STATE FARM'S NEW O & A - BIG CHANGES

September 20, 2005

Boiled down, if you were once an urban shop and located an office in a rural Zone to get paid more for those jobs you do in your urban area, those days are over. State Farm announced that beginning October 19th, jobs will be priced based on where the job is done, not where your shop is located.

But, if you have always been a rural shop and the people in your community commute to town (a Zone I) for their employment and you often drive to town so you can do the job for them during normal business hours, you had better study the new O & A offer very carefully because, as we calculate it, you will loose $133 per job.

If you go from a Zone III, which is NAGS plus 42% and $120 for labor, to Zone I which is NAGS minus 10% and $100 labor, that's going from a national weighted average of $449 to $316!

The good news, is that urban shops will feel that some of their urban competitors who "played the system" no longer have an unfair pricing advantage. Also, they will also have fewer rural shops driving into their market and getting paid more than you would for the same job. The bad news is the credible rumor that any shops in a Zone II or III which do any jobs in a Zone I will automatically default all invoices to Zone I rates, which will hurt all large shops which service most of their state.

We spoke with Bob Bischoff, national glass manager for State Farm, and there are some gray areas in this announcement. For example, if your shop is in a Zone I and you have a customer who drives out to a job site in a Zone III and needs to have the work done at the job site, will you get paid based on Zone III rates? Not necessarily. It depends upon how all the surrounding shops have answered the METRYX questionnaire.

If there are only 1 or 2 shops located in a Zone III near that job site, you would get paid at Zone III rates. However, if there are 8 shops in a nearby Zone II, all of which service that area, you might get paid Zone II rates. State Farm will pay whatever the competitive price is for that zone.

In other words, shops located in Zones I which fill out the METRYX questionnaire and say they service the Zones II & III which border them, will likely pull down prices in those Zones.