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This podcast is dedicated to changing the automotive industry for the better, one conversation at a time.
Whether you're a technician, vendor, business owner, or car enthusiast, we hope to inspire you to improve for your customers, your careers, your businesses, and your families.
David Roman [00:00:00]:
Look up one day and they're all gone. So, Brian, meet David. David, meet Brian. Brian, introduce yourself.
Brian Herron [00:00:10]:
Hi, I'm Brian Heron. I'm the CEO of Opus IV's. Opus IV's is a company that makes diagnostic tools and offers remote services for technicians. We came about from a number of acquisitions of other companies. Before Opus IV's, I was with Drew technologies. I think we're most known for the Cardac product. And I was with Drew Tech from 2006 to 2015 when we became Opus, basically.
David Roman [00:00:39]:
So we kind of met at Eti Tooltech. That's the first place that you and I met. And, you know, my first kind of knowledge of you was with Kevin years ago. And, you know, here's the thing. I guess my big question is, how did you get into the automotive space? Because you kind of came in by storm, you know, and obviously I know Drew tech, but what led you to get involved in the automotive space as a whole?
Brian Herron [00:01:07]:
I've always been kind of quietly working in the background. And so even though I've been in the industry for almost 20 years, a lot of people don't know me because I'm usually not in front of people and, you know, in big speaking events and things, I'm more just kind of grinding and focusing on what we're trying to do. So I came out of a company called SCT in the early two thousands, which hacked cars for performance and racing. And I came out of performance racing industry and really enjoyed that space. But I could look ahead and see where car technology was going and thought, I think diagnostics is the place where it's going to happen. Car technology is always advancing. You can never stop that. But back in the two thousands, families had one brand of car, two brands of car that they typically bought.
Brian Herron [00:02:02]:
And, you know, now, fast forward today, and there's just, like, every family has every different kind of car, whether it's a Tesla, a Porsche, a Volkswagen, or a GM. So, you know, in 2006, I got into diagnostics with Drew Tech, and it was a really small company at the time. Yeah, for sure, three or four people. And Drew tech was working on the J 25 34 standard and working with oems. And when I joined the company, I said, hey, let's take this to repair technicians. Let's take this OEM diagnostic and reprogramming technology, and let's go try to get it into professional technicians. So we worked with partners like Snap on and Bosch, who sold our tools. And then we just started to build a brand.
Brian Herron [00:02:46]:
And it took ten years of advertising on P ten and going on to technician communities and going to things like Kansas City vision at the same time. We were trying to do that, really, the industry was changing around us to allow oe diagnostics through the J 2534 interface. And the need for it was growing, too, because cars were getting more complicated. You were having more reprogramming events. So everything just kind of came together. But you look back and you say, wow, the car deck. Everybody knows that now, but not at the time. It seemed like it took forever, right, to repair also helped as well, because we were having challenges with car companies who they had j 25 34 subscriptions, but you can only buy a year at a time, and a lot of people can't buy a year of a brand of car to fix one car.
Brian Herron [00:03:45]:
And maybe they don't see that brand every day. So ride to repair was really helpful in getting daily, monthly, yearly subscriptions and starting to identify some of the issues and gaps of coverage and stuff.
David Roman [00:03:57]:
Well, you know, it's really interesting you say that, because I remember when the Kardak came onto the scene, right? And like, I remember it started and people looked at it in the magazine and thought, meh, I don't know about that. And then slowly but surely, it gained popularity, right? And it got more and more popular among technicians. And then all of a sudden it became, this is the go to. This is what you need. You need to buy this. This is what you have to have. And so much of that, I think, from, from my perspective, because I started in the, the performance world, too, right? And so when you say SCT, I'm thinking like the x three and the livewire and all the stuff for the diesel trucks, right? And so for me, it's very interesting because we've talked on the show a number of times about the hype, right, and how the hype can make or break a brand. And like so much of what your brands do is dependent on what the consumer or what the user of the product is willing to say about it on the Internet today.
David Roman [00:04:54]:
And so I watched kind of the car deck rise to fame, if you will, as it, as it started out. And it was just in the magazine and then everybody was recommending it six months, a year later. So it was pretty neat to watch that from the outside looking in, you know, when you talk about right to repair, because we're really involved with the Autocare association, we're really involved with ETI and tool tech and the whole thing. You're really involved with ETI. You're on the board right. And so when you look at that from your perspective as somebody who's producing these tools and gaining this access, as well as somebody who's on that board, somebody that's involved with Seema, somebody that's involved with auto care association, you know, there's a lot of talk about right to repair, but there's a lot of technicians and a lot of shops that look at it and say, I don't know that that really affects me. What, what are your thoughts on that from, from the outside looking in? As far as shops go, as far as technicians go, do you think it's going to affect them in the long run? Run?
Brian Herron [00:05:55]:
I always felt like it was important. And when ride to repair first came around and gosh, it was probably 2000, 920, ten. When we first got involved, it was interesting that some industry associations were in support of it and some were not supporting it. And I could never understand why wouldn't you support right to repair? And I thought, well, maybe it's in the details, like maybe I'm going to read this thing and it's going to not make sense. I read it and I thought it's about access to diagnostics for everybody. And you could sort of universally apply right to repair to any industry and say, look, I just need access to my iPhone screen diagnostic tool or, you know, whatever it is, and automotive. You know, we were in an interesting place because we were starting to get to where you needed oe tools to do certain things. And there was a reprogramming mandate from the EPA.
