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Spring Comes to Taiwan AM Auto-parts Makers After the State Farm Case Ceases
(Taiwan Economic News Via Thomson Dialog NewsEdge)Taipei, March 20, 2006 (CENS)--After a period of six months for appeal, the U.S. Supreme Court rendered a final judgment by allowing no further appeals from plaintiffs in the Avery v. State Farm case, according to Gordon Auto Body Parts Co., Ltd., a leading maker of aftermarket (AM) replacement sheet-metal body parts in Taiwan
In August 2005, The Illinois Supreme Court reversed a US$1 billion judgment against State Farm Insurance Co., the No. 1 auto-insurance firm in the U.S., in a nationwide class action based on the use of non-OEM automotive parts for car repairs. With the final judgment, Gordon expects State Farm to soon begin using AM parts again to repair policyholders' vehicles, creating strong business possibilities for local AM auto-parts suppliers, which now account for more than 80% of the North America AM market
Quoting a forecast made by BB&T Capital Market, Gordon said that the earnings per share (EPS) of Keystone Automotive Industries, a leading AM-parts importer and Gordon's major customer in the U.S., are expected to grow by 50% in 2007, 100% in 2008, and 200% in 2009
Encouraged by the favorable news, most local major AM auto-parts makers' stock prices recently rose
According to local AM parts makers, the State Farm case started in 1999 and the North America AM parts market suddenly dropped by about 40% in 2000, resulting in tough times for almost all Taiwan AM parts suppliers during the following two to three years. The meaning of the U.S. Supreme Court's decision is, according to the local makers, that sales in North America are expected to recover to an even-higher level than that in 1999
In the U.S., industry sources said, original equipment supplied (OES) auto parts currently account for about 85% of the total auto-repair market while AM parts account for about 15%, implying a great deal of room to grow for the latter
According to AM parts makers, they began aggressively joining the Certified Automotive Parts Association (CAPA) quality-certification system in 2000, and have been actively increasing the number of their CAPA-approved items available to the auto-insurance market
Both Tong Yang Industrial Co., Ltd., the world's largest maker of aftermarket (AM) plastic body-parts, and affiliated Taiwan Kai Yih Industrial Co., Ltd., a leading AM sheet-metal body parts maker, said that their goal is to get CAPA or Manufacturers' Qualification and Validation Program (MQVP) certifications for all products exported to the U.S. market. Gordon claimed that it made 530 CAPA-certified body parts in 2005, and said that the number would increase to 650 this year
The top-two AM auto-lamp makers in Taiwan, Depo Auto Parts Ind. Co. Ltd. and TYC Brothers Industrial Co., Ltd., began joining the CAPA system in July 2005. As of the end of last year, the two companies owned 18 and three CAPA-certified lamp sets
TYC, however, claimed that it aims to own 150 to 200 CAPA-certified headlamp sets by the end of this year.
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