Car Insurance

Freightliner LLC of Portland, OR, has created a used truck retail sales group dedicated to serving fleets. The group will work with SelecTrucks Centers as well as Freightliner Trucks, Sterling and Western Star dealers to develop new fleet customers for high quality, late model, Class 6-8 used vehicles.

“In establishing a dedicated used truck retail fleet sales group, we are allocating significant new management resources to our used truck sales effort,” said Bill Gordon, president of Freightliners business unit responsible for the company’s used truck operations. This move is further evidence of Freightliner LLC’s focus on the used truck business and our commitment to used truck customers.”

According to Gordon, this fleet group will serve fleets that do not have an existing used truck relationship with a SelecTrucks Center or a dealer. “We want to ensure that all fleets, including those with substantial owner-operator programs, are familiar with all the ways we can creatively help them,” Gordon said. “Although this fleet group will aggressively prospect fleet customers, it’s important that the sales activities are coordinated with the local SelecTrucks Center or Freightliner, Sterling or Western Star dealer. This added management focus will help us better develop and deliver used truck vehicle-solutions to our customers.”

Customers to be served by the newly-formed used truck retail sales group include medium and large fleets that traditionally buy used trucks or those that currently purchase new, competitively-branded trucks but may be better served by high quality, late model used vehicles. The group will be headed by Bob McTernan, a 26-year veteran of the trucking industry and formerly Western Region General Sales Manager for Freightliner Trucks.

McTernan’s team will consist of industry-experienced sales managers located in various geographic regions of North America.

The establishment of a used truck retail sales group is the latest in a series of used truck-related initiatives by Freightliner LLC. Among other measures, the company recently announced new financing options for used truck customers and innovative used truck purchase programs including “Power to Succeed” and “SelectOne.” The company also is opening a group of used truck retail remarketing centers, increasing its used truck reconfiguration operations and expanding its network of SelecTrucks Centers. First opened in 1997, SelecTrucks is Freightliner LLC’s network of used truck outlets offering a wide selection of used trucks in numerous locations, provided with warranty packages, financing terms and business support.

Based on Advanced Disaster Management Simulator (ADMS(TM)) software, ADMS-ARFF(TM) helps Aircraft Rescue Fire Fighting (ARFF) crews train in operating crash trucks for any aircraft incident or disaster. Target skills include vehicle operation, tactical deployment, airport orientation, driving/radio procedures, and command/control. With all necessary displays and controls for dual-person operation, simulators calculate and visualize all effects of their decisions and actions in real time.

Environmental Tectonics Corporation’s Simulation Division today announced the launch of ADMS-ARFF(TM), a new simulator based on the ADMS(TM), Advanced Disaster Management Simulator software.

ADMS-ARFF was developed so Aircraft Rescue Fire Fighting (ARFF) crews can realistically train in operating crash trucks for any aircraft incident or disaster. Skills trained include vehicle operation, tactical deployment, airport orientation, driving and radio procedures and command and control. Multiple ADMS-ARFF simulators can be coupled to offer team training. The system allows ARFF crews to train realistically, without the restrictions, danger and environmental and operational impact that live fire training presents. ADMS-ARFF is realistic, safe, non-polluting, cost effective and available 24/7. Additionally, crews can train on scenarios that are difficult or impossible to organize as live scenarios.

ADMS-ARFF consists of an out-the-window visual display, extinguishment operation console with turret controls and critical switches and gauges, a steering wheel and pedals. With these controls the crew operates virtual roof and bumper turrets that can flow water, foam or dry-chem agents for fire suppression. An operator can drive to an incident scene and position the vehicle while the vehicle commander sitting in the passenger position, can command and control the operation. Both positions can use the turrets at anytime. The heart of the simulator is the ADMS software platform that powers the simulation dynamics and physics and visualizes the crashed aircraft, casualties, fuel leaks, fire, smoke, weather conditions, debris, and the entire airport environment. ADMS calculates and visualizes all effects of decisions and actions in real time. An instructor can configure an infinite number of incidents with the Scenario Generator and review trainee progress with the Observation and Scoring System.

