No Issue Next Week!
We will not publish next week. Our offices will be closed May 29 through June 4, reopening on June 5. The next issue of The Greensheet will be dated June 8.
Quick Hits …
(A few short items to get us started this week)
• Northwood University has created a campus recovery fund to round up resources following recent flooding that has led to a state of emergency in the Midland, MI area and the complete evacuation of Northwood’s Midland campus. The funds will be used for restoration work needed for students to return in August. Click here for more information on the fundraising effort. And click here to read about how the flooding has affected campus.
• MEMA on May 20 sent a letter to U.S. Treasury Secretary Steve Mnuchin urging him to engage with members of the Michigan Congressional delegation to address “the urgent liquidity issues” facing automotive suppliers as U.S. auto manufacturing restarts.
• The Ford Motor Company will reportedly pay suppliers early in an attempt to ensure the flow of parts needed to restart its factories, according to a May 21 Bloomberg news report.
• MEMA, SEMA and the Tire Industry Association have signed on to a May 21 letter to U.S. Treasury Secretary Steve Mnuchin, U.S. Small Business Administration Administrator Jovita Carranza and Congressional leaders seeking modifications to the Paycheck Protection Program (PPP), including extending the eight-week period to calculate loan forgiveness and extending the June 30 safe harbor date for rehiring and restoration of pay.
• The Auto Care Association on May 20 issued a guide to Paycheck Protection Program (PPP) loan forgiveness.
• More automotive aftermarket associations — including the Auto Care Association, Tire Industry Association and Automotive Oil Change Association — have come out in opposition to new “Cash for Clunkers” type programs.
• U.S. Rep. Jeff Duncan (R-SC) recently became the 50th member of the bi-partisan Congressional Auto Care Caucus, according to the Auto Care Association. The caucus got its start in 2017 by co-chairs Reps. Scott Perry (R-PA) and Brendan Boyle (D-PA), who wanted to share their enthusiasm and understanding of the auto care industry, as well as garner support for industry issues on Capitol Hill.
Exide Holdings Files For Chapter 11 Protection; Company Up For Sale
Exide Holdings and certain of its U.S. subsidiaries on May 19 filed for Chapter 11 bankruptcy protection with the U.S. Bankruptcy Court for the District of Delaware. This is the company’s second Chapter 11 filing in seven years and the third in its history.
The purpose of the 2020 filing is to restore the company’s liquidity until an auction can be held to sell Exide as a whole; to sell its Americas operations, in part or as a whole; and/or the company’s Europe and Rest of the World (ROW) business segments, in whole or in parts. Absent one or more of these transactions, a liquidation or wind-down of Exide is possible.
“Today’s actions are intended to position our businesses around the world for future growth and profitability while also providing the greatest benefit to our employees, customers and other stakeholders,” Chairman, President and CEO Tim Vargo said in an announcement dated May 19. “Our board of directors determined that — given the continued, unsustainable impact on our cost structure resulting from legacy liabilities in North America, and in light of the global economic COVID-19 slowdown that has amplified these pressures — a sale of our North American operations through a court-supervised process provides the best opportunity to continue delivering high-quality energy storage solutions and service to our customers.
“We believe this is an attractive business, and we are already advanced in a robust marketing process that includes active engagement with a number of potential strategic and financial buyers. We are pleased with the interest to date and look forward to continued discussions about new ownership that will drive forward our businesses in North America, [Europe, the Middle East and Africa (EMEA)] and Asia-Pacific. …”
BACKGROUND … In June 2013, Exide (which was a corporation at that time) commenced a Chapter 11 case in the Delaware bankruptcy court. In March 2015, the court confirmed the company’s plan of reorganization after nearly two years of negotiations.
Despite Exide’s efforts to implement its new business plan and despite the support of the company’s new owners and lenders, Exide continued to face liquidity, performance and operational challenges that were more persistent and widespread than anticipated, Exide Chief Restructuring Officer Roy Messing stated in a declaration filed with the bankruptcy court May 19, 2020.
According to Messing’s declaration, since emerging from the 2013 Chapter 11 case in 2015, Exide has experienced significant drains on its liquidity and cash flows, including …
• Mounting costs for environmental remediation and related litigation with its Vernon, CA facility and other closed operating sites.
