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Power Steering Pumps and Gearboxes

By Pablo Aguilera

In today's increasingly competitive marketplace the quest for additional profits is of paramount importance not only for continued growth and success, but for the survival of the company itself. This is particularly true for undercarriage specialists such as CV axle and rack-and-pinion rebuilders.

Niche market diversification can accomplish economic and strategic objectives that will not only improve the "profitable" cash flow of your rebuilding operation, but also strengthen your company's position in the marketplace as well.

The profitability of a niche market opportunity should not be the only factor considered when determining the direction of diversification. Other economic and competitive issues should be considered as well and incorporated in the diversification plan. Elements to be considered in making the right diversification choice include the following:

• Affordability of the investment in terms of initial cost. This includes special equipment, space requirements, personnel, training, documentation, core and new parts acquisition expense, etc. You don't want to place yourself in a situation where a high initial cost places an undue burden on your present operating capital and reserves, and therefore negatively impacts your current production and sales capabilities. The availability of reasonable leasing or financing terms can determine the feasibility of the investment as well.

• Based on the profitability of the investment, what is the break-even point (BEP) and return on investment (ROI) potential. A high profitability niche with a low investment cost will give you a fast BEP and high ROI potential. A high investment cost, even though it might have high profitability, could extend your BEP inordinately and provide for a lower ROI figure. This could be disastrous if market conditions or demand changes, since the break-even point is further extended and the ROI is further reduced. In general, low asset intensive businesses with high margins have the highest profits and potential for sustainable growth.

• Implementation time. A quick and efficient setup reduces down time and provides for fast production capabilities and profitable cash flow generation; this is what we are all seeking.

• Marketing considerations are internal and external. They include such variables as what is the adequacy of the existing distribution network, to an analysis of the competition's objectives, capabilities, strengths and weaknesses.

• Strategic objectives. Diversification should be synergistic whenever possible by introducing a complementary product line. You should be seeking sole-source convenience shopping for your customers by introducing a line that increases your product coverage. This will not only provide you with additional sales, but it will also increase the market penetration of your existing product lines.

By increasing product line coverage, an additional benefit accrues that can provide competitive advantages as well; this is complete system diagnostic capability and improved technical support and service. A rack-and-pinion rebuilder that starts rebuilding power steering pumps can now completely diagnose the hydraulic steering system for a rack-equipped vehicle and vice-versa.

Background

My company, P.S. Systems, Inc., Miami, FL, is an experienced power steering component rebuilder. We specialize in all domestic and imported rack-and-pinions, gearboxes, pumps, control valves and cylinders for automotive as well as heavy duty trucks. We are an authorized CV joint and axle rebuilder as well. The company is divided into four separate departments for production, cost and sales tracking purposes. These departments are domestic rack-and-pinion, import rack-and-pinion, pumps and gearboxes, and finally, CV joints and axles. Of these departments, the pump and gearbox department accounts for about 25% to 30% of all sales.

Remember, for every power steering rack-and-pinion unit there is a power steering pump. For every pump that is not connected to a rack-and-pinion, there is a power steering gearbox. This department's gross profit margin, however, constantly exceeds those being achieved by the other departments in my business by a factor of 200% to 300%. What is remarkable is that this department uses the least amount of manpower, facility space, tools and equipment, and parts inventory.

Howard Coggenshall the technical director for Partcraft, Inc., a full-line power steering parts supplier in Lancaster, CA, states, "Rack-and-pinion rebuilding seems to be the most likely tie-in with other front-end products - that is until you look more closely. There are still hundreds of thousands of cars and trucks out there with old-fashioned gears and every vehicle with power steering has a pump. I honestly can't understand why a rebuilder who is familiar with high-pressure hydraulics would let this segment of the market get away."

What's involved

The procedures used in rebuilding power steering pumps and gearboxes are similar to those used to rebuild rack-and-pinion units. The units require the removal and replacement of certain parts and the machining of others to get the desired finish/condition for proper hydraulic operation. Some specialized assembly methods and tooling are required in addition to the hydraulic testers necessary to verify the desired operating parameters.

Some examples of the average parts and labor costs for rebuilding both domestic and imported units (items such as seal kits, bearings or bushings, cam packs, shafts, core utilization costs, etc.) have been included in charts within this article. For illustration purposes, a labor rate of $10 per hour is being used. Please note that the asterisk preceding the make/model indicates a heavy duty component, i.e., truck.

The really good news - profits!