Brian Herron [00:06:57]:
So we didn't need right to repair for reprogramming, but we needed it for diagnostics. And, you know, it just, without it, you just potentially don't have access to things that you need. So we were a big advocate from the beginning, and there's always like, this is what it says and this is what it means. And the translation of the right to repair laws into practice is something that took another decade after it was, you know, passed and was passed in Massachusetts. And I think the MoU was 2014. Well, it's 2024 now, right? So it's now been ten years since ride to repair started. It's not perfect. What does it mean for a technician? And I think one way to relate this to something really relevant is the collision industry.
Brian Herron [00:07:46]:
In the collision industry, I'm sure you're familiar with pre scan and post scan, where a car comes in after a collision and they scan it to see what codes it has. It helps them to understand how to write the estimate. And then when it's all done. They post scan it to say that it's now fixed correctly. Well, the oems who originally weren't huge, you know, hugely in favor of right to repair, which you can't blame an OEM because they don't really don't like regulations. They'd rather kind of take care of it on their own. And the oems have adapted to a lot of industry need without regulation, but sometimes it is required. So they weren't in favor of the regulation.
Brian Herron [00:08:25]:
But then when collision came around, something interesting happened. They issued positions to repairers that said, for this car to be safe, you must scan it using our software, an OE post scan. But you couldn't actually have an OE post scan without right to repair and access to OE diagnostic software to the whole world. And so that was kind of a great statement that the oems have actually kind of come around to elements of this. And now every car that's in a collision is supposed to be scanned with the OEM software. And the value to the shop is to make sure that the car is fixed correctly, because they don't want to send a car home and have it come back. And the check engine light or the lane departure warning comes on 50 miles later, the customer is mad at them. They have to rework that job.
Brian Herron [00:09:20]:
There's lost profits, benefits in that case by having that accessibility. And the consumer actually benefits, too. Right to repair was sold as, hey, it's competition and right of choice. But in this collision instance, it's actually your vehicle is sent home safely instead of sent home without systems not working. And in North America, not every dealership has a collision bay. In fact, most of the collision repairs are happening outside of dealerships. So ride to repair was really a great example of why OE service information and OE tools need to be available to everybody.
David Roman [00:10:00]:
I agree. And, you know, one of the big things for me, or one of the things that made me really think about this or dig into the thought process here is the majority. And until you become involved with ETI, you don't see that the majority of manufacturers really are working to make the independent repair space better. Right? Because they recognize, hey, it's our logo on the front of that car, we're still responsible for it. And it affects the consumer buying patterns if they can't get their car fixed. The majority of the manufacturers are at the table saying, hey, let's work together to make this better for everybody. There's a few who are not. And so one of the things that I've always been worried about is the right to repair and an aggressive act of enforcement with right to repair.
David Roman [00:10:43]:
Does that negatively impact us with those manufacturers that are coming to the table willing to play ball? I mean, you look at Toyota, right? They're fantastic. And they're saying, hey, look, we're releasing a new diagnostic software. We want the independents to have a chance to look at it and give their input. We want the dealers to have their input. But then you look at some other brands, and I'm not going to say any names because I don't have to, but you look at some of these tools and it's like, holy crap, what am I supposed to do with $40,000 worth of tools for a car that I'm going to work on three times, right? And the subscription costs that are outlandish, man, they're just insane. And so I understand we have to have right to repair to make sure that there's more of an equal playing field. But are we at risk for damaging the relationships that we already have by pushing so hard to bring some in alignment? What do you think about that?
Brian Herron [00:11:33]:
You know, Toyota is a great example of one of the oems who has always been on the side of the repair shop and the consumer, and I think it's really a part of their just company culture is, hey, we want our customers to have a good experience anywhere that they have their car service. So they are loyal customers. And back in my drew tech days, we started working with Toyota well before ride to repair. In fact, Toyota released a version of their j 2534 software on Mongoose in 2008. It was called Techstream Lite that predated ride to repair entirely. I think when ride to repair came around, they looked at Toyota and there were a few other oems doing that as well, and saying, that's a pretty good model. And like anything where you have a regulation and it benefits everybody, which right to repair did. It's not necessary for everybody.
Brian Herron [00:12:27]:
It's necessary for those who maybe have some reason why they don't want to do it. You know, there's politics inside of every automaker. And many automakers in the two thousands suffered from this internal battle of do we want the dealership to do the work, or do we want anybody to do the work? I think a lot of car companies have moved past that, but some still seem to struggle with the idea that the only qualified place to have a car repaired is at the franchise dealership. And I think also that kind of stems from their desire to sell parts through those channels where in the aftermarket parts are in competition with aftermarket parts and remand parts and things.
David Roman [00:13:08]:
I don't know. I've got to say this because you bring it up, I am seeing a massive shift in OE parts, that they are substantially more competitive now, especially in a time when we're seeing, and I don't know that you hear this much of this, but aftermarket parts right now, it's bad. I mean, it is to the point that every single day you're hearing shops say, I just, I can't use aftermarket parts, I have to go oes or I have to go OE, because aftermarket parts, there is a very, very clear quality problem right now. And if you don't shop your parts and know what you're buying. And so I think that the OE is becoming more competitive in this part space than they ever have before. And it feels like it's by design. And now, that being said, I've seen some quality issues in some of the OE parts even. But it's nothing like it is in the aftermarket world, right? I mean, the aftermarket part world's falling.