ADMS President and former Chief of the Royal Netherlands Air Force Fire and Rescue Training Centre, Marco van Wijngaarden commented, “ADMS-ARFF is an ideal training solution for the ARFF-world. You can train as you fight and learn to tackle challenging scenarios without any harm to the environment. It is a critical utility for training responders who might otherwise only have an opportunity to learn during an actual emergency — and by then, it’s too late. ADMS-ARFF imparts knowledge, skills and experience within a realistic context, will enhance performance and operational preparedness, and can also allow for valuable preparation for live training.”

ADMS-ARFF will be introduced to the world at the ARFF Working Group Conference, September 5-9 in New Orleans, and then at the International Aviation Fire Protection Association (IAFPA) Conference, October 16-18 in Singapore. All conference participants will be invited to take the Driver or Commander seat and experience the system for themselves.

ADMS is a high fidelity, interactive simulation platform that offers a proven methodology to provide operationally cost-effective synthetic incident and disaster management experience. Since 1995, it has been used to train emergency responders around the world to better prepare and respond to incidents and disasters, as well as testing and validating emergency response and management plans.

While Range Rover has a relatively short history in the U.S., it is in fact celebrating its 32nd anniversary this summer. Long though this is for a single model, what is more astonishing about this ground-breaking vehicle is that it went a full two dozen years before undergoing its first facelift.

It was in June 1970 that the original Range Rover first saw the light of public day. Coming from Land Rover, which had made its name in producing rugged off-road workhorses used by farmers, the military and police the world over, the new model aimed to continue the tradition. It had all the off-road capability for which Land Rovers were renowned, and even retained some of the utilitarian aspects-it was recommended, for example, that the interior could be hosed down as there were not any carpets to worry about-but it was aimed at a different type of buyer. In the event, though, it became apparent that the closest most Range Rovers ever went off-road was when mounting a kerb in a tight parking situation. As its off-road behavior had been at the expense of its on-road characteristics, air suspension was adopted-at a considerable price for the customer-to the top of the range versions in 1984. However, it was not until 1992 that the car began to change visibly, when the wheelbase was lengthened and the originally oldsmobile-designed V8 was enlarged from 3.8 to 4.2 liters.

It was to take still another couple of years later, though, for the model to undergo the first major makeover in its life. The shape substantially changed although the design remained basically traditional. A separate ladder chassis with deep side members gave good protection for the underside of the body and all the under-works. Steering was by recirculating ball, which limited kickback over hard going and the exceptionally long travel of the beam axle suspension endowed the car with very high cross-articulation abilities, valuable for preserving traction in extreme situations-and air suspension was adopted for the entire range.

By this time, though, the company had passed into BMW ownership, along with the rest of what was now called the Rover Group in 1993. Thus it was that when the latest Range Rover was conceived in 1996, its engineering and style design were under BMW direction. But to add to the convoluted story, BMW sold Land Rover to Ford in July 2000 when disentangling itself from its Rover Group investment-and in a strange twist of fate, the new model came back under the control of the one person who can be regarded as its godfather. As BMW board member responsible for product development, Wolfgang Reitzle had pushed hard for the new model before he lost his job. And now, as president of the Premier Automotive Group, to which Land Rover became a subsidiary, he was once again master of its fortunes.

By the time of the Ford takeover, the design had been completed, but development was still in progress. As Land Rover engineer Peter Thomson explains, “BMW was contracted by Ford to complete the development work. There were already a large number of Land Rover engineers working on the project, and the number of them increased after the sale–so we have had a parallel organisation within Land Rover/BMW since the takeover. It’s a great reflection on the part of the project management that the whole thing has come up so well.”

