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Jobber Rebuilt Small Parts Report

By Dave Wooldridge

Most rebuilders will tell you that the market has never been more competitive than it is today. Many will also tell you that the past 12-18 months have been difficult in terms of maintaining their sales levels of rebuilt units.

However, although total units sold may be down industry wide, according to a recent survey of 1,000 jobbers across the U.S., the percentage of rebuilt versus new parts sold in most product categories is higher than it has ever been.

In fact, of 19 product lines sold by jobbers, 18 have higher rebuilt compared to new unit sales compared to those sold in 1995. In 10 of those product lines jobbers report that rebuilt units represent 90% or more of all units sold.

The product with the highest percentage of rebuilt units sold is alternators at 94.1%. Rounding out the top 10 are rack-and-pinions (94%), alternators (93.3%), engine blocks (93%), calipers (92.1%), crankshafts (92%), power steering pumps (91.3%), CV axles (91.1%), cylinder heads (90.6%) and transmissions (90.4%).

Although not representing 90% or more of total product line sales, carburetors (86.7%), on-board computers (85.9%), brake shoes (85%), wiper motors (84.5%), A/C compressors (77.3%), water pumps (66.3%) and master cylinders (66%), all had significantly higher sales of rebuilt versus new unit sales.

The only product lines with comparative or fewer rebuilt units versus new units sold were clutches (52.5% rebuilt) and fuel pumps (13.5% rebuilt). Fuel pumps have been the product line with the highest percentage of new unit sales since we began our survey study back in 1988.

Clutches, on the other hand, began a steady downward progression of rebuilt unit sales beginning in the early '90s when the influx of offshore new units available in the market began to grow, as did the growing number of crimped cover clutch design equipped vehicles. Since then an increasing number of rebuilders have become distributors of new rather than manufacturers of rebuilt units.

The reasons for increasing new unit sales of clutches are a combination of their attractive price as well as the difficulty that most rebuilders have when it comes to sourcing parts for and rebuilding newer crimped cover clutch designs.

Of the 19 product lines surveyed, 14 actually saw increases in rebuilt versus new unit sales. All product lines with 90% or more of total sales represented by rebuilt units saw increases in rebuilt versus new unit sales. One of those product categories, transmissions, actually rose a staggering 29.6% in rebuilt versus new unit sales.

In fact, several other product lines actually saw significant increases in rebuilt versus new unit sales as well. CV shafts, for example, rose from 84.8% rebuilt sales in 1995 to 91.1% rebuilt sales in 1998. Cylinder heads also rose in rebuilt sales from 83.7% to 90.6% in 1998.

The increase in rebuilt unit sales within most product categories points to the greater value that jobbers continue to feel these products offer their retail and wholesale customers. When asked to quantify their purchases of rebuilt parts jobbers ranked warranty, quality, order fill, price and their previous experience with the product, in that order, when considering the purchase of a rebuilt product line.

About seventy-four percent of jobbers said warranty was most important when making a rebuilt product line purchasing decision. Warranty was followed by brand quality (69.2%), order fill (63.4%), price (60.8%) and previous experience with the product, which was cited by 47.1% of survey respondents.

Parts warranty actually showed the largest percentage increase in importance from our last survey. A little more than 69% of jobbers cited it as very important in 1995 compared to 74.5% who ranked it as very important in this year's survey.

The increase in the length of warranties is viewed by many rebuilders as an extension of liability, especially on products such as engines or cylinder heads that can fail within the warranty period due to customer misuse or service neglect.

On the other hand, extended warranties are viewed by many in our industry as a necessary marketing tool to compete with OEM new and remanufactured products, as well as the rising expectations by consumers for better performance and quality of vehicle replacement parts.

Unfortunately, a longer warranty does not necessarily indicate a better product. It's no secret that many extended warranties come with a plethora of "small print" which negates coverage when either the installer or end user does not fulfill specific criteria. When that happens, little has been done to enhance the opinion of the installer or the end user concerning the quality, value and performance of his rebuilt part purchase. Quite the contrary, a lot of harm has been done concerning positive perceptions of rebuilt products overall.