Brian Herron [00:14:03]:
Apart, you know, the competition. And, like, I think you can go on Amazon and buy GM AC Delco parts now with prime, and it's probably a GM dealership who, who's offering them, but it's pretty good pricing. And like, I just bought a starter for a 2018 Cadillac XT five and the AC Delco price was $136 and the aftermarket price was $140. And it's kind of a no brainer, right, if you're going to go OE new versus aftermarket Reman. And the oems have pretty strong presence. Other parts are obviously OE means OE, but then when you get into older model vehicles, that's where it becomes a bit more challenging. The OE parts requirements are only for so many years that they have to carry in stock. And then sometimes Oe parts that are more than ten or 15 year old model year cars are actually remand parts that are rebranded back as OE.
Brian Herron [00:15:01]:
And so you would see, and I won't say any particular brands, but you would see a certain OE brand of part that actually is an aftermarket remand part that's been relabeled by the OE to go back. Parts are always a challenge, man. It stinks when you put a part on a car and it doesn't work and you've got to pull it back off, especially when it's a programmable part, for sure, because the programmable part space is really changing. In the last five years. In the next five years, everything is coded now. And aftermarket parts are pretty tough to get for coated parts, headlights and things like that.
David Roman [00:15:38]:
Right. To repair. When we think about the part aspect of it, it. Right. 15 years ago, it didn't seem like that big of a deal. Right? But now, when you're talking about a center stack in an automobile, that's a $7,000 part, and we need to at least be able to access it before we make a call on it instead of sending it back to the dealer. And I. Look, I'm not speaking poorly of dealer tax, but the pay systems within the dealer environment and some of the cultures in some dealerships, this is not a manufacturer issue.
David Roman [00:16:09]:
This is a dealership management issue. The pay structures and the cultures within those organizations lead to part swapping, and a lot of it is, hey, I have this part sitting here. I'm going to plug it in and see if it works or just sell it to them. And if that doesn't work, we'll try something else because they're not really fairly paid for doing the testing that it would take to find that. And so we're seeing a lot of those automobiles in our shops, and when you're talking about such a large investment, not having the access to the data, not having the access to the tool, to be able to communicate with that component clearly and in a proper way. And I. You know, one of the things I found really interesting in some of the discussions with the OES is there was almost this. This air about them that they thought that repair shops were trying to hack stuff together.
David Roman [00:16:59]:
And I'm sure there are some that are trying to do that, but. But it was a wake up call to them in these conversations that there are shops out here who are trying to do this by the books, who are trying to test this properly, who have more trained technicians than what the dealership does, who have more capabilities. Right. And I think that when we move into this space where we have such advanced technology, we can be an asset to the manufacturer. I don't think this is necessarily a bad thing for the manufacturers. What do you think?
Brian Herron [00:17:28]:
Yeah, I think that having access to the best diagnostic tool and service information is really important to fix the car. Right. And I've heard the sentiment that you've said where oems might think the shops are sort of trying to hack things together, and I don't really see that very much you know, you see shops that are trying to diagnose and avoid part swapping. And there's a lot of great non OE tools out in the market, but there's always a point where having the oe tool becomes critical. And I'll give an example. So at my house, we always have a project car or two. And my son bought this Cadillac X T five that we ordered a starter for. It was actually struck by lightning.
Brian Herron [00:18:14]:
He bought it as a project car.
David Roman [00:18:16]:
Oh, my.
Brian Herron [00:18:17]:
Can you imagine? It's a 2018 car diagnosing a lightning strike vehicle without the OE schematics, without the OE wire. When the light hit this vehicle, it actually caused the immobilizer to go out of sync between the BCM and ECM. So we needed to have techline connect and gds to be able to do the programming and the coding of all these parts. And, you know, you can't swap every electronic module on a car, so you have to have the GMbus tool and see what's coming online. And at the same time, I also use the Opus tool on the same car because it's a multi tiered approach to how you diagnose. But I think the days of part swapping, they really will come to an end soon because you can't economically justify part swapping coded parts anymore, for sure. And if everything is coded and programmed now, you're going to put in a much more expensive part, you're going to program it, and then you're going to realize that it didn't solve the problem. I just don't see how that can go on forever.
David Roman [00:19:19]:
Yeah. The consumer won't tolerate it. The, I mean, plain and simple. And, and in some ways, the consumer won't tolerate it. Right now, the consumer won't tolerate what's happening in many of these repair shops. Now. They. Look, I'm upset.
David Roman [00:19:32]:
Some people straight up piss some people off here, but they've, they've used sales techniques and they've used a slick talking advisor on the front counter to cover it up.
Brian Herron [00:19:40]:
Right.
David Roman [00:19:40]:
And they've, they've told the client the thing that sounded good and what they wanted to hear. But, but all of a sudden, when you throw a $6,000 part at a cardinal because their h vac doesn't work and nothing else works, and you say, oh, I bet it's this. And you buy that $6,000 part and you put it in there and you say, oh, well, it turns out we, we need to do some additional testing. And it's also this over here. That was still bad though. I. I don't know that you're going to get a consumer to buy for very long. I mean, David's pretty slick talking, maybe, I don't know.