It has not been a cheap project for Ford. Before the new model could be built at the Solihull plant, Land Rover’s traditional manufacturing base in the West Midlands of England, a massive investment was needed to upgrade the historic plant. To date, almost $300 million has been invested in the 121-hectare (308-acre) site specifically on the Range Rover project.

Principal improvements directly linked to the new Range Rover project include the implementation of a $90 million new stamping plant–a first for Land Rover, which has previously relied on outside suppliers for all its body panels.

The plant, which was opened in December 2000 and is staffed by around 120 people, contains the largest press in terms of bed size in Europe. The five station, 8,300-tonne crossbar transfer press was manufactured by Muller Weingarten and is capable of handling aluminium and steel blanks between 1,370-mm and 4,500-mm wide.

It took just 14 months from the start of the building project–which saw 180,000 cubic metres of soil removed from the site–to the initial run of the press. At its peak, it will produce 58,000 steel or aluminum panels per week. Press changeover, including the switching of dies to change the pressings, takes less than 10 minutes. On older equipment, this procedure can take hours.

Alongside the new press is a $6 million try-out press, on which new tools and maintenance work can be carried out to ensure minimum downtime and disruption during routine maintenance. As well as producing panels for the Range Rover, the new press provides body panels to BMW for the new MINI; stamping time is currently split 50/50 between the two models. The press will also produce panels for future Land Rover models, though existing models will continue to source panels from existing suppliers.

While analysts seem to agree that the macro picture for aftermarket retailers is

brightening, CSK Auto, the nation’s fourth largest player, continues to struggle as a result

of costly acquisitions starting in 1999 that nearly doubled the company’s store base. As

aggressive and praiseworthy as this growth plan was at the time, it has now saddled the

Phoenix-based retailer with a financial burden that may prevent it from prospering in

today’s increasingly favorable market conditions.

While growing its market was top priority two years ago, CSK is now working to contain

itself as it looks to commercial sales to drive results. The company, which is the top auto

parts retailer in the West by store count, pledged at the outset of fiscal 2001 to cut debt

and lift profits–with inventory reduction a key component to its strategy. However, auto

parts retailing is seasonal and highly dependent on weather. High rainfall in California,

where the company has its largest share of stores, conspired with overall economic malaise

to drag first quarter comp sales down 1%. High energy costs in that state also harmed

results.

Then the inventory cuts and payout of legal settlements hurt second quarter profit margins

as vendor volume allowances and cash discounts were lost; net income before restructuring

charges fell 37.5% to $5.2 million year over year. For the first half of fiscal 2001, ended

Aug. 5, CSK’s revenue rose just 1% to $738 million; same store sales were flat.

The company has renewed liquidity thanks to its recent $30 million in financing secured

from Oppenheimer Funds. It is calling for income in the third quarter, which ends Nov. 4, to

rise 50% over the second. But some analysts worry about the company’s high borrowing levels,

the financial strain from the hefty price paid for its acquisitions and subsequent

integration costs and high product costs.

To conserve cash, CSK has halved its planned 2001 store openings from 50 to 25 and is

closing 36 underperforming stores. Management hopes these actions, along with eliminating

120 mostly corporate jobs and scuttling low-selling product lines such as clutch parts, will

help return it to the healthy profit growth it enjoyed before its rapid expansion-not to

mention boost the company’s ailing stock. CSK’s shares trade between $6 and $8, down sharply

from highs over $30 in 1999.

Charges for these second quarter restructuring moves totaled $44.6 million and led to a

reported loss of $21.6 million for the first half of the year. Before the charges, net

income was $9.5 million, or $0.34 per share, still far short of the $21.5 million, or $0.77

per share, earned in the first half of 2000. CSK expects the store closures to reduce

revenue by $23.6 million and gross profit by about $10.6 million over the next 12 months.

However, all the recent measures are expected to lower operating expenses by $9.3 million in

the second half of 2001 and $16.5 million in fiscal 2002. The job cuts are seen shaving $7

million from annual salary costs and the closures lifting annual profits by $4 million.

