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Niche Market Opportunities

By Dave Wooldridge

In today's highly competitive market, it makes sense to constantly be on the lookout for new opportunities. Information on the markets described in this article may provide some new business prospects for those shops not already involved with them. However, rebuilders should constantly be prospecting for other niche markets for their existing products or services.

There are potentially many products or market opportunities for the machine shop or production engine rebuilder (PER) curious enough to prospect for them. From small industrial crankshaft applications to one-off repairs of large equipment, machine shops and PERs may find profitable niche business exists just around the corner.

It's important for shops to know the neighborhood that they do business in. What types of businesses exist in your markets? You may be pleasantly surprised at the variety of industrial and commercial jobs that can be handled, for example, by your existing shop equipment and technical capabilities.

Do you employ an outside salesmen whose job it is to locate these types of businesses and to learn what machine work and/or rebuilt products they may require on a regular basis? Sadly, many shops don't. However, with competitive pricing on typical passenger car and light truck work being what it is, it makes sense to do so.

Too many engine rebuilders today are not keeping up with technology, especially as it pertains to marketing and customer service. Make a commitment to keep abreast of developing information technologies to expand your business opportunities. From e-mail to the World Wide Web, managing information and information systems will be a critical ingredient to keeping up with developing markets and customer expectations.

One of the most talked about information resources today is the Internet. And believe it or not, the Internet offers PERs, machine shops and small parts rebuilders the same basic capabilities as it offers any other business. Those capabilities include using the Internet as:

• A business-to-customer sales tool;
• A business-to-business sales tool;
• A marketing research resource;
• A technical information research tool;
• An industry events calendar;
• A rules and regulations resource;
• A recruiting tool.

Although there are a lot of less-than-useful locations on the Internet, the World Wide Web will only become more and more utilized to conduct business. There simply is no other medium that offers either the immediacy or the variety and volume of information as the Internet.

The search engines used to navigate the hundreds of thousands of websites on the Internet are becoming increasingly more sophisticated in categorizing and presenting information. Modem connections are increasing in speed to access this information as well. Concerns about financial transactions over the Internet will soon become a thing of the past.

There are already 75 machine shop and supplier members of the Automotive Engine Rebuilders Association (AERA) with their own websites. These sites range from simple name, address and phone number pages to full-blown multi-page websites detailing all products and services provided by the engine rebuilder or supplier. At the very least, shops should not underestimate the benefits provided by e-mail, e.g., documented and immediate communication between your business and your existing or potential customers.

Find a need and fill it

When looking for profitable niche markets engine rebuilders should:

• Identify engines/components that fail most often;
• Identify engines/components that have high replacement costs;
• Identify engines/components where availability is a problem;
• Identify engines/components that are difficult to rebuild;
• Identify engines/components with low volumes but high margins (often the very old or the very new);
• Identify services as well as products that solve customer problems.

Look at these areas and then decide if you can enter any of them as either a rebuilder or a distributor. What might make sense for a small to mid-size remanufacturer to rebuild might be the kiss of death for a higher volume rebuilder. Obviously, you have to be able to take advantage of the expertise and the economies of scale that your business presently offers. But you also don't want to forgo any sales opportunities that may present themselves by partnering with another shop that may provide you with the resources and products to serve various niche markets.

Specific market opportunities

As was mentioned earlier, there are potential customers for a variety of shop services, too many actually, to describe in detail. What products and services those potential customers require will only become known once you make the effort to call on them to learn more about their businesses.

This article will take a look at some of the markets that PERs and machine shops often have asked us to provide more information on. These include: performance, marine, transmissions, on- and off-road diesels, cylinder heads, finish out parts kits and specialized repairs.

Performance

In general, the performance market has grown to more than a billion dollar industry that includes both racing and performance products. According to the Specialty Equipment Market Association (SEMA), the performance and racing industry amounted to $1.4 billion in 1994. Racing and performance products defined by SEMA consist of internal engine, drivetrain, exhaust system, fuel system and ignition components. Light truck, off-road, street performance, street rod/custom, restoration, racing and restyling make up the primary outlets.

Performance Outlets

Outlets for performance products include speed shops (16.1%), full line auto parts store/jobber (15.5%), mail order (14.2%), auto chain store (13.7%), specialty products/installation (9.5%), direct from manufacturer (7%), discount chain (4.9%) and other (19.1%).

The speed shop specialist, full-line jobber and mail order outlet account for nearly 46% of total racing and performance market sales.

