Joe Kellman Talks About the Auto Glass business, Himself—and More
Reprinted from the September 1993 issue of USGlass magazine.

Saying that Joe Kellman needs no introduction to our industry is an understatement. The company his father founded years ago as a single auto glass replacement shop is today one of the largest auto glass replacement chains in the country, The Globe Group. Kellman grew up in the business and is largely responsible for its growth. His innovations include mobile service, Electronic Data Interchange (EDI) capabilities and networks, among others. Often controversial and seldom popular in his views, Kellman is known for speaking his mind. This is the third interview I've had the good fortune of conducting with him. The last was in late-1990 when the Globe-Sears deal was announced. Kellman was happy with the deal and jubilant at having "won" Sears over his competitors. Now, two and a half years later, both parties have scrapped the project. Competition between the networks and independents is more fierce than ever. Kellman was ailing on the day we met and left for the doctor right after the interview was completed, but he was kind enough to spend 90 minutes looking at the deal and the industry in retrospect—and himself retrospectively. We met in his office at the corporate headquarters of the Globe Group in downtown Chicago in late May [1993]. —Debra Levy, publisher, AGRR magazine

DL: The last time we met was right after the Sears Deal was signed. Now it's three years later, and you're parting ways. Why?
JK: Yes, we closed all of our Sears branches. We never could have predicted that the objections to using Sears made by other insurance companies would be so great. So that told us that there wouldn't be enough [business] if we depended solely on Allstate. It cost us several million dollars to learn this lesson.

DL: In our previous interview you had talked about opening 250 shops in Sears stores. You also said this deal would be a big risk for you.
JK: And I'm sorry to say it was all our risk. We were, by contract, compelled to open that many shops. If Sears hadn't been the nice partners that they were, they could have forced us into compliance. But Sears did not. They're very fair and reasonable, and they're understood.

DL: I guess they didn't get what they were hoping to get from the deal either.
JK: They didn't. So there would have been one casualty after the other [if we kept it going].

DL: Let's talk about Allstate. There has been some opposition to their "Preferred Provider" agreements.
JK: Yes, legislation has been enacted to limit "Preferred Provider" agreements. In South Dakota, the legislature successfully overrode the Governor's veto. I thought the Governor was right when he said that the consumer would carry the burden ultimately as a result of any legislation that restrained insurance companies from getting the best deal. Allstate is suing the State of South Dakota on grounds of constitutionality.

DL: Do you find that legislation efforts threaten the way your business is conducted?
JK: No. In most states, including Illinois, legislation has not passed or has passed in a manner [that] doesn't have an impact on the insurance company's ability to get the best deal, buy at the best prices, and save money.

DL: Have you seen the newsletter that is produced in Minnesota by National Auto Glass Consultants Inc.?
JK: Oh yes. Mr. Custer's group. He asked if he could interview me at the NGA convention, and I said yes. But he never tracked me down after that. He's capitalizing on a problem common to smaller glass shops, and he's convinced any number of them to keep on fighting the inevitable. Networks are not going away. They are not illegal. I've seen the newsletter, and it's been very appealing to glass shops who don't want to go to work. We have thousands of network members. You don't think they are losing money now, do you?

DL: Well, when you listen to them, yes.
JK: Oh yes, it does depend on whom you listen to, but what I said at the Scottsdale meeting [the 1991 NGA Auto Glass Conference in Scottsdale] still goes. "The party's over."

DL: There has been tremendous discussion about that Scottsdale speech. It's become a milestone—famous or infamous.
JK: I think so. You know, my son, Jack, and I were sitting in the back of the room, and he wouldn't let me go up to that microphone. He had that big hand of his on my leg the whole time. But as I told the audience, Jack had to go to the bathroom. When Jack went to the john, I went to the mike.

DL: And when he camee back, he said, "What have I done?"
JK: Yeah, yeah,"Where did Dad go?" I told those people in the audience: "Don't waste your time denying what is happening. You can't expect to put in three or four windshields and then go to the ball game or play golf. You'll have to put in eight or nine of them. The insurance industry is awakening. I'm proud to say that. I've been attempting to wake them up for 40 years. I'm sorry to say it took me so long."

