John Washbish is a familiar face in the industry. With more than 35 years of experience in the automotive aftermarket, Washbish began a new journey this year as president and CEO of the Aftermarket Auto Parts Alliance. He recently spoke with Aftermarket Business magazine and www.searchautoparts.com.You have spent a number of years on the manufacturing side, especially before coming over to program distribution. How has your transition to the other side of this relationship offered you a different perspective?
My perspective hasn’t changed and I think that’s a tribute to the very good suppliers I worked with over the years. Each of them was focused on the ultimate customer, which is the person who throws away the box. Having grown up in my father and brother’s distribution business in Louisville, I started my career on the supplier side with a good understanding of the distributor's perspective. For 32 years as a manufacturer I worked to build relationships with distributors because I believe that is the best way…the only way…to deliver the collective value our mutual customers want.
My time here at the Alliance has reaffirmed the wisdom of that approach. The undeniable truth is that good parts require good delivery. With the current set of market dynamics we face every day and the technology that is now available, the Alliance is taking deliberate steps to work even closer with our supplier partners. Considering the sordid nature of some industry history we're all finding it tough to build a truly collaborative aftermarket. But that's what it will take to really improve vertical efficiencies; you know, improvements between the levels in the supply chain. I view this now the same as I did before and that's why I say my perspective hasn't really changed.
Do you have any concerns as an ex-manufacturing employee and as a current program distribution employee about the manufacturing in low-cost countries, into our buying products from low-cost countries? And fundamentally, is this good for the American economy?
As with most major issues there's more than one side to this story. From one perspective it’s our obligation to the motoring public in North America to provide economical and timely vehicle service and repairs. That’s what our people do. We have to deliver high quality products to qualified technicians, with all the support they need. As the program group headquarters it's our job to make sure that we are continually improving that package. If jumping into the mainstream of globalization is what it takes to keep some of that going, then that's what has to be done. The global economy is not some optional activity that you can decline to participate in.
Is this fundamentally good for the American economy? In the end, business is about being competitive. If you believe as I do, that the United States can learn to compete with anything thrown our way, then the answer has to be yes. Being forced to address the myriad problems presented by rapidly emerging countries will make us stronger. Only American businesspeople can make America successful in the inevitable global economy that lies ahead.
Suppliers decry the act of cherry-picking brands -- when a reseller tries to get the lowest cost of all the products across the line -- and the fact some resellers don’t buy into full lines and this has been widely discussed, as it could affect the sales support, the training, some of the add-on service that go along with this. Do you still see cherry picking out there, and if you do, how do you think this will affect these add-on services in the near to distant future if this trend continues?
You’re always going to have cherry picking to some degree. If you remember the movie “All the President's Men,” the story of Watergate, Deep Throat told Bob Woodward to "follow the money"; same thing here. There always will be some industrious entrepreneur who says to him or herself, "If I just go source some cheap, fast-selling product and deliver it with no services whatsoever, I can beat the pants off of these full-line, brand name suppliers."
That's the motivation on the supply side, and on this side it depends on the philosophy of a group and its distributors. Our Certified Service Center technicians tell us they see a tremendous amount of value in the types of programs we pull together for them in the areas of education, training, warranty, product line and point-of-sale support, returns handling and all the other services that add up to our value proposition. To provide that package, we have to work with vendors that offer sales help, great cataloging, product and marketplace information, price recommendations, etc. We've found that a cheap price rarely compensates for the non-existent services that come with the typical short line.
PAGE 2Now that you are on the distribution side of the equation, has your philosophy of private brand versus premium brand changed? Why or why not, and what are your members asking for in your short tenure here?
My feelings about private label versus national brands has not changed at all and here's why. Earlier I mentioned that business is about being competitive. In the aftermarket, where so many products are safety related or vital in keeping people mobile, we simply can't afford to sacrifice quality in the interest of competitiveness. What can be varied is performance. A good product strategy will recognize the distinct difference between reduced quality and reduced performance. A "do whatever it takes to be competitive" product strategy will not.
If you sell the finest national brands, as we do, you know they will deliver the best performance for all applications. But today, particularly with the U.S. vehicle fleet aging as it is, the best performing, premium priced product is not appropriate for every application. The third owner of a 15-year-old Chevy may well feel that a lower level of performance is appropriate for their needs. But that doesn't mean they want to put low quality parts on their only means of transportation. What they want is top quality parts that provide appropriate performance. Our members understand the quality-performance relationship and introduced our PartsMaster line to cater to it.