Anyone who has attended the PRI Show in Cincinnati and Columbus, OH, over the past several years could attest to the growing interest in performance and racing. Interestingly enough, several equipment suppliers told us that many of the new shops which they are opening are much more performance oriented, as compared to full-service traditional machine shops of the past.

Does the performance market offer opportunities for the PER or machine shop? Yes, of course. How does a PER or machine shop integrate a performance line into existing production? To build exotic, high performance engines takes a lot of technical expertise and can be quite costly for the rebuilder as well as the customer. Most engine rebuilders producing performance engines, would likely tell you that circle track or tractor pull engines, for example, are viewed more as a research and development opportunity than as viable, growing profit center for them.

While there are two to three thousand racing shop specialists that do perform a variety of specialized, high profile, performance engine rebuilding, the typical PER or machine shop would probably be better off aiming for less technically sophisticated applications.

Shops we interviewed concerning performance work offered the following suggestions for the typical PER or machine shop:

• Aim to use existing equipment and processes as much as possible;
• Target the weekend warrior involved in street rod, Saturday night specials and/or local bracket racing;
• Target the "towing packaging" RV buyer looking for more horsepower to get the job done.

A moderate performance engine program where you offer a mild duration cam, upgraded valve springs, steel crank, etc. has definite possibilities. Building these engines is not nearly as disruptive to the production process and they can be targeted to those growing number of vehicle owners looking for a towing package or to street rod enthusiasts and those of similar interest. The performance line then becomes a good marketing tool for promoting the quality and performance of your standard engine services.

Mail order outlets providing performance motors told us that these engines are always marketed and sold by horsepower. All the small block engines, that is, the 320, 330, 360, 400 and 450 engines make up the bulk of demand in the street racer, bracket racer, Saturday night special categories. Long blocks, sold with all the tin, go from $2,000 to $5,000. The essential criterion is to provide the required horsepower while still delivering a nice idle, fast ride and the ability to burn pump gas.

Performance engine rebuilding is all about combinations of parts. The more exotic the engine, the more critical and expensive the combinations become. And the more critical the combinations and machining specs, the more difficult it becomes to utilize existing personnel, material handling and equipment/machining processes.

Karting

A lot of people don't realize it, but karting is the fastest growing segment of the motorsport industry. Basically karting is divided into the concession kart rental, backyard consumer and racing kart markets, most of which feature 5hp Briggs & Stratton, Tecumseh or Honda engines. There are about 26,000 service outlets dealing with these engines scattered throughout the U.S.

Within the concession kart market there are 9,000 to 10,000 new karts sold annually. There are about 2,000 rental tracks in the U.S., most of which operate 10-12 karts. Engines last about one year before they are rebuilt or replaced.

The "fun kart" market is primarily the realm of the backyard user. This market expects to sell 1 million karts over the next five years. True Value is the largest single retailer of karts in the country, although there are more and more lawn and garden, stand alone kart shops and some motorcycle shops getting involved with rebuilding and servicing kart engines.

Within the performance and racing industry, karting is becoming quite a phenomenon. Today there are about 80,000 to 100,000 kart racers in the U.S. There are about 600 kart racing tracks with heavy concentration in the Northeast, Midwest and Southeast.

One of the reasons karting is growing so fast is that you can buy a race ready kart for between $3,500 to $4,000. That gets you a race chassis and a stock 5hp, 2-cycle or 4-cycle engine. Most karters don't race longer than a year, however, before they go looking for more horsepower.

There is a rapidly developing aftermarket for carburetor, crankshaft, connecting rods and other parts for these engines. What do they sell for? It's not unusual to pay $750 to $1,000 for these engines. Stroker crankshafts can sell from $200 to $300.

Age brackets for karting start at six years old, although the average racer is typically a 28-year-old male. Overall the karting market is presently estimated to represent about $1.3 billion in annual sales. Several OEMs offer high end racing engines. Yamaha, for example, manufactures its own 100cc, 15hp engine strictly for kart racing. Briggs & Stratton has a high horsepower Raptor line of racing engines as well.

The ease of access in terms of cost, should position karting as a continuing growth industry. It might be interesting to explore the opportunities of doing business with kart tracks directly or independent distribution outlets providing parts and service for this marketplace. Perhaps even mail order sales of these engines and parts to the growing number of lawn and garden or service and parts repair outlets is a possibility.

