Transcript AASA Supplier Barometer

MEMA Information Services
Council
October 15, 2007
Naples, FL
1
Discussion Outline
1. Brief Overview of AASA
2. Defining the aftermarket
3. State of the industry
4. Health of the supplier base
5. Open discussion & Questions
2
AASA
Leadership in the Global Automotive Aftermarket
•Automotive Aftermarket Suppliers Association
•Aftermarket Market Segment Association (MSA) of MEMA
– HDMA, OESA
•Nearly 300 Member Manufacturers
•Represent 80% of North American Aftermarket Volume
•Approximately $154 Billion in Sales
3
Automotive Aftermarket Suppliers Association
•AASA serves as the voice of the automotive
aftermarket suppliers and:
– is a recognized industry change agent
– promotes a collaborative industry
environment
– provides a forum to address issues
– serves as a valued resource for members
4
AASA Value Proposition
1. Government Affairs
2. Image of AASA Member Manufacturers in the
Automotive Aftermarket Industry
3. Market Research, Industry Analysis, Benchmarking &
Best Practices
4. Manufacturing Standards
5. Industry Collaboration on Issues Important to AASA
members
6. Brand Protection and Intellectual Property Rights
7. Global Opportunities and Challenges for AASA Members
8. Education & Training
9. Member recruitment, retention & satisfaction
5
Defining the U.S. Aftermarket
2006
•New vehicle parts market = $193 billion
• Light vehicle aftermarket sales of products
and service $209 billion
•Sales of Heavy Duty aftermarket products and
services $59 billion
•Combined light/heavy duty aftermarket
products and services $268 billion
6
Primary Drivers of Aftermarket Sales Volume
•Vehicles in Service
•Miles Driven
7
Total Vehicles in Service (000)
250,000
200,000
150,000
100,000
50,000
0
1980
1985
1990
1995
2000
2005
2006
Source: R.L. Polk
8
Vehicle Miles of Travel in the U.S.
3,000,000
2,500,000
1,500,000
1,000,000
500,000
20
05
20
00
19
95
19
90
19
85
19
80
0
19
75
Millions
2,000,000
9
Total Light Vehicles in Use by Age
18,000,000
16,000,000
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
19
17
15
13
11
9
7
5
3
1
0
Automotive Aftermarket Sweet Spot
Source: R.L. Polk
10
Average age of light vehicles in use in the U.S.
12.00
10.00
8.00
6.00
4.00
2.00
0.00
DOMESTIC
CAR
DOMESTIC
LIGHT TRUCK
IMPORT CAR
IMPORT LIGHT
TRUCK
2005
10.82
9.12
9.14
7.01
2006
11.10
9.35
9.29
7.04
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Shares of Vehicles in Service
40%
35%
36%
33%
30%
25%
25%
20%
1 5%
1 0%
7%
5%
0%
DOMESTIC
CAR
DOMESTIC
LIGHT TRUCK
IMPORT CAR
IMPORT
LIGHT TRUCK
Source: R.L. Polk
12
U.S. Retail Sales of New Light Vehicles
20,000,000
18,000,000
16,000,000
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
0
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Cars
Trucks
Total
Shares of New Vehicle Sales
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
DOMESTIC
CAR
DOMESTIC
LIGHT TRUCK
2002
Source: Ward’s Automotive
2003
IMPORT CAR IMPORT LIGHT
TRUCK
2004
2005
2006
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U.S. Market Outlook: Light Vehicle Aftermarket
Dollar Volume ($Millions)
$250,000
$200,000
$150,000
$100,000
$50,000
20
08
F
20
10
F
20
06
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
$0
15
Aftermarket Distributor Sales
$8
$7
$6
$5
$4
$3
$2
$1
$0
2 003 2 003 2 003 2 004 2 004 2 004 2 004 2 005 2 005 2 005 2 005 2 006 2 006 2 006 2 006 2 007 2 007
Q2 *
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
GENUINE P AR TS / NAP A
Source: MFSG
* MEMA Est.
ADVANC E AUTO P AR TS
P EP B OYS
O'R EILLY AUTOM OTIVE
AUTOZONE, INC .
