Over The Counter: March 2005

Mixed Results the Rule of Financial Reports

Financial results for many auto parts sector companies paint a picture that was less than stellar, but far from disastrous.

Federal-Mogul reported yearly sales up 12%, but a yearly loss that widened over 2003 due to other factors. The good news for Federal-Mogul was that it reported net sales of $1,548 million and $6,174 million for the three- and twelve-month periods ended December 31, 2004, representing an increase of 10% and 12%, respectively over comparable periods of 2003. New business, increased OE and aftermarket volumes, and well as favourable foreign currency drove these increases. However, the company reported a loss from continuing operations before taxes of $209 million and $189 million for the three and twelve-month periods ended December 31, 2004 largely as a result of impairment charges totalling $240 million and $276 million, respectively. All figures in U.S. dollars.

While the strong Canadian dollar may have helped buoy that company’s results, the loony’s continuing strength was stated as a key reason that a long-time spray booth manufacturer based in Barrie, Ont., announced it was pulling up stakes for a new home in Mexico.

“We are facing intense world competition from low-cost manufacturers,” says Carlos Pippa, president and chief executive officer of Global Finishing Solutions. “The Monterrey location will enable GFS to conveniently access American and Canadian markets, and allow us to operate at much lower cost.” The Canadian plant in Barrie, Ont., will gradually transfer all manufacturing to Monterrey throughout 2005.

Also in the collision sector, Keystone Automotive Industries, Inc. reported record sales for its fiscal third quarter ended December 31, 2004. Net sales for the fiscal third quarter increased 8.2% to a record $136.6 million, compared with $126.3 million last year. All figures in U.S. dollars.

“Record sales for the quarter reflect continued strength of Keystone’s Platinum Plus private label product line as well as increased utilization of aftermarket collision replacement parts by the collision repair industry,” says Richard L. Keister, president and chief executive officer.

Domestic market performance also indicates a mixed picture. Canadian Tire Corporation, Limited, which enjoys a dominant share in the do-it-yourself automotive market, reported net earnings of $291.5 million for 2004, an increase of 20.8% compared to $241.2 million in 2003. Excluding non-operating gains and losses, net earnings were $267.5 million, a 17.4% increase compared to $227.7 million in 2003. All figures in Canadian dollars.

“We finished the year with a strong fourth quarter. Even with one less week in the retail calendar compared to last year, Canadian Tire Retail and Mark’s Work Wearhouse increased both total and comparable store sales in the fourth quarter supported by robust holiday sales,” said Wayne C. Sales, president and CEO. “Our 2004 results reflect our success in continuously improving our operating performance, as well as our demonstrated ability to execute our strategic plan and leverage the investments we’ve made in our business over the past several years.”

Sales accelerated in the fourth quarter, led by strong holiday sales across the home, leisure and auto categories.

PartSource’s total retail and commercial sales increased year-over-year, while comparable store sales declined slightly, consistent with softness in the North American auto parts sector. PartSource’s overall sales growth benefited from a focus on operational execution and penetration of the Greater Toronto Area market during the year, adding seven new stores. PartSource opened a total of eight new stores in 2004 and plans to open approximately 10 stores in 2005.

Uni-Select jobber Pat’s Auto Supply, based in Grand Prairie, Alta., is celebrating its 50th Anniversary this year.

Dan Gorman, who runs the operation, having taken over for his father Pat some years ago, says that growth and smooth succession have been keys to the company’s longevity, adding that plans are already underway to ensure that the next transition goes as smoothly.

Plans are also underway for a celebration in May, just prior to the Automotive Industries Association of Canada’s Western Regional Conference in Victoria, B.C.

Beck /Arnley recently concluded its “Back on Track” promotion by awarding big screen TVs to three jobber counterpeople across Canada.

The winners’ names were selected from ballots entered for product sales over the course of the four-month promotion.

Winners were Dennis Teigen, Wyatt Auto Parts, Kelowna, B.C.; Rob Finamore, Guelph Auto Parts, Guelph, Ont.; and Benoit Fafard, Pieces D’Auto B.L., Sherbrooke, Que.

Raising the Grade of Automotive Press

Castrol held a recent press conference design-ed to inform key members of Canada’s automotive press about the changes occurring in motor oil technology.

