A New year has begun, another CES is here and the independent service companies are just now getting paid for work we did in mid-December. Those that go to CES for the show, get to see the new toys. Some attend the NESDA board meetings and generally leave exhusted and excited.  As LG would say, “Life Is Good”.

That lasts for about a week. Then expectations and reality return. 2012 will have the same financial hits as last year.

Most service agreements renew on the 1st of the year. That is when we either agree to them or not. Those new agreements are breathlessly awaited by us to see what we are NOT going to get paid for this year by manufacturers and extended warranty companies (ESP). Many of these agreements are accompanied by letters with such exciting  phrases as, “To enhance our mutual customer’s service experience” or “To improve our overall efficiency to better support the authorized service company”, etc.  This drivel usually precedes payment reductions for our technical services and/or additional uncompensated administrative burdens.

The Grump read an article at CNN Money Doctors in Independent Practice Going Broke that eerily has some parallels with our industry. Our industry always has had some similarity, even in terminology such as “diagnosis”. I suspect that was because early warranty procedures and reimbursements adopted the health care industries.

The entire supply chain of the consumer service industry is suffering from multiple hits from all sides. It all starts with what the consumer is willing to pay for electronics and appliances. With the (generally) higher reliability of the products, warranty work on the TV side has been drying up. The price that manufacturers and dealers can get for their products has been driven to unsustainable lows by consumers and a bad economy. This drives the added cost of an extended service plan down (or no contract at all). Out of warranty work on the TV’s sold the last couple of years will be non-existent as they are turning into a commodity. White goods is still holding it’s own, at the high end especially, but the complexity of the products are daunting to those who try to diversify into it.

While many of our industry are hurting, we are just above the bottom of the food chain - parts suppliers are hurting worse. Extended service plan companies are demanding deep discounts for their parts purchases and the thin margins are getting thinner. The larger parts suppliers naturally make sure these large contracts are fulfilled to the detriment of the independents. They don’t mean to - but sheer volume with low margins dictates that happen. But on the flip side, the ESP companies may be their cash-flow, but we are their reliable profit margins. Another parts supplier seems to drive away small independents altogether. They won’t sell parts at dealer cost until you have spent a large amount first. You can’t have access to their parts information unless you have an account, which you can’t get without losing money first.

When servicers do submit their parts requests or bills - auditing and second guessing over expensive parts occur that eat into administrative time as ESP companies try to avoid paying for parts that either shouldn’t be replaced or never were replaced. That is due to poor troubleshooting skills or outright fraud. But should the established service companies and providers be punished for the cheaper rent-a-techs? No. They already have a grading system and there should be 2 tiers of accountability. A provider that is consistently of high quality should not be subjected to the same second-guessing and auditing of the lowest common denominator. By going that route, that may cause the poor providers to ramp up both their technican and business management skills.

One ESP company seems to be continuously charging back their service providers based on poor tracking by the part supplier for cores and credits. These two industry giants are not computer coding amateurs. Can their two platforms not communicate effectively? Or is there performance bonuses at stake?

All-in-all, 2012 seems to be on track for another year of service providers retiring or going out of business. Good techs will leave the business because pay and benefits will be low. There are no replacements in the pipeline. Those companies that remain will have no choice but cut costs at every point on the general ledger to remain in business. Store front operations will begin to evolve into smaller industrial office/whse spaces without drop-off service.

Those that remain will be less compromising on low rates or larger, uncompensated territories. A smaller nimbler operation will allow them to pick and chose who to do business with.

Pick and choose they will.

On our news feed there is a headline,
“National Service Alliance .. Again?”.

That bulletin was done prior to the National Electronics Service Dealers Association’s (NESDA) NPSC and since the closing of the trade show there have been dozens of reports of outright hostility and anger over the Mitsubishi/NSA pairing culminating in an astonishing (for NESDA) report to it’s members.

NESDA President, Ben Fowler (ABC Electronic Service Corporation - Rochester, New York) reported to the NESDA members, that the NESDA board firmly, and without equivocation, denounced the proposal with a recommendation for the members to NOT agree to it.

