Colnago, I have watched you post this for a while about the...

Colnago, I have watched you post this for a while about the small fixed price work being most profitable & you are actually incorrect.

The reason for AMA entering into fixed price models with insurers in the first place is to gain access to the more lucrative larger work, that is not subject to fixed price models. its the reason why most large AMA rapid sites either have a heavy repair center stationed next to them or in close proximity.

Its basically having to "eat through the crust, to get to the cherries inside the pie" so to speak.

Example 1- A rapid site wanting to turn over $160,000 per week. Needs 100 cars to go out each week, hence needs a 3000sq metre shed - extra rent, needs 20 Panel Beaters, fitters, production staff, estimators, managers etc. Needs 10 painters, buffing & detailing staff. The fixed & wage costs for this site are through the roof & they have to repair more rather than replace to keep costs down, so they require more staff & still skilled staff to repair. 3- 4% profit if that.

Example 2- A heavy site that wants turnover $160,000 per week. Needs 10 - 15 cars averaging between 10 - 20 thousand dollars per job. Needs a 1000sqm shed - less rent. Needs 10 Panel Beaters, fitters, production staff, estimators, managers etc. Needs 5 painters, buffing & detailing staff. Wages & fixed costs are much lower as well as paint spend, more parts are replaced rather than repaired, with AMA buying power & on-sell to insurers at list price producing very large profits. 15 - 20% profit if run poorly.

The Capital Smart acquisition was always been about aligning itself more with Suncorp to gain greater access to the larger repair work through the 25 year supply agreement.

Fixed pricing model repairs compared to those outside the model or we may as well say drive-able compared to non drive is normally at a ratio of 80% Drive-able to 20% non drive. However as you have seen by the model above the monetary breakdown between both in the quoted 7 billion dollar industry is actually a 50 -50 split.

So if the worst thing happens as RU555 says & Repairhub takes all that rapid work, they are actually taking the heavy cost laden non profitable work of AMA's books. Where it has hurt AMA so far is that they are still bound by the fixed price models per contract that they setup prior to Repair hub being formed, while Repair hub takes the low cost value repair out of the equation hence forcing AMA to repair the high cost drive-able vehicles at the same low fixed price. AMA's only challenge is renegotiating these contracts to get out of the fixed price model or change the way it is calculated to factor in the loss of the cheapest work. IAG will still use AMA, but it will be for the high profit hi impact work, which will give IAG the result it wanted when forming Repair hub of limiting AMA's influence on the smash repair industry as far as holding all the cards over IAG goes.

The Mum & Dad repair shops you both talk about will actually be worse off, because now you will have IAG controlling the low cost work & AMA diverting all its resources into repairing high cost repairs, which will include equipment to deal with the new ADAS reliant vehicles, which will put these repairs even further out of the reach of those family businesses.