Denver -- While consolidation and tightening margins have become omnipresent in many automotive segments, perhaps the greatest consolidation has occurred among machine shops. With declining engine rebuilding as a market fact, Engine and Performance Warehouse Inc. (EPWI) has redoubled its efforts to ensure that it is able to gain market share and continue to grow.
"It really started after Sept. 11, 2001, when you started to see very aggressive new car financing deals, which led to fewer engines being rebuilt," said EPWI President Paul Van Woensel.
"On the stock rebuilds, it seems to definitely be declining, although performance seems to still be doing fairly well," Van Woensel said. "This makes the market very competitive. There is more price pressure than ever before. It's not just at our level -- the manufacturers and the shops are also having problems maintaining margins."
With 12 engine parts warehouses serving the western United States, Van Woensel said EPWI is facing the challenge by trying to ensure that it is a one-stop shop for its customers and providing them with a wide range of choices in price and quality.
""Our mission is to provide choices," he said. "The customer is going to make the decision of what to buy." For instance," he said, "EPWI offers seven lines of camshafts, so customers can choose a specific brand or the house brand."
"We have what they are looking for, rather than just trying to sell them what we have," said Dusty Dodge, director of marketing."
"Our inventory follows sales," Van Woensel added, "so we're always adjusting our inventories."
To allow customers more value options, Van Woensel said EPWI has also continued to add to its Engine Pro and EPWI lines.
"Offshore parts are driving many changes in the engine parts industry," Van Woensel said, noting that it is obtaining more parts directly from overseas than ever. "Even many of the traditional national brands are moving their manufacturing offshore," he said, noting, for example, that Federal Mogul now manufactures pistons in India and Italy.
The advantage to working with companies such as EPWI or traditional national brands that are now producing offshore is that they provide quality control, Van Woensel said." "If you're going to be buying parts from offshore, it's good to have someone that can supply the quality control that is needed. You have to be careful. There's a wide variety of quality coming out of the same country, and you have to watch it very closely."
Offshore parts can mean not only lower prices for comparable quality parts but in some instances even better margins, Van Woensel said. "I think the lower prices are definitely making it to the street," he said.
In cases where there are domestic and offshore choices available, Van Woensel said EPWI offers both and lets the customers choose. In some lines, though, he said there is no domestic option any more. "It's really global today," he said. "For some things, there is no U.S. manufacturer. Try to buy a valve guide manufactured in the U.S."
The company's warehouses in Denver, Dallas, and Oakland, Calif., serve as hubs for the company's smaller regional warehouses, allowing even slower-moving parts to be available within a day in most cases, Van Woensel said.
To improve service, Van Woensel said the company has just launched a new company-wide phone system, which allows calls to be answered at any of its branches. "There will be more people available to answer the phones as the peak periods move across our four time zones," he said, adding that salespeople will now be available for longer hours as well.
Van Woensel said that EPWI's 12 locations not only allow it to service the entire West but to provide cost-effective shipping. "The logistics of freight are certainly coming into play," he said. "There are a lot of freight surcharges that have squeezed margins. By being in these markets, we can provide economical overnight service to the whole western United States."
Another customer service advance in recent years has been in the company's engine kit business, Van Woensel said. By combining the company's vast inventory with a sophisticated Web site, the Kit Wizard Web site function allows customers to build engine kits with the specific brands of parts that they desire, he said.
In addition, Van Woensel said the company recently added E-Direct kits, which are a less expensive, more generic version of the branded kit. "The key is to make sure you maintain the quality," he said. "It takes a lot of inventory to offer both choices.
"In some instances, the E-Direct kit is appropriate for our customers, and in others it's not," he said. "The shop may be competing with a production engine rebuilder, or the customer may just not be able to afford the name brand parts."
While the growth of the high-performance segment has been a bright spot in the engine parts and rebuilding industry, Van Woensel said it is not without its pitfalls. For one, he said, the margins on performance parts tend to be among the lowest for distributors and shops. He pointed to MSD Ignitions as one company that has recognized the issue and taken step to address it.
The MSD MVP program set minimum retail pricing, which allows both the distributor and shop to make a reasonable margin on its products, Van Woensel said. "MSD was a very low-margin line for many years," he said. "People weren't exactly excited about it because it was just something else that you wouldn't make any money on. Now our MSD sales are up, and we're able to invest in that growth with more inventory. And it's not just us; our customers are able to make more as well."
The challenges facing the industry make it that much more important that EPWI step up and provide the best selection, service, and pricing, Van Woensel said. "We have to be efficient. We're a distribution company, and we have to be good at it. We also have to make enough to keep the doors open because we provide a service that makes our customers' lives easier."
"We help the industry by providing a service of high value to our customers," Dodge said. "If we weren't here, there wouldn't be this breadth of inventory or overnight service."
While the industry is unlikely to return to its glory days of 50 years ago, Van Woensel said, at least some of the circumstances that created the recent declines are mitigating, including the absence of new-car loans at zero percent interest. In addition, he said, the average age of vehicles is increasing as is the total number of vehicles on the road.