The Grump has received many copies of that report and found it to be extraordinary in that it firmly defines the negatives for independent service providers and our industry and chastises the NSA president, Randy Whitehead. Since both NSA and Mitsubishi are sponsors of NESDA and it’s NPSC trade show, The Grump finds it a gutsy act that places the NESDA members before the sponsors.

The Grump Report would like to publish that entire report, but we have no permission and it’s unlikely we would get it if asked. At minimum, NESDA should make it a public press release. It is significant for the entire independent service industry. While NESDA is the largest, it represents less than 20% of the industry. But, they do represent an important percentage and cannot be dismissed. It is important in that NESDA has drawn a significant line that is clear to all.

The Mitsubishi/NSA agreement is outrageous. NSA’s egregious attempt to set up a program where they control a service businesses employees and take advantage of that business bespeaks of arrogance if not outright hubris. No other explanation is possible. The Grump wonders how the IRS would treat this scenario. Are they really independent contractors or employees? Perhaps someone should file IRS form SS-8, and attach a copy of the NSA contract and a copy of the NESDA finding.

This whole pairing is somewhat weird. NSA is a relatively new and secretive organization (a Delaware company) whose ownership is largely unknown. Mitsubishi has been an open company and fine supporter of our industry for decades. NSA seems to always attempt to siphon money away from the industry by placing themselves between the servicer and the customer, while taking a percentage off the top or user fees. What is known, is that some of the largest service companies in the country are investors and they get first call on service work before all others. In The Grump’s opinion, those who sign up, who are not NSA “owner” companies, will see little or no referrals where an NSA owner is based. As pointed out by Fowler - no metrics will be involved to decide who gets the referred service work. Quality of service will not be a determinant.

Since Mitsubishi decided to exit the consumer flat screen business, the volume of service work is expected to shrink dramatically in the next 12 months or so. But the NESDA board apparently is worried, and rightfully so, that this sort of “thing” could be a template for other struggling manufacturers. Mitsubishi is a great and honorable company, but it has lost face and should be embarrassed by the reaction to what has occurred. The Grump wonders if Mitsubishi had all the facts.

While our industry deals with many second and third party administrators, service contract providers for example, they are generally honorable and honest companies. There is always the struggle for service providers to get more concessions (money) while the TPA’s try to limit their expenses. There is nothing wrong with that. That’s business. They know that we have a cost of doing business (CODB) and do their best to make sure we don’t lose money doing business with them.

NSA doesn’t seem to particularly care that a provider makes any money. The rates, and the punishment for failure to comply, apparently are not negotiable. That’s astonishing, since Whitehead, for all intents and purposes, helped created the Certified Service Manager program and in fact created the CODB calculator widely used. Now it  seems he is saying that he doesn’t need your management - just give him your technicians. Mr. Whitehead apparently does not think that CODB is relevant anymore.

He is the chairman of NESDA’s Professional Service Management committee.  One wonders if that chairmanship is now open.

Many of the NSA owners are past presidents, former board members and committee chairs of NESDA. They are wired into the “inner” NESDA and The Grump thinks the NESDA board finally realizes that Walt Herrin’s famous “Barbarians At The Gate” speech published in the VPEA Reporter (Fall 2005) has come to pass. The barbarians appear to be inside the gate.

The Grump is not shocked. He figured out Mr. Whitehead and NSA some time ago. It took about 10 minutes.

The Head Grump has offered a Grump Report to be published, unedited, to Encompass and they have not responded. Please note the comment from Encompass does not refute anything in the report. Please note the comments from Mr. Summers. Gowens association with Pheonix was not noticed before. But it has been confirmed. Cooledge is right about misinformation on the internet. Their reply was a classic example.

June, 2011. The following “grump” is news, opinion and commentary.

According to Encompass Group Affiliates, Inc’s 8-K filing with the Securities and Exchange Commission (19-May-2011) - Encompass Group Affiliates, Inc (Encompass), can’t pay their loans and they are toast.

With all the money they have sucked out of us with unresolved core/dud charges, one must ask, how can that be? Not to mention their arrogant demand that if you order a part, that they have to order from an OEM, you have to pay for it. Even if it has been on backorder for 6 months with no ETA. They don’t care that the product has been exchanged.