The event, held at Queensway Audi, briefed attendees on the increasingly stringent standards applied to motor oils by industry groups such as the American Petroleum Institute and ILSAC, as driven by the need to increase vehicle fuel economy, reduce emissions, preserve emissions components, and lengthen oil drain intervals.

A key part of this development is the increased dependence on synthetic lubricants by automakers. Audi, for example, specifies synthetic motor oil exclusively for its 2005 models. This is part of the reason it can also push oil drain intervals out to 15,000 km and beyond.

Castrol also released a training CD and an ASE-recognized Synthetic Motor Oil Education Program for the aftermarket which outlines the changes in motor oil technology and engine requirements, as well as how to communicate these changes to customers at both the jobber and service provider levels.

“We really try to focus on patience and respect,” says Castrol Canada marketing manager Anthony Stadelman. “The goal is to create a positive experience for the consumer.”

Among the more interesting points revealed at the event was that Audi disables its oil monitoring system in North America, preferring to set a standard 15,000 km oil change interval rather than a variable one based on driving conditions. The reason, according to an Audi spokesperson, was to provide North American consumers with a set oil change interval program which they have become used to. When activated, that oil monitoring system could push recommended oil change intervals out to more than 20,000 km.

Cardone Industries Celebrates 35th Anniversary

Cardone Industries, a well-known and respected supplier of remanufactured automotive parts, as well as new automotive parts, has announced that it is celebrating its 35th anniversary.

Cardone Industries opened its doors February 8, 1970 and continues to operate from its headquarters in Philadelphia, Penn.

“Our success and longevity is due to our passion for excellence, innovation, and improvement,” said Michael Cardone Jr.

Cardone Industries was the first remanufacturer in the United States to earn ISO/ TS16949 certification. It was also one of the first remanufacturers to achieve ISO 9002 and QS-9000 quality certifications (precursors to ISO/TS16949) and ISO 14001 certification, an environmental management certification.

Cardone is a supplier of automotive products, including a full line of brakes, drivetrain, electronics, motors, pumps, and steering to the automotive aftermarket throughout North America.

Maple Ridge, B.C. based Lordco Auto Parts Ltd. has made a generous donation of $100,000 to Maple Ridge Hospital Foundation capital campaign.

Ed Coates, owner of Lordco Parts Ltd., rose to the occasion to contribute to his community’s hospital and raise the standard of the company’s local hospital. He felt that it was his duty since the community has been so supportive of his company for more than 30 years. Pictured (left to right) are Right Meadows Hospital Foundation representative Bart Findlay, and Lordco owners Ed Coates and Marlyn Coates.

Auto Value Signs with Evernham

Auto Value/Bumper to Bumper has inked a deal as associate sponsor of Evernham Motorsports, including primary status on the No. 91 Dodge in the 2005 NASCAR Nextel Cup Series and on the No. 79 Dodge in the NASCAR Busch Series.

Mustang Instruments Land Ford In Court

Engineer Frank Weyer has filed a lawsuit demanding royalties from Ford Motor Co. for using a feature in 2005 Mustangs that permits operators to change the background colour of their car’s instruments.

The engineer is claiming he patented the technology in 1999. He wants Ford to pay $4 U.S. for each car that carries the feature, which Ford calls MyColor. Ford claims the lawsuit is without merit.

OBITUARY

Canadian automotive aftermarket advertising and marketing veteran Lube Koval passed away suddenly in late January.

Koval, who helped build the Matthew.Scott agency from an advertising entity to a full data gathering and sales and marketing assistance venture, passed away in Toronto of undisclosed complications. He was 52.

He was involved in the automotive aftermarket in ways far beyond that of an advertising and marketing services provider, having worked to further many aftermarket initiatives. Most notably he was a member of the board of directors for Shad’s R&R, a charitable cause in aid of muscular dystrophy research that has raised millions of dollars over the years. Matthew.Scott also provided the ice time each year for the “Slapshots for a Cause” fundraiser which donated money to the Canadian Cancer Society. He was also conspicuous at many industry events and made presentations to the aftermarket industry on a number of occasions.

Koval is survived by wife Janice and three sons, Matthew, Christian and Michael.

The family has asked that donations be made to Canadian Blood Services or Organ Donation Ontario. Condolences may be sent to the family at lube.koval@wardfh.com.