By Jeff Sanford
Toronto, Ontario — October 6, 2016 — This week we look at the latest report from industry analyst Bradley Mewes, the reintroduction of the Ford Bronco just in time for OJ Simpson’s parole hearing and the fuel cell vehicle Chevrolet is developing for the US Army.
– Collision repair industry analyst Bradley Mewes has released his latest report. He finds that, “In the first 9 months of 2016 the largest 4 collision repair consolidators have collectively added 177 locations in North America, for a total of 1486 collision repair locations.”
He notes that as in “previous quarters and years, the vast majority of these additional locations thus far are a result of acquisitions, or the purchase of an existing business. To a lesser extent, some of the consolidators are building and developing new locations.” He goes on to say that Q3 had “some major surprises.”
According to Mewes, an interesting collision industry consolidation trend has developed over the past few months. “Increasingly some companies have continued to grow aggressively, while others have pulled away from expansion. Interestingly as well, the way in which the leading companies are expanding is changing as well. Partnerships with REITs, or Real Estate Investment Trusts, is becoming more common, both in acquisitions as well as in new location development or re-developments.”
Drilling down to a company-level basis Mewes notes that “Caliber continues its aggressive growth strategy across the U.S. In Q3 the company added 31 locations, more than any other consolidator and more than any quarter in 2016. Growth has been predominately acquisitions, but new developments and re-developments are an increasingly important part of the company’s growth strategy. Cumulatively for the year the company has added 85 locations and appears to be on target to possibly have another record year in terms of additional locations added … Boyd, which operates as Gerber in the U.S., continues its rather measured and consistent growth. The company added 18 locations Q3, more than any other quarter this year. Growth has been predominately in the form of acquisitions, however the company has completed some re-developments. Management continues to re-iterate they are well-positioned to take advantage of additional large acquisition opportunities, and a quick review of the balance sheet shows they have the capacity to do so… Depending on what transpires in the next 3 months, the company may be on target to have another record year, exceeding the 2014 record of adding 61 additional locations.”
As for the other big brand name, Service King “has been relatively quiet on the expansion front” in the first part of 2016. Rounding out the Big Four ABRA has not made a single acquisition. “In fact, for the first time in recent memory, one of the large consolidators decreased in size over the quarter. At the end of Q3 ABRA operated 356 locations, two locations fewer than the previous two quarters. ABRA has grown aggressively over the past 3 years and it appears that the company has temporarily slowed its growth plans.”
Commenting on the slowing of the pace of acquisitions, Mewes wonders “Whether this is a strategic pause after years of aggressive growth, or something else is yet to be determined. Regardless of the reason, it is an important consideration for the owner of a collision repair business contemplating a sale of their business. Generally speaking, the greater the number of willing and able buyers, the better the outcomes for the seller. Competition is good, especially when selling a business. If buyers exit the market this can have a negative impact on valuations.”
The second key trend that caught his attention is “the continued use of brownfield and greenfield developments (i.e. redevelopment or new developments). Of the 3 companies that increased the number of locations in Q3, all of them have opened locations as a result of a new development or redevelopment in the last 12 months. Again, from an M&A standpoint, this is an important consideration as brownfield and greenfields can often have a negative impact on valuations as well (these developments act as substitutes for acquisitions – why pay a premium to acquire a business when you can build one from scratch?).”
Check out supp-co.com/insights for the full report.
– Ford is bringing back the Bronco in 2018. Introduced in 1966, the vehicle was the original SUV. According to a report on Maxim, the new machine will be “aligned with the trucks roots,” in that it will be closer to the original rather than the underpowered-overweight versions that came out post-1978. The report on Maxim slyly notes that O.J. Simpson will be eligible for parole the same year as the Bronco will be reintroduced.
– Chevrolet is working on a “zero-emission hydrogen fuel cell.” According to a report on Tech Crunch, the “just-revealed Colorado ZH2” is being developed for the US Army to “find out if the unique advantages of fuel cell tech are viable in actual real-world military mission situations.” The advantages of a fuel cell over an internal combustion engine include “near-silent operation,” “reduced acoustic and thermal signatures,” “high wheel torque at all speeds,” “low fuel consumption across operating range,” and “water by-product for field uses.” It is also a vicious looking vehicle.
– The Dallas Cowboys announced a long-term partnership with Caliber Collision this week. Caliber will present the Dallas Cowboys Military Combine, presented by Caliber Collision, which will be held on November 5 at Hood Stadium in Fort Hood, Texas. According to a press release, “Active service members will participate in a football combine for a chance to compete in a final competition hosted at The Star in February 2017. The Military Combine winner will have the opportunity to announce a Cowboys 2017 draft pick at AT&T Stadium.” In addition, Caliber Collision will donate “a vehicle to a military family in need … ” Along with the Military Combine, Caliber Collision will also join the Cowboys in various community efforts including supporting programs such as the Cowboys Taste of the NFL in 2017 and beyond.
– A month after a large piece of concrete fell five stories from a vacant building in downtown St. Louis and crushed a car, the owner is wondering what to do about his finances. The insurance company of the firm that owns the building the concrete fell from has paid out. But the amount has left the owner of the car in the red. According to a report by local TV station KSDK, the couple received an “insurance check for total losses in the amount of nearly $9,300 on behalf of the Cincinnati Insurance Companies.” But that amount doesn’t come close to covering the $18,000 loan still outstanding on the car. The insurance company only had to pay market cost for the car (based on prices gathered from a 100-mile radius). But many cars in America today are being bought through huge, high-interest loans. Presumably this is an explanation for the discrepancy between the insurance payout and the outstanding amount owed on the car. According to the report, the incident, “…[has] become a massive financial burden that’s crippling the young couple.” Now they have to take out another loan to pay back the first one and afford another car.
– Volkswagen has agreed “to pay $1.2bn to its 652 US dealers as compensation for the diesel emissions scandal,” according to a report in The Financial Times. The settlement resolves only one set of cases related to the claims.
– A multi-millionaire has set up an offshore classic car restoration business that takes advantage of low wages in the Philippines. A report by the UK paper The Telegraph finds that “more than 200 people” work in the complex that has “vast hangar-like halls for bodywork, for Jaguar, for Rolls-Royce and Mercedes … ” The restoration factory is on a former US airbase that is now known as the Clark Freeport Zone.
Australian businessman Jim Byrnes is the one bankrolling the Byrnes Motor Trust Restoration facility. “I’ve been a collector for 40 years, but six years ago I sold a company for $100 million and started investing seriously. If I buy the right cars, they’re a currency hedge; if the currency is down in one country, I’ll buy there. If it’s strong in another, I’ll sell there,” said Byrnes as reported by The Telegraph.
– Is the auto sales boom done? Could be. “General Motors, Ford, Honda and Fiat Chrysler all saw their sales go down in September,” according to a report on NPR. Only sales of Nissans and Toyotas were up. One analyst, Jessica Caldwell of Edmunds.com, put a positive spin on the numbers, saying that, “Just because we’re not seeing the same amount of growth as we’ve had in the past six years, it’s not a bad thing because we’re on a record pace.” She went on to say that the fundamentals of the market surrounding cars remain strong. “We’re plateauing at the highest level ever. We’re at point in which automakers are going to make money, dealers are going to make money and consumers are getting good deals,” she said.
– Hyundai has a new video attacking counterfeit parts. The video “points out serious deficiencies in a counterfeit airbag installed in a 2011 Honda Sonata … In the film, a Hyundai interviewer asks a man named Scott to evaluate two airbags, both stamped with the Hyundai logo. You can check it out for yourself in the player below.
