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Restoration Review 1999: The Engine Restoration Market Is Healthier Than Ever

By Greg Bukosky

By all accounts, the engine restoration market is healthier than ever. According to the Specialty Equipment Manufacturers Association (SEMA), retail restoration expenditures accounted for over $933 million in 1998, an increase of almost 10% over 1997. Even more impressive is the fact that these figures don’t include labor charges from engine and machine shops that would surely push the figure over the $1 billion mark.

As one rebuilder so aptly stated, "as long as the economy is good and people have the discretionary income to spend, we’re going to do okay." On the flip side, however, there are certain issues that rebuilders need to be aware of before jumping headfirst into this growing market.

Turnaround times tend to be lengthy due to parts availability. Estimates are time-consuming and critical to profitability. Many portions of the restoration will need to be sourced out. And like any quality rebuild, you’ll need a certain level of expertise and patience to deal with issues not commonly found in your regular rebuilding work.

Furthermore, legislation aimed at reducing the population of restorable vehicles through scrapping is looming large in the rearview mirrors. Bills of this nature are currently on the books in at least seven states, as well as other proposals that could ban pre-restored classic vehicles from being stored in private and some commercial areas. These so-called "junkyard" laws are aimed at reducing what lawmakers term "visual pollution".

A simple definition
According to SEMA, the restoration market is generally comprised of four groups: antiques manufactured before 1920; domestic vehicles manufactured from 1920 to World War II (also classified as antiques); post-World War II domestic vehicles built through the 1950s, ‘60s and ‘70s (referred to as classics); and foreign vehicles.

A true restoration will return a vehicle as close to brand new as possible. Engine restoration experts recognize two types of restoration - show and street. The main difference between the two is that show vehicle restoration (sometimes called "100-point") brings the vehicle as close to perfection as possible with a total disregard for cost. These restored vehicles are seldom, if ever driven on the street and obviously will bring machine shops the highest levels of profit.

Street restorations on the other hand, are usually done for customers who expect to drive their vehicles infrequently for pleasure. Performance modifications are very common to increase durability, and the level of detail is usually less than that of a show restoration.

Today’s hot tickets
The hot restoration jobs today according to most of the shops interviewed for this article are classic muscle cars followed closely by mid 1950s through early 1960s vehicles. Steve Markley, sales team leader for Egge Obsolete Engine Parts in Santa Fe Springs, CA, affirmed these trends.

"Even though our inventory covers 75 years of engine parts, our big volume is definitely the post-war ‘50s and ‘60s vehicles," Markley said. "Right now we’re catering to the recent empty nesters with newfound discretionary income. The kids are out of the house and it’s time to play again. Generally, the cars they remember from their youth are the cars they want to restore. That’s what we’re seeing today."

As discussed earlier, mid 1960s and early ‘70s muscle cars are also very popular, and for good reason. Most shops know how to work on them; cores are readily available at reasonable prices; parts are plentiful; and best of all, customers are willing to pay good money to get their hands on one.

"Even though we have a reputation for being able to restore any engine from any time period, our specialty is 426 Hemi’s," said Larry Shepard of Shepard’s Automotive in Akron, OH. "We’ve amassed a large number of quality cores which we restore and sell throughout the world.

"In fact, we hardly do any local business anymore. Through my experience as a NHRA Top Fuel engine builder, word-of-mouth, Internet listings and ads in Hemming’s Motor News, we get calls from Germany, France, Great Britain, Australia - you name it.

"These people will pay big bucks for American horsepower. In fact, we’re getting ready to ship a 500 cid Chrysler engine to Germany today. The customer there said he wanted something he could drop into a Challenger and run 150+ mph on the Autobahn. After what we saw on the run stand today, it’ll do that and then some. I’d imagine you’re going to see some pretty stunned Porsche owners over there in a few months!"

Other machine shops serve specific niches regardless of trends. For example, Mark Kirby of Motor City Flathead in Dundee, MI, only restores what he calls "resto rods". "Basically these are period pieces," said Kirby. "In the 1950s the hot cars were the ‘32 Ford Flatheads and other street rods. Watch the movie American Graffiti. These are the types of cars our customers desire. It’s good, steady business if you know what you’re doing."

