In the Boyd Group Services Inc.’s fourth-quarter report and year-end report for 2021, president and chief executive officer Tim O’Day says in the first half of last year, the company showed “steady improvement” after the pandemic. The Boyd Group Inc. operates Gerber Collision & Glass and Glass America in the U.S., as well as Boyd Autobody & Glass and Assured Automotive in Canada. The automotive industry’s labor shortage and supply chain challenges affected the company in 2021.
“Unlike one year ago, demand for Boyd’s services is continuing to substantially exceed capacity,” O’Day says. “The ability to service demand continues to be constrained by labor availability and parts supply chain issues, with the accompanying margin pressure continuing into the first quarter of 2022.”
“We have successfully negotiated an unprecedented number of meaningful rate increases from clients, demonstrating that insurers understand the need for increased pricing in order for us to serve their needs,” O’Day says. However, in the first quarter of the New Year, “the majority of the benefits of price increases have not been realized” because of increased wage costs to retain labor. The company continues to pursue necessary pricing increases.
Last year, the company opened 127 new locations, a record for the Boyd Group. O’Day says that 101 were acquisitions, 10 were start-ups and 16 were intake centers.
Sales increased in 2021 by $1.9 billion or 19.9% from 2020. Net earnings decreased to $23.5 million or by 46.6% compared to $44.1 million the previous year.
The Boyd Group experienced “increasing supply chain” challenges in the second half of 2021. The company spent $4 million on labor costs to retain talent. Total operating costs increased $129 million for 2021 and “were negatively impacted by the extraordinarily tight labor market,” O’Day says.
In the fourth quarter of 2021, the company’s sales increase of 27.9% was constrained by production challenges and supply chain disruptions. Increased wage costs and a labor shortage negatively impacted the company. Net earnings for the fourth quarter were $4.9 million, O’Day says. In 2020, the company’s net earnings for the fourth quarter were $16.3 million. O’Day says net earnings were offset in the fourth quarter of 2021 by higher operating costs and new location growth. For the 14th year, O’Day says the company increased dividends to shareholders.
Acquisitions and Labor
The Boyd Group introduced a five-year growth strategy in November 2020 with a goal of doubling its business. Last year’s acquisition of 127 new locations is in line with that strategy. “We had a very good year of growth last year,” O’Day says of why acquisitions were made. Some businesses acquired by Boyd Group were affected by the labor shortage and supply chain. “We still believe that there are good growth opportunities,” he says.
O’Day says he is confident in the company’s long-term growth. “We are committed to addressing the labor market challenges [with a training program],” he says. The goal is to double labor to meet future company labor needs and increase talent retention.
“We believe we are competitive,” O’Day says of the labor market. The company’s plan includes expanding field recruitment efforts, applying retention initiatives and continuing a technician development program initiated in 2018. “We’re making slow progress toward [alleviating the shortage of technicians],” he says. The company will continue an “intense focus on the performance of our current network.” “Until we build our labor to the point that we can service this work,” O’Day says the cycle of challenges will continue.
O’Day says compensation levels in the automotive industry must increase, and auto insurance companies must pay more for repairs so that technicians can be compensated more. “We have to attract new labor into the industry,” he says. It’s in the best interests of insurance companies for the insured to be happy with service and repairs, or they will change insurance companies. O’Day says he thinks premiums for insurers will continue to increase.
As the first quarter of 2022 ends, O’Day says the supply chain disruptions continue to leave vehicles sitting at shops waiting for parts. “Thus far in Q1, we have not seen any meaningful improvement,” he says. And aftermarket use of parts is down compared to OE.
During the pandemic, O’Day says Boyd Group “probably saw an acceleration of retirements” among auto glass technicians, but the industry is also experiencing a shortage of administrative staff. The Boyd Group’s long-term solution to the labor shortage is recruiting and providing training for administrative positions and technicians. O’Day says the company’s retention is good, but retention is a vulnerability for the company.