Brian Herron [00:20:12]:
Well, that's a tough job for the mechanical industry. You know, the collision industry serves the vehicle owner, but it's paid by an insurance company. And so the path for how you repair a collision vehicle is really you're blueprinting towards what needs to happen in a mechanical environment. You have so many challenges. First you have to sell the consumer on fixing their car because they may not want to fix it. They may want to just drive it broken and take it, you know, out the door. If there's not a state inspection requirement to fix it, first they have to be willing to fix it. And then you have to come up with a number on what it's going to be to fix it.
Brian Herron [00:20:51]:
And then that's based on your assumption that it's this part I need, this diagnostic software, it's a subscription. You've built this plan that can change, you know, and especially if you're, you're part swapping and you haven't really reached a full diagnostic, you know, procedure, then yeah, you gotta call them back and say, hey, I know that I said it was gonna be an alternator, but it's actually an ECM or something else. And man, that's a tough job. Yeah, I can't imagine having to make that phone call and you would think that that probably builds, you know, more just willingness to go down the right path. But we see it a lot and I don't wanna paint any technicians in a bad light because there's a lot of technicians who are learning and there's also a lot of brands of vehicles they have to deal with so they don't have an easy job to begin with.
David Roman [00:21:44]:
Right.
Brian Herron [00:21:45]:
It's even harder when you involve the consumer and they say, yeah, I don't want it, never mind, you know, you've gone down this path and yeah, it's a tough job for sure.
David Roman [00:21:54]:
Well, and I think that we've set ourselves up for failure in a lot of ways because what we might come up with on one of these complex automobiles is that, hey, my shop pays 1 hour for Diag or they pay 0.5 for Diag and it doesn't matter what it is. So they throw me into a comms fault and I find that it's a broken wire. And it took me 3 hours to find this broken wire. And, you know, a harness with 250 wires in it. And now they expect they're going to write an estimate for $50 to fix this wire. And so where do I get mine back? Right? And they expect the car to be fixed, so what do they do? They start just throwing things at it. And I think it's caused them to be very creative in a lot of ways. And so a lot of this, in my opinion, goes back to the systems and constructs we've built within the industry that tolerate that behavior.
David Roman [00:22:48]:
And it starts with pay systems, right? Because they. I don't want to say it's all about money to people, but in the same respect, if you ask somebody to do something enough times and you tell them, hey, I'm not going to pay you for that, sooner or later they're going to find a way around it. Sooner or later they're going to say, because value has to go both ways. It can't just be I'm providing value to the client. You have to provide value to your staff, too. And if they're unwilling to do that.
Brian Herron [00:23:14]:
Yeah, I'm curious. Like, you're talking, like, how do you feel about flat rate pay?
David Roman [00:23:18]:
Yeah. Oh, man. Look, it needs to burn. And, you know where, like, I upset a lot of people. And I'm going to tell you something, because when we moved into ten bays, right, we were in three bays. And the thought of flat rate never crossed my mind. But the, the effort it takes to manage ten bays and to keep five or six technicians moving at all times, the amount of work it takes, the amount of financial skill it takes to manage the money and the stress and everything that comes along with it. I get it.
David Roman [00:23:47]:
It makes sense to me why they paid flat rate. Because it's easier to manage, it's easier to handle that. But. But then you have to build the system on the other side. Okay, well, we have to charge for testing. How much time does he need for testing? And so now you've got an advisor who's paid commission who doesn't want to have a low CSI score from calling back to ask for an extra hour or extra .5 or whatever it is. And so the systems are built up against one another and. And you find yourself in a situation where nobody's willing to make the call.
David Roman [00:24:17]:
And. And that's why I do the hourly hybrid pay plan, because I feel like I want them to have some type of reward. Now, look, I'm going to say something that's super unpopular. You can have people that are too comfortable, and I have clearly found myself in that situation more than once, where I pay them enough that all of a sudden they're not producing. Because you know what? That's stressful, and that's hard. And I make just as much money whether I do or whether I don't. So I can survive on what I get. I don't really have to try that hard, and I have found myself in that situation before.
David Roman [00:24:50]:
I'm not gonna say I'm there now, but I have definitely found myself there before. So I get why people use flat rate for sure. David, what about you?
David Roman [00:25:00]:
No, I don't use flat rate. It's terrible. I don't use a bonus garbage either.
David Roman [00:25:05]:
That's just why your shop hours a week?
David Roman [00:25:08]:
25. 25. That's all we have to do? Yeah. Hey, you have to figure out what's profitable. That doesn't make any, like, you figure out what's profitable and then get to that number. However you have to just get to that number. The rest is whatever. Then the rest is just, like, chasing after boats.
David Roman [00:25:26]:
I just need a boat. Like, now you have a boat. I want a second house. Now I have a second house. I want a bigger boat. Like, when does this stop? You just keep chasing more and more. What's the point? How has consolidation affected you, Brian? The company, is it moving into opus been beneficial to drew tech overall? How do you see consolidation overall in the industry? Because that seems to be, this last year, a big strand. Huge, big vendors and smaller vendors just consolidating into now this giant conglomerate that owns 17 different brands.
David Roman [00:26:04]:
You know, from a. From a consumer standpoint, I'm a customer of two or three of these brands now. They're under one company. Everybody tells you it's great thing. They're like, oh, it's gonna be wonderful. We're gonna have more resources. I don't know. That still has to be seen.