OEM remans growing

While the good news is that rebuilt parts are far and away the preferred replacement option, the bad news for many independent rebuilders is that OEM rebuilt parts have, in many cases, seen an increase in jobber purchasing preferences. Of 14 product lines researched, jobbers reported that they had increased the percentage of OEM rebuilt versus independently rebuilt parts in eight of those product lines.

OEM rebuilt engines saw the largest increase from our last survey, being cited as the preferred replacement option by 41.4% of survey respondents compared to just 31.6% of respondents in 1995. The next largest increase in preference for OEM rebuilt units was in rotating electrics. Twenty-eight percent of jobbers said they preferred OEM rebuilt starters compared to just 21% who said so in 1995. And in 1995 23.5% of jobbers said they preferred OEM rebuilt alternators while this year 30% cited a preference for OEM remanufactured units.

While the increase in purchasing preferences was much smaller, usually anywhere from less than 1- 4 percentage points, jobbers also reported a growing preference for OEM versus independently rebuilt units in cylinder heads, clutches, water pumps, CV shafts, rack-and-pinions and brake shoes.

Although the increase in OEM preference for rebuilt units is marginal in some product categories, and despite the fact that independently sourced parts still maintain the majority of market share in all product lines that we surveyed, the overall trend seems unmistakable.

The cost of warranty work in terms of time, money and customer inconvenience is a growing issue for many service technicians. Although usually a more expensive alternative, OEMs have done a good job of promoting the performance and "original" replacement part quality of their own remanufactured products. Judging from the increase across the board in OEM rebuilt unit sales, it appears more service technicians are listening.

Such trends point to the growing need for quality rebuilt units. It also points to the need for the independent aftermarket to continue to fight for access to on-board diagnostic (OBD) information necessary to ensure that service problems are diagnosed correctly, and that a replacement part can be rebuilt and installed properly. Although access to such information is currently mandated within existing Clean Air legislation, more than a few OEMs have made it difficult, if not impossible, to source.

Reinforcing the concern for quality of a rebuilt replacement part, fewer jobbers said that the quality of rebuilt parts which they use has increased. In fact, a higher percentage of jobbers than ever reported that the quality of rebuilt parts which they purchase has declined.

This year just 25.8% of jobbers reported that the quality of rebuilt parts which they use has increased over the past two years. In our 1995 survey, 32.6% of survey respondents said quality had improved.

In this year's survey, 14.8% of jobbers reported that the quality of rebuilt parts, overall, has decreased over the past two years compared to just 5.9% who said quality levels had declined in our 1995 survey.

Similarly, for those reporting that quality had increased, the average increase was less than all previous years, and for those reporting that quality had decreased, the average decrease was the highest since 1991.

Survey data indicates that an overwhelming percentage of jobbers would prefer to see rebuilt parts built to an industry quality standard. When asked if they would like to see such a standard developed for rebuilt units, a little more than 84% of all jobbers responded yes. That compares to 85.4% who said so in our 1995 survey.

Although the percentage of jobbers saying they wanted to see a standard for quality developed declined by about 1 percentage point, the percentage of jobbers who said they would be willing to pay a higher price for units built to such standards rose significantly. Nearly 80% of survey respondents reported they would be willing to pay more for a part built to a uniform quality standard compared to just 72.6% who said they would in our 1995 survey. The increases in purchasing preferences for many OEM rebuilt units discussed earlier seems to provide evidence of such intent.

The price issue

In addition to questions concerning quality, we also asked jobbers to tell us which rebuilt products their customers were most price conscious about. The ranking of the top three rebuilt units in terms of price concerns was the same as in our 1995 survey.

Alternators, starters and brake shoes were ranked one, two and three in terms of customer concerns over price. However, the percentage of jobbers who said price was a top concern increased for alternators and starters, while the number of jobbers reporting that price was an issue for brake shoe purchases declined.

Specifically, nearly 72% of jobbers ranked alternators as one of their top five "price conscious" products compared to 65.5% who said the same for starters. In our 1995 survey a little more than 69% of jobbers said alternators were ranked in the top five price concern products while 59.4% said the same for starters. A little more than 44% of jobbers said that brake shoes ranked in the top five price concern products in 1995 compared to just 38% who said so in this year's survey.