Another bright spot is that sales at the acquired Big Wheel/Rossi stores are growing in

double digits, although the business is still undercutting CSK’s earnings. The June 1999

purchase of the chain gave the retailer a presence in the upper Midwest, with 86 locations

in Minnesota, Wisconsin and North Dakota converted to Checker stores, and a distribution

center in Minnesota. CSK paid $62.7 million in cash for the company and assumed its debt,

which it funded by borrowing $125 million. Management has promised the stores will turn a

profit in 2002; Lehman Brothers analyst Alan Rifkin estimates they will add $0.05 to $0.07

per share to earnings next year.

Already contributing to CSK’s earnings are 194 former Al’s and Grand Auto Supply stores in

five Western states acquired in October 1999 for $143 million from PACCAR Inc. The purchase

solidified CSK’s dominance in the West. To strengthen its position in the Midwest, the

company purchased All-Car Distributors and its 22 stores in Wisconsin and Michigan, now

operating under the Checker banner, in April 2000.

The acquisitions left CSK with 84 auto service centers, which generated $7.6 million in

sales in fiscal 2000, but also lost $2.9 million that year. The company has ditched the

service business and closed or sublet most of the centers. Integration of all the 1999 and

2000 acquisitions cost CSK about $24 million in fiscal 2000, while capital expenses ate up

another $10.2 million.

In response to manufacturer marketing initiatives that have encouraged dealership care for a

longer period, CSK paid $10 million last year for Automotive Information Systems, a database

service whose “Identifix” diagnostics technology can be marketed to both professionals and

consumers through the Internet.

In fact, one of the few areas where CSK is doing well is its burgeoning commercial business.

In a recent conference call with the investment community, chairman and ceo Maynard Jenkins

noted the success of the CSK Proshop wholesale business, which has grown about 25% per year

since it began in the mid-1990s. Sales to commercial accounts rose 14.5% in fiscal 2000. In

its latest quarter, the commercial side totaled 19% of all sales at $71 million and rose

11.5% on a same store basis. By comparison, DIY same store sales were only slightly in

positive territory. Commercial comps were the chief driver of CSK’s 2% same store sales gain

in the second quarter.

“The diminished DIY business has been offset this year by growth in the professional and

corporate side, which generally improves the productivity of CSK’s stores,” said Moody’s

Investor Service analyst Marie Menendez. CSK has been so effective at marketing to

professional installers that it has been able to maintain its position against AutoZone’s

entry into its key markets, she added. AutoZone has about 400 stores in California.

CSK credits expansion of its parts depots, an on-line local warehouse network and increased

sku mix for growing sales to commercial accounts. “We have significantly increased our

marketing efforts to the commercial customer,” the company said in its most recent quarterly

filing. CSK operates commercial sales centers in about 554 of its stores.

According to several store managers, CSK is beginning to format some of its Midwestern

stores in what presumably will be the prototype for new stores going forward. At a Checker

Auto Parts outside Milwaukee that opened in March, the format is a marked contrast to a

former Big Wheel site in a nearby strip mall that has operated as a Checker for about two

years.

The newer store, a freestanding site, is smaller. It has lower ceilings, narrower aisles and

merchandise more easily within reach. Most notably, the parts counter, located in the rear

of the older store, is now positioned adjacent to the checkout registers near the entrance.

Motor oil, one of the most in-demand items in any auto parts store, is more prominently

displayed high up on the wall facing the entrance near the batteries, clearly visible to

anyone entering the store. In the older store, motor oil is hidden away in an aisle far from

the entrance. And on the wall above the display of FRAM air filters, banners carry all the

brand names found in the store. An electronic parts catalog in the same section, where

customers can key in their vehicle type and find the proper product, is also a new feature,

the manager said.

The overall effect is a more shopper-friendly store where any item a customer is looking for

can be easily spotted, with more accessible sales staff to answer questions. One manager

said that new stores will also trend toward free-standing sites.

