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Motor Service, Inc.: Brian Casey, Incoming Engine Rebuilders Association (Aera) Chairman

What do you do after graduating from Worcester Polytechnic Institute in Worcester, MA, with a degree in management engineering? Why, run a heavy duty machine shop and service repair business, of course. Well, maybe not always. But that is the way it has turned out for Brian Casey, incoming Engine Rebuilders Association (AERA) chairman and one of the guiding hands at Motor Service, Inc., located in Auburn, MA.

Casey is following in the footsteps of both his father and grandfather who also were AERA board members. Casey's grandfather, Peter, started the business back in 1928 in half of a store front in Worcester where he used the local post office as his parts depot and an adjacent alley for changing out piston rings.

Today Peter is 98 years old and still sometimes brings friends into the shop to talk about "how things started" and "how they are today." Brian, his father, John, and his brother, Kevin, run the day-to-day operations of Motor Service. John is president of the company, Kevin runs the office and Brian oversees the machine shop and service repair sides of the business.

Anyone who has been in the independent heavy duty machine shop business for any length of time knows that the last eight to 10 years have seen dramatic changes in competition for heavy duty shop work and parts replacement. During the late 1980s a countrywide recession, as well as excess inventory and over capacity of the heavy duty OEMs, served as a catalyst for the OEM's entry into the remanufactured replacement parts business.

They've been tough competitors ever since, providing independent machine shops with more than enough competitive pressures in the form of national warranties, liberal core return policies, and competitively priced authorized rebuilt engines, in addition to offering a variety of other component parts ranging from fuel pumps to turbochargers to cylinder heads.

So how has Motor Service adapted to market changes? In a nutshell, through diversification and expanded OEM affiliations. For example, during the early 1980s, Motor Service's machine, service and parts business was almost entirely Detroit Diesel related. Today the company is an authorized service repair and sales outlet for numerous OEMs from Detroit to Caterpillar to Cummins, Perkins, Mitsubishi, Onan and Allison transmissions, to name just a few.

"I wonder how, in the future, independent shops will find enough business without being affiliated with an OEM," Brian Casey offered. Casey says that sales of his own shop's machining services is the first option he likes to offer the customer. However, realistically, he says he'd rather be able to sell an OEM remanufactured engine or cylinder head rather than miss a sale he otherwise would be unable to get.

"It provides us with sales that we otherwise would be unable to get," said Casey of his OEM reman products sales. "When the OEM had only new replacement products to sell, the independent machine shop could provide great cost savings to the customer. But the market has changed dramatically. In light of the OEM warranty, price and quality, it's often hard to convince the customer that you've added any value with your own remanufactured parts or machining services."

The dramatic market changes Casey is referring to include OEM reman parts that are generally of good quality, priced competitively and that carry a national warranty. And the OEM seems committed to staying in the reman aftermarket, as Casey noted that today more than 50% of Caterpillar replacement part sales are provided through Cat's own remanufactured products.

But perhaps even more significant is the extended life span of heavy duty diesel engines. Today, 500,000 to a million miles are not unrealistic expectations for the life of an over-the-road heavy duty diesel engine before major work is required.

"We used to get the diesel engine machine work from a local Mack fleet," explained Casey. "Every 200,000 to 300,000 miles they would tear down the engines and we'd do the machine work. We don't get that type of work anymore. They don't need to do that type of preventive maintenance any longer."

While customer expectations for quality, performance and durability are higher than they've ever been, Casey says when machine work is needed the customer usually expects to get it at competitive pricing.

"It seems like almost every customer that we have today is running lean," he explained. "Whether it's a mail carrier, a trucking company, city fleet or off-road construction operation, pricing is always key." Casey said that many of his accounts will seek two or three different bids on a job before getting the work done. That has required a lot of effort educating the customer.

"It's very difficult to bid a job today," explained Casey. "You have to spend the time to educate the customer about what is included in your bid and find out if a lower bid includes all the work that is included in your own bid. However, sometimes it still isn't enough." It's very frustrating, he said, when a customer asks you to bid a job a certain way and you do, and then you find out later that he accepted a lower bid from a competitor that isn't going to do the work the way it was originally bid out.

"Because of all of the consolidations and competition, pricing will remain key," said Casey. He explained that with his own machine shop products and services, he feels he must base his pricing on the OEM's aftermarket products' pricing.

"With the OEMs you really need to understand their pricing," he explained. "We can't always get what we should on everything that we do. The OEM pricing often dictates what we must price at. In the 1980s my average markup was about 40% on a fleet price. Today it's about 25%. We get squeezed on some products and on others we make a very good margin."