David Roman [00:26:20]:
Whether that's gonna play out to benefit the consumer or not, I don't know. I don't know that. I think I was aware of Drew tech after you guys became part of Opus, where maybe it was too small before or too niche, or there just wasn't enough marketing dollars behind it for me, the average shop owner, to be aware of it, but I can see the benefits. But how has it affected you guys?
Brian Herron [00:26:55]:
It's been a fun journey. Drew tech, when I joined there, it was really small. And when we were acquired by Opus, we were still relatively small. I think we were less than 40 people at that point. What Drew tech did before the Opus acquisition versus after, we pretty much did the same things, but we did more of them. We still made cardac and mongoose and new j 2534 devices under the new Opus umbrella. We had the ability to grow. And the first thing we did when we were part of Opus is we said, look, we'd really like to help people do reprogramming.
Brian Herron [00:27:39]:
We make these tools and we go to these events and we do training, and it's just not catching on fast enough. There's a lot of people who just don't want to download the subscriptions and follow right to repair and do it themselves. The first product we did together under Opus was called Wrap, which was remote programming. And it was tough. It took us four years to really get that off the ground. It took a lot of money and a lot of people and a lot of mistakes, frankly, is whenever you launch something new, you try things and they don't work, and you try other things and they don't work. And I can safely say we never would have done that as drew tech, because we just didn't have the resources to take that big of a risk and go launch rap. And, you know, today there's more than 10,000 users of wrap and transmission shops and everybody.
Brian Herron [00:28:28]:
And I feel like it solved a problem in the market. You know, also under Opus, we had the desire to put together a remote services team and a better diagnostic tool. Drew was always OE, and we said, look, we'd like to have some multi branded, you know, tool and a part of it. And I spent ten years trying to convince all these different diagnostic companies to build the j 25 34 version of their software so it could just run through Cardac. Well, nobody ever took me up on it. So when Opus came together, I had the opportunity to go acquire a couple diagnostic companies, autologic and auto ingenuity. And they were great products. But the first requirement under the acquisition is make your software chip 25 34.
Brian Herron [00:29:12]:
So now we can have an aftermarket diagnostic tool running through the same VCI that the OE software does. So we were able to accomplish a lot. And I would never look back and say, as an owner of Drew and one of the early entries, I regretted the Opus acquisition, because I think from an industry perspective and what we were able to advance, it scaled way better than we ever could have. It's not like we wouldn't have gotten to some of these places, but we never would have acquired a diagnostic company. We probably would have launched rap and probably never reached the level that we're at now. But to be fair, we've had great ownership, and they've allowed us to lose money and take risks and do things that are not your typical consolidation. A lot of consolidators of companies say, look, I'm going to put these two things together and I'm going to maximize the profits of. That was not our mission.
Brian Herron [00:30:10]:
We wanted to put these things together and build something that was different. And obviously the upside is high if we can get there, but the risk is high. It was really great. We're still in it and we're still growing. So that's been my journey and a lot of adventures along the way of mistakes made and cool things that have worked out. When I look at the industry and I see a lot of the consolidation that's happening, I see in collision, I see benefits to individual shop owners who've owned the shop for 2030 years and they're looking for an exit. And this is not a bad opportunity for them to take it. For technicians who want to have a career path of growing up into a larger, larger brand, a larger opportunity, and also increase leverage to talk with insurers and oems about parts pricing or reimbursement.
Brian Herron [00:31:09]:
So there's definitely benefits from it. There's also downsides too. If you're trying to be an individual store operator and that's your goal, and now you've got all these giants around you and you don't always benefit from them if you don't go with the flow and the mechanical side, there's not as much consolidation right now of shops, because I think you go back to that customer conversation, which is very difficult to have when you want to sell things. It's slowed down consolidation and mechanical industry of shops, but mechanical suppliers, they're consolidating. Does it benefit all of us to have less parts suppliers? I'm not sure. Right. I think that you get too few parts suppliers and too few competition, and that could be a hindrance to the industry that could slow down innovation. So I think it cuts both ways.
Brian Herron [00:31:59]:
I don't want to say I'm overly optimistic or pessimistic about it. I think when it's done right, it can be amazing. And when it's just done for consolidating profits and cutting costs, I'm not sure we really get value as an industry from that kind of activity, for sure.
David Roman [00:32:16]:
I can tell you absolutely without a doubt, the reason why there isn't a lot of content consolidation in the mechanical side is because there are so many terrible operators. They are making money because they are in a cheap situation. They have cheap labor, cheap overhead, and they are barely making any money. And somebody that wants to buy that particular space, the real estate has to be absolutely killer for them to want to invest in that, because the operation itself is worthless. It's absolutely, completely 100% worthless. And they don't. The operator doesn't realize that. The owner doesn't realize.
David Roman [00:32:54]:
They think, hey, I've been here for 25 years and I've been able to make this quote unquote successful. The problem is you're doing $600,000 a year. You've got maybe two employees. You do most of the work barely above the water. You're tread water, and you're making maybe, I don't know, 50, 60, $70,000 a year. And I. The only reason why you're making that any kind of money is because you paid the building off five or ten years ago, and it was only because you bought it when the building was worth $100,000. But now that real estate might be worth a million, maybe, and that's the only reason why anybody wants to come talk to you.