“The company has invested heavily in systems and in-store improvements in recent years to

reduce future needs,” Moody’s Menendez wrote in a report, noting that CSK’s broad geographic

coverage, strong branding in its markets and seasoned management team are the retailer’s

primary strengths. “There is potential for sales to increase over the next few years as the

increase in auto production in 1994 and beyond translates into a larger number of cars

entering the sweet spot for repairs.

“But greater longevity of parts, changes in lease and warranty terms and [new] technology

could change the timing and venue of repairs, [which] have migrated toward professional

channels.”

Jenkins allowed during the recent call that the company’s comps have been spotty. “We can’t

draw any conclusion on the way comps are running. In areas where there’s no competition our

business has been tough, and in other areas with more competition, it’s been better.”

During the 1990s, investors bid up the share prices of Ford, General Motors and Chrysler to new highs as the companies reported spectacular profits fueled by record sales of light trucks, low inflation and reduced fixed costs stemming from actions taken to lower breakeven points. But by 2001, the auto group was under selling pressure as investors began to fear the consequences of an economic slowdown and competitive pressures from European and Asian manufacturers who were relentlessly claiming more market share. The auto stocks always lose their appeal in the face of a recession, with its corrosive effect on margins and overall profits but the group rallied briefly in early 2002 when it seemed that the economy was turning up. However, the year ended with the individual stocks close to their lows for the year with investors questioning not just the cyclical outlook but whether these companies could reverse long-term, negative trends.

In the mid 1990s, investors were told by automakers that this time everything would be different. Breakeven points had been reduced through plant closings, while remaining capacity had been shifted to popular trucks. Meanwhile, variable profits on those light trucks climbed each year as material and component costs were stable and customers accepted higher prices and more content each year. Incentives had virtually disappeared by the late 90s as new vehicle demand set new records. A buoyant stock market minimized post retirement pension costs by inflating the value of pension assets. Actions to curb health care cost inflation seemed to pay off for a time.

These were heady times for auto companies, even as executives at the auto giants complained that their stocks were ignored by the rush into high tech. The boom years masked the underlying problems of this industry, which have been laid bare by the recession and the stock market collapse.

In 2002, GM, Ford and DaimlerChrysler accounted for less than 60 percent of the cars and light trucks sold in the country. GM succeeded in taking market share away from Ford but the three together failed miserably in the car segment while, as a group, they lost ground to foreign competition in light trucks. That American brands, even the best, should have warranty and recall costs five and 10 times greater than Toyota is an embarrassment in 2002. I believe that the methods by which the Japanese maintained high quality were revealed in various studies in the early and mid 1980s, more than enough time for them to have been employed by Detroit. Incentives have been the curse of the industry for decades and they never work. Oh sure, in the short term people flood showrooms. But after a year and a half of the same message, shoppers realize that the deals will be there when they are ready to buy a car.

In addition, billions of shareholder dollars were wasted on questionable acquisitions and investments. GM might luck out and not have to buy Fiat, but Ford wasn’t so lucky with Kwikfit or the mega bucks spent on Internet silliness.

In 2003, the auto industry will sit down with the UAW to discuss its predicament. The UAW has not succeeded in unionizing any foreign-owned assembly plant. As the numbers of these facilities increases, the massive burden that the Big 3 carry in post retirement costs becomes even more crippling. GM’s unfunded pension liabilities were probably more than $16 billion at year-end and retiree healthcare costs are more than three times that level. GM’s market value of about $25 billion appropriately recognizes that the company is “owned” by its retirees who have first claim on its assets. Without a booming stock market, the Big 3 will have to satisfy pension claims from operating results.

2002 revealed how little progress Detroit had made in closing competitive gaps with its rivals while it had the chance and had the cash. Now investors are wondering what’s in it for them if industry sales are weak, price deflation continues and post retirement costs claim cash needed to revitalize factories and product lines. I think I won’t sell my Treasury bonds yet!