So I believe, as I always have, that an appropriately attributed private label offering is a good thing, as long as you’re controlling the quality that’s in the box.
A recent AASA report notes the increased importance of manufacturer’s reps in the supplier-seller relationship. This should not come as a surprise to anyone who has been in the industry for some time, but how do you convince all concerned parties that this is the preferred way to do business, or do you believe it is the preferred way to do business?
To use or not use manufacturer's reps really isn't a question of preference, but of circumstances. In the right situation manufacturer’s reps are fabulous, and the Alliance certainly works with a lot of them. But this is not a one-size-fits-all business and it really depends on the product line, the geography, the physical effort required and a lot of other things.
On the plus side, generally speaking, reps are usually knowledgeable about a number of product lines and often cover a lot more geography. This gives them a broader sense of what's going on in the marketplace and some of the information they pass on to our members can be very helpful.
But there are some product lines for which a 100 percent dedicated person makes more sense. In a larger product line, say chassis parts for example, where we’re doing hundreds of millions of dollars in sales, we could keep a factory person busy 24/7.
But whichever approach is right for any given situation, the real key here is the benefit of live, interactive, get-it-done representation. The point that may not have been explicit in the report is the inherent importance of having good feet on the street. We’re not going to fight about whether it's a manufacturer’s rep or a direct person as long as they get the job done.
Let me tell you a couple of things I learned from my Dad on this issue. I was the oldest son in our family and I was getting ready to graduate from college. Being a 21-year-old smart aleck kid, I asked my Dad if he was ready for me to come home and take over the warehouse. The old man said, “Hey, I’ve got an idea. Why don’t you go someplace else and screw somebody else’s business up, get that out of your system, then maybe we’ll let you come home.” So I asked him who I should go to work for. He said, “I want you to go work for a company that uses manufacturer’s reps rather than direct salespeople.” When I asked why, he said, “Because when you come home to the family business, you’ll appreciate that we’re not selling a single product line. We’re selling several product lines and we have to be very versatile and flexible. We have to be able to move from brake parts, to engine-management parts to lighting products to antifreeze, or whatever the case may be.” So I spent my first six years out of college with a firm that worked exclusively with reps, and it was a tremendous learning experience. I saw firsthand why reps are very well thought of and very strong in the marketplace.
Oh, and one other thing. Around 1962 – I was 8 or 9 years old – I asked my dad about the difference between a rep and a direct guy. He said, “Come over here to the window. The factory guy that's waiting to see me came in that Chevy Impala over there. His rep that met him here for the appointment came in that black Lincoln Continental. That's the difference.” That stuck with me.
Now, another trend we’re seeing more and more of is industry consolidation — the manufacturing, distribution and service levels. How do you see this affecting Alliance members in months ahead, or in years ahead?
I think your analysis is correct, we will continue to see consolidation on the manufacturing side. Certainly the tragic experiences that many vendors have had in dealing with the original equipment manufacturers the last couple of years will force more of that to happen.
Another, less talked about phenomenon is the incursion of offshore manufacturers into the U.S. I've traveled the world pretty extensively since 1988 and there's no question that a lot of very good suppliers in other parts of the world want to break into the North American market. They can manufacture top quality products, but they don’t have brands or presence. They know they're facing a steep climb so they look for an acquisition or JV (joint venture) that will provide "instant" brand awareness and a customer base. We think this is probably a good thing, but good or bad it's just another element of the inevitable globalization that we discussed earlier.
So, yes we expect more mergers and acquisitions at the supplier level. Of course that means we have to be vigilant as ever to make sure we’re riding the right ponies, because when the ponies consolidate you don't want to find yourself on foot.
We also think that there will be fewer distributors as a result of acquisitions and mergers. Certainly that’s happening within our group, as some of our key members buy out other key members and consolidate. There are perhaps seven or eight of our members that are looking at acquiring or partnering with other Auto Value or Bumper-to-Bumper members where it makes sense. We think that that will continue along with the consolidation you see in the other areas of the industry.
And at the next level we're seeing jobber consolidations as well. Sometimes it’s because a consolidating distributor owns a few jobbers and they go with him. But we’ve also seen a trend in the last couple of years of independently owned jobbers moving here from other groups. They cite our flexibility, expertise and technology enhancements as reasons. I think a lot of them like our "structured freedom" approach. We don’t tell you what time you should open and what time you should close. Our part stores are not cookie cutters. We want those independent entrepreneurs to capitalize on their markets as only they know how. We see ourselves as a very entrepreneurial-friendly group, and that type of wholesaler likes becoming part of our game.