Despite the fact that warranty coverage ranks as the most important factor when making a rebuilt parts line purchase decision, price is still a major concern. Rebuilt alternators, starters, CV shafts, A/C compressors, carburetors, on-board computers, crankshafts and wiper motors were all rated as more price sensitive products compared to their 1995 rankings. On the other hand, brake shoes, rack-and-pinion, calipers, master cylinders, clutches, engine blocks, power steering pumps and fuel pumps were ranked as less price sensitive. Of all rebuilt parts sold, wiper motors, crankshafts and fuel pumps were ranked as the least price sensitive compared to other rebuilt products.

In general, when trying to understand the impact of price and warranty when it comes to jobber purchasing decisions, it is obvious that both the professional service installer and the consumer have come to expect more.

What sells the most

Topping the list of highest number of units sold is alternators. A little more than 84% of jobbers said that alternators were among the top five rebuilt parts sold. Alternators were followed by starters (79.8%), brake shoes (79.8%), water pumps (69.7%), calipers (30.3%), master cylinders (30.0%), CV shafts (25.9%), fuel pumps (17.9%), rack-and-pinions (13.8%) and clutches (12.1%). All other products each accounted for less than 10% of jobbers ranking them among their top five parts sold.

Although the top 10 volume producers were the same products listed in our 1995 survey, their rankings changed somewhat. Among the top three sales leaders, for example, alternators replaced brake shoes as the number one volume product this year. In our 1995 survey alternators ranked number three in volume. Starters retained the number two position in units sold.

Readers should keep in mind that sales volume rankings are industry averages. There, of course, are jobbers who might specialize in certain product lines depending on geographic location and customer base.

Highest profit products

Although alternators displaced brake shoes as the leading rebuilt part sold in terms of volume, brake shoes retained their ranking as the most profitable rebuilt product line. Nearly 50% of all jobbers ranked brake shoes among the top five most profitable products they sell. Brake shoes were followed by starters (44.4%), alternators (41.8%), water pumps (38.7%), CV shafts (25.6%), calipers (23.6%), A/C compressors (23.2%), master cylinders (21.9%), clutches (21.6%) and fuel pumps (18.9%).

As with our explanation of sales volume, readers should keep in mind that profit rankings are industry wide generated averages. Often times statistics can be just as revealing about what they don't say as what they do say. We suspect that some product rankings in terms of profits are based on "total" profit dollars generated rather than profit "margins" of specific product lines.

Jobbers, for example, that may not sell many crankshafts or engine blocks may not be reporting these products as higher profit generating products compared to alternators and starters which they sell in significant numbers.

Highest warranty products

We also asked jobbers to tell us which products were among their highest warranty returns. Alternators were number one on jobbers' headache list, claimed by nearly 69% of jobbers to be among the top five products returned as a warranty claim.

Alternators were followed by starters (62.3%), carburetors (48.2%), A/C compressors (39.7%), master cylinders (31.3%), water pumps (26.3%), on-board computers (20.2%), clutches (19.9%), fuel pumps (17.9%) and power steering pumps (12.8%).

Although the percentage of jobbers ranking alternators and starters within the top two warranty return categories was lower, these two products repeated in the top two categories again this year. Jobbers said both professional installers and do-it-yourselfers continue to make unintended misdiagnosis of vehicle electrical system problems. So, too, do they sometimes install rebuilt units as diagnostic tools to help locate the actual no-start or charging problem on the vehicle.

Computer controlled vehicles increasingly present both retail and wholesale purchasers of rebuilt units with diagnostic and correct installation problems. Warranty return rankings of these two units, especially, point to the continued need for the rebuilding industry to fight for access to on-board diagnostic tools and information from the OEMs in order to make properly rebuilt units available. They also point to the importance of rebuilders having the proper testing equipment to ensure that rebuilt units operate as they should.

As our survey results indicate, the expectations for higher quality rebuilt parts are rising. But so are those for proper diagnosis and installation. Survey results indicate that jobbers are more pleased with the diagnostic and installation skills of professional installers.

When asked if professional technicians are adequately trained to install rebuilt parts, 71.6% of jobbers responded yes. It is the highest percentage ever reported, and an increase of a little more than 6 percentage points compared to the 65.4% of jobbers who said technicians were adequately trained in our 1995 survey.