The marine market

Replacement marine engines are primarily for the inboard/outboard/stern drive applications. The National Marine Manufacturers Association says that at the end of 1995 there were 1.4 million inboard and 1 million stern drive boats in operation in the U.S. Based on conversations with a variety of people from OEMs to aftermarket gasket suppliers to PERs and machine shops, we'd estimate that the marine market is about 1% of the size of the passenger car/light truck gas engine market.

The automotive gas engine market is between 2.7 to 3.2 million rebuilt engines produced annually. That would put the demand for rebuilt marine engines at somewhere between 27,000 to 30,000 units per year.

PERs that we've interviewed with marine engine market programs have seen impressive growth in terms of percentage increases over the past one to two years. But, the total number of these engines in actual unit numbers produced is not all that great. As late as this past February, however, Mercury Marine was looking to develop PER sources for its own line of remanufactured inboard engines. Mercury Marine sold between 1,500 to 1,600 rebuilt engines last year and about one-third of these were for warranty purposes.

Marine inboard engines consist primarily of a basic Chevy, Ford or Chrysler engine. Companies such as Mercruiser, OMC, Volvo Penta, etc. then marinize these base engines by adding their own proprietary exhaust manifolds, ignition and electrical systems, carburetion, mounts, transmission or drives.

In general, the marine market is not a growing industry in terms of either new boats sold or existing boats in operation. That said, the market for an exchange reman marine engine is growing. There are a couple of major reasons for this. One is that many marine distributors, of which there are maybe 40-60 in the U.S., have not really been involved in engines or engine hard parts in the past.

Many of them have been more involved in boat accessories such as life jackets, rope, bottom paint, lights, etc. The problem is that many of these distributors have seen their market share in these products eroded by the K-Marts, Wal Marts and other mass merchandisers, so some are looking at putting in a line of reman engines or parts. However, up until just a few years ago, there were perhaps only 10-12 marine WDs with any significant expertise in engines or engine parts.

The other contributing factor to growth in marine reman exchange engines is that the boat owner does not tolerate well any delay or problems in getting or keeping his boat in the water. It's a short season for many and they only get to their boats once a week or once a month and if they have a problem, they want it fixed 'yesterday.' So the convenience of an exchange engine is attractive to them.

Marine reman programs are growing primarily because traditional marine distributors are looking to replace lost market share, and the boat owner is looking to minimize lost time on the water. All of this exchange engine business seems to be coming at the expense of the local shop that formerly repaired or rebuilt the engine, because the boat market in general has remained stagnant, or actually declined somewhat since the mid to late 1980s.

If you do enter this segment, you should recognize that it is a very traditional, close-knit market. Most marine dealers have had only two sources of supply, their franchise OEM and their local distributor. Dealing with the OEM or the independent WD is likely your best bet in terms of developing a customer base. Mercury Marine is looking at expanding sales of its reman line of engines. It has 6,500 dealers and its big problem as we see it is that most of them don't know anything about engines or engine service. The problem for Mercury Marine is identifying the proper dealers for this program and then educating those dealers on how to market reman engines.

Because marine engines are primarily the typical base Ford, Chrysler or Chevy engine, you can likely take advantage of existing processes and equipment within your company's production and materials handling programs. You can also expect to price these engines to return about 6-10% higher profit margins than your typical passenger car or light truck engine.

Transmissions

For some PERs, transmission sales have been the largest single growth area in their business over the past 12 to 18 months. One PER told us that redistributing remanufactured transmissions now represents one-third of total sales volume for the company.

Some people think that the small mom and pop transmission rebuilder is at the stage where many jobber machine shops were 10 years ago, that is they can no longer compete on price for the rebuilding of the popular, fast moving numbers. Nor in many cases do they have the technical expertise to rebuild the variety of transmissions in the marketplace.

Many people feel the small transmission rebuilder will gravitate to an installation specialist rather than a rebuilding specialist. Or they will become more specialized in the repair or rebuilding of specific lines of transmissions. Presently there are about 15,000 to 20,000 transmission rebuilding shops in the U.S. Of that number, there are maybe 300-400 that build as many as 150 units monthly.

Where engine durability has generally improved over the past decade, at least in terms of the lower end, light-weight transmissions have not seen the same kind of longevity. And people generally do not provide preventative maintenance to their transmissions like they do with their engines. In terms of unit numbers, the transmission market will likely experience more growth than the engine market over the next several years.

Many people feel that it will be the high volume transmission rebuilder that has the economies of scale to invest in the training and testing equipment required to meet future market demand. As compared to engines, there is much less machining during the rebuilding process. More expertise is required in materials processing, assembly and testing.