DL: I recently asked a very knowledgeable person in the auto collision and repair/insurance business if other parts of the business have problems with the insurance companies that the AGR business does. He said no, because when the insurance industry began to squeeze the auto glass business, companies such as Globe rolled over. I thought that was a very interesting comment.
JK: I think it's a stupid comment. The insurance industry has awakened-with the need to cut their costs or raise their premiums. In some states, including California, the insurance industry is prevented from raising premiums. Well now, if you want to sell your product, and you can't raise your prices or control your costs, is someone nuts? Don't blame it on the buyer. That is like going shopping, and the law telling you that you're not allowed to shop. Maybe you get an item for $50 or $100 less, but the law says you can't.

DL: Have you seen a copy of the Globe invoice that was making the rounds at the NGA convention?
JK: No. The invoice where a customer mentions the huge amount of profit that there was on one single invoice.

DL: Yes, I have it with me. It's been circulated so widely, I thought you should have a chance to see it and respond.
JK: It might have evaded my seeing it [until now]. There are individual jobs that we do that we lose money on. You haven't seen our network. It's not housed here, but we have over 200 people working there. It costs us so much to perform a transaction, to make a network call from a policyholder or an insurance agent, or an insurance company's claims agent. Then we tie that call into a vendor in the policyholder's area. We lose money on thousands of individual jobs.

DL: I understand you're saying that a company such as Allstate is paying less for a collective body of replacement work than they would individually.
JK: And they should be able to take advantage of their mass buying.

DL: I understand that. But look at this invoice. The bill to the insurance company was double what the auto glass installer received for doing the work. If the insurance company had dealt directly with the installer, even if EDI and transaction fees had added a few hundred dollars, the insurance company would still have paid significantly less than they did through Globe.
JK: But on a collective basis, Allstate estimates that we [Globe] saved them between 20 and 30 million dollars in 1992.

DL: So you don't think Allstate minds if individual situations such as this occur?
JK: If they did mind, we would have no deal. Collectively, of all the tens of thousands of jobs we've performed, they're saving $20 million minimum.

DL: So you think if the insurance companies were dealing with the independents directly, they wouldn't be saving nearly that much?
JK: Whey didn't it happen before Joe Kellman sold it to Allstate? I told this to the audience in Scottsdale: "Let's admit that we have taken advantage of-I think I used the word 'scrwed'-the insurance companies for years. I include myself in that category. When I was on the street 40 years ago, I found out that agents, largely, didn't care what you charged."

DL: Last time I interviewed you I asked you if you knew why the auto glass industry thinks of you as a traitor.
JK: And what was my answer? My answer was what?

DL: You said that you don't think of yourself as a traitor.
JK: No, I don't. Not at all. I don't understand why it took me 40 years to convince the insurance industry that they ought to pay attention to auto glass. During those 40 years, I believe they overpaid, not by millions of dollars, but by billions of dollars. Let's face it, folks, we've been giving dealers and body shops and those who shop a better price than those who don't. They buy a fraction of what our best customer buys. Our best customer, the insurance industry, gets the worst prices. We all took advantage of them, and I emphasize "we." After all, if you come in and buy, and you don't shp it, I'm not going to cut your discount one bit. You're going to pay top dollar. So the insurance industry got what it deserved until they finally awakened. And they awakened before Kellman died.

DL: Safelite does the same thing [run a network]. Harmon and Windshields America do the same thing. Why does everybody concentrate on you? Why are you perceived as the bad guy?
JK: I received some ugly letters following that Scottsdale speech. One said, "You were a legend, and now you're a son-of-a-bitch." We introduced networking to the insurance industry, so we were the first. My son, Jack, had the idea, and I pursued it. We had 52 million dollars invested in networking and hadn't made a quarter. And as I told that audience in Scottsdale: "This is not the wave of the future; it's the wave of today. Now go home and go to work instead of standing here and screaming to have the networks disappear." One State Farm executive made the statement that if the networks disappeared they would open up their own glass chain.

DL: What do you think of the independent groups that have formed, such as the National Auto Glass Coop?
JK: Welcome is what I say. There is nothing wrong with what they're doing. We'll all compete against each other and the best of us will emerge. Hopefully, Globe will be one of them.

