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Letter to the Editor
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This article originally appeared in the December 2006 Issue of INSIGHT

Toss a Coin and Make a Wish

In November many of the collision related stocks that we follow showed significant increase in value, specifically: BASF, DuPont, Genuine Auto Parts, 3M, Sherwin-Williams, Snap-on Tools, and Sonic Automotive showed some nice increases.

On the other side of the coin, Keystone Automotive Indus-tries dropped significantly, perhaps on the chance that Keystone and other aftermarket suppliers will lose the copyright patent case currently being tried in Washington.

Ford Motor Co. has sued Keystone and others for patent violation on sheet metal, specifically for a number of parts on the new F150 truck. If this case should go in Ford's favor, then more vehicle manufacturers would certainly patent the design of sheet metal used on their vehicles, thus either forcing the aftermarket suppliers to obtain a license, or precluding them from selling aftermarket parts with the same design as the OEs.

Overall Keystone stock has had a nice run in 2006 for approximately $30 to $39 per share of stock, an overall increase of approximately 22 percent. If Keystone should lose the case currently before the patent courts the company would certainly appeal, and thus the impact of this decision might not be felt in terms of their sales for quite some time.

Sherwin-Williams was one stock that was up dramatically, having the highest percentage gain of the year. It is not clear at all as to how much of this gain is automotive related, i.e. increases in automotive refinish materials.

This year versus last the Collision Industry as a whole is relatively flat. However, some suppliers have shown increases in sales outweighing price increases.

In Detroit, U.S. automakers are trying to find a few coins to rub together. The Big Three are cutting fat, but it is unlikely that we will see a return to profitability for them for at least a year or so.

General Motors said that it has completed the sale of a 51 percent stake in its finance unit, General Motors Accept-ance Corp. (GMAC) to private investors, a deal that is expected to pay the automaker about $14 billion. The consortium of investors, led by Cerberus Capital Management, a private investment company, also includes Citigroup Inc. and Aozora Bank Ltd.

Ford Motor will watch about 38,000 employees, nearly one-half of its factory workforce, leave the company with buyouts or early retirement offers in early 2007. The auto maker is clearly banking on making up for the hefty payout with improved operations over the next few years.

Wishing a happy and prosperous New Year to all!

-Charles Baker-

 

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