Private Equity - Motor Trader Magazine Motor Industry News by niusheng11


									                                  Summer 2007

           White Paper

The pros and cons of private equity
  in the automotive supply chain

            Toby Procter
        Trend Tracker Limited
                                     The pros and cons of private equity in the automotive supply chain

While the insolvency of several public companies in the automo-         investors and managers, and ultimately, post-Chapter 11 exit, by
tive supply chain is of obvious concern, so too is the growing role     providing other, more risk-averse investors with once-more vi-
of private equity in restructuring and consolidating the sector. It     able quoted stocks. The restructuring task of private equity can-
raises wider issues of corporate governance in building sustain-        not be undertaken easily by quoted companies if the investment
able value in the automotive industry, many of whose corpora-           increases their gearing without showing a creditable return within
tions’ revenues exceed the gross domestic product of several            a given full financial-year profits guidance period.
nation states.
                                                                        But while the sanitising role of the corporate scavenger is widely
In a recent Automotive World interview with John Hoffecker,             acknowledged, private equity firms are beginning to challenge
managing director of the company doctors AlixPartners LLC,              not only the incumbent managements of failing public firms, but
38% of the companies in the US automotive supply chain were             even the very notion of what a corporation should be, and some
said to be at risk of financial failure. This is an unsurprising fig-   of the corporations targeted by private equity are national-
ure, in the context of two-thirds of US automotive suppliers hav-       champion vehicle manufacturers as well as ailing suppliers. The
ing disappeared altogether since 1990, leaving around 10,000            previous Swedish prime minister's recent strictures on the
vying to be among a forecast 4,000 entities remaining by 2010,          'vultures' circling around AB Volvo echoed similar attacks from
according to a recent Detroit News report.                              German ministers on the European Commission’s threats to
                                                                        Volkswagen's protection from takeovers under the so-called ‘VW
Under U.S. law, restructuring under Chapter 11 protection from          Law’.
creditors represents one, way for an insolvent company to evade
death and shed unsupportable liabilities to retrieve adequate           Concerns about corporations' guiding purpose have begun to
liquidity, bringing the conflicting interests of managements, credi-    worry US stakeholders and some leading executives, too. Ac-
tors and stockholders under judicial arbitration.       More com-       cording to ex-Hewlett Packard CEO Carly Fiorina, interviewed in
monly - and also in conjunction with Chapter 11 - private equity        The Guardian (28 October 2006), "When 52 of the (world's) top
funds have re-assembled selected assets of weak companies               100 GDPs are companies, of course companies make a big dif-
into new groupings of specialised firms which may achieve scale         ference." So it matters how corporations are governed, and con-
benefits not available to their former owners.                          sequently so does the nature of their stockholders. And with the
                                                                        automotive sector increasingly exposed to private equity inves-

The company's dead, long live the company!                              tors and hedge funds, which bet as eagerly on decline as on
                                                                        recovery, the behaviour of these investors is now of more than
For some quoted companies, Chapter 11 treatment may prove
                                                                        passing interest.
curative in the medium term and even return some value to ex-
isting stockholders, although few Chapter 11 petitions have
                                                                        Private equity has been a major mover in automotive merger &
come without due warning, and they inevitably bring with them
                                                                        acquisition (M&A) activity in recent years. Fifty-three percent of
big falls in stock prices, besides entailing high legal and account-
                                                                        all disclosed automotive M&A deals last year, worth in aggregate
ing costs, as any reader of the filings on Delphi's Chapter 11
                                                                        US$22 billion, were funded by private equity, according to PwC's
website can verify. Since pension funds cannot hold junk-rated
                                                                        Automotive Institute; private investment funds are now firmly
stocks or debt, while Chapter 11 bankruptcy leaves 'bust' corpo-
                                                                        embedded in the US automotive supply chain, and in the Big
rations' stocks in play, the Chapter 11 process offers private eq-
                                                                        Three OEMs, too. Just a few of the recent headline-making in-
uity opportunities for speculation, and even eventually to fund
                                                                        cursions of private equity into the running of automotive manu-
Chapter 11 exits, subject to bankruptcy courts’ consent. Indeed,
                                                                        facturers and ‘Tier 1’ suppliers include:
nearly all of the prospective buyers of the growing number of
automotive suppliers which have entered Chapter 11 bankruptcy
have been hedge funds, according to the Detroit News of 1 No-           • General Motors – Former Chrysler Corp. stockholder Kirk
vember 2006.                                                               Kerkorian buys 9.9% of GM stock, enough to install his nomi-
                                                                           nee Jerry York on the board and insist loudly on the pursuit