A company can mistreat the independent servicers only for so long before they stop doing business with them. They have tried to buy a good reputation by spending lavishly with the trade-show associations, but that is false security.

When an independent gets fed up with being mistreated - they stop doing business with that company. Many of us are disappointed that Encompass hasn’t been hit with a Sherman Anti Trust Act lawsuit. I guess the Feds are too busy with things more important than an industry of small business being harmed. We don’t have unions.

But when we excersize our purchasing power - we can have a direct and serious impact.

In Encompass’ February, 2011 8-K filing, they note; In a Notification of Late Filing on Form 12b-25 filed with the SEC on September 28, 2010, the Company stated “…a loss from the impairment of goodwill in the amount of $11,907,000 …” Loss of goodwill. That is the loss from independent service providers (and others) refusing to do business with Encompass.

Those, who in this industry, take for granted service providers do so at their peril. Collectively we have mass and when angered inertia. We are the talent. We are the “doers”. If this new company wants to have any value - they need to stay away from advice from the Old Farts Clubs at the trade associations (they are out of touch and have no influence anymore) and talk to the customers and service providers who stopped doing business with them.

Below is the entire May, 2011 8-K filing, but The Grump is going to pick out a couple of fascinating paragraphs and satirically comment on the them.

The “Buyer”, Sankaty Advisors LLC (nee Bain Capital) Will pay out $1,000,000 in cash. That’s not much money for what they paid to buy out Tritronics and Vance Baldwin’s shareholders. But wait ! They will assume all liablities to their lender (Bain Capital?) but exclude certain liabilities, which include.

“the completion of arrangements to effect the exchange of the Baldwin/Tritronics Parent Equity received by the Company for the subordinated debt held by the former Tritronics and Vance Baldwin shareholders”.

I hope that doesn’t mean Kim Wagner (Tritronics iconic leader) gets it in the neck. She has always been a stalwart supporter of independent servicers and has assisted even when the totally ignorant dickweed management (in the Grump’s opinion) of Encompass Parts was screwing us into the ground.

Nobody cares about Baldwin except as sponsors for a couple of trade associations.

“An exhibit to the Asset Purchase Agreement provides a summary of the Parent’s capitalization after closing. The common stock in the Parent that the Company will receive will represent a 15% interest in the common equity of the Parent, but there will be approximately $10 million in secured debt and at least $33 million in preferred equity senior to the common stock the Company will receive. Therefore, the Company does not place any significant value on the common stock. This exhibit includes a description of the Parent equity to be exchanged for the Company’s notes held by the former Tritronics and Vance Baldwin shareholders, who have not yet approved the terms of the exchange. If the former Tritronics and Vance Baldwin shareholders have not agreed to those terms by June 7, 2011, the Company will have an option to terminate the Asset Purchase Agreement”

That’s pretty convoluted but it sure looks like there is a bunch of debt. It also looks like if the former Tritronics and Vance Baldwin people don’t agree with what that paragraph means - it all falls apart. Then I guess whatever the lender wants repaid has to be be paid immediately.

Oh, oh….

“The Company may terminate the Asset Purchase Agreement if, before the closing, it enters an acquisition agreement with a third party that provides, on terms reasonably acceptable to the Buyer, for payment in full of the senior and subordinated notes held by the Lenders. As of March 31, 2011, that amount was approximately $37,000,000. In the event the Asset Purchase Agreement is terminated on this basis, the Company must reimburse Buyer’s transaction expenses. The financial advisor to the Special Committee of the Board of Directors, Cassel Salpeter & Co., has been authorized to contact parties who may have an interest in acquiring the Company or its assets. ”

I guess we know now how much the loans are for. Holy Crap! $37,000,000. Cassel Salpeter & Co is the liquidators? The name of the firm is appropriate. (If you know what I mean).

It appears that Sankaty created Encompass Supply Chain Solutions (Delaware, April 20, 2011) to be the new holding company until liquidated.

I hope NESDA got their sponsorship money upfront.

 The original HIG Agreement that created Encompass Group, etc. al.

The 2008 8-K Acquiring Tritronics and Vance Baldwin

February 2011 8-K advising they can’t pay their creditors.

Sankaty Advisors LLC

 Cassel Salpeter & Company

Here is the SEC 13D filing reporting the takedown.

