Magazine article Black Enterprise

Pole Position: Cid Wilson Sees Auto Aftermarket Industry as a Growth Driver

Magazine article Black Enterprise

Pole Position: Cid Wilson Sees Auto Aftermarket Industry as a Growth Driver

Article excerpt

Until an indestructible car is invented, Cid Wilson, analyst and director oft at Kevin Dann & Partners, says the companies he covers will profit. Wilson tracks retailers, but his primary focus is the automotive aftermarket. Companies in this slice of the industry sell mechanical and auto body parts to consumers and repair shops. Some also handle auto repairs.

Figures from R.L. Polk show that American drivers are holding on to cars longer. The average age of vehicles in the U.S. in 2005 was 9.1 years old compared with 8.9 in 2004 and 8.6 in 2003. And with the number of vehicles on the road increasing each year, the probability of accidents as well as the number of cars in need of repair increases, says Wilson.

One challenge for auto aftermarket retailers is that auto dealerships are expanding their parts and service business to make up for shortfalls from sales. "GM loses $2,330 a car," says Wilson, quoting statistics from the 2005 Harbour Report. "They are looking for other ways to make money, and the aftermarket side is very lucrative." Wilson also explains that when automakers offer sales incentives--such as employee pricing to the public, it puts newer cars on the road that don't need repairs right away, slowing sales for aftermarket retailers.

Wilson believes Keystone Automotive Industries Inc. (NASDAQ: KEYS) should benefit from more cars on America's roads. Keystone sells collision repair parts such as fenders, hoods, bumpers, paint, and other materials, for cars and light trucks, "You have a lot of regional players, but they are the only ones with a national footprint," Wilson explains. Because of its larger distribution network, Keystone can get requested parts to customers faster than smaller competitors. About 97% of its business comes from auto body repair shops. Keystone, which doesn't have any debt, has been acquiring smaller firms. …

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