Mutual & Federal is putting some auto-body repairers’ noses out of joint in an attempt to deal with corruption from rogue operators that could be costing insurers billions.
Recently the National Guild of Auto-Body Repairers, which claims to represent more than 200 panel beaters, marched from Mary Fitzgerald Square in Newtown, Johannesburg, to Mutual & Federal’s head office in the city centre to protest against “unfair” contracts it claims members are being forced to sign.
Guild chairperson Thaba Mufamadi says the main issue of dispute is that Mutual & Federal is trying to squeeze panel beaters’ margins by forcing them to procure parts through the insurer instead of from dealerships.
But Mutual & Federal managing director Keith Kennedy says the new procurement policy is to combat rogue panel beaters who return parts to the dealership for credit and then use pirate parts in the repair of the vehicle.
“We are concerned that in the motor industry there is quite a high return-for-credit rate,” says Kennedy.
He says Mutual & Federal’s proposed new contracts will see it pay for the parts upfront and then courier the parts to the panel beaters.
Kennedy emphasised that Mutual & Federal has up to 700 panel beaters contracted to it and that at least 90% of these are happy with the new contracts.
Mufumadi, however, says the new contracts will erode margins by 15% to 22% and will “either lead to the demise of some auto-body repairers or it will lead to shoddy work and short cuts”.
“It is one-sided and unfair and it changes the entire business model of the industry,” says Mufumadi. “Mutual & Federal’s main motivation is to erode the profit of auto-body repairers and increase its own.”
Mufumadi says the guild is angry that Mutual & Federal insists on negotiating individually with the panel beaters and insists it wants to sit down and collectively negotiate commercial terms.
But Kennedy says this would be tantamount to price-fixing and that Mutual & Federal will not get involved in such activities.
The dispute has been going on for a while — long before the guild formed two months ago.
Kennedy says before the guild was formed the dispute was continuing between the South African Motor Body Repair Association (Sambra) and Mutual & Federal, which resulted in the insurer seeking a court interdict in August preventing Sambra from unlawfully interfering in its contracting of individual panel beaters.
A panel beater, who agreed to talk to the Mail & Guardian on condition of anonymity, says Sambra has become a “dog without teeth” and some panel beaters formed the guild to deal with their complaints.
The panel beater says the industry is rife with corrupt practices, including panel beaters who quote for parts that are not broken and do not need replacing.
“It is crooked like you can’t believe,” says the panel beater. “Mutual & Federal knows this and it is trying to put a stop to it.
“Insurance companies are losing billions a year because of theft,” says the panel beater.
Mufamadi says it is not correct to smear an industry with generalisations.
“The members of the guild are highly professional businesses,” says Mufumadi.
“If Kennedy has any proof of these practices, nothing is stopping him from dealing with this matter openly.”
Sambra’s Richard Green says the organisation fully supports the guild and what it is trying to achieve.
“The majority of guild members are also Sambra members,” says Green. “We are fighting similar causes; the dominant bullying practices of insurers.
“Mutual & Federal is trying to form a direct supply system using a company it controls to squeeze our margins,” says Green.
When the M&G put the allegations of corrupt practices by rogue panel beaters to Green, his response was: “Prove it and I will give you a response.
“Sambra will never support underhanded business practices,” says Green, adding that the low labour rate in the industry is another problem. Insurers pay only R190 an hour for labour costs, while other businesses — such as car dealerships — charge much more for labour when cars are serviced.