David Roman [00:33:26]:
But if the. The space isn't worth a million, potentially a million, nobody wants to do anything with you. And there's no. There's no reason why anybody would want to come buy you up where collision, I think collision was so, was so tight with the insurance companies dictating the process, they didn't have a choice. Like, we have to do it this way, otherwise we're not going to make any money because the people paying the bill have dictated the way I have to do it. You don't see that in the mechanical side?
David Roman [00:33:57]:
Well, in the mechanical side, what we're seeing, it's the same thing as my friend Derek. Right. And David, you remember the story I told about the shop where the guy said, I want a million dollars for it, and the building's just not like, hey, all you have is the property, right? That's all you have that has any value to it. Well, my friend buys it, right? And so really great guy, fantastic technician. And that's what keeps happening, is a technician sees an opportunity. I want to work for myself. I want to buy a shop. And they go out and they buy this shop.
David Roman [00:34:23]:
Well, it turns out he was charging $45 an hour and he wasn't marking parts up. So now he comes in and he tries to start running it like an actual business. And all the clients leave. And so it's like starting a business from scratch all over again. And that's what's happening to a lot of these mechanical shops. And. And so I don't think that there's a space and we're seeing more consolidation than we had been, but there's not a big consolidator coming in and scooping them up. I mean, collisions being scooped up left and right.
David Roman [00:34:51]:
I mean, it's not even slowed down a touch. And they're just shop after shop after shop.
David Roman [00:34:55]:
I dumping the mechanical side.
David Roman [00:34:57]:
Yeah, we have a lot of operators.
David Roman [00:34:59]:
Around here that they. They were collision plus mechanical. They dumped the mechanical side entirely. Oh, we don't. We don't work, and they won't honor any of the repairs. That's great. Customer had a repair done a year ago. They've been bought out, and they just say, hey, sorry, you're screwed.
David Roman [00:35:15]:
Don't do that now.
David Roman [00:35:16]:
Yeah, we don't do that anymore. What do you do? Wrap was. Was interesting. The I bought my first day box, like, 2017, and it's because I wanted to keep everything in house. And I remember talking to my tool guy and he said, nobody is buying this thing. Nobody is buying this thing. And I couldn't understand why. I'm like, hey, I'm installing parts that require programming.
David Roman [00:35:40]:
I don't want to send it off to the dealer because either I have to tow it and then I have to coordinate, and then who knows when they're even going to touch it, and they're always behind, and then it delays the repair for several days. Why wouldn't I want to do this in house? And I've got this great tool, and it does 90% of what I needed to do. This is fantastic. Rap comes around, and it took a little bit of time to take off, but I cannot believe how many shops were refusing to accept the need for programming. It was wild. And rap. Rap seems to have masked the actual underlying problem, which is just overall ignorance from the shop owner side, not understanding that they need. They need this.
David Roman [00:36:29]:
Hey, you need this in your shop. You don't realize it, but you do. And I don't know how many repairs you're not able to do or ignoring or not being able to diagnose because you can't do XYZ, and it's because you don't have this thing. How were you guys able to finally, like, cross over or cross that threshold that said, well, now we're actually making rap viable? And do you think maybe those efforts should have gone into just selling the device to begin with?
Brian Herron [00:37:01]:
I think one of my lessons is, anything that's going to be sustainable takes a decade. Card act took a decade rap is not quite a decade. We've got another year and a half to go. When we launched it, we actually launched it with AcDelco, and it was an OEM supported effort. We were selling it through GM wholesale, and it was specifically targeted towards the techem module in the six l 80 trans because the tech modules were failing and they could sell a new Tekken module, but it had to be programmed. And so the whole trans industry was the first target. And like anything, it just took years to educate on the need. You know, I'm not a fan of buying Reman electronics that are pre programmed because they got the wrong vent in them.
Brian Herron [00:37:56]:
You know, there's adaptive things that have to be reset. It's just not the right way to fix a car, in my opinion. So we went down this journey with GM and wholesale, and so we launched it, and it was really for GM transmissions. Plus we had Ford and Chrysler. Chrysler. But to really catch on wholesale, we needed, like, everything. Because, you know, your typical shop owner is promised all these things. Like, again, like, you have to be a skeptic.
Brian Herron [00:38:22]:
If you're in a repair shop and the tool guy walks in or you read it back, everything does everything perfectly. Everybody says it, and it's never really the case, right? Nothing is perfect. And so our. Our challenge was first to get this product out and to get a supporting things. But then we had to educate on, like, this is what we can do and this is what we can't do. And that education doesn't really help you sell tools because they're like, oh, wait, you're telling me you can't do something? What else can't you do? And then over time, we build up the coverage, you know, now we can do pretty much anything you could do with a j box, and. But it's just taken us eight, nine years to do. So now we're getting momentum, and then, you know, a shop sees another shop using it.
Brian Herron [00:39:06]:
I think there's a lot of trust amongst peers at mechanical shops. Call my friend and find out what they're using versus buying off of a magazine ad or at a trade show. And I don't blame them because of all of the promises that are out there, but it just takes an incredibly long time, even if you have a good idea and it's well implemented for it to really get off the ground.
David Roman [00:39:30]:
I think one of the interesting things that's come of that here recently, and I'd love to get your take on it, is the situation with the Nissan transmissions. And there's there's been a lot of talk as far as wrap goes, as far as installation in shop and how to handle that and being able to obtain a warranty, because a lot of shops have been installing these. These Nissan transmissions. We even talked to somebody maybe two weeks ago that installed one, towed it to the dealer to have it programmed, and Nissan denied the warranty and said, no, it wasn't programmed correctly. And so I see that there's a new TSB that's out. Do you have any insight on that? For them that are programming these transmissions, how do you make sure that there's that proper level of documentation to ensure they're covered when it comes to something like that?