For some failed companies sheltering under Chapter 11, drastic             of an alliance with Renault-Nissan - and failing in that mission

remedies - amputations or all-out break-ups - may be the only              months later, may either to sell his stake, GM’s third-largest,

operations capable of restoring sustainable value, and if private          at an opportune moment or mount a bigger bid to get his

equity funds are almost the only players with enough cash and              way - without indicating (he has no co-investors to persuade)

foresight to undertake the task, they ultimately will prove their          how he believes GM could overcome its legacy liabilities to

worth; first, by assuring well above-average returns to their own          justify his investment. But then, why should he? Mr. Ker-

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                                    The pros and cons of private equity in the automotive supply chain

   korian is reported to have made about US$250m on paper              White knights and opportunists
   from his stake already, and despite suing DaimlerChrysler
                                                                       The most obviously strategic private equity-funded investor in
   because, he alleged, Daimler-Benz misrepresented its acqui-
                                                                       the supply chain has been International Automotive Components
   sition of Chrysler as a merger of equals, has been reported to
                                                                       (AIC) LLC, the consolidating vehicle of US billionaire, ex-
   have made US$2.7bn from his stake in Chrysler Corporation.
                                                                       Rothschild restructuring expert Wilbur L Ross, who has so far
                                                                       accumulated (in harness with Lear Corporation and Franklin
• General Motors again - The company agrees to sell 51% of
                                                                       Mutual Advisers), Collins & Aikman Europe; Safety Components
   its finance subsidiary GMAC to three private equity firms led
                                                                       International; part of Oxford Automotive, which had emerged
   by Cerberus, bringing GM cash and a probable improvement
                                                                       from Chapter 11 in March 2005; and the European part of Lear's
   in GMAC's credit rating.
                                                                       ‘Interior Experience’ business, consigned to a joint venture.

• Ford - A similar asset sale was Merrill Lynch and two private
   equity groups acquiring Hertz from Ford Motor Co. for               Ross's stated aim has been to create from undervalued assets

   US$5.6bn plus nearly US$10bn in debt.                               groups of companies which create synergies not available to
                                                                       their previous owners and become capable of acquiring domi-
• Delphi – Delphi, now counts Appaloosa Management as its              nant market shares from failing firms.
   largest single shareholder (with 9.3%); Appaloosa also holds
   US$180m in Delphi’s 'junk'-rated bonds. To date, Appaloosa          Compared with Ross's objectives, which are at least as far-
   is said to have made around US$134m on its US$16m Del-              sighted as any institutional investor's, the intentions of most of
   phi stock purchase, made shortly after Delphi entered Chap-         the other private equity firms hitting recent headlines have been
   ter 11 in late 2005, and in late 2006 was engaged in confi-         obscure. In the European aftermarket, for example, private eq-
   dential discussions with Delphi's management and stake-             uity funds have bought firms as diverse as Kwik-Fit, the UK's
   holders, following a period of hostilities when it was excluded     Nationwide Auto Centres, the Automobile Association, and BCA
   from an equity committee which Appaloosa campaigned to              (British Car Auctions), naturally without advising how long they
   form to obtain representation in the bankruptcy court. Former       expect to retain these investments. Their tenure is expected to
   Chrysler president Thomas Stallkamp, now a partner in pri-          be no longer than it takes to realise a targeted return on the ac-
   vate equity firm Ripplewood Holdings LLC, is also rumoured          quisition cost via an I.P.O. or private sale – typically four to five
   to be a potential bidder for the more attractive parts of Delphi,   years at the outside.
   in collaboration or in competition with Appaloosa and Cer-
   berus (qv) - as is, also reportedly, the diversified automotive     The most extreme example of purely tactical investment by pri-
   magnate Roger Penske.                                               vate equity in the automotive sector came from the UK in 2006,
                                                                       when an arm of the U.S. fund Sun Capital acquired the British
• Metaldyne - The Tier 1 supplier is bought by Asahi Tec Cor-          van maker LDV out of administration - which the company had
   poration, which is in turn controlled by the US investment firm     entered and exited within the space of a few hours, just long
   Ripplewood Holdings (qv).                                           enough to pass its pension liability onto the public purse under
                                                                       UK legislation. No announcement was made concerning the new
• Lear Corporation and Dana Corporation - Private investor
                                                                       private equity owner's intentions; within just a few months the
   Carl Icahn buys into both companies, earning a seat on
                                                                       buyer sold LDV on to the Russian conglomerate GAZ.
   Lear's board; Appaloosa Management also has a (15%)
   stake in Dana Corporation.
                                                                       Debt versus equity funding
• Visteon - Pardus Capital Management Corporation in-                  Mainstream financial institutions seem generally to welcome the
   creased an existing stake in Visteon to 15.6% in October            chance to participate at arm's length in hedge funds' prepared-
   2006. A month later, the UK listed supplier GKN plc an-             ness to take risks that banks and pension fund managers cannot
   nounced its possible purchase of some Visteon subsidiaries.         take on their own account. But a common objection to private
                                                                       equity deals from those outside the money markets is that they
The pace of capital restructuring is such that the above list would
                                                                       are too highly geared (and too opportunist) to provide reason-
need frequent attention to be updated. Altogether, around a
                                                                       able assurance of being able to follow through with productive
dozen private equity firms have significant holdings in at least as
                                                                       re-investment after the initial restructuring of the target's assets.
many automotive suppliers in the US and Germany, and about
                                                                       If assets are bought cheap enough, after all, they don't need to
as many automotive aftermarket and rental/leasing firms now
                                                                       be best-in-class to make private equity funds a profit on disposal;
have private equity firms as their sole or major investors.

