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Desert Engine Reman Expands in the West
By Ed Sunkin
Since the early years of the United States, the West has always
provided young pioneers a chance at adventure and the freedom
to expand our nation. For Jonathan Smith, president of the Production
Engine Remanufacturers Association (PERA), the passion for expansion
found in the hearts of those heading west is also a key element
in operating his own successful business.
Smith will serve as president of PERA until the association's
annual convention September 16-20 in Albuquerque, NM. He is also
the president of Motor Replacement Co., Inc., a production engine
remanufacturer located in Phoenix, AZ, a business Smith has been
working to expand since becoming president of Motor Replacement
in the mid-1980s.
Motor Replacement Co., Inc. was started in 1946 in a downtown
Phoenix location, by Everett Warner, who also served as a president
of PERA in 1959. In late 1984, Smith, along with partners and
family members, bought the company and retained the then current
At the time of the purchase, Smith had never worked as an engine
rebuilder. But he had always had a fascination with motor vehicles.
"Growing up we worked on our own vehicles, but nothing major
like engine rebuilding," recounted Smith. "However,
when I saw Motor Replacement Co. advertised for sale, we all thought
it would be a good investment opportunity."
Since taking over the business, Smith has come to share in the
universal understanding that other remanufacturers and rebuilders
have when it comes to such things as coping with engine design
changes, installation matters, core availability and customer
satisfaction. "It's a difficult industry," Smith stated,
"very labor intensive. But it's pretty much about what I
Smith, a 37-year-old Indiana native said because the other investors
in Motor Replacement were involved in other careers, he assumed
the title of president. "
In October 1988, Motor Replacement moved to its current location,
a 50,000 sq. ft building situated on a seven acre site west of
downtown Phoenix. The new site is more than double the size of
its previous location. Smith said all of the engine remanufacturing
is completed at the Phoenix location and engines, both long and
short blocks, are sold under the Roadrunner Engine® brand
name. About 1,000 engines are in inventory at any given time at
Piston assembly process (left) and crankshaft grinding operations
(right) at Motor Replacement Co. About 65 crankshafts are ground and inspected each day.
The company also has five engine distribution warehouses located
in El Paso, TX; Las Vegas, NV; Salt Lake City, UT; Tucson, AZ;
and Mesa, AZ. Each location is staffed with a territorial sales
representative and stocked with anywhere from 150 to 300 remanufactured
engines, depending on the market's distribution needs. Smith noted
another warehouse location opened Dec. 1 in the Denver, CO, area,
adding sales are already doing well there.
When the company relocated to accommodate growth, Smith found
out that expansion doesn't always proceed smoothly. Although the
new location meant a larger work area, there were some limitations
to the layout. "This building wasn't a custom build for an
engine remanufacturing facility," Smith said. "We did
have some limitations such as the thickness of the concrete in
various areas, so equipment like our five crank grinders had to
be set up in specific locations. When setting up the equipment,
we had to step back and really look at what we were doing. How
the building was originally built dictated how things had to be
set up for desired production flow." However, Smith said
talking to equipment manufacturers provided helpful information
implementing the shop's layout and production flow.
Because Phoenix has year-round warm temperatures and sees little
precipitation, the engine tear down and cleaning areas of Motor
Replacement Co. are located outdoors. It is there where each block
receives an identification stamp that is used throughout the remanufacturing
process. "When an engine comes in as a core, it is stamped
with a work order number," Smith said, adding organization
is a must in an operation this large. "With this number,
we can track what work has been done and what is left. It's an
extremely small, but effective detail."
Smith said Motor Replacement Co., which had $9 million in gross
sales for 1997, has the ability to grow in both workload and sales.
"Right now we're not running to the total capacity of our
facility and we do feel we will be adding to our personnel by
about 10% over the next 12 months." Currently, there are
55 people working in production.
Smith estimated the company is operating at about 75% to 80% rebuilding
capacity. "We feel we have the capabilities to grow another
20%," Smith said, adding he is looking toward additional
equipment expansion for the cleaning department, as well as other
Despite a competitive market place throughout the country, the
company anticipates continued expansion. "We sell to program
distributors, warehouse distributors and jobbers throughout the
Southwest," explained Smith. "But the Southwest isn't
as densely populated as the East and West Coasts, so we're looking
to sell our engines in some new markets." Noting that the
company's new Rocky Mountains center is a practical location,
Smith said he is looking to step up service to Southern California.
A motor reaches the final assembly area prior to testing where all new rockers,
pushrods and lifters are installed.
Smith said he credits much of Motor Replacement's growth to increased
marketing. "Remanufacturers like us are doing a lot more
marketing today," he said. "Not only do we market our
product to jobbers, installers and WDs, but we've even done some
consumer advertising on television to increase customer awareness
of remanufactured engines, too," he said. "Viewers who
call us for information are provided with the name and location
of a reputable installer near them."
Motor Replacement remanufacturs all domestic gas passenger car
and light truck engines. Although the company has been primarily
a domestic engine remanufacturer, import engine remanufacturing
has grown to about 15% of total production. The company does not
remanufacture diesels, although the possibility of doing so down
the road could provide another area for future growth, Smith said.
