Sudden Fox closures highlight necessity of careful DRP deals, sustainable growth

Todd Fox's impassioned open letter to the collision industry railing against unfair direct repair program (DRP) contracts may garner sympathetic nods from some shop owners, yet others familiar with the sudden closures of 18 Fox Collision Centers in Oklahoma, Kansas and Arkansas say blame should instead be directed at poor management rather than insurance company wrongdoing.

Industry leaders are sounding a similar theme — and a warning — as the fallout over Fox continues: Don't sign up for a DRP that carries conditions that are not conducive to the long-term sustainability of your business.

The Fox debacle illustrates the significance of being selective and thorough whenever a potential DRP is being negotiated, says Darrell Amberson, collision division director for the Automotive Service Association (ASA) and president of Lehman's Garage in Bloomington, Minn.

"It's certainly a significant event. It should be a wake-up call to shop owners and insurers — be careful who you partner with," he advises.

"Aggressive DRPs are, of course, an issue," Amberson reports, yet "the importance of not making concessions that you can't afford" should be paramount when an owner is considering a DRP's proposed terms. "If it means going too deep and you're going to lose money on it, then you shouldn't do it."

Lehman's has a number of DRPs in place, although the company has opted out of a few that were deemed unattractive arrangements. "We're not a shop to end DRPs," he says, "but you have to make wise business decisions."

"Fox's letter to the industry seems to have been Todd's cop-out," says Gary Wano Jr., executive vice president of GW & Son AutoBody Inc. of Oklahoma City.

Wano said Fox willingly entered into DRP agreements in an effort to expand the competitive reach of the business. "He did not mind riding the wave while it was at its crest, meanwhile dragging other shops down to the prices and procedures he was willing to do to get a job," Wano says.

"There is no doubt that some of the network programs available squeeze most, if not all, of the profit on a repair," he says, "but to assign all the blame on the program is not taking responsibility for your own actions. I hate to hear it when anyone fails," yet he says "pointing fingers" is irresponsible.

Hunting for Fox

In the meantime, a Fox hunt is underway to locate the owner as former employees of the business say paychecks are dishonored by banks.

"I had two bounce and I didn't get my last week's check," says Roy Binion, who had worked at a Tulsa, Okla., Fox location. He was telephoned Oct. 26 and given until noon the next day to retrieve his personal belongings.

Repeated calls placed by ABRN to locate Fox at several of the shop facilities went unanswered. A Fox Collision hotline for disseminating additional information to consumers carried an announcement recorded Oct. 31 saying that people can pick up their cars during a two-hour window on Nov. 1. The same missive was still running as Thanksgiving Day approached; the line was not accepting messages.

The Oct. 27 closures apparently came without warning to customers and employees alike, leaving vehicles in various states of disrepair behind locked doors and workers suddenly without jobs and a source of income. Fox issued a letter of more than 2,000 words excoriating insurance carriers, DRPs, participating shop owners and industry suppliers, yet there was no explanation of how customers can recover their cars or details regarding employee pay disbursement. (To read Fox's letter, go online at http:// abrn.com/foxletter — scroll down to "The letter can be read HERE.")

Former Fox worker Binion is especially upset over the bleak futures seemingly in store for hundreds of loyal employees facing the sudden prospect of no money coming in and a miniscule chance of collecting any back pay. Binion is retired from a longtime corporate career in the snack foods and soft drinks industry. His commitment to Fox amounted to a modest 18 hours a week.

After contacting assorted Oklahoma state officials on behalf of his displaced colleagues, Binion says any meaningful redress will be years in coming — if at all. "It's just a bad deal," he laments.

A meeting recently held among several former employees featured a Tulsa lawyer who advocated a class action lawsuit, but Binion has little faith in a timely resolution of the pay issue because he says court cases move excruciatingly slow and Fox owes vast sums of money to an array of creditors.

"I was in management for 40 years, and this was the poorest-run company I've ever seen," Binion contends. "It's not just something that happened overnight. This has been going on a long time." Vendors had increasingly been demanding "everything on a cash basis" for an extended period.

According to Binion, lambasting DRPs and blaming them for the company's demise is disingenuous. "The insurance companies didn't have anything to do with it," he asserts.

"Insurers aren't the reason why a repair facility chooses to perform an unsafe or poor-quality repair," says Dan Risley, Society of Collision Repair Specialists executive director. "There are instances when a collision facility may be asked or told to repair the vehicle in a certain way. The repair facility has a choice."

Although these decisions can be tough because of fears over possible retribution or reduced revenues, "If you've gone against your own professional judgment you have nobody else to blame but the person in the mirror," Risley says.

"If what you are being told to do is unsafe or against what you believe is a proper repair, say, 'No.' Nobody can make that decision for you, and if your business, livelihood and credibility are being compromised, the decision is really easy."