Depending on the time of year, Motor Service's shop work comes from a variety of sources including OEM distributors, construction companies, bus fleets, municipal equipment and other machine shops. Jobs are sourced from markets that range from marine to industrial to the retail customer.

The geographical market that the shop draws from consists primarily of the surrounding four state area including Rhode Island, New York, Vermont and New Hampshire. In addition to standard in-house machining services that cover a wide array of jobs, the shop also does various on-site repairs such as line boring and cylinder boring of over-the-road, construction and marine applications.

Motor Service runs a mean and lean operation with just 10 employees to handle its machine shop, service garage and new truck sales divisions. Casey notes that his shop employees are all capable of running a half dozen different machines, and several also do double duty as service technicians in the 10-bay repair garage.

Casey says that several years ago when things really got tough, the company made the decision that if it was going to survive and its employees were going to make a comfortable living, they would have to learn how to do a variety of work, and that's just what they've done. Apparently the employees have also seen the wisdom in that decision as almost none have been with the company less than 10 years.

Of the approximately $2.5 million in annual company sales, about 65% is accounted for through parts and vehicle service work, 30% through the machine shop and the balance through new Mitsubishi Fuso and GMC medium duty truck sales.

Casey notes that sales of new trucks in themselves are not a high profit opportunity. However, the 40 to 60 new trucks the company sells annually, does bring parts and service, as well as machine shop work to the company, which does represent higher margins.

Motor Service is also switching its focus to retail rather than fleet customers for its truck sales. It's trying to devote more emphasis to selling "features and benefits" rather than price, which often is the primary issue for larger fleet buyers. "We want to sell trucks to people who will bring them back to us for their parts and service requirements," said Casey.

Casey said Motor Service purchased the two truck dealerships about 10 years ago in an effort to diversify the company. Today truck sales come from about a 30-mile radius. "We feel we are going to be able to grow our truck sales in the future," said Casey. "And vehicle parts and service and the machine shop will benefit from the improved volume of work in our bays."

Motor Service's 10-bay service garage is one of the largest in the area. Work is drawn in from a surrounding 65-mile radius. Major accounts include service contracts with companies such as Ryder and Penske, eight different school bus fleets, OEM dealerships, new truck sales customers and municipalities.

As with the machine shop, OEM technology has required better trained technicians and the availability of information to properly diagnose and repair modern drivetrains and vehicle systems.

"In the machine shop we have to be more concerned with such things as surface finishes, specific tolerances and the way component parts must fit to each other," said Brian. When it comes to repairing trucks and buses in the service bays he says that this concern translates into having the proper diagnostic tooling and direct access to OEM information.

"We probably have $18,000 to $20,000 invested just in diagnostic equipment for the various OEM engines and powertrains that we service," said Casey. Cummins, Cat, GMC, DDC, Mitsubishi, each OEM has its own diagnostic software."

While Casey says that such equipment is expensive and that costs can also be high in terms of training technicians to use it properly, he notes that it is the most direct and efficient way to service vehicle powertrains and operating systems.

"Today's electronics provide the history of the performance of an engine or vehicle system and allow us to determine the cause of a failure or potential failure," explained Casey. "We also employ personal computers and software that enable us to reprogram ECMs to perform updates and to reprogram system parameters that the OEM has determined are needed. We are doing more and more of this all the time."

Motor Service is also linked on-line to most of the OEMs it is affiliated with. Having a direct computer link to the OEM expedites warranty service and payment. It also facilitates more efficient parts ordering, product updates and allows for direct training sessions with the OEM, all of which leads to better cash flow and a happier customer.

For the present, the mix of machine shop, service garage and new truck dealerships seems to be working to the benefit of the entire company. Casey notes that when he advertises his new truck and service repair operations, he also simultaneously promotes the machine shop and the services which it provides.

Casey admits, however, that perhaps Motor Service could do a better job of marketing the machine shop. He said that he is considering hiring an outside salesperson or two to look for business that the shop could provide services for. "It's probably the best way to expand our shop business, although we do get a lot of referrals from the customers we already do business with," he said.

Although Motor Service may look to expand its machine shop market customer base over the near future, it will continue to use its ties to the OEMs to strengthen its parts and service offerings to its customers.

"Customers today expect a competitive warranty, good price and service," said Casey. "Having the machine shop, the OEM reman lines, and the service bays allows us to provide that."