There has been intense pressure to reduce costs and expand into new markets. But will the old business model in the aftermarket, where suppliers maintain their role as full-line providers of service, continue to be effective?

With globalization, increased competition and industry fragmentation, we can’t continue using our past approach, says Gordon Ulsh, president and CEO of Exide and a speaker in this year’s GAAS panel entitled, “Adapting to the changing automotive aftermarket: The supplier’s perspective.”

He believes we spend too much time protecting yesterday, including items that don’t add value, rather than taking the chances on a “different tomorrow.”

Mike Howarth, senior vice president of KYB and another panelist, agrees. “My opinion is that the aftermarket in North America is very traditional, very inward looking,” hoping that what’s worked for the last 20 years will be good enough for the future. “That’s a very dangerous mentality to have. It’s like us all getting on the Titanic…some of us have seen the end of the movie. We all know what’s going to happen.”

Panelists agree that due to industry changes, manufacturers can’t continue offering services currently provided to the distribution channel without more valuable services suffering.

So focusing on key growth areas is needed, says Howarth, who adds in a post-show interview that instead of typical price reductions and other promotional programs, KYB will work along with their distributor channels on sales training. “This has to be a partnership with our distributors.”

Power shifts?
Ulsh suggests that U.S. suppliers tend to “loan” products to their customers too often, and with an already fragmented marketplace, this trend will continue to put more strain on the supplier/distributor relationship.

“To the extent that any of us are full-line suppliers of our product line, to the extent that an organization can take on sourcing of certain segments of that, you also erode the sort of volume equation that manufacturers go through,” explains Ulsh.

Al Stecklein, group president for Gates’ Global Aftermarket Division, is discouraged by the fact that some larger distributors have taken on what has traditionally been defined as a manufacturer’s role in product management. “Some of that is driven by the distributors’ need to be successful and drive product down the chain,” he claims, or it could be the result of some manufacturers’ financial difficulties, “but in my opinion, that’s not a trend that will continue to the ultimate end point with the distributor doing all the product management.

“The first time that the distributor has to deal with losses related to product liability or a violation of intellectual property, that the manufacturer today supports the distributor in fighting those battles, I think that will slow down the trend.”

Stecklein believes if manufacturers are going to be full-line suppliers to their distribution partners, then they have to be able to “step up to the plate and have full global coverage for the models that need to be supplied in the marketplace.”

But the suppliers aren’t the only ones seeing a power shift: the service dealer, too, has lost a lot of power and influence with the motorist, according to Howarth, who says the average service dealer is only billing 60 percent of his time.

“We have to take great care of our true customer, and that’s the service dealer, because he’s facing difficulty day in and day out. They are going out of business, and they need the support of the manufacturer and the support of distribution, and I don’t see that coming forth at the moment,” says Howarth, who points out that selling technicians good, better and best product lines is also “working in the wrong direction in an already very complicated business.”

But Stecklein believes there is a need for value lines in our socio-economic environment.

“On a 15-year-old vehicle, (a motorist isn’t) going to pay full price on a belt that lasts longer than the car will.” He believes the danger today is that there’s a tendency to take value line products and sell them in a niche they aren’t intended for.

“It’s in the interest of all channel partners to be responsible in terms of where they sell that particular value line product and how they sell it based on that performance price formula built into (the) product line.”

Technology’s accelerating pace
Product line shifts are changing rapidly, and it’s mostly due to advancing vehicle technology, so without focusing great energy on the growth of technology in the aftermarket, Frank Ordoñez, president of Delphi Product & Service Solutions and VP of Delphi Corp., fears for the industry. Although the distribution channel understands that a vehicle electronics revolution is coming, it collectively hasn’t determined what to do about it, he says.

“Marginally, we can’t afford to lose customers” to the dealership due to the fact that our service dealers are unable to handle the technology changes. By doing this, we are “subtly changing consumer behavior,” says Ordoñez. He adds that the industry must change the mentality that being a technician is a “second choice career.”

“We are working on vehicles that are 40 and 50 percent electronics” and they will hit our technicians. Seeking collaboration is one of the only solutions for teaching technicians how to service these vehicles, says Ordoñez.

Ulsh with Exide suggests we might be stuck between a rock and a hard place when it comes to ensuring the service sector is getting the training it needs: The traditional model where every distributor and manufacturer develops their own program is “probably an outdated model and I suspect the lack of technical capability really inhibits people from taking on added sales opportunities in installation and service, which could be good revenue, and they’re afraid with the lack of knowledge.”

He believes we need to view change as an impetus to business because it offers “the opportunity to reshape, fine-tune our business, expand what works for us, expand what has value in the market and abandon those things that don’t provide real value on an ongoing basis.”