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Letter to the Editor
This article originally appeared in the March 2002 Issue of INSIGHT
Slow and Steady
Spring seems all but sprung already, at least here in Cleveland, INSIGHT’s hometown. The unusually sparse snowfall in our neck of the woods subdued the usual winter bustle at collision repair shops in the Midwest. The closest we got to our infamous lake-effect snow was watching the recently completed Olympic Winter Games on television.
The slow recovery of our industry stocks that I predicted last month seems to have started - very slowly but hopefully also steadily.
Fourth quarter and year end reports from the major refinish paint manufacturers were sobering, especially from DuPont, where earnings were down a whopping 75 percent in Q4.
DuPont’s automotive refinish segment, however, performed considerably better, down (only) about 12 percent. Continuation of the company’s restructuring activity and its determination to "diet" off non-core business segments should get this large cap company back in shape for a better year. p>Apparently, Wall Street is betting on DuPont, too, with a small but optimistic increase in stock price of just under five percent this month.
The Sherwin-Williams stock value is up just a hair, but I believe we can look forward to some solid improvement there if this company can get more determined to focus on its strongest business units. As CEO and chairman Chris-topher M. Connor commented, "We expect that 2002 will continue to be challenging..."
News from the aftermarket crash parts arena lately demonstrates how vital it is to respond to challenges with determination and careful business planning. Both Keystone Automotive and Eagle Automotive operations were impacted by the State Farm $1.2 billion judgment in 2000.
Keystone management steadfastly continued to grow its core business, to add product lines, to improve its national distribution operation, and to cautiously pursue attractive acquisitions. Over the long haul of 2001, the company moved steadily along the path it had chosen, and it is working. Net income for Q3 was up four-fold, and Keystone’s share price rose almost ten percent since January 1.
Keystone’s competitor, Eagle Automotive, in stark contrast, closed its 18 U.S. locations after 20 years in the aftermarket crash business.
Both Copart and Insurance Auto Auctions seem to be moving along this month. Copart announced a stock split, expanded its midwest auction sites, and has recently completed installing its Virtual Bidding online auction product for use at 16 locations across the country.
Insurance Auto Actions just entered into a $20 million credit facility, which should encourage more growth there.
For insurers, any quarter would probably look better than Q4 of 2001. Allstate chief executive Edward Liddy commented, "We are not pleased with our financial results in what was an uneven quarter." (Uneven is a euphemism here for a drop in quarterly profits of about 50 percent.)
Despite the really hard Q4, though, INSIGHT’s insurer index is staying fairly even so far in 2002. Insurance companies are always keenly aware of the bottom line, and famously (or notoriously) ready to cut costs and raise premium rates, so we can expect better results by mid-year.
-Charles Baker-
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