The Age Of Aluminum

You probably remember something in world history about the Stone Age, the Bronze Age and the Iron Age. When it comes to the future of automobiles in America, the Age of Aluminum is upon us. With increasingly aggressive CAFE (Corporate Average Fuel Economy) standards being rolled out by the United States government, the move toward aluminum and exotic metals to increase fuel efficiency is ramping up into full swing as Ford unveils the new F-150 this fall.The use of exotic metal on body panels is not something entirely new as magnesium and aluminum have been around for a while. However, in the past these metals were mainly found on higher dollar, lower volume vehicles or on just a few panels such as the hood or lift gate.The F-150 signals the first major use of aluminum as it is one of the best selling mass-produced vehicles in history. Collision repair and insurance claims industry professionals will be put to the test once these vehicles encounter their first fender benders. According to many sources including collision repairers, part suppliers and insurers, the impact is uncertain but there could be some dynamic changes within the industry as the conversion to aluminum accelerates. Here are some possible scenarios that may unfold.1. Collision Repair Shop Numbers Continue To Shrink. Over the past decade we have seen a rapid contraction and consolidation in the repair industry. With the advent of more specialized repairs, hi-tech cockpit gadgetry and newer metals, many repair facilities are simply unprepared. The investment required to work on aluminum includes specialized riveting tools, clean room stations to eliminate cross-contaminates and separate vacuum systems which are beyond the economics of many smaller independent shops. For smaller shops to compete, there will likely be a trend toward “specialization.” Smaller shops may band together in geographical areas with one focusing on new metals to maintain viability while insurers will focus their DRP networks to the larger MSOs and dealerships. Shops unable to adapt will likely disappear, accelerating the declining shop landscape.2. Rising Repair Costs. For years the average repair severity has been fairly consistent and insurers have become very comfortable with this. With an increase of collision warning systems, cameras, and aluminum, repairs costs could quickly skyrocket. Aluminum repairs are a little more involved as aluminum does not retain memory like standard sheet metal. Often, simple repairs that are common with sheet metal may require replacement with aluminum. Additionally, repair times may increase on repairable panels leading to higher aluminum rates and more expensive replacement costs. Even if repair costs only increase 3% on a $2,500 repair, that’s an additional $75 per car. For an insurer processing just 1000 files month, this translates nearly $900,000 in increased repair costs per year.3. Higher Premiums. When insurance carrier expenses rise, the consumer ultimately absorbs the cost. The next possible scenario resulting from higher repair costs due to an increasing influx of aluminum cars would be higher insurance rates. Insurance experts predict that the cost to insure the new Ford F-150 will be higher than the standard pre-aluminum models while others feel it will even out when factoring in lower fuel expenses. More than likely, insurance premiums will rise until insurers gain a grasp on the true costs associated with aluminum repair and part replacement. One other unintended possibility could be the increase in uninsured motorists on the road when some consumers realize they cannot afford coverage. They may take risks and forgo insurance, which may lead to a subculture of smaller unqualified shops that attempt aluminum repairs improperly creating more unsafe cars on the road.4. Rise in Total Losses. If the repair costs suddenly climb on vehicles utilizing newer metals we may see certain vehicles exceed total loss thresholds more quickly. Insurers could face a spike in total losses as aluminum use becomes prevalent and the first wave of aluminum cars age. In a few short years this would reduce repairable vehicle opportunities for shops further straining the tightening collision repair marketplace. This may further damage the viability of smaller independent shops, as they would now lose previously repairable vehicles to total losses.Nobody can be certain exactly how the transition will play out. As with all change there are always those with dire predictions that never come to fruition. On the other hand there may be some truth to the warnings given by those within the industry. The good thing is that innovators often step forward and many of the fears are alleviated with new solutions and technology. The collision industry and insurers just need to be prepared to adapt and innovate and understand that the future will be quite dynamic and the key is to be agile and adapt quickly.