SIC 7532
TOP, BODY, AND UPHOLSTERY REPAIR SHOPS AND PAINT SHOPS



Firms in this category repair automotive tops, bodies, and interiors, or engage in automotive painting and refinishing. This includes non-factory customizing of vans, trucks, and automobiles. Firms building custom-designed vehicles on a factory basis are classified in SIC 3716: Motor Homes. Franchise operations are classified under SIC 6794: Franchises, Selling or Leasing.

NAICS Code(s)

811121 (Automotive Body, Paint, and Upholstery Repair and Maintenance)

Industry Snapshot

For almost as long as there have been cars, "scratch and dent" shops have been in business to rejuvenate them. Not long after cars became affordable for most of the public, car owners began looking for ways to "jazz up" their vehicles to suit their individual tastes. Such customizing uses the technology and expertise of the body and paint shop to convert mass-produced cars, vans, and trucks into special-use vehicles.

As the cost of new cars escalated, increasing numbers of Americans were extending the life of their current vehicle with a little paint and body filler. According to the 1998 Statistical Abstract of the United States published by the U.S. Census Bureau, automotive repair shops of all kinds took in $65.3 billion in 1997, up from $62.0 billion in 1996. In 1997, car owners spent $19.8 billion on auto body repair and paint services, nearly one-third of total industry revenues, up from $18.7 billion in 1996.

Organization and Structure

Most firms in the industry were relatively small; many were owner-operated "mom-and-pop" shops. Individual proprietors ran 15,977 firms in 1993, partnerships accounted for 1,757 establishments, and corporations and other business groups accounted for operation of the remaining 17,734. According to the U.S. Census of Service Industries, in 1993 there were 35,074 establishments, a slight increase from 1992. The number of establishments was projected to reach 36,815 in 1998.

Although the operations must be physically separated, many body shops also had onsite painting facilities. Generally, these shops strive for a craftsman image, emphasizing quality rather than speed of delivery. Consumers, however, chronically placed auto repair shops in general, and body shops in particular, high on their complaint lists. Many firms adapted an assembly-line system to the repainting process. These shops performed only minor body repair, concentrating instead on a high-volume business in quick paint jobs. In the 1990s, franchising became an important segment of the industry, combining the small, personal craftsman image with the impact of nationally-recognized trademarks.

In 1987, more than 3,000 converters supplied specialty vans to car dealers and individual buyers. However, the product was often unacceptable to consumers, prompting Ford, General Motors, and Chrysler to establish "consignment pools" of preferred converters. That policy and increasing competition for a dwindling market share drove the number of active converters down to between 300 and 600 by the early 1990s. It was predicted that this number would decrease even further as larger, better-capitalized conversion firms such as the Starcraft Corporation (the holding company for Starcraft Automotive Group) forced out the craft-shops through intense price and service competition. Posting almost $53.1 million in sales in 1999, Starcraft was the largest company in the industry. Firms manufacturing for the consignment pool are classified under SIC 3716: Motor Homes.

Background and Development

In 1937, the price of painting a car ranged between $85 and $350 and took from six days to two weeks to complete. Then came the assembly-line paint job, pioneered by Earl Scheib Inc. of California, offering the same job for $19.95 and same-day service with a three-year guarantee. Scheib's technological innovation led to a basic division in the paint and body shop industry that continues to persist.

Small shops provided detailed precision work using high-grade materials and tools developed for the modern automobile. In the 1980s, the major auto manufacturers switched to unibody construction and metallic paint finishes. Consequently, frame straightening and quality paint application began to require specialized equipment costing hundreds of thousands of dollars. Those shops, which could not afford the massive capital investments in this technologically advanced machinery, became noncompetitive.

Assembly lines also provided quality work by specializing in repainting and confining their body work services to surface preparation and minor repairs. During the early 1970s, MAACO Enterprises Inc. of Pennsylvania combined the best of both systems with its franchising concept. Instead of creating a chain of company-owned shops, MAACO used its name and national image to tie together a system of 553 independently-operated facilities in 1999. A 1997 issue of Entrepreneur magazine ranked MAACO number one in auto appearance services. MAACO claimed that they painted and repaired more vehicles than anyone else in North America. In March 1997, MAACO painted its 10 millionth car in a special promotion commemorating their 25th year in business.

Other firms, like One-Day Paint and Body and Econobake followed. The national clout of these chains and their access to sophisticated tools and training forced many of the marginal craft shops out of business. These franchise operations are covered in SIC 6794: Franchises, Selling or Licensing.