             Trend Tracker Limited CIL Buildings Corsley Warminster Wiltshire BA12 7QE
                                     The pros and cons of private equity in the automotive supply chain

they need only be worth more than when they were acquired.              holders including employees, their unions, suppliers, customers
And if, as is usual, private equity partners lack the industry-         and as far as legally possible, governments. In the case of Del-
specific expertise of seasoned executives, buyouts' manage-             phi, now ensconced in Chapter 11 for a year, the delicate, pro-
ments may be operationally weak and/or risk-averse. The entry           tracted mediation between Delphi's and GM's interests and
of Collins and Aikman into Chapter 11 in 2005, just three years         those of its workforce has effectively put its stockholders' inter-
after its leveraged buyout, offers a cautionary example.                ests on ice.

The managements typically engaged by private equity funds will          It is reasonably assumed that had Appaloosa been able to influ-
tend, like their masters, to focus on short- rather than long-term      ence Delphi’s management, it would have struck much harder
                      performance indicators                            bargains with both GM and the UAW than the incumbent board,
                                                                        Appaloosa having itself no legacy of commitments to either key
Further, it is now common for private equity firms to form tactical     stakeholder. Such an aggressive approach could have been, at
alliances to jointly fund acquisitions, so helping to spread individ-   least in the short term, far more destructive of value for workers,
ual funds' risks. Since joint owners cannot run their acquisitions      GM and second-tier suppliers dependent on Delphi than the
by committee, they will depend on the quality of the bought-in          eventual, repeatedly adjourned judgment of the bankruptcy court
executives they delegate to run their businesses without the con-       on Delphi's labour contract annulment petition is likely to be;
tinuous supervision of boards of directors formed by experience -       indeed, most observers believed GM could not have survived
and the company doctor-type executives typically engaged by             any significant disruption of supply from its erstwhile subsidiaries
private equity funds will tend, like their masters, to focus on         spun off and re-labelled 'Delphi'.
short- rather than medium- or long-term performance indicators.
                                                                        Since several former Delphi executives have been accused of
Banks lending to investment managers will be far less patient           fraud, it is unreasonable to complain that investors like Appa-
than a public corporation's institutional or family investors in the    loosa should not interfere with corporate managements; they
event of low returns coinciding with any increase in debt costs,        would not be inclined to do so, if their returns were being opti-
whereas loyal investors permit managements like those of BMW            mised. But Chapter 11 petitions do no enhance managements’
or Volkswagen to pursue recovery strategies which in the nature         reputations with investors, and if investors in Chapter 11-
of things take longer to fulfil than any set of analysts' or invest-    protected firms can mostly only watch and wait for judges' deci-
ment fund managers' profit forecasts. Patient stockholders may          sions, some of them have been highly interventionist in under-
ultimately be proved wrong, of course: BMW and even Fiat, the           performing companies elsewhere. Adding to the example of Ker-
latter celebrating in Q3 2006 the first four straight sets of quar-     korian's intervention with GM, Barington Capital Group won a
terly Fiat Auto profits for several years, speak perhaps better for     recent legal battle to nominate four directors to the board of the
family control than Ford, or indeed Delphi, several of whose            US auto parts retailer Pep Boys, and Karch Capital Management
managers were accused of false accounting prior to its Chapter          recently attempted to force the board of another US parts re-
11 filing. Ford’s family and institutional investors have sought        tailer, CSK Auto, put the business up for sale.
comfort (so far in vain) from short-term performance against a
long-term trend of decline in the company’s North American              Corporate disasters such as Enron show how badly stockholders
automotive operations. After retreating from former CEO Jac             can be treated by incumbent managements, and it may be that
Nasser's diversification investments, Ford has sought to meet           private equity firms will always be generally smarter investors
short-term targets through reliance on its highest-margin light         than the pension funds which rely on third-party brokers' analysts
truck cash cows, and accordingly has a North American model             for insight. But when private equity firms take controlling stakes
portfolio ill-prepared for an increasingly abstemious US market.        in their investment targets, the issue of stockholders' rights is
                                                                        overtaken by another, equally serious one; the question of
 If Appaloosa could have influenced Delphi’s management                 whether the longer-term interests of a corporation and its stake-
  before it entered Chapter 11, it would surely have struck             holders can be assured by investors unfettered by any con-
 much harder bargains with both GM and the UAW than the                 straints but the cost of their borrowed funds.
                    incumbent management
                                                                        Private equity firms and hedge funds are coming under increas-
Relying on relatively expensive debt funding, private equity firms      ing fire – if more from politicians than the financial markets - for
are generally suspected of pursuing aggressive, short-term profit       being intrinsically 'short-termist', unaccountable and essentially
objectives and of disregarding the interests of established stake-      hostile to the defence of 'national champion' firms such as

