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Engine Installation - A Growing Opportunity?

By Ed Sunkin

Engine rebuilders who are looking to expand their share of the market may want to consider engine installations. Although some rebuilders may think installations are better left untouched, others are finding installations provide a profitable niche in a competitive market.

Terry O'Donnell, manager of RPM Engines and Machines, Rohnert Park, CA, is just one of many rebuilders in the industry who believes today's market is prime for the rebuilder to provide installations. "There's a good demand for it right now," said O'Donnell, adding his shop, located about 45 miles north of the Golden Gate Bridge, is in a market that serves about 250,000 to 300,000 people.

O'Donnell said he began providing installations about 18 months ago as a way to expand his profits and provide his customers with more services. "Customers like the idea that they can go to one place and have the engine rebuilt and reinstalled in their car. It also helps that we do transmission and rear-end work. Everything the customer needs is under one roof here," O'Donnell said.

Steve Hekman, general manager of Burlingame Engines, Grand Rapids, MI, said three years ago he made the move to make installations a part of his business as a way to reduce warranty returns and comebacks. In 1993, Hekman, who for 13 years operated an 8,000-sq. ft. rebuilding operation called Great Lakes Engine Rebuilders in Holland, MI, merged with Burlingame Engines. Burlingame was located 30 miles away and specialized in engine installations. Not only did the merger help reduce false warranty claims, it also provided Hekman's business with continued demand for rebuilt engines. Great Lakes contributed to the merger by providing the installer a source of quality-built engines.

Although performing installations isn't for everyone, Hekman said it can provide the small to medium-sized rebuilder an opportunity to become more successful. Hekman said the rebuilder can do the installation himself, or enter into a formal relationship with an installer. A formal relationship should supply the installer with good, rebuilt engines, and the installer will provide the rebuilder a place to sell and properly install their engines. If there isn't that formal agreement, problems can arise.

"What happens when something does go wrong with the engine that Brand X PER provided? Who will handle the warranty?" Hekman asked. "What often happens is the installer blames the rebuilder when there's a problem. The rebuilder says it's not his problem and says that the engine was not installed correctly. Meanwhile, the customer is the one who's stuck.

"With the rebuild and installation both handled at Burlingame Engines, we can give the customer peace of mind. There is no finger-pointing here. We're one big happy family," Hekman explained.

Glenn Kral of Glenn's Engine Repair, Rhinelander, WI, is a rebuilder who said he's learned early on the benefits of doing installations himself. Kral, whose primary work is engine repair and rebuilding, (about one-third of his business is installations) said he provides installations himself because relying on an installer sometimes causes differences of opinions. "I've learned you just can't do the rebuilding without doing the installation too. There's just too much, including your reputation, that's involved," Kral said.

Kral, who rebuilds about one automotive engine a week, said most of the time he reinstalls the customer's rebuilt engine. "The customer often wants some kind of special performance anyway, like a special piston or performance heads, so I'll just do the work," he said. But if the customer is in a hurry, or when a production engine remanufactured engine is more affordable, Kral will install a remanufactured engine that he's already purchased. "Why rebuild a 350 when you can buy one cheaper than it would cost to rebuild it," he said.

Located in northern Wisconsin's agricultural area, Kral gets a lot of work for farm machinery and tractor engines, including Ford and International Harvester. "It's amazing. These tractors are from the 1940s and they're still running today. These guys don't want to part with them," Kral said.

One problem area rebuilders who offer installations do find is with on-board diagnostics and engine computerization technology used in today's engines. Hekman said no longer are two-gas analyzers enough to troubleshoot today's complex engines. He recommends an engine analyzer with four-gas exhaust testing capability, as well as other forms of electronic diagnostic equipment. Although today's engine technology is designed to provide cleaner air, better fuel economy and improve the vehicle's performance, it can also give the installer a few problems.

Hekman explained what he refers to as the 'driveability factor.' After a rebuilt engine is installed and the customer pays the $2,000 bill, the customer expects the car to run properly. The engine itself may run fine, but if there is a bad sensor, the vehicle's "check engine" light will come on and the customer believes he has been ripped-off by the installer.

By using the necessary diagnostic equipment, the installer would be able to catch the sensor problem, notify the customer and replace the bad sensor for a charge.

"In this way, we don't have to unnecessarily defend our installation," Hekman said.

Of course, not every rebuilder/installer can afford the diagnostic equipment or the well-trained diagnostic technicians who can interpret the information. Instead, a rebuilder may seek to contract the engine diagnostic work with a local shop that has these capabilities.

Other tools the installer should consider purchasing include basic hand-tools, leak testers, heavy-duty compressors, pressure washers, jacks and jack stands, engine hoists and lifts. Lifts should be purchased based on space limitations, lifting capacity and the availability for upgrades.

But the best tool is probably the shop manual.