Brian Herron [00:40:17]:
We work with these every single day, and, you know, we work with. Sometimes programming doesn't work, right? I mean, like, if 99% of reprogramming is successful and 1% fails, that means every single day in our call center, we've got a handful of failed events, and we deal with those through recovery. Sometimes we work with dealerships. We guarantee our programming. So we've always stood behind it, and we've had engagement with dealers and with Nissan. We use Nissan software under a license, and we create documentation for every single programming event we do. So there's never been a question, once it reaches the high enough level of communication, like, look, let us show you. We're using your software.
Brian Herron [00:41:01]:
Here's what was done. The Cardac is a validated Nissan VCI. In fact, drew tech made oe tools for Nissan in Japan. I was part of that project in 2012. We were working with Japan. So we have deep relationships, but it doesn't stop somebody at a dealership or at a regional level saying, hey, I'm not going to pay for this. And we just get the right people involved. We educate, and it's like anything else.
Brian Herron [00:41:26]:
Once you run it to ground, it's not an issue. But it just took some time to get there.
David Roman [00:41:31]:
And I think that's one of the key benefits of having an organization like that behind it, is that it knows who to call, right? Because I've gained connections over the years to where I can call somebody and ask for help for something. But the reality is, is a lot of shops don't have that opportunity. They don't have that person to call to fix a. A problem like that. And so they might just be out that money. They might be buying that client a new transmission. And so it stands to reason that it's. It's a valuable resource to have on your side that if you're going to program that transmission, at least you have somebody who does this every day.
David Roman [00:42:05]:
And now you have a record that, hey, it was done properly. And here's the record, here's what it looks like. And it's like that technical service bulletin. It lays out exactly what has to be done to program that transmission and to be able to obtain more attention. Well, at least if you're using somebody that knows that bulletin exists and they're, they're following the procedure, you don't have to worry about it. Whereas if you're trying to do it yourself and you misclick something, you don't do it every day. You might install one Nissan transmission a month. And, and I'm giving them a lot of credit on the quality of that transmission.
David Roman [00:42:39]:
But, you know, if you don't think of what that does to you, and that's a, that's a 4000 $5,000 unit right there, and that money's gone. So I think that programming pays for itself in that sense. To shift gears a little bit, there was a whole big deal about another technology by service or a programming service getting in bed with GEiCO a while back. Yeah, it really upset a lot of people. Now we're not in the collision industry, can you give us a rundown why people are so mad? Because David and I have talked about it. We're like, we don't exactly know what the deal is. Can you give us a rundown why everybody's so upset about that?
Brian Herron [00:43:20]:
Yeah, I've read the news and I've seen some of the posts about it. And my opinion from the Opus view is that we do have a responsibility to educate insurers why cars need to be repaired. And that's always been a part of Opus's mission is to talk to insurance companies and explain, you need to scan this car, it needs to be oe, you need to calibrate this car. And so we've always been on this mission to communicate that information with insurance companies. And I've had people tell me, watch out for insurers. And I've said, look, we're not in this to set a price or put you in a position where we're in the middle of YouTube, but we can actually create value for both sides by educating. And we've always been kind of a technical expert in the space. If you go back to right to repair, you know, we've testified in front of Congress and NHTSA and Dot, like, this is why this has to happen.
Brian Herron [00:44:23]:
It's extremely important to repair the car, right? So that's the opus hat. Now if I look at other actions that have happened in the industry, and I don't want to really condemn anybody or anything they've done, but I could say that I see a lot of friction when any company works with another company, and then there's a repair shop or a collision shop at the end, who gets the output of that and it controls their profitability or the decisions that they have to make to make money. So I could understand why there was some friction there. We certainly weren't interested in being a part of a program that sets a price. It's one thing if an insurance company, a repair shop, comes to some agreement and then they bring us in as a third party to help them implement it. We do that all day long, but that's where we are in this. And I think everybody saw that. And, you know, probably things will change in the future within our industry based on how that was reacted to and the lessons learned, there would be my thought for sure.
David Roman [00:45:30]:
And I agree with you. And I think that was the main concern was that, hey, you didn't bring us to the table to discuss this. You didn't have an agreement with us first. You came in and said, this is what's happening and this is what you get paid. And to them, that kind of felt a little shady there. That felt like, hold up, now you're setting my price for me. And I think that's one of the things that is I got to know more people in collision, right? Because I was on the AASP national board and I started seeing more and more of that. And that's one of the reasons that I'm kind of against things like repair, pal, is, hey, don't let somebody else come in and tell you what your price is.
David Roman [00:46:09]:
You have to be very careful about that. And giving them that bandwidth to set that. And especially in the consumer's eyes, because it's one thing when it's an insurance company, it's another thing when the consumer is being told what it should be. But it was, man, it upset a lot of people. I probably saw five or 600 videos about it in like the first two weeks that all that happened.