DL: A couple of companies that do work for networks have said they've felt squeezed by those networks not to belong to the coop. Do you think this is accurate?
JK: Yes, I think that is a reality. But I wish them well. You know, I've been competing since I was 14 years old. I've been in the glass business for 59 years, and nothing ever came easy to me. Evidently I have a creative mind. I created mobile service, which caught on all over the world, and I made a network work. So call Joe Kellman whatever you want for awakening the insurance industry. Go ahead, I'm proud of it. And, in so doing, I challenge myself because I have to work for a smaller dollar in spit of this invoice you showed me. I wish we had more of them! You take the world of windshield repair. Do I like the repair? No, I don't. But I feel it is a must. The customer demands it, and we aggressively seek bigger percentages. But we lose money on every repair.

DL: I understand what you're saying about the need for the insurance and auto glass industries to work together for the ultimate beneficiary—the consumer. But, in reality, the networks and the insurance companies are ultimate beneficiaries as well.
JK: There is no doubt about that. We wouldn't be in the network business if we hadn't been successful in negotiating these arrangements.

DL: Do you ever get tired of having to defend your views?
JK: I think it's stupid to have to defend something that is reality.

DL: Is there anything that embarrasses you about your years in the glass industry?
JK: The industry has been very good to me … I had only a grammar school education … Obviously, I'm creative, and I have good instincts, but I'm self-educated. I'm grateful that there was a business that my dad took me into. I would like to have had more education, but it wasn't to be.

DL: I was going to ask you how your health is.
JK: Oh, you can ask me. There are a lot of people out there who would be delighted to know how much trouble I'm in. I'm amazed I made it to 73.

DL: You are 73. Some people might say …
JK: I know, I know, "Why don't you stop?" The business keeps me going. My ego is fulfilled when I see mobile service. When I'm on the road, I always look in the local phone book to see who is doing mobile service. I was a horse-breeder, boxing promoter, comedian. I've done all these things, and the most fascinating of all is the business world.

DL: Some people might say that by being in the business that long you can lose your effectiveness. Do you agree?
JK: Oh, yes. That is why we have a new president at Globe. Bill Tortorello has been on board for six months now. One of my blunders is not having found a successor long before I was in my 70s. In what we've seen for six months, Bill is it.

DL: That's a pretty amazing statement for you to make.
JK: It is so obvious. One of my strengths is being outrageously honest with myself and acknowledging my stupid moves. Some are of such a personal nature that I can't share them with you. Bill comes from Allstate. What impressed me most about him is that it took him three years to sell my idea to his superiors there. His persistence in following through was strong because he believed in the ideas. He did in three years what I couldn't get done in 37.

DL: Was going outside the family to find a successor a difficult decision?
JK: Yes, indeed. You love the candidates [fro the family], but you have to acknowledge their limitations. The task fathers, or fathers-in-law, like me face is convince their children or in-laws of their limitations. When they acknowledge that fact themselves, it's a giant step forward for them and for the company. To thine own self be true. The last name doesn't get you the job.

DL: Who do you consider your really good friends in the industry?
JK: Carl DeReises of PPG. He has a great sense of humor and great talent for using foul language. He puts Hackett [Kellman's close friend comedian Buddy] to shame. Most of the people are from the long ago past. Tommy Walbridge from LOF and the Safelite people: Dee Hubbard and Ernie Malbin. Ernie is a former president of Safelite, who is now on my Board of Directors. We are a private company, but we have five outside board directors.

DL: Globe also has three flat glass locations. There is talk about the flat glass industry going in the same direction as the auto glass networks. Do you think this will happen?
JK: Yes, I do, and we will be there. With the technology that is available, I believe order-taking, billing, the whole process can be done electronically. It will make the transaction costs cheaper. The insurance companies, the buyers, may not be buying the product for any less, but networks manage the flow of information more efficiently and less expensively.

DL: Is there anything else that you want to say to the industry?
JK: My advice to my auto glass friends and competitors is efficiency. You will survive and make a good living. It will be harder, true, but you will do so if you are efficient.

DL: Thank you.

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