in a disclosure document of the use of the part.” The amended opening sentence states: “Existing law regulates the use of motor vehicle replacement parts, and prohibits an insurer from requiring the use of noncriminal equipment manufacturer aftermarket crash parts, as defined, in the repair of an insured’s motor vehicle, unless the consumer is advised in a disclosure document of the use of the part.” (Italics in original.) What? Does this mean insurers are currently permitted to require the use of criminal aftermarket crash parts? I could make the assumption that the Assembly is talking about aftermarket parts fraudulently identified as OEM parts, but who knows what these legislators mean? They continue to surprise and amaze me, so I hesitate to offer any speculation as to what was intended by the designation of noncriminal parts.

Of course, all of my original issues from prior posts remain unaddressed.

PDF version of A.B. 1163, as amended

Paul Winston over at Business Insurance questions the conspicuous silence of the insurance industry at Eliot Spitzer’s accusation that this industry is “rife with corruption”. Mr. Winston does not think that insurers have been behaving badly and points out how members of that sector got together recently to raise money for charity. It’s comforting that they know how to do the right thing, but what has that really got to do with whether insurers and brokers have committed illegal acts or whether the system is rife with corruption as the Lord of Regulation claims?

Winston is concerned that the insurance industry’s failure to defend itself will be perceived as tacit acknowledgement of wrongdoing. He also encourages members of the industry to offer some solid defense to give writers and pundits something to write about.

Maybe the reason no one is going out on a limb to defend the industry is because each believes the allegations are true. At least one person affiliated with the insurance industry seems to think his Lordship is on the mark.

Hat tip to Walter Olson at Point of Law

I thought the results of this Lexis/Nexis poll on the Class Action Fairness Act were interesting. Of the people responding, 82% think that the Act was a bad idea, opposed to 18% who think it is positive.

Joe Sherlock has a way with words. When he needs to, he even makes up a few, as in this eloquent quote from his remembrance of the late Pontiff.

His predecessors rode like royalty in black, custom-built limousines. JP II hung on to the roll bar of a white open jeep, bringing him closer to his flock as he waved and blessed them as his “Popemobile” weaved slowly through the crowds.

Someday I hope Joe will name a “mobile” after me.

Hat tip to Carpundit aka the Englishliteraturepundit.

In my recent post on Bob Lutz’s “comments” at a recent conference, I laud Lutz for his behavior and note that he acts the way we expected corporate executives to act in the pre-Enron/Worldcom days. Guess I should have made that the pre-Enron/Worldcom/AIG days. Tom Kirkendall of Houston’s Clear Thinkers brings us a pointed commentary on how AIG admitted that its accounting irregularities could reduce the company’s net worth by $1.75 Billion.

Kirkendall gives a good analysis of why companies like AIG and Enron are subject to meltdown when their credibility goes. Plainly, it’s because they are in businesses that traffic on trust. When doubt creeps in, everything falls apart.

This would seem like a very good time for trust-based businesses like insurers to take a long hard look at the very things that induce people to rely on them. Running ads that say how reliable your company is doesn’t come close to the goodwill you develop when you treat people fairly — insureds and third parties alike.