Although the percentage point increases were marginal in most product lines, all parts showed an increase in the percentage of time that professional technicians were able to correctly diagnose the original vehicle part or system problem. This year 12% of jobbers reported that technicians did a "good" job of diagnosing vehicle parts and service problems compared to just 8.9% who said so in 1995.

A little more than 68% said that technicians did an "adequate" job (69.2% said so in 1995) of diagnosing parts and service problems, while 19.5% said technicians did a "poor" job on vehicle diagnostic work compared to nearly 22% who said so in our 1995 survey.

Specifically, the parts with the highest diagnostic satisfaction ratings were brakes (86% of jobbers said problems with them were correctly diagnosed), followed by CV shafts (85.5%), clutches (84%), rack-and-pinions (81.2%), A/C compressors (75.8%), engine blocks (74.3%), cylinder heads (73.4%), transmissions (73.4%), fuel systems (68.4%) and carburetors (62.2%). Electrical (61.1%) and on-board computers (57.7%) received the lowest satisfaction ratings when it came to proper diagnostic work by professional technicians. There has been an increase in the satisfaction with technician diagnostic and installation work. But when just 12% of jobbers say that technicians do a "good" job at it, there remains a lot of improvement work yet to be realized.

Lastly, we asked jobbers for their perspectives on sourcing, core policy, length of time doing business with the same supplier, preference for product packaging, training and sales/promotion support.

With the industry-wide number of consolidations taking place among both suppliers and rebuilders you would think that more jobbers would be purchasing their parts from a single supplier. However, more jobbers said they preferred sourcing their parts from multiple sources. This year 41.8% of jobbers reported a preference for using multiple suppliers compared to 39.8% who said so in 1995.

The length of time that jobbers have stayed with a source of rebuilt product has increased virtually across all product lines. We asked jobbers to indicate the number of years they had used the same supplier in 11 different product categories. In the three years or longer category, the percentage of jobbers responding was higher in every product line except for starters where it declined less than 1 percentage point.

Transmissions and engines/cylinder heads showed the largest increase in the number of jobbers that have used the same source for three years or more. Interestingly, the largest percentage of jobbers indicating they had used a supplier for less than one year was also in the transmissions and engines/cylinder head categories. This seems to indicate there are many jobbers who are unhappy with their current source in these product lines, however, once they find a source for those products they like, they are reluctant to change. The higher cost in inventory, warranty and customer satisfaction are the likely explanation.

Not much has changed in terms of core return policies. Nearly three-quarters of all jobbers report that their suppliers require a core-for-core return policy compared to 75% who said so in 1995. Those receiving a "similar dollar value" core policy rose from 23.2% in 1995 to 24.4% this year.

Although fewer jobbers reported that their core return policies were "strictly" controlled ( 41.9% this year versus 52.5% in 1995), a significantly higher number (53.7%) said their core return policies were "moderately" enforced compared to just 38.1% who said so in 1995.

Part number proliferation and the desire to reduce inventory and warranty expenses, wherever possible, are the primary reasons for more stringent control of core returns. In most product lines, profit margins are being squeezed and rebuilders are being forced to implement more efficient core return policies.

As to rebuilder efforts to promote and advertise rebuilt products, jobbers ranked the personal sales call as the most effective sales tool. The personal sales call was also number one in 1995, although the percentage of jobbers saying it was most effective rose from 31.6% in 1995 to 35.6% this year.

The personal sales call was followed by seminars/technical clinics (31.3%), trade magazine advertising (10.7%), direct mail (7.7%) and telemarketing (0.4%) as the most effective sales and promotional tools of rebuilders.

Once a decision was made to buy, however, preferences for the best procedure for placing an order have changed dramatically. In 1995, 89.5% of jobbers said that the telephone was the preferred way to order parts. This year, just 55% of jobbers said so.

The telephone still ranks as the most popular method for placing an order. However, where just 4.8% of jobbers said the computer/fax was the best approach to order placement in 1995, a whopping 40.4% of jobbers said it was the preferred method for placing an order this year.

In sum, there seems to be no question that technology continues to significantly impact vehicle diagnostics and parts installation, as well as the way in which rebuilt parts are purchased, processed and rebuilt.

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