Now, when we get down to the service center level, we’re beginning to see some expansion as well as consolidation. We have a dynamite Certified Service Center program in which you can fly the Auto Value flag or the Bumper-to-Bumper flag. In the last few years we’ve seen a number of service center operations grow from one to two, three or more locations. Sometimes this is purely expansion. Other times it's consolidation as one service dealer buys out another.
My feelings about private label versus national brands has not changed at all and here's why. Earlier I mentioned that business is about being competitive. In the aftermarket, where so many products are safety related or vital in keeping people mobile, we simply can't afford to sacrifice quality in the interest of competitiveness. What can be varied is performance. A good product strategy will recognize the distinct difference between reduced quality and reduced performance. A "do whatever it takes to be competitive" product strategy will not.
If you sell the finest national brands, as we do, you know they will deliver the best performance for all applications. But today, particularly with the U.S. vehicle fleet aging as it is, the best performing, premium priced product is not appropriate for every application. The third owner of a 15-year-old Chevy may well feel that a lower level of performance is appropriate for their needs. But that doesn't mean they want to put low quality parts on their only means of transportation. What they want is top quality parts that provide appropriate performance. Our members understand the quality-performance relationship and introduced our PartsMaster line to cater to it.
So I believe, as I always have, that an appropriately attributed private label offering is a good thing, as long as you’re controlling the quality that’s in the box.
A recent AASA report notes the increased importance of manufacturer’s reps in the supplier-seller relationship. This should not come as a surprise to anyone who has been in the industry for some time, but how do you convince all concerned parties that this is the preferred way to do business, or do you believe it is the preferred way to do business?
To use or not use manufacturer's reps really isn't a question of preference, but of circumstances. In the right situation manufacturer’s reps are fabulous, and the Alliance certainly works with a lot of them. But this is not a one-size-fits-all business and it really depends on the product line, the geography, the physical effort required and a lot of other things.
On the plus side, generally speaking, reps are usually knowledgeable about a number of product lines and often cover a lot more geography. This gives them a broader sense of what's going on in the marketplace and some of the information they pass on to our members can be very helpful.
But there are some product lines for which a 100 percent dedicated person makes more sense. In a larger product line, say chassis parts for example, where we’re doing hundreds of millions of dollars in sales, we could keep a factory person busy 24/7.
But whichever approach is right for any given situation, the real key here is the benefit of live, interactive, get-it-done representation. The point that may not have been explicit in the report is the inherent importance of having good feet on the street. We’re not going to fight about whether it's a manufacturer’s rep or a direct person as long as they get the job done.
Let me tell you a couple of things I learned from my Dad on this issue. I was the oldest son in our family and I was getting ready to graduate from college. Being a 21-year-old smart aleck kid, I asked my Dad if he was ready for me to come home and take over the warehouse. The old man said, “Hey, I’ve got an idea. Why don’t you go someplace else and screw somebody else’s business up, get that out of your system, then maybe we’ll let you come home.” So I asked him who I should go to work for. He said, “I want you to go work for a company that uses manufacturer’s reps rather than direct salespeople.” When I asked why, he said, “Because when you come home to the family business, you’ll appreciate that we’re not selling a single product line. We’re selling several product lines and we have to be very versatile and flexible. We have to be able to move from brake parts, to engine-management parts to lighting products to antifreeze, or whatever the case may be.” So I spent my first six years out of college with a firm that worked exclusively with reps, and it was a tremendous learning experience. I saw firsthand why reps are very well thought of and very strong in the marketplace.
Oh, and one other thing. Around 1962 – I was 8 or 9 years old – I asked my dad about the difference between a rep and a direct guy. He said, “Come over here to the window. The factory guy that's waiting to see me came in that Chevy Impala over there. His rep that met him here for the appointment came in that black Lincoln Continental. That's the difference.” That stuck with me.
Now, another trend we’re seeing more and more of is industry consolidation — the manufacturing, distribution and service levels. How do you see this affecting Alliance members in months ahead, or in years ahead?
I think your analysis is correct, we will continue to see consolidation on the manufacturing side. Certainly the tragic experiences that many vendors have had in dealing with the original equipment manufacturers the last couple of years will force more of that to happen.