Brian Herron [00:46:31]:
I mean, everybody in this space has challenges to deal with, right? Collision repair shops need to fix the car correctly. They need to make sure they get reimbursed for it. They have a customer to make happy. Insurance companies are trying to reduce fraud and make sure they're paying for what they're getting. And to some extent, the insurance companies will point out, well, look, at this car I was charged a calibration on, and it's a 1980 car. So clearly there's no calibrating. And I'm sure there's multiple sides to this. And at the end of the day, repair shops and insurers should work out the details of their business arrangement.
Brian Herron [00:47:11]:
Opus is a diagnostic partner, will support both of them in the decisions they make. And Opus has a lot of MSO customers. We've been really focused on helping msos grow their business in scale. We look to them and say, how can we help you? Can we help educate? Can we help bring awareness? One of the opportunities we see is to help all parties understand what calibrations need to be done. And that's really one of our missions in collision, is to bring awareness to what calibrations need to be done. And everybody benefits from that. The consumer benefits, the repair shop benefits, the insurer benefits. I mean, there's rarely do you have a situation where when you do something like everybody in the value stream gets benefit, and that's where you should focus your business, right.
Brian Herron [00:48:01]:
Is you don't take from one and get to the other. So identifying the calibrations is where we're at and we try to stay out of all of the other stuff that.
David Roman [00:48:09]:
The political side of it. Right.
Brian Herron [00:48:12]:
And that's why, you know, go back to me. Like you say, I'm not really around very much. Like we're heads down, just trying to get, get things done for our customers. And, you know, when all these things erupt online, we just go back to work.
David Roman [00:48:24]:
Yeah. Amen, buddy. Amen. Hey, last question for you, and we'll touch on this very carefully. You know, we are huge proponents of ETI, right. And I see what they're doing for the industry. And there was a lot of pushback over stuff that happened with other organizations and this and that, and there were all these videos made talking about ETI. And, you know, from my standpoint, I can look back and I can laugh about it because I know it's not true.
David Roman [00:48:50]:
Right. Like, it's not even remotely true. What some of the things were said. What, in your eyes, what is it that Etihadh does for the independent repair shops, be it collision or be it mechanical? Because I see it my way. I want to hear what your take on it is.
Brian Herron [00:49:08]:
ETI is really about connecting oems with those who make tools for repair shops. And there's been repair shops that have visited ETI events. And I get it. Like, there's a lot of good trends and information, but it's really the companies who make diagnostic tools. We need an advocate with oems. Sometimes oems want to charge a crazy amount of money for data that we need to build the diagnostic tool. And if we're one on one with those oems, we really don't have much of a choice but to say either we play ball or we don't play ball. And either way, it doesn't really benefit the repairer, because if we have to pay a ton of money for licensing, it just gets passed through in the end somehow.
Brian Herron [00:49:56]:
And if we don't play ball, it's just one less option. They have to be able to perform the service. So ETI really fits as a single, single industry entity in that space. Nobody else advocates for the tool companies. With the oems, it's not like a glamorous institute and it doesn't really interact with the repair shops and the technicians, except that they're the ultimate consumer of products that ETI helped enable.
David Roman [00:50:27]:
Absolutely.
Brian Herron [00:50:28]:
And Eti is primarily in North America right now. They did announce at Tooltech they're expanding to Europe. I'm excited for that because I think the european oems are at times they feel far away from us, even though Opus has an office in the UK and we have business in Europe. We just have a much better business model and stronger relationships with oems who participate in North America. And we hope to change that. We hope, as secure gateway is starting to become more prevalent, that we'll be able to protect for access through ETI and those relationships. So technicians have a choice, because, look, if your only choice is an Oe tool, at the end of the day, that means you have access, but what are you going to pay for it? If you don't have any kind of competition for the ability to, to clear a code on a vehicle with the secure gateway, then you're going to pay what you're going to pay. And it might be $64 for three days of access to clear a code.
Brian Herron [00:51:27]:
Just might be right.
David Roman [00:51:30]:
Well, you know, here's what I see is there was a lot of stuff saying, oh, ETI is trying to restrict things. ETI is trying to, you know, charge for this and charge like, no, they are literally the reason you have the access you have right now. Right. And they, they continue to nurture and grow these relationships through the. The networking and the connections that are available there to the tool companies to ensure that the repair shop, be it mechanical or collision, can continue to fix the car. And that that's the extent of it. And so I've seen the work that goes in. I've seen the people who are there to provide information, and I've seen their perspectives and, and anywhere that you can get the oes and a tool company in the same room, and they say, hey, we see this problem, let's work together to fix it.
David Roman [00:52:17]:
It means that my life gets better, my life gets easier. And so I was so bummed to see all those people talking poorly about it because I see the work that ETI does, and it, like, it partially made me mad. And I wanted to kind of rage out a little bit because my thing was, is I knew it was b's, right? When you see what they do and when you, you get a chance to experience it and hear what they say, you know, those things were not true. You could see what it was that they were accomplishing. And so I'm excited to see what they, they accomplish with the new expansion into the UK and, and where it goes. But I think it's only good things that come from that organization. I really do. I'm not just saying that.
David Roman [00:52:53]:
I mean, from the bottom of my heart, I know that they're doing the right thing for this industry. And I'll. I'll go out on a limb and say, yeah, I know that it's not a direct integration with repair shops, but I do not think our industry would be capable of what it is today if it wasn't for the work that ETI has been putting in over the past 50 years.
Brian Herron [00:53:13]:
Right? Yeah.
David Roman [00:53:16]:
Awesome.
Brian Herron [00:53:18]:
Cool.