Page 19 - Australasian Paint & Panel magazine July-August 2022

moment. We’ve got a scarcity of labour which is driving wages pressure, we’ve got parts prices increasing and that differs by marque. I’ve seen numbers of up to 19% on one of the brands in terms of their parts pricing increases in 12 months.
“We’ve also got the supply chain impacts which are running through in terms of increased shipping costs which are impact- ing consumables and those sorts of elements.
“Paint is another area where we’re expecting significant in- creases in cost. So unquestionably we’ve got an inflationary environment. We’ve seen inflation rise. I’m not an economist, but I can’t see that slowing down any time soon.
In a recent quarterly market update AMA announced several more site closures. The massive Riverwood site in Sydney has been closed and the team moved to RPM Milperra which will save the group around $0.6 million. Also in NSW three ‘hiber- nated’ sites: Luxury Bodyworks in Five Dock, Gemini Cambell- town and JPV Smash Repairs in Kogarah are closed which AMA says will save $1.2 million a year. Californian Smash Repairs in Botany has also been shut down due to lack of volume.
“We evaluate the profitability of our sites on a regular basis. So we’ll make decisions based upon the continuity of sites, based upon what work is available, what other insurers can go in. There are a number of factors that go into that.
“For us though, when we have an unprofitable site, we need to really engage with our insurance partners to understand why it’s unprofitable. There are times when there are operational is- sues that we need to fix and that’s why a site might be unprofit- able. There are other times where it’s just not commercially vi-
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That means there will
be more requests for price adjustment
becauseit’snecessary.”
able under the commercial construct that’s in place, and that’s where you’ve got to have the negotiation and discussion about adjustment to those commercial terms.
“Focusing in on pricing in general, it’s clear to me that more regu- lar adjustment of prices is required. So that means that there needs to be a greater responsiveness to what’s happening in the market.
"I think that responsiveness has not been there and certainly in the last few years where the industry has been significantly impacted by volume shortages with COVID impacts, people have been hanging on to what volume they’ve got. In those two years I think things have substantially changed. There has been wages inflation, there has been parts inflation, there has been other elements of inflation and the pricing and commercial con- structs haven’t caught up with that yet.
There’s a wider trend outside of the AMA network of repairers declining to engage in fixed cost models. “I think everyone needs to make sensible business decisions. I’m not sure what others will do but certainly what we’re going to do is engage more proactively around these issues of the commercial posi- tion, more actively and more regularly. That means that there will be more requests for price adjustment because it’s neces- sary. I would hope that that actually helps the remainder of the industry feel that they can move forward in pricing as well, be- cause it’s needed - efficiencies will only get you so far.
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