Another, less talked about phenomenon is the incursion of offshore manufacturers into the U.S. I've traveled the world pretty extensively since 1988 and there's no question that a lot of very good suppliers in other parts of the world want to break into the North American market. They can manufacture top quality products, but they don’t have brands or presence. They know they're facing a steep climb so they look for an acquisition or JV (joint venture) that will provide "instant" brand awareness and a customer base. We think this is probably a good thing, but good or bad it's just another element of the inevitable globalization that we discussed earlier.
So, yes we expect more mergers and acquisitions at the supplier level. Of course that means we have to be vigilant as ever to make sure we’re riding the right ponies, because when the ponies consolidate you don't want to find yourself on foot.
We also think that there will be fewer distributors as a result of acquisitions and mergers. Certainly that’s happening within our group, as some of our key members buy out other key members and consolidate. There are perhaps seven or eight of our members that are looking at acquiring or partnering with other Auto Value or Bumper-to-Bumper members where it makes sense. We think that that will continue along with the consolidation you see in the other areas of the industry.
And at the next level we're seeing jobber consolidations as well. Sometimes it’s because a consolidating distributor owns a few jobbers and they go with him. But we’ve also seen a trend in the last couple of years of independently owned jobbers moving here from other groups. They cite our flexibility, expertise and technology enhancements as reasons. I think a lot of them like our "structured freedom" approach. We don’t tell you what time you should open and what time you should close. Our part stores are not cookie cutters. We want those independent entrepreneurs to capitalize on their markets as only they know how. We see ourselves as a very entrepreneurial-friendly group, and that type of wholesaler likes becoming part of our game.
Now, when we get down to the service center level, we’re beginning to see some expansion as well as consolidation. We have a dynamite Certified Service Center program in which you can fly the Auto Value flag or the Bumper-to-Bumper flag. In the last few years we’ve seen a number of service center operations grow from one to two, three or more locations. Sometimes this is purely expansion. Other times it's consolidation as one service dealer buys out another.
PAGE 3How well do The Alliance’s distributor members and shop members work together? And if you could maybe you could cite an example or two of this in play?
If your entire supply chain is not in lockstep these days…well, to quote sheriff Buford T. Justice, "Boy, you're in a heap of trouble." Fortunately our folks work really well together. That's illustrated well by our convention. If you could see the number of Certified Service Center people that attend, and hear their ringing testimonials about the ways they are supported by our members, that alone would answer your question. Much of the praise relates to our training and education efforts. Some time ago Steve Marks developed a program called the Alliance University. John Wick, our vice president of training, reports to Steve and manages the University. The curriculum is not only about vehicular repair; it also focuses heavily on the art and science of running a good business. Our members feel responsible for making sure their Certified Service Centers have everything they need to be successful.
Let me give you a very specific and timely example of just how closely our people work together. Right now Steve has a cooperative marketing program going that’s specific to the OE dealership closings.
My good friend, Jerry McCabe, who I worked with for many years, is a pretty good student of the industry. He has brought some interesting statistics to our attention recently. In 2007 there were 3.21 aftermarket bays for every bay at an OE dealership. In 2010 that ratio is projected to reach 3.81…a growing aftermarket advantage. But wait…there's more! In the past 10 years the average number of registered light vehicles per service bay has grown from 156 to 205! We control more of the bay count and the number of vehicles per bay has skyrocketed. Now back to Steve's program.
Using a list of closing dealers and vehicle registration data, we can identify the owners of all the late model Chryslers in a given area. Steve’s marketing team, including the local Alliance member, works with our Certified Service Centers through a tailored program to attract those Chrysler owners who were being serviced by the closing dealership.
What were some of the greatest challenges in ’09 for the Alliance, and what challenges do you see ahead and how do you plan to meet them?
One of our greatest concerns in 2009 was about the health of our vendors. Many of our suppliers have a huge OE business, which we certainly respect and value. But when the new car market went into the dumper in 2008 we saw how badly some of them were getting hurt and frankly it scared us a little bit. When manufacturers working both sides of the fence experience that kind of trauma on the OE side, we have to brace ourselves for poor fill rates, bankruptcies and even closures.
So that was a major challenge and it was closely related to our biggest challenge…how do you achieve target growth in the business environment we're living through? Don't get me wrong; our business was good last year. We were up at the Alliance overall, but we weren’t up like we usually are. When it comes to year-over-year growth our members are spoiled because our people do such a good job each and every year.
