Is NAGS Going Ahead with the Rebalancing? Yes

The past week could not have been an easy one for NAGS. Questions have been continually raised as to whether or not the industry is ready for the rebalancing scheduled for February 28, and whether chaos is going to ensue for the industry.

For the first time, an insurance company has said that it will not implement changes by the company. PPG Auto Glass has said that it will not implement the rebalanced list pricing as the basis for its customer pricing. Autostock Distribution has elected to postpone its movement to the rebalanced schedule.

In a telephone interview this afternoon, Jesse Herrera, NAGS general manager, said that the company is still going ahead with the rebalancing February 28. "Our publication has been in the market since November, it would be impossible to withdraw or delay the February 28th effective date. We believe that a major change at this late stage would cause significant disruption in the industry."

According to Herrera, "The February 28th carrier O&As that are now public appear to be revenue neutral with existing O&As on a weighted average basis, so it seems that retailers will continue to get the same amount for the average job that they have in the past."

He said that the decision by PPG not to use the rebalanced figures would have minimal impact. "Based on the letter from PPG's distribution unit indicating that it will continue to honor its current wholesale pricing agreements, it looks as though retailers will continue buying glass at their current price levels. So, if revenues and costs have stayed roughly the same, then not much has changed. Except for the fact that nearly all of the new O&As we've observed have moved to an variable labor model. I think the fact that the new agreements recognize that the amount of labor required from job to job varies is a much better model for both buyers and sellers."

In response to a question about the Commerce Insurance Co. decision not to implement the rebalancing at this time, Herrera answered, "I am not sure how that will work for the trading partners that have already made the necessary systems and process changes. I think it could create some problems since they seem to be the exception."

Commenting on another concern that has been raised-about the point-of-sale software being up to the task with all the parties not using the same information-he said, "We have been communicating the upcoming change to POS providers for 18 months. The POS providers that I've spoken have been preparing their products accordingly."

Is NAGS relevant to the market? A number of respondents to GlassBytes chat lines say no. "I disagree," said Herrera, "I think the number of people in the industry who use our information on a daily basis suggests otherwise."

However, he says that he does understand where some of this is coming from. "I do think that some of the value of the NAGS Benchmark has eroded somewhat. The rebalancing is an important step toward improving the value of our products. I also think the use of the NAGS benchmark in wholesale pricing has become less useful as manufacturers and distributors have gravitated toward 'net pricing' agreements."

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