Shares of Gentex Corporation (GNTX) will likely see a fall this week after reports of a possible lawsuit. The maker of mirrors and headlights for automobiles is being sued by American Vehicular Services LLC. The claim is against Gentex Smart Beam Dynamic Forward Lighting headlights.
Gentex officials are determining if the case has merit, but have not denied any wrongdoing. American Vehicular Services claims Gentex violated Smart Beam technology that will be used on BMW Series 3 cars coming soon to the market. The complaint states Gentex infringed on AVS patent for "Optical Identification and Monitoring System Using Pattern Recognition For Use With Vehicles."
Smart Beam Dynamic Forward Lighting creates a "block out" zone for oncoming vehicles to reduce glare. High beams stay on at all times to provide more visibility for drivers as they are looking ahead. The new headlights are expected to be useful in nighttime driving, when further vision could prevent accidents. BMW Series 3 is the only vehicle so far to utilize the new technology.
Gentex created Smart Beam Dynamic Forward Lighting after having success with regular Smart Beam headlights. Smart Beam uses cameras to adjust headlights automatically based on oncoming traffic, rather than drivers manually adjusting. In 2001, Gentex introduced the Smart Beam technology to the market. Since 2004, over three million have been shipped to automobile manufacturers. Gentex expects this year to increase sales of Smart Beam by 40%, after shipping over 1 million units last year.
Shares of Gentex got hit earlier this year when legislation was not signed to mandate rear view cameras in all new model vehicles. The legislation would have benefited Gentex tremendously, as they are the biggest player in the industry. Newer vehicles are adding the cameras already to stay ahead of legislation and to offer something that other car manufacturers don't.
Despite recommending shares of Gentex several times over the last two years, I have to now recommend selling shares of Gentex. The company faces three big negatives this year now with potential lawsuits, weak European car sales, and the lack of rear view camera legislation.
Back in April, I advised readers to load up on Gentex shares at a fifty two week low. Shares are sure to test that level again over next week. Patient shareholders could do well picking up shares at lower levels and counting on the lawsuit to be non-material, and the possibility of camera legislation to pass in the next couple of years.