However, for the present diesels are not on the agenda.
Motor Replacement currently remanufactures an average of about
35 engines a day, 650-750 units a month. "Sales dictate what
we build," Smith explained, adding that the company has about
2,000 combined units in stock, which includes engines at its various
distribution locations. "We have a wide range of inventory
and our fill rate is very good," Smith said. "We're
a big believer that availability is an important key to servicing
customers. If we don't have something, a quick turnaround time
is a must."
Smith explained product availability is just one way Motor Replacement
Co. has worked to service customer expectations. "Although
customer expectations are different for each buyer, today's consumer
expects a better product," Smith said. "Our customers
also expect the support of a high-quality, reasonably priced remanufactured
engine that will be delivered to them when they need it."
Smith said the increasing number of engine applications and the
increasing costs of inventory have changed the way remanufacturers
operate today. Scheduling of work must be very defined. "In
the old days, you could set up a run of 350 Chevys for three to
four weeks. Obviously, rebuilding the same type of engine was
"Today it's not like that anymore. Because you are remanufacturing
different engine models nearly everyday, your shop has to accommodate
quick setup time and quick changeover time. At any one point,
though, you try to schedule work so you can maintain a full day's
production on the same engine type."
Smith also said coordinating work is vital. "We have to plan
our production by the week," he explained. "Some remanufacturers
today are planning daily production schedules, but we haven't
got to that point yet."
Smith said weekly production schedules help maintain a steady
flow of needed cores. "By preparing a weekly production schedule,
we can see which cores we have a deficit of, so those orders are
placed right away. Cores are usually delivered in about three
to four days. The just-in-time theory works with all products,
but it really applies with cores and fill rates."
Smith said Motor Replacement Co. uses about five core suppliers
regularly. "Some get more of our business than others. It
just depends on the type of service they give us," he said.
Smith said core availability continues to be a problem for remanufacturers,
especially with import engines. "In some applications, finding
a repairable core that's been junked is a growing option. Of course,
cracked cylinder heads seem to be the biggest core problem."
Smith said remanufacturers have to look at different ways to save
money, and one way is being more frugal with cracked heads than
in the past. "If it's repairable, we'll do the crack repair
ourselves. We try to salvage and save everything (that can be
salvaged)." By reducing its scrap, and making quality repairs
on components that in the past may have just been discarded, has
improved both availability and profitability of the company.
But Smith said to offer a reliable product, you can't skimp on
replacement components. He said more new parts go into a Roadrunner
Engine than many reman engines currently available in the market
place, adding when it comes to purchasing a remanufactured engine,
people should not be shopping on just price alone.
Consumers today should keep in mind the warranty that comes with
the engine, the quality of parts and the quality of the workmanship,
Smith offered. "We replace the valves, guides, springs, rocker
arms, push rods valve springs, etc. with all new components,"
he said. So our pricing on product in some cases is higher than
a majority of our competition in our sales areas.
Limited warranties on long block domestic and import Roadrunner
Engines, which covers defective workmanship and materials furnished
by Motor Replacement are 24 months or 24,000 miles (whichever
comes first) for passenger cars, vans and pickup trucks up to
3/4 ton driven for personal use. Engines for trucks, cars and
vans used commercially are covered by an 18-month or 18,000 mile
warranty. Additional optional extended coverage is available for
both warranty plans.
Short blocks (which make up just 10% of the company's total engine
production) for passenger cars and trucks are warranted for a
period of 90 days or 4,000 miles, whichever comes first.
Warm year-round temperatures combined with little annual precipitation allow for
the cleaning/teardown operations to be held outdoors.
Smith is proud to proclaim Motor Replacement Co. has a comeback
rate of less than 2% on its work. But what concerns him the most,
as is the case with nearly all remanufacturers, is the issue of
proper engine installation. "Installers today have to invest
in both education and training, as well as dedicate money for
the proper diagnostic equipment to handle all of the computerization
and on-board diagnostics on late-model engines," Smith said,
adding he believes most installers are making this commitment.
"But there are still some installers who haven't updated.
They have been getting away with it on the early-model engines,
but to work on late model engines, they're not going to be successful
without that investment."
Smith said when a remanufactured engine doesn't operate correctly,
it's not the installer who gets blamed, it's the remanufacturer.
"The typical vehicle owner doesn't understand what parts
are supplied and how critical the installation of the engine really
is," Smith said. "When it doesn't work, they blame the
engine and the remanufacturer. And too often the installer believes
that the engine remanufacturer has complete and total control
of the product quality. But in reality, it doesn't matter how
good the product is made, if the engine isn't installed properly,
it will fail."
When asked about the viability of a nationally-franchised remanufactured
engine installation business, Smith said it could be part of the
answer to installation concerns. "I think that an engine
installer, much like AMMCO which handles transmissions, could
be very successful," Smith stated. " A national franchise
would be more apt to spend money on equipment and training of
Today's market and looking ahead
Smith said he sees demand for remanufactured engines staying about
at current levels. He doesn't see much in the future which would
alter that. "In the last 12 months we haven't really seen
any increase in overall demand," Smith said, "it's been
pretty level. But on the other hand, there is great potential
for growth for engine remanufacturing in the U.S. in the future.