In recognition of the changes taking place within this market, the Automotive Parts Rebuilders Association (APRA) recently redefined its transmission division relabeling it the Volume Transmission Division. With the growing addition of electronic controls, rebuilders require more sophisticated testing equipment which necessitates higher capital resources. The need for more capital and larger economies of scale benefit the volume rebuilder and redistributor.

Volume transmission rebuilders can be large OEM contract rebuilders, those supplying independent installers, those supplying their own shops, or large single unit installer/retailer locations rebuilding for their own installation needs.

Not everyone agrees with this growth trend in market share for volume rebuilders. The Automatic Transmission Rebuilders Association (ATRA), for example, feels that the sheer proliferation of part numbers will keep the smaller retail, custom transmission rebuilder in business for a long time to come. ATRA feels that there are adequate information resources available to smaller, custom shops, and that because transmission rebuilding is more assembly oriented than machining oriented, small custom shops are in a better position to build and service the variety of transmissions in the market place.

In the final analysis, there is room for both players. However, volume transmission rebuilders are growing in number and in market share. And the market is estimated to be about twice that of the demand for rebuilt engines. ATRA estimates that there are about 6,000 to 7,000 rebuilt transmissions sold annually.

On and off-road diesel engines

Chart 1 below shows annual North American diesel engine production over the past several years.

Annual North American Diesel Engine Production

	1993	1994	1995	1996
<5hp	0	0	0	0
5-20hp	1,682	1,760	1,846	1,910
21-50hp	1,257	1,338	1,846	1,429
51-100hp	43,256	44,021	47,405	46,591
101-300hp	551,554	616,880	679,532	672,119hp
301-700hp	184,819	216,212	228,182	187,173hp
701-2000hp	7,163	8,198	8,559	8,485
2000+	995	1,109	1,247	1,231
Total	790,726	889,518	968,172	918,938

Market statistics were provided by Power Systems Research, a research and consulting firm specializing in the global on- and off-road engine market. The company maintains offices in St. Paul, MN, Brussels and Tokyo.

The chart shows that the 100 to 300 hp segment of the diesel engine market accounts for about two-thirds of all diesel engines produced on an annual basis in North America. Engines in the 300 to 700 hp range represent the next highest segment at 187,000 engines produced each year.

Chart 2 below shows the 1995 diesel engine population by OEM. According to Power Systems Research, there are presently a little more than 16 million diesel engines in operation in North America. Navistar holds about 13% of the market which represents about 2 million operating engines. Deere, Caterpillar, Cummins and Detroit Diesel each hold between 6% to 8% of engines in operation, or roughly 7% to 8% of the diesel engine population, respectively.

1995 DIESEL ENGINE PRODUCTION

Navistar	2,095,162	12.9%
Deere	1,356,497	8.3%
Cat	1,287,683	7.9%
Cummins	1,156,625	7.1%
Det. Diesel	1,089,754	6.7%
Kubota	980,090	6.0%
Chev/Pont/Can	937,481	5.8%
Perkins	921,110	5.7%
Con/Diesel	820,668	5.0%
Yanmar	773,025	4.8%
Ford	694,826	4.3%
Isuzu	680,685	4.2%
Mercedes	435,324	2.7%
All Others	1,904,131	11.6%
Total In Operations	16,265,202	100%

Chart 3 below shows the total diesel engine population in North America. The largest segment of the diesel engine market is represented by those in the 100 to 200 hp range, roughly 6 million engines. Throw in engines at 200 to 300 hp and you have about 50% of the total diesel engines in operation.

1995 DIESEL ENGINE POPULATION

By HP Range

HP Range	Pop.	%
3-50	3 MIL	18.2%
50-100	3.5 MIL	21.7%
101-200	6.1 MIL	37.3%
201-300	2.2 MIL	13.7%
301-400	1.1 MIL	6.8%
401-500	209,210	1.3%
501-700	83,583	0.5%
701-1000	43,946	0.3%
1000-1500	20,711	0.1%
1500-2000	9,399	0.1%
Total	16,264,750	100%

Engines at 50 hp and less account for about 40% of all diesels in North America. One of the more promising growth markets in this lower horsepower range are skid-steers, often referred to generically as Bobcats. It is now the largest off-highway segment of diesel engine applications, having surpassed backhoes a few years ago.

About 50,000 Bobcats were sold in 1996, and industry experts expect that number to grow to 60,000 annually by the year 2000. The versatility of skid-steers and their comparatively inexpensive cost make them a highly sought after piece of equipment for many in the off-road, construction, landscaping and agricultural markets.

