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Letter to the Editor

This article originally appeared in the January 2003 Issue of INSIGHT

Predictions: Some Ends Near and Some Beginnings Here

The end is near. That could mean the end of the year, end of the world, end of peace, or, in terms of this investment page, the end of the continuing decline in the profitability and stock prices of those companies associated with the Collision Repair Industry.

I believe that we have seen the bottom, and strong companies such as PPG, Sherwin-Williams, Genuine Parts, and 3M will lead the pack in 2003.

While our INSIGHT Fund Index clearly out-performed the Market (a 4.4 percent gain loss to the Dow of 16.3 percent), its performance was a long way from stellar. For 2003 our fund will hold these securities: CCC, FinishMaster, Keystone, SAFECO, Genuine Parts, and Pro-gressive.

While mentioning the prospects of PPG, Sherwin-Williams, and 3M, their participation in collision repair as a percent of their overall sales is low, and for 2003 we will concentrate more heavily on those companies with a higher percentage of their sales in our industry.

Stocks to get rid of now include Drivershield, Parts. com, and eAutoclaims. These puppies have grown into real dogs, especially Drivershield, in my opinion.

Management at Drivershield has not only been ineffective, but downright greedy, first with compensation and bonuses to themselves, then a move to Florida, and the sale of a key part of the business. If this stock gets much lower, Barry et al. may be able to not only see it de-listed but end up taking the company private at a low cost, getting their hands on the $7 million or so left in current assets.

Parts.com and eAutoclaims again, in my opinion, were dot-com phenomena that are now on their way to oblivion, having passed through 12 months of limbo.

For these last 18 months I have been personally heavily involved with the Ford Motor Company assisting in the development of a Ford and Lincoln-Mercury network of certified collision repair shops. This network is being piloted in Ohio and Michigan. Ford's focus in this program is verifiable quality of repair and a systems approach to maintain and confirm an established quality level.

I mention this program only as an indication of the focus on quality that I personally see at Ford and truly believe that this focus, coupled with a renewed emphasis on dealer relations and support, will help to turn around Ford's earnings, with a resulting turn around to the stock price - a bet that I have made in 2002 and will, from a personal investment standpoint, continue to make in 2003.

A bet that collision repair facility owners would be wise to make in 2003 is that insurers will still be keeping a sharp eye on their costs. Make some practical resolutions to improve shop operations and keep your eye on your bottom line. We want a prosperous New Year for all our readers!

-Charles Baker-

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