The Great Problem, no, it's the great solution: OTC : FLKI

While my German is assuredly lacking, I did manage to get the gist of the defense being opposed to the troopers. The driver simply said they were car sharing because of high fuel prices.

With the cost of gasoline and car care in general escalating, I wondered whether this is the kind of madness we are all going to be saddled with. I decided to investigate.

The figures back up this tragedy. The Automobile After-Market and gasoline purveyors are jacking prices up like there’s no tomorrow. Estimates run that US consumers are spending $ 65.7 million more on gasoline each and every day, with the average driver spending $ 87.43 per month on car maintenance, detailing, beautifying, washing etc. It’s the same story in Europe.

This, impacts most directly upon the poorest families with those in rural areas spending as much as 25% of their incomes operating a car. Resentment by the consumer targets government first of course since its taxes on fuel running from a low of 61.1% are significant. But, surprisingly consumer protest against car care industrialist and notably the better known brands was vicious. “it’s horrible, we can’t buy new cars anymore so we have to maintain our cars better and longer but we can’t afford a bottle of top quality polish” said Carl Johnson of Maury County Tennessee.

I contacted the marketing or communications officers firstly of the three largest US brands in terms of distribution, two of which are owned by colossus each a member of the Fortune group of elites. Cost increases are inevitable, raw materials are beyond our control, our general overhead keeps rising and quality isn’t free was the redundant come back.

I then flew to New Jersey, and eventually cornered Manuel Garcia, communications director of Falken, a small company traded on the OTC under symbol FLKI. The company has achieved industry renown because of its top end quality and incredibly successful cost controls - not the least of which is for raw material managed through its affiliate World Trading. “Nonsense, we have not raised prices since 2001 and continue to receive prizes for performance and innovation, the latest of which was for our “Brilliance” collection which we introduced in October” said Garcia. Much of this is the subject of press releases and general industry media easily found by searching FLKI on Google.

It seems that FLKI competitors are fanning the flames of protest across the global markets. While the flare ups have quieted as we enter the holiday season, there is much industry agreement that they will flare up again in the spring of 2010 just before the season for car care commences – retailers beware! FLKI with its publicized higher quality and lower prices seems meaningfully in good position. “In fact we have been contacted in the last two months by two of the three biggest retailers in the world and the largest auto parts store chain in Europe. All for our branded and private label products - the notable fact here is that they called us” added Garcia.

The relatively stable Automobile After-Market was first hit by the events of 9-11 and the political fallout that resulted rocked the already fragile oil-rich Middle East. The invasion of Iraq, political instability in Venezuela and America, India and China’s insatiable thirst for oil have all sent prices soaring. The industry, very much “oil” dependent for its plastic accessories, bottles, pumps and polishes, compounds and various chemicals was shattered by a barrage of price increases across the board.

Then Hurricane Katrina hit the American Gulf Coast, devastating half its key oil producing plants, followed by Hurricane Rita, which further hampered rebuilding operations. The result was that the industry’s raw material and accessory costs rose more than 40% with no end in sight. Add to that the fact that demand for the base raw material, oil, was voracious - America will for example use 4% more oil this year than last - at a time when supplies were a their all time lows and there you have it : disaster.

But wait, what about little FLKI (current market cap about $ 15 million). Hedged for three years out and protected by solid moves through its affiliate, the company suffered none of these intemperate costs. It increased no price, substantially increased production capacities and market share, all while increasing margins. “The confusion disappears when you consider that our competitors are huge and firmly believed they could leverage their non-auto care products to force their over-priced and lesser performing products ahead in the aisles. This of course is no more” suggested Garcia. A number of calls to chains, petroleum companies, and other retailers and distributors of FLKI product conceptions confirmed the incredible: there have been no price increases on these products since 2001. “Economies of scale are helping us still more as we penetrate or take market share. This is notable most recently in the Clean Plus® product conception for the automobile body shop, detailing and restoration industry, the so-called “Pro” line” said Garcia.

Well, where does this lead us? Well at the onset let me say that I do not recommend 12-up car sharing. It’s very painful I would imagine, and certainly dangerous. It will also positively damage the suspension of your car. Sensible car sharing on the other hand can work as more and more people are discovering through their burgeoning cars-pools.

Until things improve, the family car will stay. The cost of maintenance must include car care products of high end quality and at prices we can all afford. In the immediate short term - assuming FLKI competitors have the savvy to maintain quality and substantially lower their prices - Clean Plus® products with a 47.1% average advantage on industry pricing ex-vat has the global edge. “There’s been a price increase every few months for the last 5 years by our competitors and they have shown no lateral thinking in trying to alleviate the situation” concluded Garcia. I agree.

Let me go stock up. While at it I may just buy some FLKI stock as well – timing is everything and the spring is just around the corner.

Falken Industries Ltd OTC : FLKI is a diversified industrial conglomerate that operates in Chemicals, Wet Wipe and Biodegradable Technology. Falken Industries Ltd is the concept behind more than 160 products distributed through a network of global platforms and the recipient of trade awards for innovations, biodegradability and environmental and health quality standards.

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