19-May-2011

Entry into a Material Definitive Agreement, Financial Statements

Under the Asset Purchase Agreement, the Buyer will acquire substantially all of the Company’s and its subsidiaries’ assets (other than any assets of certain inactive subsidiaries). The Buyer will assume the Company’s senior debt held by the Lenders. The Lenders will contribute the Company’s subordinated debt to the Buyer, and the Buyer will contribute the subordinated debt to the Company, making Encompass both the debtor and creditor, effectively extinguishing the subordinated debt. In addition,

� The Buyer will assume all of the Company’s other liabilities except for specified excluded liabilities (as described below).

� The Buyer will pay $1,000,000 in cash purchase price.

� The Company will receive common equity in the Buyer’s parent company (the “Parent”), also a newly formed entity affiliated with the Lenders. The equity is discussed further below.

� The Buyer will reimburse up to $150,000 of the Company’s transaction expenses, and will contribute a scheduled amount to the settlement of certain liabilities.

� The Lenders will surrender their equity interests in Encompass. Currently, the Lenders own shares of the Company’s Series C Preferred Stock and Series E Preferred Stock, as well as warrants to acquire shares of the Company’s common stock at a nominal price.

� The Company is expected to receive preferred equity of the Buyer’s parent, which is then expected to be exchanged for all of the subordinated debt owed by the Company to the former majority shareholders of the Company’s subsidiaries, Vance Baldwin, Inc., and Tritronics, Inc. (the “Baldwin/Tritronics Parent Equity”). This subordinated debt (approximately $2,045,000 in the aggregate) was issued as part of the purchase price for those subsidiaries.

Excluded liabilities include:

� the debt held by the former Tritronics and Vance Baldwin shareholders (which is expected to be cancelled in exchange for the Baldwin/Tritronics Parent Equity as described above);

� any obligations to the Company’s former CEO, Wayne Danson, arising from pending litigation between Mr. Danson and the Company regarding the termination of his employment;

� any obligations to Mr. Danson, arising from a letter agreement between the Company and Mr. Danson, executed in the 2007, relating to $310,000 in accrued consulting fees;

� a note in the principal amount of $206,000 held by the Company’s counsel;

� transaction expenses in excess of $150,000;

� liabilities to employees, unless the liability is caused or increased by the Buyer’s failure to offer employment to any Encompass employee; and

� the Company’s or its subsidiaries’ tax liabilities.

A portion of the purchase price ($350,000) will be placed in escrow to cover the Company’s indemnification obligations under the Asset Purchase Agreement. In addition, the Company will be prohibited from making any cash distributions to shareholders or payments to affiliates for two years after closing under the Asset Purchase Agreement. The Company will be required to indemnify the Buyer for any losses and expenses arising from:

� a breach of any representation or warranty by the Company relating to employee benefits or taxes;

� a breach or violation of any covenant of the Company relating to taxes;

� the excluded liabilities; and

The Company’s indemnification liability is limited to an amount equal to the sum of the following: (1) the escrow amount, (2) cash on hand to the extent it exceeds claims payable to third parties, and (3) distributions to shareholders or payments to affiliates made in contravention of the Asset Purchase Agreement.

The closing of the transactions contemplated by the Asset Purchase Agreement is subject to a number of conditions, including:

� the representations and warranties of the parties being true and correct in all material respects at closing,

� there being no material breaches of the terms of the Asset Purchase Agreement,

� absence of any litigation or other legal requirement prohibiting the consummation of the transaction or preventing the Buyer from owning the purchased assets,

� certain third party consents,

� requisite shareholder approval (as described in more detail below),

� the completion of arrangements to effect the exchange of the Baldwin/Tritronics Parent Equity received by the Company for the subordinated debt held by the former Tritronics and Vance Baldwin shareholders,

� the completion of the terms of the preferred and common equity arrangements for the Parent,

� the execution by H.I.G. Capital, L.L.C. of a non-competition agreement, and

� certain other customary closing conditions.

