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Leading Off

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The first part of our annual two-part series detailing the custom engine rebuilder/machine shop market begins on page 26. But, as with any national survey, sometimes it is difficult to find the real meaning behind the numbers. My insight is based on not only the survey results, but also ongoing conversations, meetings and industry events in which both engine builders and their suppliers have provided input.

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The engine rebuilding market may be beginning to bounce off the bottom, but most industry participants feel there is still overcapacity at all levels from parts and equipment suppliers through distribution channels and down to the custom engine builder level. In short, we can look for further consolidations within our industry to continue, at least for the short term.

Market conditions are not significantly improving, overall, for the sales of rebuilt engines or machine shop services due not only to this overcapacity, but also due to increasing technical complexity of engines and engine diagnostics; aggressive competition from OE new and used vehicle financing, as well as OE parts and service channels; better quality engines with significantly longer life cycles before any major repair or machine work is required; and the continuing problem of declining numbers of service repair outlets willing and qualified to do an exchange engine replacement or utilize machine shop services in undertaking major engine rebuilding/repair work.

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Profit margins, in general, stink! And until they improve, machine shops will be unable to hire and compensate desperately needed shop employees, invest in equipment and tooling to properly build late model engines, and provide the type of products and services that will engender the trust of both the professional and consumer customer.

As one parts supplier put it, "Today, there is no

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