Not for the faint of heart
No matter what type of restoration is being undertaken, engine rebuilders should realize that turnaround times can be anywhere from a few months to a few years, depending on the project. "This work is not for the faint of heart," according to Trevis "Pappy" Shepard, Larry Shepard’s father and partner. "We just finished a 1937 Cadillac V-12 that’s been here over four years. Even though we took a pretty good deposit and billed most of the work along the way, we’re still in the hole seven grand. You’d better have some reserves to fall back on in this line of work."

The reasons for the lengthy turnaround times vary. Parts availability is the major contributing factor. Some parts are readily available, while some actually have to be manufactured by suppliers like Egge Obsolete Engine Parts. As one would expect, most restoration shops were quick to agree that antique engines require the longest turnaround times while classic muscle cars require the shortest.

The rebuilding process itself is also a determining factor as most restoration specialists work in a logical sequence from the crankshaft up. "Usually you can’t go to the next step until the current step has been completed," said Larry Shepard. "We learned the hard way many years ago that you have to take measurements and balance things as you go to avoid surprises. Although it’s nice to work ahead a little, the results can often be less than desired."

Speaking of desired outcomes, the ability to accurately provide an upfront estimate is critical to profitability and customer satisfaction. "This isn’t something you can do sitting behind a computer," Markley emphasized. "It’s been our experience, and we’ve talked to the best over the years, that the very first thing you should do when you get an engine in is clean it, disassemble it, magnaflux it and check weights and balances. There’s really no way you can give a customer an accurate estimate and turnaround time until you’ve completed these steps.

"The worst thing you want is to encounter major surprises halfway through a restoration. The customer won’t be happy; you won’t be happy and worst of all, your profit is probably going to take a hit."

Another factor shop owners should keep in mind when completing the estimate is that the engine is only one part of the total restoration, i.e., the customer is also paying a body shop thousands of dollars to restore the rest of the vehicle. That’s not to say you should estimate anything differently, but it does help in terms of understanding the customer’s sticker shock when you hand them the damage.

"The best policy is to get a deposit for at least half the job upfront," Markley said. "If they can’t do that, or they want you to accelerate the turnaround time, you may want to examine whether or not you really need their business. These are usually two warning signs of a job that’s going to go south on you."

Finding a parts source
Admittedly, the hardest part of any restoration job is finding the parts. The general rule is the older, more obscure the engine, the harder it will be to source the parts. The task isn’t impossible - you just need to know where to look.

Although some restoration specialists still prefer to scour swap meets for parts, the general consensus is that this process now delivers diminishing returns. "Sometimes you’ll find a diamond in the rough, but for the most part, more and more of the stuff is junk," said Larry Shepard.

In terms of defining what needs to be replaced in the engine, most rebuilders will find it to be all-inclusive, although mileage and wear can be mitigating factors. Valves, valve seats, valve guides, valve springs, rocker arms, pistons, rings, connecting rods and main bearings will generally all need to be replaced. In addition, camshafts, cylinders and crankshafts will often require machining.

Like their name says, Egge Obsolete Engine Parts specializes in hard-to-find parts. "We don’t limit ourselves to just what’s popular," Markley said. "We carry new old stock (N.O.S.) for most vehicles, even those that have been ‘orphaned’ or discontinued. What we don’t have, we very often can modify or manufacture here at our facility.

"Pistons would be a good example. Egge has all the castings, molds and dies to make pistons for most any classic or antique vehicle. We also manufacture quite a few valves as well." Markley went on to add that very little re-engineering is required of the O.E.M. parts. "In most cases, the designs were solid and well suited for the engine environment of the vehicle. We’ve upgraded the alloys and modified the ring placements somewhat, but that’s about all that’s required."

According to Markley, one of the biggest problems facing the restoration industry is the lack of commitment from large O.E. manufacturers to do short runs on items like gaskets and bearings. "The goal of any restoration shop and their customers for that matter, is to replace the worn parts with O.E. specified parts.