Current Conditions

Increased environmental protection legislation brought additional challenges to paint shops in the 1990s. Paint and body shops were primary sources of air and water pollution and contributed significantly to toxic waste stocks. To address this problem, the industry attempted to reduce and recycle waste thinners, solvents, and paints. The Federal Clean Air Act of 1990 mandated a reduction in volatile organic compounds (VOCs); consequently, paint shops had to invest in a major retooling of their facilities. The industry warned that it possibly would not be able to meet the new standards, and if it could, prices would soar and quality would plummet. Paint shops were faced with higher handling costs for chemicals, particularly for disposal, in addition to increased retooling and re-education costs. Major assembly plants had been able to reduce their VOC emissions by 60 to 90 percent over the decade preceding the Clean Air Act, thanks to multimillion dollar investments in ever changing technology, but small shops lacked the capital to invest in modern innovations. In 1990, the switch from oil-based to water-based paints began successfully, but painting processes still produced toxic sludge that often ended up in waste dumps. Studies in the early 1990s found that up to 40 percent of sprayed paint was wasted in this manner.

Environmental regulations also made companies legally liable for toxic contamination in waste containment facilities. One of the largest companies in the industry, Earl Scheib, faced two such lawsuits in 1992 for solvents dumped at landfill sites during the 1960s and 1970s. Clean-up costs for these violations reached an estimated $988,000.

Chrysler Corporation began using a method developed by Haden Environmental Corporation of Troy, Michigan, to combat toxic waste produced by auto paint. According to Ward's Auto World, the process recycled the over-spray into a powder, which was then used for under-body paint on Dodge trucks.

Automotive manufacturers introduced water-based paints into their assembly line process with reasonable success in 1982, but these paints required a high-temperature "bake," making them impractical for most aftermarket paint shops. In 1993, Imperial Chemical Industries PLC (ICI) of Britain began preparations to market a new version that eliminated the need for high temperature treatment. The acrylic polymer compound produced an excellent film at 60 degrees Celsius. In England, the new paint commanded a premium of only 5 percent, but in Germany and Italy, it increased the price of a can of paint by as much as 30 percent. Some American paint shop operators estimated that the paint and associated equipment could increase their costs between 10 percent and 40 percent, but their main customers, the insurance companies, were not responding quickly to the suggestion of an increase. According to ICI, tests on the process in Germany and Italy found that no major equipment or retraining investments were necessary. Moreover, the system was expected to improve conditions for painters by making the work environment healthier and cleaner. A water-based paint produces 72 percent less VOC emissions than the industry's standard solvent-borne metallic paints, which contain as much as 85 percent solvent. By some estimates, metallic paint spray accounted for one half of all industrial solvent emissions. Powder coatings emit zero VOCs, and were the fastest growing product in the paint and coatings industry.

Acrylic powders were being used in the late 1990s in primer surface applications. In 1992, General Motors started using an acrylic-based primer and an acrylic trim coating at its Shreveport, Louisiana, plant, and has since started using acrylic based powder primer surfacer at two other plants. Most producers, however, were aiming to develop clearcoats. In the late 1990s, Ferro—one of the world's largest paint suppliers—developed a powder coating that greatly reduced waste and solvent emissions. Their sales grew much faster in North America than in Europe, where powder coatings have been commercialized for a longer period. It was predicted that most primers and clearcoats would eventually be converted to powder, while the color coats were likely to be converted to waterborne coatings, which retain better color consistency and depth than powder.

In addition to reducing their VOC emissions, auto body shops must also recycle and capture refrigerants whenever a car's air conditioning system is repaired or scrapped. Before topping up systems, workers are required to check for leaks. Various pieces of equipment, from leak detection gear to recycling/recovery devices are necessary to complete this process. This equipment, all combined, can cost several thousand dollars.

Image also became an issue for body shops. Shedding the gritty, junkyard image, new shops stressed customer service in clean, friendly environments with easy main-street access. Some firms used central major repair centers to handle the "heavy-hitters," vehicles that needed more than $2,500 in body repairs. This practice kept the "wrecks" out of the public eye, improving the body shop's good-neighbor image.

Industry Leaders

In 1999, the paint and body portion of the industry was dominated by the Starcraft Corporation of Goshen, Indiana. Specializing in aftermarket van conversions, Starcraft posted $53.1 million in sales and employed 555 people. Other industry leaders included Earl Scheib Inc. of Beverly Hills, California, with sales of $50.8 million and 1,600 employees; CSI Holdings Inc., with $40.2 million in sales and 190 employees; 1-Day Paint and Body Centers Inc., with $30 million in sales and 520 employees; and Dealers Truck Equipment Company Inc., with $26.4 million in sales and 120 employees.

Workforce

Traditionally, the industry has used a skilled work force trained by apprenticeship. The federal government's Bureau of Apprenticeship and Training worked through state and territorial agencies to promote cooperative programs with employers.

