Las Vegas -- More than 600 aftermarket professionals gathered before the opening of the Automotive Aftermarket Product Expo (AAPEX) on Oct. 31 for the Automotive Aftermarket Suppliers Association (AASA) Executive Breakfast. Michael Cardone Jr., chairman and CEO of Cardone Industries, and Tom Gallagher, chairman and CEO of Genuine Parts Co. took the stage to discuss "Leadership in a Changing Global Aftermarket."

Cardone began by noting that AASA members have sales of $350 billion and that the automotive aftermarket is the third-largest industry in the United States.

"I'm bullish on the aftermarket," Cardone said, noting that it has grown by 18 percent since 2001. "The global aftermarket has a bright future."

The primary question in today's aftermarket is who will be able to build the most efficient global supply chain, Cardone said. "If we don't create the leanest, most efficient supply chain, someone else will," he said.

Part of the answer to supply chain efficiency is manufacturing the parts as close to the customer as possible, Cardone said. "The end result is a reduction of inventory levels on our customer's shelves.

"The OEs have shown us that the best way to deal with inventory is to eliminate it."

Technology is helping move the aftermarket closer to the OE-developed systems of just-in-time inventory replenishment, Cardone said. "What we do see is that a supply chain that is built in collaboration with customers is very powerful."

"The aftermarket will continue to be a vibrant segment of the overall industry," Gallagher said. "Our industry has overcome many challenges and continues to grow."

In addition, he said, "Automotive parts stores will continue to be a vital link in the distribution chain."

That being said, there has been consolidation in the number of stores, much like that experienced by other parts of the industry, he said. In 1985, there were 29,900 parts stores, which had dropped to 25,075 in 1990, 22,162 in 1995, and 19,225 in 2000, he said.

Consolidation has also taken its toll on independent installers, with their numbers falling from 274,701 in 2001 to 239,253 in 2006, Gallagher said, but he noted that the group still performs 70 percent of the maintenance and repair work.

Installers need the support of their parts distributors, including technical and management training and marketing assistance, he said.

While competition has had its negative affects on store and shop counts, the overall affect has been to create a more professional, efficient industry, Gallagher said.

"Competition is a lot like cod liver oil," he said. "First it makes you sick, and then it makes you better."

Gallagher said he foresees better days for all segments of the aftermarket. "The sun will come out for the automotive industry tomorrow. The future is bright, but how bright is up to each of us," he said, pointing out that there is no Daddy Warbucks in the industry's future.

The industry from manufacturer, to distributor, to installer is now so tightly connected and interdependent that a collaborative effort is necessary to achieve the best results, Gallagher said. "Each of us will be hard-pressed to achieve our goals without the support of our chain partners."

Responding to an audience member's question about whether the recent opening of a Genuine Parts Co. office in China would mean more parts being imported from there, Gallagher said, "It's not really our preference that we're in this endeavor. It's really out of necessity." He added that about 37 percent of the company's parts are now manufactured outside of the United States.

Cardone said companies have to constantly evaluate what they can do to remain competitive. "The reality of the global economy is that there are growing costs and shrinking prices. We have to focus on efficiency and continued improvement.

"I don't think that there's any silver-bullet solution that says move manufacturing out of the United States," he said.

Gallagher cautioned that whether a supplier is chosen overseas or in the United States, price is just one consideration and that such a move is evaluated on many factors, including financial stability, market leadership, and integrity.

"There's more to it than just manufacturing costs," Gallagher said. "Those who recognize it will be in a position to take away market share from those who don't.

"Price is an incredibly affective weapon, but at the end of the day, if all we do is lower prices, nobody has won."

Photo caption:

Cardone Industries Chairman and CEO Michael Cardone spoke to AASA members at the association's Executive Breakfast during AAPEX.

Genuine Parts Co. Chairman and CEO Tom Gallagher tells AASA members that the aftermarket remains a vibrant segment of the automotive industry.