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                                    The pros and cons of private equity in the automotive supply chain

Scania, AB Volvo, or VW, and hostile to job preservation and           US Stock Exchange Commission and the provisions of the Sar-
sustained tax revenues in beleaguered manufacturing sectors            banes-Oxley Act has failed to create the transparency that might
like the automotive industry.                                          forestall corporate failure or fraud any better than the regulations
                                                                       applied to private companies. Stockholders' faith in superstar
Automotive products' lifecycles extend upwards of ten years, and       CEOs' capacity to turn around behemoths like the Big Three,
executives must anticipate markets, technological advances and         supported by media adulation, has been demonstrably unjusti-
regulations at least a decade ahead to assure future profits from      fied. The asymmetrical supply of information to managements
investment programmes of at least three years' duration. The           and stockholders has limited executive accountability disas-
long-term view has increasingly been seen by OEMs as essen-            trously in cases like Delphi, let alone Enron.
tial to the integrity of their supply chains, onto which they have
thrust increasing responsibility for value-added. The more selec-      Accountability can never be absolute. The German and Scandi-
tive, more collaborative, longer-term supply partnerships de-          navian business cultures are perhaps more obviously conscious
manded by the Big Three in emulation of their Japanese com-            of corporations' social responsibilities than their North American
petitors are now under threat from private equity investors pri-       or UK counterparts, but the extensive German supply chain cor-
marily concerned with suppliers' immediate margin enhance-             ruption unearthed this year showed that no system of govern-
ment.                                                                  ance can prevent corporate crime. VW's dealings with its former
                                                                       Works Council chairman rather suggested that a more arm's
As in so much else, the sustained success of Toyota shows              length relationship with organised labour might be safer than the
 how important is the long-term view, where 'medium term'              temptations involved in securing institutionalised stakeholder
memorably translates in the words of Toyota North America              consensus.
           president Jim Press, as "In our lifetime".
                                                                       The high-profile prosecutions of Daewoo Motor's and more re-
The benefits of the long-term view of sustainability are, however,     cently Hyundai's chairmen and the lesser sins of omission perpe-
challenged within public companies as well as by the incursions        trated by past Mitsubishi Motors executives, provide ample proof
of private equity. Although the auto industry proclaims the bene-      that both personal interest and corporate ambition can motivate
fits of a consistent regulatory and employment environment in          crime and misdemeanours.
supporting sustainable long-term investment when participating
in, for example, the EU ‘Cars 21’ ‘high level group’, the reporting    Porsche's CEO Wendelin Wiedeking recently waxed eloquent on
and rewards structures deployed by management boards indi-             the cultural decay of German corporate life, addressing an aca-
cate a less long-sighted focus. Aside from requiring manage-           demic audience in Mainz: "Our capitalist system cannot exist
ments to report quarterly results - which in the case of OEMs,         without consideration of human and ethic values," he said, going
reveal very little operational data to support medium-term fore-       on to claim that many of today's executives have no such scru-
casts – stockholders of listed companies agree to motivate man-        ples, being capable of announcing without embarrassment an
agements to husband their resources effectively by dint of per-        earnings increase one day and mass redundancies the next. Of
formance-related bonuses and share options which generally             particular distaste to Wiedeking was the now commonplace cas-
motivate executives to focus on short-term profit targets. These       ual equation of workforce reduction with profit targets in corpo-
targets tend naturally to coincide with many fund managers' own        rate pronouncements.
share value and earnings-per-share objectives. Besides the oft-
criticised structure of public companies' executive rewards, their     Officers of public corporations who boast of returns achieved at
total size and relation to profit is also of frequent concern, which   a labour force's expense appeal most directly to what they con-
is sometimes voiced at companies’ annual general meetings.             sider their primary, constituency of investors. Some private eq-
One Tier 1 supplier's Chapter 11 bankruptcy judge recently             uity firms might share Wiedeking's distaste for such cavalier atti-
threw out proposed executive bonuses, of a magnitude which             tudes, but - this is the point - privately. They have only their lend-
had enraged the United Auto Workers, which were to be                  ers to please, and have no direct relations with the employees
awarded simply for exiting bankruptcy. Myopia is by no means           and others on whom ultimately their principal productive assets
the sole preserve of tactical private equity investors.                depend for value creation.