The examples illustrated in the Pump Profits chart on page 40 indicate our average selling price to the installer level in our marketing area. In most locations around the country, an increase in the selling price would be expected. Notice the amount indicated in the last column - gross profit per man hour - and be amazed!

Because of our high quality reputation and in-house engineering expertise, several of our CV parts suppliers suggested that we initiate a power steering start up program that they could recommend to their customers. The power steering training packages and test equipment that we have developed and fine tuned over the years provide potential rebuilders with a complete and affordable start up program. The program is designed to produce a quality and efficient rebuilding operation immediately upon implementation.

Training

I consider training to be the most critical phase of the start-up program. This is where the in-house quality standards and rebuilding methodologies are established and developed. Quality is one, if not the most powerful competitive advantage available to the rebuilder. Attention to detail and one-on-one training is of the utmost importance to achieve competency and skill levels to do the job right the first time, every time.

Each training session is proceeded by a technical presentation of the hydraulic principals involved so trainees have a better grasp of the forces at work. Trainees are familiarized with core identification and selection, disassembly and cleaning procedures, analysis of construction designs, parts interaction, correction of damaged areas, machining/honing and polishing operations, and in-house developed methodologies for boring, sleeving and assembly.

Testing procedures, problem identification, and corrective action methodologies are also demonstrated. We only train up to two personnel from one company at a given time. Training sessions are held from 8:00 a.m. to 5:00 p.m. Monday through Friday. A half-day session on Saturday is available at no extra charge.

Each pump and gearboxes training session is one week long. Rack-and-pinion training sessions last two weeks. However, we will custom tailor these programs to a rebuilder's needs; accelerated sessions are available.

A primary benefit of the training program is the two documentation packages that our customers receive. In-house developed technical information manuals contain not only a photograph and application information for a particular unit, but descriptive and quantifiable data for the core identification, assembly and testing functions. The importance of the technical and descriptive information provided in our manuals is described below.

Technical manual data

The photos on page 36 indicate the need for technical data. Even though these two pumps look identical, one has reverse rotation. The pump on the right has no threads on left (L) and right (R) mounting holes. A complete supplier information package for rebuilding parts equipment and tools is also provided for our customers convenience as well as the ideal work flow diagram.

As part of the training program, a set of rebuilding tools is also furnished. For pumps and gearboxes, these include a basic set of seal, bearing and bushing installation and removal tools. These tools will cover most of the current applications, both foreign and domestic. For the rack-and-pinion program, a basic set of boring and sleeving tools is supplied. Shaft polishing wheels are provided with all programs.

The training, tools, technical documentation, and supplier information programs range in price from $5,500 to $8,500, depending on the application. We assign training slots and initiate construction of test machinery on a first come first serve basis. Reservation and a deposit is necessary for us to "lock in" the desired time slot and initiate work on the test machinery of choice. Typically, a 30-day lead time is required to complete the test machines due to the custom fabrication process involved.

Testing methodology

The primary goal of testing is to verify that the original parts and new parts being used, and the labor expended by the rebuilder, result in the satisfactory performance of the rebuilt components. When dealing with hydraulics, minor imperfections in parts or labor can render a unit unusable or unsatisfactory in performance, immediately or prematurely, during the warranty coverage period.

This causes returns accompanied by possible labor (up to four hours per installation) or other claims including those of a liability nature. It is therefore imperative that each and every unit being rebuilt is tested to ensure that the proper operating parameters are being met and satisfied. Complete and operationally simulated testing procedures assure and verify the high quality of the rebuilt product.

What does operationally simulated testing mean? Ideally, you would want to duplicate the exact operating conditions found in the vehicle. Take, for example, our power steering pump tester and how it is designed to handle this operationally simulated testing requirement. For automotive and truck steering systems, the maximum steering effort in a vehicle occurs during low speed maneuvering, as in a parking situation. Not only is the resistance to movement at a peak, which requires high power levels, but the power source (the power steering pump) is being provided with its lowest energy input (idle speed).

Here you have a condition when maximum power output from the pump (flow rate and pressure) is being provided with minimum power input (lowest rpm). To operationally depict this condition you would have to test the power steering pump at idle speed.

Let's look at another testing parameter - noise. The operational test for noise should be conducted at a higher rpm since this condition normally is amplified as the rpm is increased. To satisfy these two diametric situations, you need a variable speed control feature on the tester. Furthermore, noise analysis, especially for automotive applications, requires a quiet operational platform. This necessitates an enclosed motor cabinet for motor noise suppression.