"Our mechanics are knowledgeable, but you definitely need the shop manuals," said RPM's O'Donnell. "Between the hand-held scanners and scopes, it is rare that we run into a problem we can't handle when we have the shop manual," O'Donnell said. O'Donnell said finding the right technician who knows how to handle today's complicated diagnostic work is also very important for installation work.

Dan Stewart, a field service technician for Fuller/Stolle Manufacturing Co., a Falmouth, KY-production engine remanufacturer, agrees. Stewart attributes installer error to most rebuilt engine "failures." Stewart spends much of his week on the road, visiting with installers who complain of problems with engines purchased from his company. When a rebuilt or remanufactured engine doesn't run correctly, Stewart said he normally finds a simple solution.

"There's usually nothing wrong with these engines," said Stewart. "The problem is when things like electrical connections or vacuum lines aren't hooked up correctly." Stewart said other errors occur when installers don't know the proper fire-up procedures or they fail to prime the engine correctly. "Some installers have fired-up an engine and let it idle, only to hear what they describe as odd noises. Of course they're going to hear noises if they're not following the proper fire-up procedures," Stewart said.

Stewart said the biggest hurdle installers face is that engine technology has changed. "It's still the same internal combustion engine that Henry Ford was making back in 1908. What's changed is the things they hang on it. The materials and components have changed," Stewart said. "Today's technicians are not keeping up with this technology. Engines are different and need different fire-up procedures.

"Stewart used an example that during the initial fire-up procedures of a rebuilt Chrysler 3.0L, it is recommended to run the engine at 2800-3000 rpm. Stewart said some installers may not be aware of that recommendation, or would be afraid to run the engine at that high of an rpm right away.

Stewart also said it is important to provide technicians updated technical service bulletins, OEM factory bulletins, trade press information and association bulletins such as the ones offered by the Automotive Engine Rebuilders Association (AERA).

"AERA is a tremendous source of information for a company that is going to do engine installation work," said Stewart. "For any shop or anyone that's considering installations, I suggest they become a member. The technical bulletins, flyers and the tech line are just tremendous.

"You need these updates," Stewart said, and used the example that if you go by the 1985-'86 manual to torque the heads of a 1986 2.5L Oldsmobile, you could be in trouble. Since the publication of the 1986 manual, GM has updated those torque requirements. "AERA is constantly updating this type of engine information," Stewart said.
Besides equipment, another consideration for installers is space. Since you will be dealing with the vehicle owner, a customer service area, including a desk to take orders and a waiting area will be required. Hekman said at his 18,000-sq.ft. facility which has 21 installation bays, about 11,000 sq.ft. are used for installation work, about 5,000 sq.ft. is for rebuilding operations, and the remaining 2,000 sq.ft. houses the customer service area.

Customer base

Just who are the customers for engine installations? Kral said most of his customers are in their 50s and are looking for a little more performance out of their vehicles - usually cars and pickup trucks. Although a lot of younger drivers (older teens and those in their early 20s) walk in his shop elated, they often walk out dejected. "Most of the younger guys today can't afford the work that they ask for," Kral said.

Lanny Lewis, who along with his wife Karen operate two Dr. Motorworx remanufactured engine installation center franchises in the East, said his typical customers are blue-collar workers between the ages of 28 and 55 who earn about $28,000 to $32,000 a year. Lewis said he also has a lot of multi-car family customers who have the engine replaced on a late-model car that is driven by college-aged children.

Karen, who manages the West Chester, PA, shop which opened in March of 1995, said a lot of their work is on four-wheel-drive and utility vehicles like Blazers and Jeeps. "It's a lot more cost efficient to replace the engine than the whole vehicle," she said, adding, they replace a lot of Japanese vehicle engines, especially the Mitsubishis.

Lanny, who operates the Wilmington, DE, shop nearly 20 miles from the West Chester location, said what makes their installation business attractive to customers is the price. An engine installation for the average domestic car is about $2,200. Imports run about $200 more.

Lanny said remanufactured engines are purchased from name brand PERs such
as AutoTek, Jasper, AC Delco and Fuller/Stolle. Lewis said his business also offers quick turnaround time. Normally a customer's vehicle is ready in three days. "We get a lot of trucks from service-type customers such as painters, plumbers and contractors. Because they need their truck for their business, quick turn-around time is especially important to them," he said.

Prior to buying the Dr. Motorworx franchises, both Lanny and Karen were professionals in the medical field. But after studying various markets, the couple decided engine installations offered the best growth and stability.

"Engine installations are really a growing segment of the automotive industry. That's why we're in this business," Karen said. "And there's plenty of installation work to go around. We're not here to compete with the local shops. In fact, we do a lot of referral work such as brakes and air conditioning for them," she said.

For some rebuilders, adding engine installations to their businesses' workload may not be worth the hassles. But for others, it improves both customer satisfaction and profits.