"These days, however, you see these parts being sourced to smaller companies. Sometimes you’ll even have to go offshore to get the price point you need to make a profit. The quality is still there for the most part; we’re just surprised that some of the big O.E. suppliers don’t think they can turn a profit with some of these things. Hopefully, they’ll re-examine the situation in the coming years."

Citing the consumer trend for one-stop shopping, Markley also added that Egge is currently implementing a plan to provide complete engine kits for most classic and antique vehicles. "We’re closing in on the goal," Markley said. "The good news for rebuilders is that some of the long lead times required to locate parts can now be eliminated. The shorter the turnarounds, the more engines our customers can do. This should be a good program for everyone involved."

Speaking of engine kit suppliers, Liberty Engine Parts, Inc., of Philadelphia, PA, claims to have over 400 different kits in stock for both domestic and import engines dating back to 1960.

Armand Mancini, president said that dealing with suppliers like Liberty can have its advantages. "Assembling engine kits, by definition, means that the company has access to lots of different engine parts from many suppliers," Mancini said. "They’re not locked into just a few manufacturers with limited lines.

"Engine kit work also means that the supplier has an intimate knowledge of overbores, undersizes and non-standard displacements. This can save your tail when you’re confronted with an oddball case where the engine has been bored out twice and doesn’t fit what’s in the catalogs."

Mancini went on to add that Liberty’s engine kits address one of the biggest problems facing engine restoration specialists today. "Older cars of the ’60s and ’70s were built to run on leaded gasoline," Mancini pointed out. "With that in mind, all engine kits sold by Liberty come with hardened valve seats. This is a good start to the problem; more than likely it will be sufficient for most applications. Obviously, high performance engines will require added measures."

Parts Finder Program
Another supplier that’s stepping up to the plate to serve the restoration market is the Engine Parts Group out of Wheat Ridge, CO. The company’s one year-old Engine Pro Parts Finder Program is designed to help machine shops and custom engine rebuilders locate rare, antique, classic and obsolete engine parts.

"Basically, we’ve put together a network which includes our 43 distribution centers around the country, 50 group suppliers, as well as a group of 35 engine parts specialty suppliers," said Greg Dunlap, president. "The parts requirements are received by EPG headquarters from one of our distributors and broadcast faxed to the finder network. Those companies with the needed parts respond directly to the inquiring distributor.

"The Engine Pro Parts Finder Program has been a great success thus far. Since its inception, the program has generated more than 500 individual requests and has assisted us in locating a wide variety of parts for our customers. We’ve located everything from main bearings for a 1936 Desoto in standard to a complete set of piston and liner assemblies for a 1955 Renault 2CV.

"Pistons and engine bearings head the list of components we’re asked to locate. These products represent about 45% of total requests.

"Valves, gaskets, camshafts, cylinder heads, crankshafts and sleeve assemblies are some of the other most frequently requested items. The program is free of cost to customers of the Engine Pro Distributors, and we feel the program supports the move by many rebuilders to specialization and niche services."

Outsourcing as an option
For the majority of machine shops, entering into the restoration market will require the use of outside sources. The most common services that you’ll require will be crankshaft grinding, connecting rod reconditioning and babbit work. Some restoration shops have also started to cryogenically treat engine blocks and parts for added durability. Invariably, it will take a few jobs to dial in what these outside services should cost, as well as what your mark-up should be.

According to Brent Nyberg of Dana Motors and the Motor Warehouse in Sacramento, CA, the need for their services has remained relatively steady in recent years. "We specialize in crankshaft grinding and connecting rod reconditioning," Nyberg said. "We sell wholesale to parts houses and machine shops and the market seems to be really healthy right now in terms of units sold.

"Where we see the chink in the armor is the lack of qualified machinists who know how to work on the older engines from the 1930s - ‘50s. These engines have looser tolerances so today’s new breed of machinists and technicians don’t know how to work on them. Some people think these engines are more forgiving, and they are to some degree, but you can still screw them up if you don’t know what you’re doing."

If you’re in the restoration business for any length of time you’re also going to require some babbit work. This process is mainly for pre-1935 engines, although some 1950s Chevy engines used it, too.