Transparency: in short supply all round                                A long-term view nurtures enduring value
Besides rewarding short-termism, it could also be argued that          Private equity firms may sometimes (like Wilbur L Ross) look
the reporting of public companies under the supervision of the         further ahead than the outgoing managements of some of their

             Trend Tracker Limited CIL Buildings Corsley Warminster Wiltshire BA12 7QE
                                    The pros and cons of private equity in the automotive supply chain

acquisitions. But sustainability is the bedrock of corporate social    The Big Three's stockholders shoulder huge healthcare and re-
responsibility and transparency its vital ally, and private equity     tiree cost burdens alone, while ironically, they are endeavouring
looks in the main to fall far short of what most stakeholders want     against a seemingly overwhelming tide of events to provide a
to see in the oversight of corporate managements. Its necessary        return to increasingly restive public sector investors such as Cali-
focus on short-term returns cannot be consistent with the patient      fornia's CALPERs teachers’ pension fund. VW's pension costs in
building of relationships with key customers, with the careful         contrast are shared by taxpayers in most of the markets where it
nurture of brands, or indeed with investments in new technology        operates, while lucky Toyota has almost no such legacy costs to
or market development that can take a decade or more to yield a        bear, and is said to have an unassailable $1,000-plus fixed-cost-
return.                                                                per-unit advantage over the Big Three.

As in so much else, the sustained profitable growth of Toyota          The Big Three waited for an audience with the U.S. President for
shows how important is the long-term view, where 'medium term'         several months to competitiveness issues and came away with
memorably translates, in the words of Toyota North America             no tangible offer of aid, while in stark contrast, the right-of-centre
president Jim Press, as "In our lifetime". Toyota and Honda have       CDU government of Lower Saxony and its SPD predecessor
managed forward-looking risk-taking without giving much scope          have both shown the strongest interest in maintaining an active
for short-term speculation. It should be admitted, though, that        influence in the affairs of Volkswagen as a 20% public sector
Toyota and Honda have benefited from the continued support of          shareholder.
particularly benign investment, supply chain and labour environ-
ments in their domestic market, while Japanese-led globalisation       Further, by comparison with their leaner competitors, the Big
has removed the Big Three's historic market privileges.                Three and their suppliers are undoubtedly suffering from the
                                                                       after-effects of gluttony, for which there is no painless slimming
Those predictable environmental factors in the Japanese auto-          diet. The Big Three's privileges have long been excessive com-
motive sector, together with a sustained favourable yen-dollar         pared to any of their global competitors, and allowed them to
exchange, have perhaps constituted as great an advantage for           surrender some of the benefits to the UAW on the mistaken as-
Toyota and Honda over their US competitors as their manage-            sumption that a steady-state market environment would endure.
ments' skills. (Mitsubishi Motors or Nissan might by the same          The US light vehicle market is so large that the Big Three came
token have collapsed sooner into the arms of DaimlerChrysler           comparatively late to the realisation that globalisation would en-
and Renault without the support they enjoyed from the Japanese         tail that growth to compensate for dwindling domestic market
banking and keiretsu systems.)                                         shares would have to come from investing in Asian markets; and
                                                                       their home market has been so pampered with cheap gasoline

