What is the Future For Independent Businesses?

(Akron/Tire Review) Special Report by Amy Antenora of AMN – With a number of critical issues currently challenging the automotive aftermarket – SKU proliferation, auto dealer expansion and raw material costs, to name a few – there was no lack for topics of discussion at this year’s Global Automotive Aftermarket Symposium (GAAS), held this week in Chicago.

Bob McKenna, president and CEO of the Motor & Equipment Manufacturers Association, moderated a panel discussion posing questions about a number of critical issues such as product demand, brand equity, counterfeiting, vehicle maintenance, Right to Repair and the complexities of aftermarket distribution.

Is it necessary to have some OE business to be a good aftermarket supplier? Not necessarily, but it is helpful, said panelist Bruce Zorich of United Components.

“There is a level of value for us and for our customers by staying on top of technology as it is developed by the OEMs. It also creates credibility for us.”

Is it necessary to have an international footprint to be a good supplier? “Absolutely,” said Affinia’s Terry McCormick. Being a good supplier today obligates manufacturers to provide the highest quality part at the lowest quality price, which today requires an international presence, said McCormick.

The GAAS agenda also included panel discussions on two other issues impacting the market: the technician shortage and the impact of the automakers’ increasing presence in the service sector. Two presentations, “Who Will Fix the Cars?” and “The OE Outlook,” addressed these issues.

Who will fix the cars? According to Advanstar’s Larry Silvey, it will be the shops that offer the most consumer-friendly accommodations. Recognizing who your customers are and how to best take care of their needs are the two most important elements to capturing market share today for independent repair shops.

Getting and keeping repair business may have little to do with actual repair work. Accommodations like extended hours, a low price and a clean, pleasant waiting area with current magazines, a play area for kids and clean bathrooms appear to be the real draws for today’s consumers.

Automotive Distribution Network Co-president Mike Kamal predicts that small, independent mom-and-pop shops will be a thing of the past in the not too distant future.

In addition to the dire need to update shops to become more consumer friendly, the technician shortage is another impediment to progress for independent shops. Petro-Canada Certigard’s John Watt took that thought one step further with a startling viewpoint. He estimates that it would take 200,000 technicians to capture the $56 billion in maintenance that goes unperformed every year, based on an average tech sales of $250,000 in parts and labor over 238 working days.

Bill Babcox, president of Babcox Publications and the third generation to lead his family’s business, moderated a panel discussion on “The Next Generation,” and the challenges inherent to privately owned aftermarket businesses. In his presentation, Babcox noted more than 95% of U.S. businesses are privately held and account for almost 70% of the jobs. More than 40% of the Fortune 500 companies are privately held, he noted.

Will privately held companies continue to hold an essential role in the future of the industry? Yes, but not without challenges, said Babcox.

Among the challenges discusses by the panel were succession plans, whether the industry is attractive to the next generation and the advantages and disadvantages of having your name on the door.

“You can’t erase your last name,” which can work for and against you in a family-owned business, said panelist Doug Washbish, president and CEO of Moog Louisville Warehouse.

“You have to work twice as hard and take no credit in order to build credibility and respect,” according to Lisa Chissus, vice president and general manager of Flex-a-lite Consolidated and Cascade Plastics.

But there are advantages too, such as cultivating a family atmosphere, said Gordon Fenwick, CEO of Fenwick Automotive Products. Still, a family atmosphere can be pressure filled. “I’ve got 1,000 families that are relying on us every day for their livelihood,” said Fenwick.

According to Washbish, there are endless concerns when running a privately held business, such as the realities of operating in a mature market, pricing pressure, inventory explosions, healthcare costs, technology and distribution changes, keeping customers and employees happy.

On the flip side, panelist Fletcher Lord Jr., president of Replacement Parts Inc., says he does not lose sleep at night worrying about the business. His only concern is not being involved in it.

When it comes to succession, Babcox noted, only three in 10 businesses make it to the second generation, and only one in 10 make it to the third generation.

“Having the same last name doesn’t always cut it,” said Fenwick. “Mentoring is really important if we want to prepare the next generation.”