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Letter to the Editor
This article originally appeared in the January 2002 Issue of INSIGHT
Predictions
Slow Recovery for Market; Strong and Steady for Us
Key question: Will we see a recovery in the economy now that the Taliban and al-Qaida have pretty well been defeated and/or chased out of Afghan-istan?
My best estimate is that a recovery will be slow in many sectors of the economy but that collision repair will remain relatively strong, down only three or four percent from last year. A growing threat to collision repair volume, however, is the accelerating percentage of accident claims that are resulting in total losses.
While a few of these totals may end up with wreck rebuilders, the vast majority end up either as sources for recycled parts or in the crusher.
One leading insurer reports that totals, including thefts, are now over 15 percent of claims as compared to 12 percent in 2000, and more alarmingly, 40 to 45 percent of the claims dollar is going to settle these totals. It would appear that overall claim severity is running over $2,600 plus deductible, and repaired vehicle claims are running around $2,150 plus deductible.
With the automotive push to sell cars this fall/winter, with zero percent down, zero percent interest, the bottom may well fall out of the used vehicle market, which will lead to even more totals as the cost of repair climbs and 60 to 65 percent of ACV (actual cash value) allows for less dollars to be spent on a repair.
As the ACVs drop, more and more owners will find themselves "upside down" in their financing after an accident - again a real potential problem impacting the volume of repair work that will be done.
At NACE this year there was a well-attended panel discussion addressing the current and future position of OEs regarding collision repair. It was interesting that Ford, Toyota, and General Motors all have or are introducing major programs to help their dealers to both expand sales volume and improve profitability of collision repair.
The OEs, with the exception of DaimlerChrysler, appear to be ready to help dealers capitalize on service and body shop expansion as new and used vehicles sales drop off in the new year. In an early 2002 issue we will provide a comparison of these three programs, hopefully along with feedback from dealers, as to the impact of their programs on operations.
On the investment scene, late November and December to the 15th has been pretty flat with minor increases in some stocks and minor drops in others.
Keystone continues with its comeback, now up over $18 from a low at the beginning of the year of $7.
AutoNation is another company that has regained prior year losses and has almost doubled in value in the past few months.
Copart just announced a split, and the stock bounced up from $30 to $35 on the news. Copart has been a strong stock for the past several years, and it would appear that the end of its growth is not in sight.
Next month we will do our best to recap the year and provide INSIGHTful suggestions/ comments as to where we feel the industry will go from an investment standpoint in 2002.
-Charles Baker-
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