Even so, the average body shop employee stayed with one employer for only two years. Between 1987 and 1996, the total number of employees in the industry increased from approximately 162,800 to 168,800, although there were fluctuations in the labor force during the nine-year period. Most of that increase was in the labor-intensive body repair and van conversion segments. The paint shop segment showed a 2.3 percent decline between 1982 and 1987, with employment dropping from 18,488 to 15,050. This reflected an ongoing trend toward automation, mechanization, and the consolidation of small shops into larger units. According to the U.S. Census Bureau, 186,000 people worked as paint and coating operators in 1998, in a variety of industries including automotive.

A 1999 survey sponsored by Auto Body Repair News revealed that independent repair shops made up 82 percent of the industry and were staffed by craftsmen who were often the shop owners.

Since the average shop had less than five employees, most workers performed tasks with materials and components used for jobs other than grinding and sanding, body repair, or detailing and painting. They might also work on suspensions and electrical systems, replace glass, or do minor mechanical repairs anywhere on the vehicle. Most workers were paid a flat rate, based on an industry standard for the number of hours required to perform the repair. In 1998, employees had gross payroll wages in excess of $4.7 billion.

Research and Technology

In an Automotive News article, Emil Hassan, vice president of engineering for Nissan Motor Manufacturing Corp. USA, reported, "Paint plant technology has progressed faster in the past 10 years than in the previous 30 years." This technological revolution would inevitably impact the small aftermarket paint and body shop in the late 1990s. Small shops would have to find capital to invest in new materials and costly equipment to remain competitive in the industry.

Clearcoat paints were introduced in the early 1990s. These paints cover color coats, provide a glossy finish, and reduce acid-etching from today's high pollution levels in cities. In 1995, Dupont was working to produce a one-coat clearcoat system to replace the cumbersome and expensive multi-coat process that was widely used in the industry. It used the process of group transfer polymerization to achieve 3 percent to 4 percent higher solids, solvent-based coating, while reducing VOC content and yielding better color. Dupont was the first company to introduce waterborne finishes to a U.S. OEM assembly plant. Powder clearcoats soon became wide spread throughout the industry.

The "green" evolution was also progressing at manufacturer paint facilities in the 1990s. At the Subaru-Isuzu plant in Indiana, managers were pushing for a 95 percent reduction in VOCs, rather than the 72 percent expected elsewhere, by combining the use of water-based paint applied electrostatically along with a paint-solvent after-burner. In 1995, the U.S. Council for Automotive Research, a consortium including Ford, General Motors, and Chrysler, built a $20 million test facility at Ford's Wixom, Michigan, assembly plant to develop standards, materials, and process equipment for powder coatings. The demand and popularity of powder coatings increased rapidly due to their zero-VOC content and durability.

In 1996, the National Paint and Coating Association announced its coatings CARE Program, which was a progressive initiative that enabled companies to follow a common, effective management approach for their health, safety, and environmental programs. Participation was voluntary, but because the program offered expanded resources, improved communications, and opportunities for heightened industry performance in health, safety, and education, the NPCA believed that participation was vital to an organization's future. They believed that the industry, regardless of size, product or specialty, would have to adopt to new technologies and respond quickly to keep pace and satisfy growing consumer demands.

New materials being used by automobile manufacturers also impacted the paint and body shop industry in the 1990s. Automakers, intent on reducing car weight to improve gas mileage, began using more plastic, fiber-glass, and aluminum in place of steel. These materials require specialized paint application processes that must be performed by trained professionals.

Such new technologies as laser wheel-alignment machines, hydraulic frame straighteners, and high-temperature bake ovens were becoming common at many body shops in order to comply with the consumer demand that the repaired car look just as good as it did when it rolled off the manufacturer's assembly line. Auto repair and paint shops were also making use of another new technology — the computer.

Further Reading

Clark, Mark. "Paint Missing Foes 90s." Body Shop Business, May 1996.

D & B Business Rankings 1999, Bethlehem: Dun & Bradstreet, 1999.

Darnay, Arsen J., ed. Service Industries USA, 3rd ed. Farmington Hills, MI: Gale Group, 1995.

Earl Scheib Inc. 1996 Annual Report. Beverly Hills, CA: Earl Scheib Inc., 1996.

Earl Scheib Paint and Body. "Corporate Information." Available from http://earlscheib.com/ .

Fattah, Hassan. "Paints & Coatings." Chemical Week, 10 November 1995.

Green, David. "Using Acrylic Powder Coatings in Automobiles." Paint and Coatings Industry, September 1995.

Phelan, Mark. "Heavy Breathing in the Paint Shop." Automotive Industries, September 1996.

Starcraft. "Press Releases and Financial Information." Goshen, 1999. Available from http://www.starcraftcorp.com/ .

U.S. Census Bureau. "Domestic Trade and Services." Statistical Abstract of the United States: 1999. . Washington, DC: GPO, 1999.

U.S. Department of Commerce. Bureau of the Census. County Business Patterns 1994. Washington: GPO, 1995.

U.S. Department of Commerce. Bureau of the Census. Service Annual Survey 1995. Washington: GPO, 1996.



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