Although a popular rental item, many contractors purchase these units outright because of their lower cost and utility. The majority of skid-steers are diesel powered with Kubota, Perkins and Deutz the primary engine suppliers. Kohler is a major supplier on the gas side. Engines on skid-steers range from 20 to 85 hp, although most engines are at the 35 hp level or above.

Chart 4 below shows the 1995 diesel engine population by market segment. It's interesting to note distribution of engines by number of owners in each market and number of engines owned or operated by each owner. Generally, in the agricultural market, for example, it is very typical for the average farmer to operate two or three diesel-powered units at most; many operate just one.

1995 DIESEL ENGINE POPULATION BY MARKET SEGMENT

Industry	Pop.	%
Agriculture	3.2 MIL	19.6%
Construction	1.6 MIL	10%
Gen. Ind.	962,851	5.9%
Highway	7.3 MIL	44.8%
Lawn/Garden	537,110	3.3%
Marine	257,723	1.6%
Mat. Handling	407,167	2.5%
Other	547,287	3.4%
Pump/Comp.	536,497	3.3%
Weld/Gen.	917,566	5.6%
Total	16,265,202	100%

In the truck and construction market segments, however, the average fleet size is closer to 35 units for trucks and 22 units for construction companies, with many fleets operating several hundred units. These markets, being more concentrated, are also areas where factory rebuilding programs have focused.

Trying to rebuild engines for the high horsepower off-road gas or diesel market is likely not a good fit for most PERs or typical passenger car/light truck machine shops. Rebuilding applications for mining and heavy construction equipment, for example, are a very specialized, custom job that requires a lot of customer attention and hand holding. However, for the right size PER or machine shop in the right location, specialized engine or equipment repair work can generate some big jobs as well as some big dollars.

Gary Reed, general manager at Lock-N-Stitch, Turlock, CA, for example, told us of an 8,000 hp Waukesha stationary engine with a blow-out hole in the side of the block which was repaired at a cost of $3,000 in parts and labor. Charge to the customer was $12,000 and he paid it happily because the cost of a new engine is about $60,000. Or how about a Mitsubishi 35,000 hp stationary engine which was crack repaired around the cylinder sleeve at a cost of $4,000. The customer paid $8,000 for the repair. The engine costs $2 million new. So, such damage is always repaired because the cost to replace with new is just too high.

It comes down to assessing where profit opportunities exist. Specialized custom repair work can be done in both commercial and industrial markets and can be quite lucrative. This type of repair work is usually billed out at a much higher hourly rate. However, these types of customers can require more 'hand holding' and the turnaround times sometimes require an around-the-clock commitment by the shop.

However, for those PERs and typical automotive machine shops involved in diesel engines, the majority are targeting mid range, Class 6 and Class 7 motors. There are numerous fleets running engines such as the 6.2L, 8.2L and 3208. Some PERs have even done a good job with diesel engine and transmissions sold as a unit to such customers as charter bus fleets and municipalities. These and similar engines can generate good profit margins while still taking advantage of existing equipment and material handling processes.

Heavy duty Class 8 engines for really large fleets are primarily an in-chassis repair item for many of them. Today these engines often see 500,000 to a million miles before a repair, and there can be a lot of warehousing of used engines and parts cannibalized off old vehicles for future use by large over-the-road fleet operations.

On average, about 31-32 million gas engines of all horsepower ranges are produced on an annual basis. Chart 5 below shows that the largest segment, nearly one-half, or almost 15 million engines, are 5 hp or less. Gas engines produced for over-the-road cars and trucks account for another 12.5 million engines annually, or about 45% of the total gas engines produced each year.

ON- AND OFF-ROAD GAS ENGINES

North American Gas Engine Production

	1994	1995	1996
<5hp	14.5 MIL	14.3 MIL	14.7 MIL
5-20hp	3.3 MIL	4 MIL	4.1 MIL
21-50hp	176,164	196,308	194,789
51-100hp	1.44 MIL	1.02 MIL	1.06 MIL
101-300hp	11.8 MIL	12.3 MIL	12.4 MIL
301-700hp	4,052	7,904	7,817
701-2000hp	873	946	973
2000hp+	138	148	152
Total	31.2 MIL	31.8 MIL	32.4 MIL

Cylinder heads

All of the market research we've done over the past several years indicates demand for rebuilt cylinder heads is the largest growth segment within the engine rebuilding market. The shift to bimetallic engines and lighter weight castings have provided a steady stream of head failures. Many PERs find that it is difficult to find enough usable cores to rebuild and install on their own engines, much less to begin an exchange cylinder head program. However, the fact remains that there is continuing demand for rebuilt replacement heads and/or repaired castings (an obvious opportunity and advantage for machine shops not as much concerned with volume core availability).