16
Unperformed Maintenance (Billions)
$70
$60
$50
$40
$30
$20
$10
20
06
20
05
20
04
20
03
20
02
20
01
20
00
$0
17
Producer Price Index
Motor Vehicle Parts and Accessories
107
106
105
104
103
102
101
100
99
98
97
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Base = 12/1/2003
18
U.S.-World Parts Trade
1998-2006
95,179
$100,000
92,154
$90,000
83,444
$80,000
74,469
62,726
61,619
Millions
$60,000
69,089
66,959
$70,000
54,365
58,864
$50,000
53,720
49,901
$40,000
46,807
52,628
49,794
50,087
48,501
2001
2002
2003
55,054
$30,000
$20,000
$10,000
$0
1998
1999
2000
Parts deficit
Source: U.S. Bureau of the Census
Parts exports
2004
2005
2006
Parts imports
19
U.S.-EU Parts Trade
1998-2006
14,000
12,099
12,339
12,000
11,009
9,858
10,000
8,425
$million
8,000
7,451
7,716
7,375
6,737
5,501
6,000
4,434
4,609
1998
1999
4,848
5,071
5,048
4,492
4,345
2002
2003
4,615
4,000
2,000
0
2000
2001
2004
2005
2006
Year
Parts deficit
Source: U.S. Bureau of the Census
Parts exports
Parts imports
20
U.S. - China Auto Parts Trade, 1995-2006
Since 2000, the auto parts trade deficit with China increased
333%
$8,000
6,928
$7,000
$6,000
5,408
Millions
$5,000
3,884
$4,000
2,788
$3,000
2,242
1,635
$2,000
1,758
1,284
1,037
815
$1,000
510
251
$0
225
258
2000
2001
636
623
344
132
1998
1999
2002
2003
2004
2005
2006
Year
Parts Trade Deficit:
Source: U.S. Bureau of the Census
U.S. Exports of Auto Parts to China
U.S.Imports of Auto Parts from China
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AASA Automotive Aftermarket Index
120
118
116
114
112
110
108
106
104
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State of the Industry
•Aftermarket large and growing modestly
•Primary aftermarket drivers—vehicles in use; miles driven—continue positive
•Significant period of transition and challenge
•Still a relationship business at the store to buyer level
•Fundamentals of quality, availability and service still mean something
•Balance of power has shifted; “power buyers” WD’s and retailers in the driver’s
seat
•Aftermarket mergers and acquisitions continuing at a record pace;
transactions first 6 months of 2007: 55; up 28% over 2006
•Private equity creating churn in the aftermarket; 21 of 55 transactions
•Service Dealer demand for form, fit and function driving increased SKU count
and inventory investment
•Insistence on lowest invoice price accelerating low cost country sourcing
•Value-adds being stripped from prices at all levels
23
Parts Suppliers:
The Largest Manufacturing Sector in the USA
24
Supplier Jobs: Midwest Focused,
but Moving Southeast
25
Source: MEMA, “Motor Vehicle Suppliers: The Foundation of U.S. Manufacturing,” January 2007
Health of the Supplier Base
•Manufacturers are struggling to maintain profitability
•Margin erosion at all levels
•Globalization impacting acquisition and sourcing
• Raw material costs rising
•Value added suppliers are competing for lowest price
business
•NA manufacturing shifting focus to emerging
international markets
•Little collaboration to address industry issues
•Many are well under way in transforming themselves into
global manufacturers/”provisioners”
26
The NA Table of Pain
Business models must survive through . . .
Industry PPI/CPI/ECI
1998-2007 YTD % Change
New Vehicle CPI
(through the dealer – includes incentives)
- 5.0%
Light Duty Vehicle Manufacturer PPI
(dealer to the manufacturer)
- 7.18%
Motor Vehicle Parts PPI-Commodities
(OEM to the supplier)
2.85%
Primary Metal PPI
+ 58.23%
Plastic Materials & Resins PPI
+ 51.46%
Petroleum Refineries PPI
+ 219.54%
Employer Cost Index for Benefits Manufacturing
+119.00%
Source: CAR and OESA at the 2005 Management Briefing Seminar; Updated by OESA through February 2007
Note: Auto accounts for 41% of US steel consumption, 31% of US iron consumption, 32% of US aluminum
consumption and 4% of US plastic consumption (CAR – Fall 2003 economic significance report)
27
AASA Supplier Barometer
Q3 2007
Question 8: How significant are these issues facing your company?
5
Q-1
Q-2
Q3
1= Not important 5 = Very important
4
3
2
1
Healthcare costs Availability
Lack of pricing
and cost
power
of raw materials
Weak sales
Globalization
Labor cost & Excess inventory Regulatory & Product returns
availability
legal issues
Counterfeit
products
28
Wild Cards
• Impact of rising gas prices
• Collapse of subprime mortgages and
tightening of credit markets
29
Opportunities for Suppliers
•Collaboration with channel partners
•Use technology to reduce cost and for competitive edge
•Low-cost manufacturing strategy
•Strategic alliances/partnerships
•Revenue diversification
•Leading market position (product, technology and
process)
30
Association/Industry
Information Technology Leadership
•MIS Council: 35 years of leadership
•Growth and success of the Aftermarket eForum
•Association push for data standards adoption
•Growing number of 3rd party providers
•Expanding technology capabilities of repair
professionals
•Increasing prominence of IT managers at the
manufacturer level
31
“The best way to predict the
future is to create it”.
32
Questions?
33
Thank You!
34