"Some remanufacturers are down considerably in work,"
he said. "We've been very fortunate here." But, the
remanufacturing market, like many industries, Smith said, goes
through cycles of good and bad years. "I felt 1986 was a
bad year, and 1989-'90 was not very good for the industry either,"
he recalled. "That was a time when there were quite a few
rebuilding companies that closed their doors as desperate moves
had to be made."
Smith said there are a number of reasons why remanufactured engine
sales are flat in the U.S today. "In this country there's
the popularity of new cars hitting the market each year along
with low finance rates," he explained. "There's also
the popularity of leasing vehicles. And we're seeing more and
more leasing of fleet vehicles rather than a company owning the
Smith also noted that the location of his plant is a key to the
company's success, saying he credits the mild weather of the Southwest,
improved body durability of new vehicles, and the consumer fondness
for trucks as reasons for what he describes as steady reman engine
Whereas the average age of a vehicle in the U.S in 1996 was 8.9
years, in the Southwest it's a little higher. "This is truck
country," Smith explained. "And people tend to hold
onto their truck and sport utility vehicles longer than a car.
Plus, since these types of vehicles hold their value longer, repowering
with a remanufactured engine can be a better solution compared
to trading in for a new truck or sport utility vehicle.
"The cost of a completely remanufactured engine is sometimes
less than the amount of sales tax you would pay for a new vehicle,"
Another familiar problem facing the industry is the new engine
technology developed by OEMs. Smith said he believes engine remanufacturing
is more difficult today and it's not going to get any easier.
"Tolerances on later model engines aren't near as simple
as they used to be and surface finishes are more demanding,"
he said. "There can be a lot of changes in an OEM engine
even within the span of a year. And with every new application,
there is a necessary learning process." But Smith contends
updating equipment is a way to overcome these issues.
So in order to attract new customers and keep the old ones in
today's competitive market, customer satisfaction is key. "We
as remanufacturers have to realize and recognize these changes
and catalog these units accurately so our customers get the right
engine the first time they order," offered Smith.
And there are other ways to stay ahead of the competition. "Our
supervisors stay focused on the ever-changing technology issues
by attending PERA functions and training courses when they are
offered," Smith said. "We do a lot of in-house training
of our production personnel and we cross-train as many people
for different jobs as we possibly can.
For the future of the remanufacturing industry, Smith doesn't
expect to see many more mergers among PERS. "There have been
quite a few acquisitions and mergers among PERS, recently, but
it's not a trend that I think will continue," he said.
He does, however, see a continued trend for mergers among parts
manufacturers and suppliers to PERs and custom engine rebuilders.
"In the last three years the trend of mergers among suppliers
has been increasing (See Federal-Mogul's recent proposed acquisition
of Fel-Pro, Coretalk, Page 6). Today there are plenty of parts
suppliers and product available out there. But I do feel the growth
of mergers will have a definite impact on the automotive aftermarket."
Smith also believes the market trend of remanufacturers selling
directly to the jobber or installer will continue. "Over
the last 12 years, we have seen, not only in remanufacturing,
but in all facets of the aftermarket, the bypassing of some WDs,"
Smith said. "Some remanufacturers feel forced to bypass WDs
in order to stay in business. It may be the only way remanufacturers
can sell their product in certain territories."
Smith also sees increased sales of remanufactured engines from
retailers. "Many of these national retail chains have a lot
of marketing money behind them. They also have real aggressive
attitudes for expansion, as some of these chains are opening more
and more stores each year. The sheer number of stores will undoubtedly
increase the amount of retail remanufactured engines sold."
Smith said Motor Replacement Co. does not currently sell engines
to retailers. He feels the sales of remanufactured engines by
PERs to retail outlets has helped some remanufacturers and hurt
Smith said his membership in PERA has helped his business a great
deal. "My philosophy is that we should work together toward
solving problems through more communication," Smith said
of his association responsibilities. "If you think about
particular problems for a specific procedure, or remanufacturing
productivity as a whole, and talk these issues out with your peers,
you can gather quite a bit of information. Even your closest competitor
will help you solve problems. The association is fairly open."
Smith said there are still some production engine remanufacturers
who could qualify for membership in PERA and who would really
benefit from the association if they joined. "Our goal is
to increase PERA membership. The association does have a lot to
offer," Smith said, adding the association is looking toward
expanding more membership internationally, too.
"The world is a big place and there is great potential for
finding new members around the globe. It's just a matter of letting
them know we're here. As more PERs become involved with more import
engine remanufacturing, the draw for more international members
will be there," he said.
Smith also said the industry needs to focus on more consumer awareness.
"Getting the word out that remanufactured engine exchanges
are readily available would help our industry tremendously,"
Smith said. "For the most part, vehicle owners are unaware
a company like ours houses 2,000 units where they can call up
and swap their engine with a remanufactured one.
Most people think their old engine has to go to a machine shop
where it's rebuilt over a number of days. People don't like to
be separated from their vehicle for a long time. Our inventory
offers a quick and convenient alternative."