An exhibit to the Asset Purchase Agreement provides a summary of the Parent’s capitalization after closing. The common stock in the Parent that the Company will receive will represent a 15% interest in the common equity of the Parent, but there will be approximately $10 million in secured debt and at least $33 million in preferred equity senior to the common stock the Company will receive. Therefore, the Company does not place any significant value on the common stock. This exhibit includes a description of the Parent equity to be exchanged for the Company’s notes held by the former Tritronics and Vance Baldwin shareholders, who have not yet approved the terms of the exchange. If the former Tritronics and Vance Baldwin shareholders have not agreed to those terms by June 7, 2011, the Company will have an option to terminate the Asset Purchase Agreement.

The Company may terminate the Asset Purchase Agreement if, before the closing, it enters an acquisition agreement with a third party that provides, on terms reasonably acceptable to the Buyer, for payment in full of the senior and subordinated notes held by the Lenders. As of March 31, 2011, that amount was approximately $37,000,000. In the event the Asset Purchase Agreement is terminated on this basis, the Company must reimburse Buyer’s transaction expenses. The financial advisor to the Special Committee of the Board of Directors, Cassel Salpeter & Co., has been authorized to contact parties who may have an interest in acquiring the Company or its assets.

The Company’s Board of Directors approved the Asset Purchase Agreement after receiving the recommendation of a Special Committee of the Board. The Special Committee was advised by Cassel Salpeter & Co., who rendered an opinion that the transaction contemplated by the Asset Purchase Agreement is fair to the Company, from a financial point of view. The Special Committee consists of all of the Company’s directors who are not affiliated with the Company’s majority shareholder. No members of the Company’s management currently serve on its Board of Directors. The Special Committee will evaluate any potential alternative transaction brought to its attention by Cassel Salpeter & Co.

If the transactions contemplated in the Asset Purchase Agreement and the exchange of the Baldwin/Tritronics Parent Equity for the subordinated debt held by the former Tritronics and Vance Baldwin shareholders (as described above) are effected, the Company’s assets/liabilities would consist of cash remaining after payment of expenses of the transaction in excess of $150,000 and liabilities not assumed by the Buyer, as well as the common stock of the Parent described above. The Company does not anticipate a material amount of cash will remain after payment of expenses and non-assumed liabilities. The liquidation preference and accrued dividends of the Company’s preferred stock exceeds $11,000,000. Therefore the transactions contemplated by the Asset Purchase Agreement will not result in any distribution to common shareholders.

The Asset Purchase Agreement requires shareholder approval. The Company intends to set a date for a special meeting of the shareholders in the near future. The Company will circulate a proxy statement in connection with that meeting which will describe the Asset Purchase Agreement in more detail. All classes of the Company’s voting preferred stock will vote together with the common stock as one class, with each share of preferred stock entitled to cast a number of votes equal to the number of common shares into which it can be converted. Because of this, the holder of a majority of the Company’s outstanding Series C Preferred Stock, ACT-DE, LLC, has sufficient votes to approve the Asset Purchase Agreement without the vote of any other shareholders. ACT-DE, LLC has committed to vote for approval of the Asset Purchase Agreement pursuant to a Voting Agreement between ACT-DE, LLC and the Buyer.

The foregoing description of the Asset Purchase Agreement, the exhibits thereto and the transactions contemplated thereby do not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Asset Purchase Agreement and exhibits thereto, which are filed as Exhibit 10.1 to this report and are incorporated herein by reference in their entirety.

Exhibit No.    Exhibit Description

            Asset Purchase Agreement among the Company, its
            subsidiaries, Sancompass, Inc. and Encompass Supply
10.1        Chain Solutions, Inc. dated as of May 13, 2011,
            including exhibits thereto.

Cautionary Note Regarding Forward-Looking Statements

This Current Report on Form 8-K includes statements about finances, expectations, plans and prospects of Encompass Group Affiliates, Inc. (the “Company”) and its subsidiaries that constitute forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on the Company’s current plans, estimates and expectations. Some forward-looking statements may be identified by use of terms such as “anticipate,” “intend,” “expect,” “plan,” “may,” “could,” “will,” “estimate,” “potential,” and similar words, terms or statements of a future or forward-looking nature. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in or suggested by such statements.

