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Letter to the Editor

This article originally appeared in the February 2008 Issue of INSIGHT

Living in the Groundhog’s Shadow

Well, our friend the groundhog saw his shadow on February 2 this year, predicting six more weeks of Winter. Although extra bad weather is a good omen for collision repairers, driving - or towing - more work to their doors, our furry friend, along with investors, seemed to see a bigger shadow over Wall Street this month. Hopefully, efforts in Washington to stabilize and improve the U.S. economy will work, but any fix will take some time.

Only one of our Collision Industry-related stocks and one insurer did not lose ground from their January 1 mark. DuPont, with a per share stock price of just over $45, posted a two percent gain, and Japan-based Millea reached an eight percent rise per share. All the other industry-related stocks in our chart have posted losses in share prices in the first month of 2008.

Taking the biggest hits were the national car dealer consolidators. When will their pain end? Not soon enough! General Motors, neck-and-neck with Toyota for the biggest vehicle manufacturer in the world, reported a $38.7 billion loss for 2007, the largest annual loss for a vehicle manufacturer ever. Another round of buyback offers to the company’s 74,000 hourly workers is rolling out immediately.

AutoNation’s per share stock price fell almost 21 percent YTD by mid-January. Penske Automotive Group, at $14.26 per share, was down over 18 percent YTD, and CarMax and Sonic Automotive share prices were both about 13 percent below their New Year’s Day postings.

Our auto insurers continue to struggle at the New York Stock Exchange. SAFECO, with a per share stock price of just over $51, dropped seven and a half percent in January. Allstate and Progressive have been suffering some Wall Street doldrums. Both insurers’ shares seem to be going nowhere.

I must confess that I came away from a January phone interview with Tony Aquila, head of Solera Holdings, the parent company of Audatex, pretty impressed with his international vision for his outfit. This global software and services provider for claims processing has my attention.

There appears to be one ray of light amid the economic shadows these days. Winter weather seems to be willing to help the Collision Repair Industry for at least six more weeks. For a change, statistics have indicated an increase in the number of collisions across the nation. Collision repair facilities in the U.S. may be getting busy.

-Charles Baker-

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