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Friday Fun: New rules for Ontario truck drivers, two-tiered highway access and the world’s worst parking job

A strong contender for the title of world's worst parking job. Note the front right tire is clearly in bad shape, and this is right at the beginning. You can see the whole sorry mess for yourself in the player below.

By Jeff Sanford

Toronto, Ontario — June 30, 2016 — Welcome to another edition of Friday Fun! This week we look into new rules governing truck drivers, how Tesla’s newest challenger may be a pet project for one of China’s wealthiest men and video footage of what may very well be the worst parking job the world has ever seen.

– The Ontario provincial government has announced new rules this week requiring truck drivers to receive specific training before they get a license. A report by the Toronto Star had found that “anyone” could obtain a Class A licence without any formal or mandatory training. The Star report found that the “lack of required driver education had allowed the growth of dozens of unregulated truck training schools, known as ‘licensing mills’,” by trucking industry insiders. The cut-rate schools are expected to be put out of business by the new regulations.

– Great idea: A low bridge in Australia is equipped with a camera that checks the height of vehicles as they approach and warns drivers to stop their truck if it is too big to get under the bridge.

– On Wednesday Sweden “ostentatiously” inaugurated a test stretch of what it called the world’s first electric road. The highway is equipped with aerial contact lines that deliver electricity to vehicles. Several news reports on the project declared this the first electric road in the world. Apparently no one remembers Toronto’s electric buses from the 1970s that utilized the same principle. The experiment is part of the Swedish government’s efforts to target its goal of reaching a fossil fuel-free vehicle fleet by 2030.

– Ontario is going to holding a lottery for drivers who want to buy permits to use the high-occupancy vehicle lanes on the Queen Elizabeth Way without having an extra person in the car. Transportation Minister Steven Del Duca announced a four-year pilot project this year that will see a few lucky drivers able to purchase a “limited” number of three-month permits for $180. This will allow drivers to use the lanes meant for car pooling without having to fill the car up with other people. One thousand of the permits will be made available starting August 1. A media report notes that the New Democrats have already begun using the phrase ‘Lexus’ lanes as a way of criticizing a program that will be available only to those who can afford it. Is this the start of two-tiered highway access?

– A report on Winnipeg-based collision repair chain Boyd Group popped up on a financial news site this week. According to the analyst, “Boyd is a high-quality business with exceptionally low capital requirements and strong [single store sales], and is well positioned to further consolidate a fragmented industry.” The analyst notes that Boyd management has guided those following the stock to believe that revenue will double by year end of 2020. According to the report, this is feasible assuming, “12% annual location growth” of 52 locations per year. The company acquires new facilities and locations with some frequency. In fact, news came in over the wire today regarding the latest one, a new greenfield location in Georgia

According to the analyst the company has been growing annual revenue and earnings at a 40 to 50 percent rate. With capital expenditures at less than “1 percent of annual sales,” there is lots of free cash flow in the company “to continue its acquisition strategy without incurring significant additional leverage.” The analyst thinks the stock looks fully priced at 13 times current earnings. Nevertheless, “Boyd is likely to follow through on guidance. My projection, adapted from management’s growth case,” underwrites a “mid-teens” [internal rate of return]. The report notes that “90 percent of completed repair jobs are covered by customer auto insurance … as the industry is increasingly driven by Direct Repair Programs … the DRPs tilt more business to Boyd without material increased marketing expense.” The report also noted a couple of risks to the outlook (as noted by Boyd management), including the arrival of automated cars that reduce accident rates and increasingly mild winters that also reduce accident rates.

– With the price of gasoline low, consumers in the US have “rekindled their love of bigger cars, pickup trucks and sport utility vehicles, favouring them over small cars, hybrids and EVs,” according to a recent report. “So far this year, nearly 75 percent of the people who have traded in a hybrid or electric car to a dealer have replaced it with an all-gas car, an 18 percent jump from 2015. This year, electric and hybrid sales have dropped to 2.4 percent of new-car purchases.

– Ontario is going ahead with a government run scheme to install chargers for electric vehicles across the province. Down south it looks like the evolution of the electric car economy will be carried out by private industry. A media report this week notes that Tesla is talking to the up-and-coming convenience store and gas station powerhouse, Sheetz, about putting electric car charging stations at its growing chain of stores. Tesla is also said to be talking to hotels and restaurants about installing charging stations. But the possibility of a deal with Sheetz is interesting. The family-run company now operates hundreds of retail outlets across six states.

– Everyone has been talking about the Brexit vote this week in the UK. The car industry in that country could lose out if the UK really does leave the EU. Many articles in the auto trade press this week noted that the one bright spot in UK manufacturing is the car industry, which has been undergoing a “renaissance” since the financial crisis, according to reports. Leaving the single market, however, could see many global OEMs pull their plants out of the country and relocate them to where they would have access to the EU market. It was said that executives in the UK car industry were “stunned” by the result of last Friday’s vote. A spokesperson for Ford, which has three plants in the UK, was quoted as saying the company would “take whatever action is needed to ensure that our European business remains competitive.” Total vehicle production in the UK had risen “more than 5 percent last year to 1.7 million units, while the number of people working in the sector had risen by 17,000 last year to 814,000,” according to a report. Presumably that trend could reverse if the Brexit goes ahead. The ripple effects may already be hitting the big US automakers. Ford, GM and FCA all saw their shares fall considerably by the closing bell on Friday.