Risks and uncertainties relating to the proposed asset sale include the risks that: (1) the Company will not obtain the requisite shareholder or regulatory approvals for the transaction; (2) the anticipated benefits of the transaction will not be realized; and (3) the conditions to the closing of the proposed transaction may not be satisfied or waived. If one or more of these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, actual results and outcomes may vary materially from those described herein. These risks, as well as other risks associated with the proposed transaction, will be more fully discussed in the preliminary proxy statement to be filed by the Company with the Securities and Exchange Commission (the “SEC”). Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made.

Important Information for Investors and Stockholders

This Current Report on Form 8-K release relates to the proposed sale of substantially all of the Company’s assets pursuant to the Asset Purchase Agreement that will become the subject of a preliminary proxy statement to be filed by the Company with the SEC. This Current Report on Form 8-K is not a substitute for the preliminary proxy statement that the Company will file with the SEC or any other document that the Company may file with the SEC or may send to its stockholders in connection with the proposed action. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PRELIMINARY PROXY STATEMENT AND ALL OTHER RELEVANT DOCUMENTS THAT MAY BE FILED WITH THE SEC OR SENT TO SHAREHOLDERS, INCLUDING THE DEFINITIVE PROXY STATEMENT AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT PROPOSED ASSET SALE. All documents, when filed by the Company, will be available free of charge at the SEC’s website (www.sec.gov).

Participants in the Solicitation

The Company and its respective directors and executive officers may be deemed under the rules of the SEC to be participants in the solicitation of proxies from the stockholders of the Company. A list of the names of those directors and executive officers and descriptions of their interests in the Company will be contained in the preliminary proxy statement which will be filed by the Company with the SEC. Stockholders may obtain additional information about the interests of the directors and executive officers in the proposed action by reading the preliminary proxy statement when it becomes available.

It was cost effective for service companies to stock parts to offer a quick turn-around. Service companies make money by repairing things. The faster we could repair a product, the faster we could start on another “job” and so it went.

While some commonality persisted until about 2002, after HDTV and the new multiple processor controlled appliances hit the market - that ended. Permanantly.

Virtually no major part or assembly is interchangeable with any product, brand or even between models in many cases - even in the same year of manufacture.

With the drive to lower prices, many manufacturers do not want to “waste” money on service support. For many, especially the low end brands, diverting parts to service from manufacturing is a cost that they do not want. So they limit what’s available for service, if they provide parts at all. What does that mean?

BACKORDER

Today, under normal circumstances, there seem to be always backorders or out-of-stock conditions. Many parts distributors have gone to just-in-time (JIT) inventory control and when they run out - they are out until they get the next shipment from a manufacturer or factory.

 There is about to be an epidemic of backorders and it will happen because of the troubles in Japan. Not just for your product but all products. The only two factories that make the resin for IC chip fabrication are in the disaster area. Your reply may be, “are you kidding me?”, but the answer to that is, “no I am not kidding”. The U.S. factories that made that critical resin, to save costs - shut down.

So, you are notified by a servicer that your part is on backorder - what’s next?

If we wait - you wait. Period. No matter how angry you get at your service company, there is absolutely nothing they can do. You can scream and threaten the service company with the BBB (there’s a waste of time) or your lawyer all you want but if your service company cannot get the part your product requires, they cannot repair it. About the only thing you will accomplish is to ruin the relationship or get your repair assigned to another service company. Then you have to start all over again.

Besides, why would you blame the only company that makes it’s living by repairing products for the parts delay? Service companies MAKE NO MONEY IF THE PRODUCT ISN’T REPAIRED. Why would we delay it? Who made the decisions that prevented the part from being available? Not us!

For the most part, stocking parts is ancient history. Service providers see some common failure parts within a brand year, but they generally have no idea what to stock.  JIT stocking has become the norm for the service industry as well, and not just because we don’t know what to stock, but we have an added burden that prevents stocking many parts.

CORE (DUD) CHARGES

Some parts, a service company does see on a regular or semi-regular basis for various manufacturers. Those parts, we would like to stock but are unable to because of the distributor and manufacturers policy regarding core returns.

A core charge is what they will charge the service provider if the part is not returned within a certain period of time, which ranges from 15 days to 2 months. Many also have a time limit when they can be returned at all. A core charge IS IN ADDITION TO THE COST OF THE PART.

