By Jeff Sanford
Toronto, Ontario -- June 12, 2018 -- In this week's Tuesday Ticker: Ford reverses policy on Canadian dealership ownership, GPC gets in on global consolidation of parts distributors, a digital repair estimator raises funds in Europe, and much, much more!
Ford Canada: Now open to the public(ly traded)
Ford Canada will allow publicly traded companies to own dealerships. While in the U.S., Ford has always allowed publicly traded companies to own dealerships, it is a reversal for the Canadian side of the company, that has had a long-standing policy that required dealerships to be owned by a single person.
The news also comes at a time when publicly traded company AutoCanada has begun acquiring dealerships in Canada. Once a highly disaggregated sector, AutoCanada now operates 54 dealerships in Canada. Within the U.S., the company has recently bought a Ford dealership near Chicago.
Ford Canada is just the latest OEM to make this change. According to a report in the trade press Honda Canada and Toyota Canada are the last major OEMs that still prevent publicly traded groups from owning dealerships in Canada. The changes come as dealership groups find it is becoming more difficult to find individuals willing to put up the money to own a single dealership. In the wake of the Great Recession of 2008 many dealership owners tumbled into bankruptcy.
An article running on an investment-focused website wonders if breaking up huge conglomerate 3M might be a smart idea. According to the story, many big American conglomerates have come under pressure to break themselves up of late, among them General Electric and Honeywell. For the most part, 3M has avoided such pressure as the company’s stock had remained relatively buoyant.
Shares in 3M have long been assumed to be a “buy and hold” stock. But over the past year shares have fallen 20 percent. As shares in 3M sag, however, some wonder if investors will begin to pressure the company to split in two, with one half focused on industrial markets and the other on commercial markets. https://bit.ly/2Mk6maW
GPC: Easy as H-F-G
The global trend toward consolidation of parts distributors continues. This week, Genuine Parts Company (GPC), NAPA’s parent company, announced it has acquired a parts distributor in Germany, the Hennig Fahrzeugteile Group (HFG). Headquartered in Essen, North Rhine-Westphalia, HFG is described as one of Germany's leading suppliers of light and commercial vehicle parts, with 31 locations. GPC expects the acquired business to generate annual revenues of approximately USD $190 million.
Paul Donahue, CEO, Genuine Parts Company, was quoted as saying, "Hennig Fahrzeugteile Group is a premier supplier of vehicle parts in the German marketplace, and the addition of this business serves to further expand our presence and scale in Europe as we build on our global growth strategy. We are pleased to welcome the Hennig Fahrzeugteile team into the AAG and GPC family and expect the combination of our organizations to be a great fit, both financially and strategically.”
The transaction is expected to close by August 1, 2018. Shares in GPC have been trending up over the month of June, hitting USD $94.60 this week. The acquisition comes at a time other companies are buying up parts distributors as well. Used parts distributor LKQ has made some global acquisitions of late.
Another company making acquisitions in this space is Bain Capital, once run by former Massachusetts Governor Mitt Romney. This past week Bain announced that its Autodis Group, a French automotive parts distributor, has bought up a Netherlands-based parts distributor, Geevers Auto Parts. Bain Capital had discussed the possibility that it would float Autodis Group through an IPO. But the current political chaos Trump is creating around global trade is said to have played a role in sidelining those plans.
Trump’s Terrifying Tariffs
A report from the Peterson Institute for International Economics in Washington suggests that the Trump administration’s proposal to apply a 25 percent tariff on imported cars and auto parts would see the industry suffer 1.5 percent loss in productivity, a two per cent drop in auto sector employment (about 25,000 jobs). The resulting increase in auto prices for consumers would lead to reduced demand for auto sector products. According to the report the overall effect of reduced sales and shipping activity would be a wider loss of 95,000 jobs across the entire economy.