Machine shops averaged about a 25% increase in the production of cylinder heads from 1993-1995. Over that same period of time their long and short block production has remained flat. So this increase in cylinder heads represents those that are being sold independently of an engine sale.

There are opportunities for profiting from this market, but you have to be able to make a serious investment in facilities, equipment and trained personnel to be able to rebuild heads on a cost effective basis. Good equipment and good processes will allow you to rebuild the heads that others cannot, and to produce those heads in volumes that generate the required margins. Availability is a major problem on many cylinder heads, and that information comes to us from everyone from installers to jobbers, to WDs and retailers.

Finish out parts kits

When you look at a market place characterized by a lack of qualified service technicians, and an imperative to improve turnaround times in the service bay, selling your engines with a parts kit for finishing out the installation may make a lot of sense.

Of course, depending on your customer base, this type of program may or may not be possible. If you're a PER or machine shop selling engines to a retailer or jobber, forget it. However, PERs and machine shops selling fleet or service garage/installer customers may be able to grow such a program. One PER we interviewed with such a program in place told us that presently 30-35% of all engines sold are delivered with such a parts package.

In addition to improved margins, such programs could help in reducing warranty claims as almost everything that is needed for a proper installation could be provided at the time the engine is delivered. On the negative side, such programs are more akin to the full line jobber or WD functions with all of the attendant problems associated with part number identification, proliferation and inventory management.

Specific customer opportunities

Who should your customers be? There really isn't a wrong or right answer for every rebuilder. As far as recent history goes, the largest growth in engines sold has come at the OEM and retail levels. OEMs are becoming larger customers of a select number of PERs as they increase both their warranty and nonwarranty engine programs.

For a PER, doing business with an OEM may offer acceptable margins, higher volumes and help in mitigating the problems obtaining cores and technical and application information. However, these PERs will also have to be able to provide the quality levels and the financial resources to get OEM programs up and running.

Although many feel that OEMs are using PERs primarily for warranty replacement engines, they are also increasing their nonwarranty sales. We were told that AC Delco, for example, has taken its retail rebuilt engine line from 3,000 units annually several years ago to expectations of 25,000 to 35,000 engines to be sold this year.

A lot of people think that technology and the rising age (read, do-the-work-for-me) of the vehicle owner will put a large dent in the DIY engine sales of retailers in the future. However, rebuilt engine sales among retailers is growing. Between O'Reilly, Western Auto and Auto Zone, 75,000 engines will likely be sold this year alone. Despite news reporting inroads into the professional service market, sales for Western Auto and Auto Zone are still 70% retail and 30% professional installer. The number one engine sold through retailers is still early model 2-bolt main 350 Chevys.

Today's vehicle population sports 123 million cars and 70 million trucks in operation. About 26 million of these cars alone are 13 years or older, and the miles driven per year, on average, is increasing. More and more vehicles are coming out of OE warranty coverage, and the number of used vehicles sold per year has never been higher.

The mix of new vehicles sold is also trending towards vehicles that are traditionally kept on the roads longer, i.e., sport utility, light trucks and minivans, a market segment which accounted for more than 40% of all new cars and light trucks sold last year.

It also appears that at least in the case of engines and transmissions, "remove and replace" with a complete or partial unit is becoming more of a preferred option for many. Such alternatives mitigate the problem of qualified service technician shortages, reduce turnaround time in the service bay and provide the customer with improved warranty and quality products and service. So we think that demand for rebuilt engines should be as good as or better than it has been over the past two to three years.

That said, it's imperative that our industry concentrate some serious effort on promoting the independently rebuilt/remanufactured replacement option. As an industry we need to figure out a way to provide the consumer with the message that quality, availability, warranty and easy financing are the character traits of making a decision to purchase an independently rebuilt or remanufactured engine.

The secret to success

The secret to success? Well as usual, there really aren't too many real secrets. Whether you're working within traditional markets or developing new customers and new products within niche markets, it comes down to this: find a need and then find a way to fill that need.

Determine what the priorities and product/service requirements of your customer or your potential customer are, and then provide the products and services that meet those requirements.