Simply defined, babbit is a soft alloy comprised of tin, nickel, lead, copper and antimony used in varying amounts at the discretion of the supplier. The main benefit is that babbit can be melted and poured in place and then align-bored to proper size.

Several suppliers around the country provide this service including Egge Obsolete Engine Parts, Pittsburgh Crankshaft Service in Pittsburgh, PA, and Paul’s Rod & Bearing in Parkville, MO.

According to Steve Grabbert, owner of Paul’s Rod & Bearing, there are various reasons why very few shops offer babbit services. "To begin with, the equipment and the dies are pretty rare," Grabbert said. "We have most of the original dies from the old Federal-Mogul operations. "Not many people know how to do it, either. I have a book from 1952 that said even then, that babbiting was a lost art!"

Other suppliers use the babbit process for non-traditional purposes as well. Mike Muehlbauer of Pittsburgh Crankshaft Service claims that his babbit man, Rob Vento, manufactures 60% of all the broken or missing parts for engines coming through his shop.

In any case, the process can be tricky and rebuilders should look out for certain trouble spots. "We use a lead base with tin and other additives," Grabbert said. "Many of my customers felt that the tin and nickel compositions were too hard. Under stress, they didn’t give and cracked.

"Getting the babbit to adhere to the substrate is also tricky. We use a certain type of acid for best results. Without it, the babbit won’t stick. You also need to watch out for what we call ‘blow holes’. They start out as little tiny imperfections, and over time, the motor oil will make them bigger and bigger until there’s a failure."

Grabbert also stressed that engine restoration shops need to implore their customers to regularly change their motor oil and filter. "It’s really critical to the durability of the babbit. The good news is that unlike most late model bearings that will take a crankshaft with them when they fail, babbit bearings will always give an audible warning before they go. Shut it down right then and you’re going to save yourself a lot of money."

Pending legislation
One of the things that could affect the restoration market over the long term is the introduction of "scrappage laws" that originated in California. Without going into great detail, the Environmental Protection Agency (EPA) allows companies from the so-called "smokestack" industries to purchase emission credits, usually in the neighborhood of $700 for retiring vehicles that are 25 years or older. In return, these companies can delay their emissions compliance with the EPA.

The obvious problem is that this scrappage would include the cars that fuel the restoration market. Many lobbyists, including SEMA, have gone to bat for the industry by educating lawmakers that collector cars are not polluters and are, in fact, driven very infrequently. To date, several states have exempted restored vehicles from emissions inspections including Washington and Nevada.

The other concern is that some of these pending laws call for the scrappage of the total car and do not allow for the salvage of usable parts that could be used in the aftermarket. With parts availability already a problem, many inside the industry are watching the developments with great interest. Further legislation on these issues are expected later this summer.

Another potentially damaging development that could affect the restoration market is the introduction of inoperable vehicle or "junkyard" laws. The aim of these laws is to prohibit the storage on private property of vehicles deemed to be public safety hazards.

Industry experts worry that these laws would make it difficult for hobbyists and professionals to work on collector vehicles on private and commercial property. Basically, the proposed laws state that the vehicles cannot be stored outside under any circumstances within public view. Furthermore, they empower law enforcement officials to remove the vehicles from the property without probable cause or advance notice to the owners.

For more information on any of the aforementioned legal developments, or to voice your opinion to lawmakers, please contact the SEMA Washington D.C. office at 202-783-6007.

Conclusions
Now is a great time for machine shops to enter the restoration market. The economy is good, suppliers are plentiful and willing to cater to your needs, and it’s a niche that can be carved out virtually anywhere in the country.

Best of all, restoration allows for increased profit margins. Customers expect to pay top dollar and the good machine shops can get it. Wouldn’t it be nice not to haggle over the price of a valve job for once?

To get started, visit your local car clubs or swap meets. The people are always friendly and willing to share information, and once you do a good job for one of them, you’ll be amazed at how quickly the others follow.

Sure, the cars may be old, but the way we see it, the opportunities are as new and exciting as ever.

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