– No matter what you say about Brexit, things aren’t as bad as they are in Venezuela. The low price of oil has that country teetering on the edge of collapse. Venezuela has massive reserves of crude oil and relies on the proceeds to fund generous social programs. With oil low the country is collapsing. A media report this week notes the challenges of dealing in the auto sector there. According to the report the “country’s aging fleet of cars, trucks and buses is slowly grinding to a stop … Bus lines are operating at half capability, and families are deserting their vehicles as even scrapyards lack the spare parts needed to keep vehicles on the road. At the same time, the lack of dollars has pressed new vehicle prices beyond the methods of all but the richest Venezuelans.” Production of autos has almost come to a halt. According to the report the “industry’s approximated installed capability stands at 250,000 a year, only 331 new automobiles were produced in the nation last month, according to the Venezuelan automobile association, Cavenez. In 2007, production reached over 12,000 a month.” That hurts.

– It seems recycled parts provider LKQ has also been sideswiped by the Brexit vote. A report from a financial analyst notes that stock in LKQ, “swung down 7.5 percent on Friday, a big move for a traditionally low beta stock.” A low beta stock is one that doesn’t move a lot day-to-day. The hit to the stock price is no surprise. The company recently made major acquisitions in Europe in a bet that region would drive growth. And while the “business model really shouldn’t be affected by a Brexit,” according to the analyst, it does seem investors were spooked a bit last week. The analyst still likes the stock, noting that the emergence of “crumple zones (areas designed to deform to absorb impact force), high tech gadgetry, and steady labour cost inflation have pushed claims to all-time highs” in the collision repair industry. The analyst notes that “Average parts used per claim have been on a steady rise,” a good reason to buy the stock.

Balancing the pros with the cons, the analyst notes that the LKQ business model could be hit by the emergence of automation. According to the analyst, “the amount of auto insurance claims that are being made is reversing what had been a steady downtrend … concerns regarding collision avoidance systems (lane monitors, automatic braking) and automated vehicles in general have plagued discussion surrounding LKQ Corporation equity, but these systems remain expensive and not in force on many vehicles today. Given that the average age of vehicles on the road in the United States exceeds ten years, it will be some time before these systems are present on a meaningful number of cars that will impact claims.”

The report goes on to suggest that while technology is having the effect of reducing accidents in some cases, “technology is proving to be a negative in other aspects. The rise of distracted driving (texting, watching YouTube in rush hour traffic) can be pointed to as a primary contributor for the reversal in overall claims filings.”

– Now they tell us. A report that showed up on News Corp Australia Network notes that an “executive at Swedish car maker Volvo has claimed Volkswagen’s diesel emissions cheat was an ‘open secret’ in the automotive industry seven years ago—more than five years before the scandal was exposed … But no-one notified authorities because the existence of the software that sidestepped regulations could not be proven at the time … Kent Falck, a 29-year veteran of Volvo responsible for the development of future vehicles, said diesel experts at rival car brands were suspicious about how Volkswagen could meet strict US emissions standards, but they themselves could not.

‘We have the same suppliers, we have Bosch, we have Denso, we are working with the same partners, so we know this technology doesn’t exist,’ Mr Falck told a small group of Australian media at the launch of a new Volvo sedan in Spain on Wednesday. ‘I have known that for seven years.’”

– US retail sales of new motor vehicles are forecast to total 17.1 million units in 2020, down from 17.9 million units in 2015 according to a newly released report. According to the report, “As the average age of US drivers increases, the number of total miles driven is expected to fall and negatively impact new car sales. Furthermore, a rise in leased vehicles over the historical period is expected to suppress prices for used vehicles over the forecast period, further constraining demand for new models.”

– There is a new challenger to Tesla. Karma Automotive is an EV company bought up by the owner of a Chinese auto parts conglomerate. The company is owned by Lu Guanqui, said to be the 18th richest person in China. Apparently he bought the company, “as a project for his kids and their kids.”

– A video posted to Youtube allowed Vancouver police to find a driver suspected of a hit-and-run. A newspaper report suggested the footage caught “one of the worst parking jobs in human history.” The 16-year-old driver had taken the truck for a joyride and hit a car downtown. A resident caught the kid trying to park the truck in his garage. “We didn’t have a whole lot to go on in the hit-and-run investigation … but a few days later we received a video which really helped us connect the dots,” said a police spokesman. The newspaper report, describing the parking job caught on video, points out, “The front passenger tire is already shredded and bent as the driver awkwardly angles the SUV into the garage, scraping the driver’s side along the entrance.” Check it out for yourself in the player below.

 

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