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Letter to the Editor

This article originally appeared in the June 2005 Issue of INSIGHT

Hitting the Road

This month, only five of our Collision Repair Industry-related stocks and two auto insurers had per share prices on the plus side of their beginning of the year figures. Our Supplier Index is down almost 15 percent from its January standing, and even our INSIGHT Fund Index is down over ten percent YTD. If Allstate’s stock price had not jumped over $5 to $56.32 per share, even our Insurer Index would have shown negative growth in May. As it stands, our insurers squeaked by at less than a percentage point above their January starting place.

As of May 15, our refinish manufacturers’ per share stock prices were all down YTD, anywhere from about six to 11 percent, but none of them had a wretched quarterly report.

First quarter net sales for Sherwin-Williams in the Automotive Finishes Segment increased eight percent, to $129.9 million. DuPont, although probably unable to get back any of its money from the failed M2 operation, announced plans to double its investment in China, spending another $600 million by 2010. The company has been thinking about building a plant to produce titanium dioxide in China.

U.S. automakers Ford and GM, faced with serious disapproval on Wall Street, are taking a long hard look at business plans. Bill Ford has even decided to forego his salary for the time being, but Ford will need more than that considerable amount of money to bail out its ailing spin-off supplier Visteon.

Insurance Auto Auctions, Inc. has received the shareholder votes necessary to complete the acquisition of IAA by an affiliate of Kelso & Company, a New York based private equity firm, for approximately $400 million. IAA's stockholders will receive $28.25 per share in cash as a result of the transaction.

In Canada, the Boyd Group Income Fund units took a tumble this month after the collision repair consolidator cut its distributions by nearly 40 per cent. I am still, however, confident that management at Boyd is on an ultimately successful course. It may be a wise idea to solidify operations for a while before making any new shop purchases.

Two of our car dealership stocks, AutoNation and United Auto Group, managed to stay within one percent of their January per share stock prices. CarMax, however, had a rough month on Wall Street. The company lowered its earnings and sales targets for the quarter, indicating that its dealerships were feeling the impact of higher gas prices at the pump, and therefore consumer uneasiness and curtailing of road travel.

I am optimistic, though. I am hoping that the call of the road in a slow-to-arrive Summer season will be a temptation too powerful to resist, despite the over-$2 per gallon price of fuel. AND, it makes no sense to pump such pricey gas into an old beater, so perhaps dealers should put a a few shiny convertibles out front on their lots and hope for some Summer sales.

-Charles Baker-

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