To reduce the possible aeration and noise that can occur during initial start up, which would slow the test, the machine comes equipped with a pre-start priming system that also pre-lubricates the test unit to prevent damage.

Another factor that affects noise and leakage potential is the side-load thrust being generated on the pump shaft by a tensioned belt driven pulley. Since this is the typical configuration found on most vehicles, both large and small, the tester must duplicate it at the correct belt tension for any particular pump size.

Insufficient belt tension can cause slippage, and excessive tension can cause pump damage. Our tester satisfies this condition by the use of a novel adjustable pneumatic loading system. This system allows quick connection and disconnection of the belt from the test pump and variable belt tensioning adjustment through the use of a conveniently mounted pressure regulator.

For those wishing an affordable universal tester for pumps, racks and gearboxes, our pump tester can be modified with an expandable option to test rack-and-pinions and gearboxes. The basic pump tester sells for $5,900 with the deluxe tester selling for $9,025.

P.S. Systems' deluxe multi-purpose gearbox and rack-and-pinion tester with its high-load simulation capability is designed to be able to perform nine operational hydraulic tests. In addition, the unit has a unique built in air flush and air test system with low pressure leak down test capabilities. The rack-and-pinion and gearbox testers range in price from $8,900 to $13,500. These machines are patent pending.

Total investment cost

In addition to the training program with its attendant documentation and tooling packages, and the test equipment cost, the following items need to be considered when establishing the total implementation costs of diversification:

• Initial core acquisition and new part inventory.
• Additional special tooling and equipment, personnel and other related costs during setup, etc.

Depending on the scope and size of the intended program, these can range in price from a low of about $2,000 to more than $10,000. For example, let's take a pump program using the top of the line tester and a $5,000 additional start up cost.

Deluxe Pump Tester	$ 9,025
Pump Training/Documentation	$ 5,500
Initial Cores and New Parts	$ 3,000
Other Costs	$ 2,000
Total Diversification Cost	$19,525

With a $3,000 initial core and new parts investment, and using the pump models described in the pump cost charts, about 110 pumps could be rebuilt for the initial inventory if grouped in the following fashion. This is with a 10% unrebuildable rate for the cores.

American Automotive:
(20 of each model) 60 total;
Imported:
(10 of each model) 30 total;
Heavy Duty/Truck:
(10 of each model) 20 total.

This initial 110 pump inventory should result in about $7,600 in gross profits. Gross profits would increase as this inventory is turned over since the cores would be exchanged rather than purchased, as was originally done. Assuming a turnover rate of about 100 pumps per month, the break even point for this first investment would be reached in a little less than three months.

Supply + demand = diversify

In conclusion, these are some of the thoughts expressed by three of the top suppliers in the power steering industry on the profitable niche opportunity rebuilding power steering pumps and gearboxes.

Howard Coggenshall, technical director, Partcraft, Inc., Lancaster, CA: "As a full-line supplier to all levels of the power steering remanufacturing industry, I see and talk to just about everyone in the business. I can positively state that the most successful rebuilders are those who have diversified.

"The day of the rack-only rebuilder is passing and the business is going to those who can supply full-line steering products. It's just common sense - no WD wants to buy pumps from Joe, gears from Phil, and racks from Stan when he can get it all from Bill."

John Galloway, market segment manager, Freudenberg NOK (Transtec), Milan, OH: "I feel that the remanufacturing of pumps and gears is a natural extension of the rack-and-pinion business. It closes the loop on the hydraulic steering system and immediately expands the remanufacturer's customer base."

Michael DeGrott, president, D.M.S. Inc., Phoenix, AZ: "We have seen a continually increasing demand to supply a growing number of "hard parts" to the power steering rebuilder, especially in the areas of pumps and gears. Heavy-duty gear components command a growing percentage of our manufacturing capabilities due to popularity and longevity of these vehicles in both military and commercial use."

Aguilera has been in the automotive rebuilding industry since 1984. In 1980 Aguilera became involved in a machine shop partnership that manufactured high performance marine gas and racing engines. In 1984, a rebuilder introduced him to rebuilding power steering pumps and gearboxes. Soon after he opened P.S. Systems in Miami. He has a degree in Ocean Engineering, has worked for the Navy doing logistical and reliability related analysis and program management, and also for the Corps of Engineers doing coastal engineering and economic analysis.