Are Detroit's problems essentially political?                          that their core products are mostly inadaptable to any other mar-
In the end, the problems of Detroit look as much political as in-
dustrial. The Big Three have pursued essentially the same paths
                                                                       The end of cheap gasoline and the beginning of climate change
as, say, Volkswagen - the hectic pursuit of volume in the expec-
                                                                       will probably come to be seen as the coinciding tipping points
tation of scale benefits which have not materialised to investors'
                                                                       that downsized Detroit, beyond the capacity of any corporate
satisfaction. All four are suffering the long-term consequences of
                                                                       hero or public or private equity investor to overcome, or even
granting privileges to uncompetitive workforces which, having
                                                                       foresee. However, if only the 'vultures', as private equity and
secured contractual no-redundancy terms and retirement entitle-
                                                                       hedge funds have been described were left to pick through the
ments, cannot readily be shrunk to fit reduced circumstances.
                                                                       remains of the Big Three's failing supply chain, Detroit would
                                                                       surely forfeit a lot of the remaining loyalty of its stakeholders.
The difference between the Big Three's and VW's current pros-
                                                                       Should more of the European sector pass into private equity
pects, let alone Toyota's or Honda's, is geopolitical rather than
                                                                       groups’ ownership, a similar loss of public and public sector sym-
just corporate; and while private equity looks a problematical
                                                                       pathy will also be forfeited.
basis for managing consolidation in the medium term, it is not yet
clear that conventional listed equity structures supported by term
                                                                       Customers, whether they are OEMs or consumers, surely prefer
bond debt can work any better. Few quoted companies can af-
                                                                       companies which are prepared to communicate and want to stick
ford the risks that private equity can take, when their most influ-
                                                                       around long enough to ensure a supply of parts.
ential investors require consistent on-target EPS growth and
'safe harbors' for pension funds.

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                                   The pros and cons of private equity in the automotive supply chain

                                                                                   Available to order:
                                                                                   Mfbi The Future of the Car
                                                                                   Body Repair Market—2006

                                                                                    EXECUTIVE SUMMARY
                                                                                    MARKET BACKGROUND
                                                                                    UK economy, car ownership, size and age
                                                                                    structure of the car parc
                                                                                    CAR BODY REPAIR MARKET
                                                                                    Market size and trends 1996-2006, Number
                                                                                    and value of repairs, average repair costs,
                                                                                    average labour, parts and paint repair costs
                                                                                    by marque, repair gross margins by
                                                                                    MARKET FACTORS
                                                                                    Insurance market and policy trends, control
                                                                                    of claims costs, accident and repair rates,
                                                                                    trends in total losses, technology and
                                                                                    vehicle complexity, OE and non-OE parts,
                                                                                    labour charge-out rates, work provider and
                                                                                    repairer relations, PAS 125, EU Paint and
                                                                                    Products Directive.
                                                                                    THE SUPPLY STRUCTURE
                                                                                    Number of outlets, trends in outlet size,
                                                                                    repair capacity, independent and franchised
                                                                                    bodyshops, approved repair networks,
                                                                                    bodyshop profitability, insurer and
                                                                                    bodyshop relations, strategic relationships,
                                                                                    influence of vehicle manufacturers, insurer
                                                                                    liabilities, SMART repairs.
                                                                                    STRATEGIC OUTLOOK
                                                                                    Market opportunities and threats,
                                                                                    franchised bodyshop SWOT analysis,
                                                                                    independent bodyshop SWOT analysis,
                                                                                    main strategic recommendations for
                                                                                    insurance companies and bodyshops.
                                                                                    FUTURE AND CONCLUSIONS
                                                                                    UK economy, motor insurance, vehicle
                                                                                    complexity and repair methodology, market
                                                                                    volume and market value forecasts,
                                                                                    average repair cost forecasts, forecast
                                                                                    number of bodyshops, repair specialisation
                                                                                    and long term outlook.

   The pros and cons of private equity
        in the automotive supply chain

This white paper was written by Toby Procter, a
director of Trend Tracker Limted.         A shorter ver-
sion    was     published     by    Automotive      World
( in November 2006,
and this paper is published with their kind permis-                       Trend Tracker Limited white papers:
                                                                 Porsche and VW: The art of cuckoo-nesting
Trend Tracker Limited welcomes dialogue on the topics            How Porsche is continuing to defy gravity with an
addressed in our white papers. Please email:
                                                                 Innovative new business model
                                                                 Visit for more information
or telephone:
(+44) (0)870 421 4350 with any comments or queries.

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