Diamond in the Rough

What’s that old saying? “Fool me once, shame on you, fool me twice, shame on me?”

Well, shame on me. In fact, shame on all of us, shame on the whole entire auto glass aftermarket industry.

I didn’t quite get it the first time round in 2000, but I see it crystal-clearly now. In fact, let me raise my can of Bud in honor of Diamond Auto Glass. They have put forth, and will profit by, an amazing strategy, similar to the one Safelite used eight years ago.

Now, to most of the world, it seems like both companies laden with debt like a teenager with acne, had decided to shed it through a process known as Chapter 11. It’s a brilliant strategy and it goes like this:

Keep your prices artificially low. Charge too little or pay too much for product. When the rest of the industry screams out that “you can’t do it for that,” smirk and say “yes, we can and we are.” Imply liberally that those other companies are just not run by savvy businessmen, or just aren’t as good at business as you, the big national corporate boy.

And don’t forget to pound into the heads of your insurance customers that the rest of the industry is woefully inefficient, just small mom-and-pops hanging on to a business model that has long since ceased to work. Pretend you feel sorry for them.

Hang on to your secret, the one that Diamond (and Safelite before it) don’t ever mention: that it turns out those screaming independents were right. They couldn’t do it for that—and neither could you. You were losing money at the prices you charged. And, despite being able to one of the largest volume buyers in this country presumably having some of the lowest material costs, you were too. Diamond was barely profitable EBITDA and wasn’t profitable after.

But none of that matters really, because Diamond is a big company and filed for Chapter 11. It will shed all that debt and will be bought eventually. Even Safelite’s owner Belron has expressed interest, probably just to keep it out of the hands of anyone else.

But here’s why I’ve been fooled again. I have to ask: how many smaller companies went out of business during Diamond’s reign? How many mid-sized ones had to sell out because they couldn’t compete? How many of them get a second chance Diamond does? How come they get to take others down while they can rise again?Maybe Diamond’s strategy (and Safelite’s before it) had little to do with making money and more to do with eliminating competition. If so, it’s brilliant. It just shouldn’t be legal.