Joe Kellman Talks About the Auto Glass business,
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 retrospectand
himself retrospectively. We met in his office at the corporate headquarters
of the Globe Group in downtown Chicago in late May . 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
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 milestonefamous 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
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
JK: And they should be able to take advantage of their mass
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
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 beneficiarythe
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
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
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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