Profiting From the Failing Auto Industry

I've been following the economic gyrations of our auto industry with some interest.  Fifty years ago, the US auto industry was the pinnacle of success.  Now, the remnants of a once mighty industry are being torn apart... like vultures ripping up a dead animal carcass.

So who wins in all this?

Of course the lawyers do... (feel free to insert your canned lawyer joke here).

Aside from the lawyers, there's a small group of companies benefiting from the automotive industry turmoil.  I'll tell you who they are in a moment.

First, let's take a look at our favorite Dow Jones Industrial Average component... General Motors (GM).

With typical automotive flair, GM is keeping the world on a see-saw of news.  One moment they're threatening bankruptcy.  The next they're reaching agreements with debt holders.  Today, it looks like bankruptcy's a certainty.  The stock chart looks like the scribbles of a two year old with an indelible marker.

Up one moment, down the next.

One of GM's biggest competitors - Chrysler - is already in bankruptcy.

Ford, the lone survivor of the big three, seems to have sidestepped the turmoil.  You already know how highly I think of Ford.  You can find my most recent article on them here, "Time To Buy Ford... Are You Crazy?" 

To understand what's truly happening, we need to look at recent news on car dealerships.

Chrysler's cutting around 800 dealerships.  GM's in the process of slashing almost 2,000 dealers.  Ford's already done the dirty work.  In the last few years, they've cut more than 600 dealers.  Rumors are they've got another 100 or so in their sights.

Dealerships are being closed across the country.

But the dealership woes aren't limited to the big name brands.

Other smaller car dealers are struggling and closing as well.  Just take a quick drive through a few of the older automotive areas in your city.  The sight is frightening.  It's like a ghost town.  Empty lots, boarded up buildings...

weeds.

Why are the smaller dealers closing?

For the smaller dealers, it's all about credit.  Due to the credit crisis, getting a car loan is near impossible.  If nobody can get a loan, nobody can buy a car.  Add to that concerns over housing, foreclosures, and job losses and you have a perfect storm pounding the smaller dealers.

So, who's the winner in all this?

It's the automotive service companies.

Take a look at Monro Muffler Brake (MNRO).  The company runs 720 stores focused on providing services for automobiles.  They do a whole litany of things.  Everything from break repair to air conditioning services.

Many car owners used to have their vehicles services by their dealer...

In the next few months, as thousands of dealers close up shop, customers will be looking for new places to take their car.  And Monro is certain to pick up a number of them.

Trust me, it's not going to happen all at once.  The closings will take time.  But eventually the migration will happen.  Customers will slowly find their way over to service companies.  And those companies will see improving revenue growth and, of course, higher margins.

Monro's been on quite a run lately. The stock's nearing its 52-week high of .40.  I take it as a great sign the stock's showing strength in an otherwise weak economic environment.  All of the key moving averages are pointing toward a continued move higher.  Consider Monro for your portfolio.  Pick it up on pullbacks... but don't wait too long.  I think this stock trades over in no time.

Anaerobic Digestion for Energy and Biofuel from Municipal Solid Waste

Globally refuse disposal is still one of the great growth industries of our time. The majority of what we buy and use, is destined for the dustcart, and in an ever shorter time and breaking all previous records for quantity as civilization becomes more affluent.

We purchase great quantities of goods which come with a relatively short lifespan and abundant quantities of packaging material. In times gone by many of us composted our putrescible waste in our gardens ad vegetable plots.

Gardens are getting smaller, we grow fewer food crops, and there is little room left for the compost heap and the garden bonfire is often banned due to clean-air regulations.

Dustbins are getting larger and refuse collection authorities are becoming more efficient and helpful in collecting ever larger quantities of household refuse and civic amenity wastes.

To reduce the sheer bulk of waste destined for our landfill sites, to extend their operating lives and to minimize the environmental and safety hazards of the materials delivered unto them, there is increasing public and legislative pressure to recycle and reuse a greater proportion of the discarded possessions we call "municipal solid waste" ("MSW").

There is also a growing demand for energy and for that energy to be "green" and not from a fossil fuel based source which contributes to the greenhouse gas effect and climate change.

There are lots of ways that waste, with its locked-in energy, can be used as a fuel source, but one of the very best, if not the best is a process called Anaerobic Digestion.

The scope for anaerobic digestion of MSW "putrescibles" becomes apparent when one examines the composition of household refuse and the limitations of existing recycling schemes.

The big advantage possessed by anaerobic digestion is that using it to produce "biogas" can not only provide a fuel for ordinary diesel generators, but also can be converted into biofuel which can be used in the automotive industry. This can potentially provide us with green fuel in the place of fossil fuels which are saved.
Anaerobic Digestion is still a technology which needs a lot of improving and developing though. There are quite a few problems in using it reliably for the fermentation of wastes, despite the fact that Anaerobic Digestion has been used for sludge digestion at sewage works for at least 50 years.

The problems become apparent when one examines the cost and complexity of the anaerobic digestion equipment and the need to find appropriate outlets for the "refined digestate" liquid it produces.

The incentives derive from consideration of the alternatives:

The other alternatives, including refuse-sorting and incineration, refuse-derived fuels and refuse-reclaimed materials do not seem likely to offer an obvious straight forward quick-fix solution.
Landfilling is generally considered to be cheap and effective, if it's available, if it's acceptable in the locality, and it will always be required as the ultimate resting place for a small proportion of our refuse.
But landfill sites do fill up and the problem always remains of finding appropriate new sites..

To summarise this we would say that:

Household waste is inherently putrescible (compostible), and provides a natural material for decomposition by methane bacteria.
It will ferment naturally, in a landfill, which even when lined and capped is at comparatively little cost.
But, landfills do bring with them considerable environmental and safety hazards. They require extensive gas abstraction and leachate control systems to protect neighbouring crops, neighbouring properties and underground water supplies. Even then possibly 30% to 50% of the methane produced leaks out and can't be collected..
Household waste will also ferment rapidly in anaerobic digestion plants to provide a convenient source of biogas as fuel and a stabilised "digestate" for landfilling, or refining into useful soil conditioners and soil substitutes for agriculture, forestry or land reclamation. .
It will capture almost 100% of the methane produced, and this methane can also be processed into a automotive biofuel. It is carbon negative (helps reduce carbon emissions) and "green". Anaerobic Digestion technology may not be as reliable as other processes and the cost is high at present, but further investment in research into the processes will almost certainly be able to improve reliability very rapidly.>

Shouldn't you consider Anaerobic Digestion for your waste processing solution?.