Those two challenges, or concerns if you will, go hand in hand. How can we maximize sales and top line growth in the face of concerns over our parts supply. Fortunately for the most part our vendors did well and we appreciate that. We ask them to continue to hang in there and keep pushing those fill rates as we think the worst of this economic mess is behind us. We've seen improved fill rates over the last four or five months so we're feeling pretty good about 2010.
Going forward our biggest challenge will continue to be that top line growth. For me personally, my part of that challenge involves recruitment. There are some geographical territories where we would like to add some new members. We’re visiting with some new folks, but you know, even in good times change is difficult for most people. These are not good times. In fact this country is in the worst period of uncertainty that most of us have seen in our lifetimes. Sure, it can be expensive to take down the old signs and make all those conversions at the jobber level and the installer level and so on. But the real issue is that reluctance to change, even when you know it's the right thing to do.
So my biggest challenge, personally, is to help some of those people get over their aversion to change by showing them how easy it is to convert – to either an Auto Value or Bumper to Bumper distributor, and how powerful their benefits will be all the way through the supply chain.
If your entire supply chain is not in lockstep these days…well, to quote sheriff Buford T. Justice, "Boy, you're in a heap of trouble." Fortunately our folks work really well together. That's illustrated well by our convention. If you could see the number of Certified Service Center people that attend, and hear their ringing testimonials about the ways they are supported by our members, that alone would answer your question. Much of the praise relates to our training and education efforts. Some time ago Steve Marks developed a program called the Alliance University. John Wick, our vice president of training, reports to Steve and manages the University. The curriculum is not only about vehicular repair; it also focuses heavily on the art and science of running a good business. Our members feel responsible for making sure their Certified Service Centers have everything they need to be successful.
Let me give you a very specific and timely example of just how closely our people work together. Right now Steve has a cooperative marketing program going that’s specific to the OE dealership closings.
My good friend, Jerry McCabe, who I worked with for many years, is a pretty good student of the industry. He has brought some interesting statistics to our attention recently. In 2007 there were 3.21 aftermarket bays for every bay at an OE dealership. In 2010 that ratio is projected to reach 3.81…a growing aftermarket advantage. But wait…there's more! In the past 10 years the average number of registered light vehicles per service bay has grown from 156 to 205! We control more of the bay count and the number of vehicles per bay has skyrocketed. Now back to Steve's program.
Using a list of closing dealers and vehicle registration data, we can identify the owners of all the late model Chryslers in a given area. Steve’s marketing team, including the local Alliance member, works with our Certified Service Centers through a tailored program to attract those Chrysler owners who were being serviced by the closing dealership.
What were some of the greatest challenges in ’09 for the Alliance, and what challenges do you see ahead and how do you plan to meet them?
One of our greatest concerns in 2009 was about the health of our vendors. Many of our suppliers have a huge OE business, which we certainly respect and value. But when the new car market went into the dumper in 2008 we saw how badly some of them were getting hurt and frankly it scared us a little bit. When manufacturers working both sides of the fence experience that kind of trauma on the OE side, we have to brace ourselves for poor fill rates, bankruptcies and even closures.
So that was a major challenge and it was closely related to our biggest challenge…how do you achieve target growth in the business environment we're living through? Don't get me wrong; our business was good last year. We were up at the Alliance overall, but we weren’t up like we usually are. When it comes to year-over-year growth our members are spoiled because our people do such a good job each and every year.
Those two challenges, or concerns if you will, go hand in hand. How can we maximize sales and top line growth in the face of concerns over our parts supply. Fortunately for the most part our vendors did well and we appreciate that. We ask them to continue to hang in there and keep pushing those fill rates as we think the worst of this economic mess is behind us. We've seen improved fill rates over the last four or five months so we're feeling pretty good about 2010.
Going forward our biggest challenge will continue to be that top line growth. For me personally, my part of that challenge involves recruitment. There are some geographical territories where we would like to add some new members. We’re visiting with some new folks, but you know, even in good times change is difficult for most people. These are not good times. In fact this country is in the worst period of uncertainty that most of us have seen in our lifetimes. Sure, it can be expensive to take down the old signs and make all those conversions at the jobber level and the installer level and so on. But the real issue is that reluctance to change, even when you know it's the right thing to do.
So my biggest challenge, personally, is to help some of those people get over their aversion to change by showing them how easy it is to convert – to either an Auto Value or Bumper to Bumper distributor, and how powerful their benefits will be all the way through the supply chain.