Core charges are to compel service companies to return the “dud” part so that it can be remanufactured. After about a year or so, that particular part or assembly is no longer being manufactured and all that they can do is rebuild them for service.

Because of the time limitations, and the high core charges, stocking parts is economically impossible. A popular Sony optical block for their LCD TV’s have a core charge of $2500.00. One major manufacturer has a core charge for all boards of $250.00. Obviously, those parts are not stocked and ordered on an as needed basis.

Lastly, very few manufacturers or distributors give us an ETA for a backordered part, or if they do, it is obviously bogus. They guess or estimate. When you call your service company and ask when it is going to arrive, they are going to say they don’t know, or perhaps they will give that “estimate” they received. When that estimated date passes, who do you get angry with?

Many have asked why we don’t just tell the manufacturers or extended service plans to just replace your product. Your service provider has about as much authority to do that as we have to order the U.S. Justice Department to arrest every Wall Street banker.

Your service company (and extended service plan company) is on your side and we are your advocate. We are the only ones who have an investment in your repair.

Why beat up on us?

One problem - it was false. We had been hearing rumors about an unknown OEM putting spyware on computers for a couple of months and didn’t report on it until Network World broke the story at the end of March and identified the purported OEM as Samsung. Both parties to this media disaster have since responded:

The Deer-In-The-Headlights party:

GFI Aplogizes For False Positive

“The detection was based off of a rarely-used and aggressive VIPRE detection method, using folder paths as a heuristic. I want to emphasize ‘rarely’, as these types of detections are seldom used, and when they are, they are subject to an extensive peer review and QA process,” Eckelberry wrote.

“We apologize to the author Mohamed Hassan, to Samsung, as well as any users who may have been affected by this false positive. False positives do happen, it’s inevitable and like all antivirus companies, we continually strive to improve our detections, while reducing any chance of a false positive. This one (admittedly, an incredibly embarrassing one) made it through our processes, and I have met with the senior manager in the area this morning to handle what happened and to continue to improve our processes.”

The DUFUS party:

Network World who started this embarrasment, says it “could” have been a false positive. But the story has more updates on it than a stock ticker. I guess Network World is still trying to hold on to some shred of dignity.

One of the updates:

Update 3/31/11: Kabay: A Samsung executive personally flew from Newark, N.J., to Burlington, Vt., carrying two unopened boxes containing new R540laptop computers. These units were immediately put under seal and details recorded for chain-of-custody records. At 17:40, Dr Peter Stephenson, Director of the Norwich University Center for Advanced Computing and Digital Forensics, began the detailed forensic analysis of the disks. We expect results by Monday”

But at the end of this, you still have to wonder WHY that Samsung supervisor said that Samsung installed the keylogger to, “monitor the performance of the machine and to find out how it is being used.”  Or did he actually say, it “may” have been, speaking from ignorance, just to get rid of an annoying individual. Who knows?

But should a supervisor of unknown pedigree or experience be the authoritive voice of Samsung that causes Samsung to be thrown under a bus in a news story?No.

The Grump

Samsung hasn’t had a good last several months. They have multiple product class-action  and patent lawsuits to defend, they had the great Samsung Mold Epidemic during the Christmas season, LG vaults past them in appliance sales, Vizio succeeds them as the top LCD manufacturer in North America and, just recently, they get an anti-dumping complaint filed against them by Whirlpool. To make it even more interesting, Samsung’s top guy calls LG’s engineers “stupid” and has to apologize after LG threatened to sue.

I guess all those legal bills are why they just reduced many ASC’s and FE compensation.

The reason TPA’s use reclaimed parts from scrapped units, in most cases, is because parts are not available for the cheap Tier-3 brands. So they have to find them anyway they can to prevent a replacement of the product or a buy-out of the contract. Either of those options drives up the cost of an ESP or force them to reduce the already low labor rates they pay service providers.

Service providers know how doctors feel about how they are reimbursed by insurance companies for their services. Accept low rates or drop the plan. In this economy, that is hard to do.