"We're also seeing more upper-end rebuilds, which are more expensive to do with DOHC or four valves per cylinder," he said. "Even if the engine in the car never gets rebuilt, the upper end probably will."
"It really started after Sept. 11, 2001, when you started to see very aggressive new car financing deals, which led to fewer engines being rebuilt," said EPWI President Paul Van Woensel.
"On the stock rebuilds, it seems to definitely be declining, although performance seems to still be doing fairly well," Van Woensel said. "This makes the market very competitive. There is more price pressure than ever before. It's not just at our level -- the manufacturers and the shops are also having problems maintaining margins."
With 12 engine parts warehouses serving the western United States, Van Woensel said EPWI is facing the challenge by trying to ensure that it is a one-stop shop for its customers and providing them with a wide range of choices in price and quality.
""Our mission is to provide choices," he said. "The customer is going to make the decision of what to buy." For instance," he said, "EPWI offers seven lines of camshafts, so customers can choose a specific brand or the house brand."
"We have what they are looking for, rather than just trying to sell them what we have," said Dusty Dodge, director of marketing."
"Our inventory follows sales," Van Woensel added, "so we're always adjusting our inventories."
To allow customers more value options, Van Woensel said EPWI has also continued to add to its Engine Pro and EPWI lines.
"Offshore parts are driving many changes in the engine parts industry," Van Woensel said, noting that it is obtaining more parts directly from overseas than ever. "Even many of the traditional national brands are moving their manufacturing offshore," he said, noting, for example, that Federal Mogul now manufactures pistons in India and Italy.
The advantage to working with companies such as EPWI or traditional national brands that are now producing offshore is that they provide quality control, Van Woensel said." "If you're going to be buying parts from offshore, it's good to have someone that can supply the quality control that is needed. You have to be careful. There's a wide variety of quality coming out of the same country, and you have to watch it very closely."
Offshore parts can mean not only lower prices for comparable quality parts but in some instances even better margins, Van Woensel said. "I think the lower prices are definitely making it to the street," he said.
In cases where there are domestic and offshore choices available, Van Woensel said EPWI offers both and lets the customers choose. In some lines, though, he said there is no domestic option any more. "It's really global today," he said. "For some things, there is no U.S. manufacturer. Try to buy a valve guide manufactured in the U.S."
The company's warehouses in Denver, Dallas, and Oakland, Calif., serve as hubs for the company's smaller regional warehouses, allowing even slower-moving parts to be available within a day in most cases, Van Woensel said.
To improve service, Van Woensel said the company has just launched a new company-wide phone system, which allows calls to be answered at any of its branches. "There will be more people available to answer the phones as the peak periods move across our four time zones," he said, adding that salespeople will now be available for longer hours as well.
Van Woensel said that EPWI's 12 locations not only allow it to service the entire West but to provide cost-effective shipping. "The logistics of freight are certainly coming into play," he said. "There are a lot of freight surcharges that have squeezed margins. By being in these markets, we can provide economical overnight service to the whole western United States."
Another customer service advance in recent years has been in the company's engine kit business, Van Woensel said. By combining the company's vast inventory with a sophisticated Web site, the Kit Wizard Web site function allows customers to build engine kits with the specific brands of parts that they desire, he said.
In addition, Van Woensel said the company recently added E-Direct kits, which are a less expensive, more generic version of the branded kit. "The key is to make sure you maintain the quality," he said. "It takes a lot of inventory to offer both choices.
"In some instances, the E-Direct kit is appropriate for our customers, and in others it's not," he said. "The shop may be competing with a production engine rebuilder, or the customer may just not be able to afford the name brand parts."
While the growth of the high-performance segment has been a bright spot in the engine parts and rebuilding industry, Van Woensel said it is not without its pitfalls. For one, he said, the margins on performance parts tend to be among the lowest for distributors and shops. He pointed to MSD Ignitions as one company that has recognized the issue and taken step to address it.
The MSD MVP program set minimum retail pricing, which allows both the distributor and shop to make a reasonable margin on its products, Van Woensel said. "MSD was a very low-margin line for many years," he said. "People weren't exactly excited about it because it was just something else that you wouldn't make any money on. Now our MSD sales are up, and we're able to invest in that growth with more inventory. And it's not just us; our customers are able to make more as well."
The challenges facing the industry make it that much more important that EPWI step up and provide the best selection, service, and pricing, Van Woensel said. "We have to be efficient. We're a distribution company, and we have to be good at it. We also have to make enough to keep the doors open because we provide a service that makes our customers' lives easier."
"We help the industry by providing a service of high value to our customers," Dodge said. "If we weren't here, there wouldn't be this breadth of inventory or overnight service."
While the industry is unlikely to return to its glory days of 50 years ago, Van Woensel said, at least some of the circumstances that created the recent declines are mitigating, including the absence of new-car loans at zero percent interest. In addition, he said, the average age of vehicles is increasing as is the total number of vehicles on the road.
"We're also seeing more upper-end rebuilds, which are more expensive to do with DOHC or four valves per cylinder," he said. "Even if the engine in the car never gets rebuilt, the upper end probably will."
Comment on this article
Send This Link To Friend