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Letter to the Editor

Thinking Shrinking

As this was written, good news for Sherwin-Williams appeared on the horizon. As detailed on page 6 of this month’s INSIGHT, Sherwin-Williams lost a major law case in Rhode Island addressing the issue of lead in paints. At first, dollar amounts of liability were estimated in millions, even billions. The good news was that Sherwin-Williams will not be required to pay punitive damages, which should shrink the company’s settlement cost substantially.

Sherwin stock rebounded somewhat after this was announced, but it will be some time before we will know the full implication of the court ruling on the per share price of Sherwin-Williams stock.

Besides at Sherwin-Williams, happy faces are probably evident at Keystone Automotive, based on the fact that the company leads all of our Collision Industry related stocks with a YTD increase in value of just over 37 percent. The State Farm agreement for the new Select Service Program leaves open the door for future specification of aftermarket parts by State Farm.

It is our belief that State Farm will maintain its present position on aftermarket pending appeals by the plaintiffs in the Avery case, after which we may see State Farm renewing its specification of aftermarket sheet metal.

This will be the last month that ADP appears on our stock list as a result of the sale of the insurance services operation in San Ramon, California to Solera, headed by Tony Aquila.

On page 3 there is coverage of this acquisition. It will be very interesting to see in just what direction this operation heads.

Those readers that have been with INSIGHT for a long time will remember a feature article titled “Honey, I Schrenk the Profits,” which referred to Ed Schrenk’s efforts to position USAA as a purchaser of collision repair parts, which would then be used by shops in the USAA Stars Program, and the shop would be provided with a “fee” rather than enjoying an industry average of 28 percent GPM on OE replacement parts.

Ed Schrenk is now, I believe, an officer of Solera, Inc., and it would not surprise me a bit to see renewed efforts to assist insurers in reducing severity by offering “solutions” to insurers, based on his experience with USAA.

-Charles Baker-

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