While the consumer is not being told they are “new” parts - they aren’t being told upfront the source of these reclaimed or knock-off parts. Should they be? That’s hard to say. Is there a safety hazard from using parts with an unknown etiology? Unknown. The reason parts are not available on these cheap brands is because they were never intended to be supported after the warranty expires. Not like the European and Japanses brands who refuse to reduce their quality or consumer support.

The Grump calls on every state’s Attorney General’s office of consumer protection to look into these products that are being sold to an unwitting public. We caution all consumers to read the warranty closely for any product they purchase. If you are buying a throw-away, don’t blame the service industry.

The best pickups are made in Japan. Install them in a set, and there’s better than 95% odds that the pickup will run properly. One step down the ladder are pickups that say they’re made in Japan on the box, but just don’t look and feel 100% right. These have about a 75% chance of working correctly. Next are pickups that come from China — no doubt about it — but that may actually be original OEM parts or come from the same factory. These also have about a 75% chance of working correctly. At the bottom of the stack are the pickups that usually have no origin stamped on the box and that have a crudeness of look and feel. These have about a 35% chance of working correctly.

With transistors and IC’s it’s even worse. There are original devices. There are devices that look like original devices, but which arouse suspicion. There are devices that are crude copies of original devices, with smeary numbers and different packaging — but that sometimes work (if a tech is willing to take the risk.) And finally there are hard-core counterfeits, usually fakes of expensive original devices. Install one of these, and you can be sure the part will blow up.

I tell my customers that a professional service technician can distinguish among and between these different grades of parts. He or she will only use the best parts that are currently available for any application. And if NO parts are currently available except sub-standard knock-offs, a professional service technician will say, “I gave it my best shot, but it appears that quality replacement parts are no longer available.” He or she will return the set unrepaired and charge a diagnostic or estimate fee. Meanwhile, the non-professional may install a sub-standard part, return the set to the customer, and then cross fingers.

Fred
Classic Audio Repair
http://www.repairaudio.com

Questions to current Samsung employees begets the response, “I can’t talk about it”. Hmmmmmm.

The Grump

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September 26, 2010

Confirmed information is that Jay Reynolds, VP Field Service has had Field Service removed from his portfolio and that Mark Francisco has been named Director Field Service for Samsung.

Three current and former employees of field service stated that it “couldn’t have happened to a nicer guy.”

Reynolds’ LinkedIn profile state he is VP Strategy and Field Service at Samsung. Looks like it is just “strategy” now.

Reynolds’ most recent actions as leader of field service was to drastically cut reimbursements for service companies on their flat screen products and to use “trunk slammers” instead of qualified service companies and technician’s. This has caused many qualified independent service companies and technician’s to stop accepting warranty referrals. With the use of quasi-qualified field people at low rates, who inevitability failed to fix the product or the customer; product take-backs and customer satisfaction has been reported to have adversely impacted the bottom-line of field service at Samsung.

Reynolds’ has been reportedly antagonistic to any organization of independent servicers and has been hostile to any meaningful cooperation between Samsung Field Service and independent service companies or their trade associations. His more infamous comments were addressed to independent service company’s national trade association where he referred to it as a “whore” with multiple witnesses.

This commentary is this Grump’s opinion and The Grump claims the 1st amendment priviledge.

The first time was to warn the public and authorized service companies (ASC) that RCA/TTE wasn’t paying their warranty bills.
Now it seems that they cannot afford quality professional service and are going to be sending out the goof squad to fix your TV.
Worse, the professional technicians who have been servicing RCA products FOR DECADES under warranty are going to take a pay cut AND BE CHARGED for the honor of
working for less money than a teenage grocery bagger.

You read it right. The service companies are going to be charged to come to your home to fix your RCA TV for less money and they have to pay for it.

Normally this Grump doesn’t comment much on tier 3 brands. But we have been deluged with comments from outraged service companies. Watch this spot - there will be copies
of the correspondances between this new disaster in the making and their screwed-in-the-ground warranty service companies.

Before you buy an RCA….talk to your local service company. If you can’t find one that services RCA under warranty, well you might consider a different brand.

RCA, Nipper, His Master’s Voice are trademarks of one or all or some of these companies: RCA, which was owned by Thomson and sold to TTE a division of TTL who has contracted with DEX who then subcontracted to…….we lost track.

Holy zāogāo