• Rising production costs, exacerbated by the closure of two of its recycling facilities, which have exposed the company to price fluctuations in raw material inputs.
• Operational inefficiencies caused by its legacy mixed-use manufacturing facilities.
In an effort to remedy these issues, Exide divested its branch distribution network, closed multiple mixed-use manufacturing facilities and reduced its headcount.
Beginning in early 2019, the company commenced an M&A process to identify buyers or investors for its businesses. And in an effort to address immediate liquidity constraints, Exide obtained financing in June 2019 designed to infuse approximately $150 million into its business operations.
In December 2019, the company completed an internal reorganization in which it converted to a limited liability company in an attempt to align the company’s legal structure with its operational structure and to facilitate a potential sale or financing of its Europe/ROW business.
Messing stated in his declaration that despite these efforts, Exide continued to face significant liquidity and operational headwinds in 2019 and 2020, which have been exacerbated and accelerated by the coronavirus pandemic. And the company was not able to consummate an out-of-court transaction with a third-party purchaser for the sale of its North American and European assets, according to Messing.
NEGOTIATIONS … Messing stated that Exide — facing growing uncertainty with respect to its ability to continue as a going concern, severe liquidity constraints, and upcoming interest and maturity payments — began negotiating with an ad hoc group of its noteholders that hold in the aggregate approximately …
• 90.11% of the company’s superpriority notes.
• 87.94% of its exchange priority notes.
• 76.40% of its first-lien notes.
• Over 80% of Exide’s equity interests.
The talks ultimately culminated in a restructuring support agreement (RSA) that was executed May 18. The RSA contemplates the sale of all or substantially all of Exide’s assets through an auction process. According to court records, debtors will seek bids or proposals for transactions that provide for one or more of the following …
• A sale of substantially all of Exide’s assets.
• A sale of the company’s Exide Americas business segments and/or their related assets, in whole or in parts.
• A sale of the Exide’s Europe/ROW business segments and/or their related assets, in whole or in parts.
• The liquidation or winding up of any assets or businesses of Exide.
The aforementioned ad hoc group has submitted a bid for the Exide Europe/ROW business segment, which will serve as a stalking horse for a Europe/ROW transaction and will be subject to higher or better bids. This business is not included in the Chapter 11 proceedings and continues to operate as usual, according to Exide.
Exide’s plan calls for an auction in July, with closing on a potential Exide Americas transaction in August.
FINANCING … Exide has obtained a commitment for $40 million in debtor-in-possession (DIP) financing from a group of lenders, including a certain number of its existing noteholders. The financing is designed to provide sufficient liquidity to support ongoing operations in North America for the duration of the sale process and restructuring.
Additionally, the aforementioned ad hoc noteholder group has provided additional liquidity of as much as $75 million designed to ensure that the Europe/ROW business remains in a strong financial position during the adverse economic impacts created by the coronavirus pandemic.
STAKEHOLDERS … According to court records, Mackay Shields LLC of New York owns nearly 40% of the equity interest of Exide. Alliancebernstein LP of New York owns more than 19% of Exide’s equity interest, and D.E. Shaw Galvanic Portfolios LLC of New York owns roughly 11% of the equity interest of Exide. All three are non-debtors, according to court records.
The Neuberger Berman Group LLP of Chicago owns more than 6% of Exide.
THE NUMBERS … According to court filings, Exide’s creditors are estimated to be between 5,000 and 10,000. The company is estimated to have between $500 million and $1 billion in assets and between $1 billion and $10 billion in liabilities.
Court records list the California Department of Toxic Substances Control as one of the Exide’s largest creditors with a combined unsecured claim exceeding $10.90 million in the form of regulatory fees and government obligations.
Among the other top creditors are Daramic Inc., a company that specializes in lead-acid battery separators, with an unsecured claim of nearly $3.14 million, and American Integrated Services (AIS), an environmental services company, with a nearly $2.10-million unsecured claim for professional services.
Additional information about Exide’s Chapter 11 proceeding can be found at exide.com/2020-restructuring. — Marc Vincent
PWI/Tri-States Deal Expected To Close In August
Aftermarket Auto Parts Alliance shareholder owners Parts Warehouse Inc. (PWI) and Tri-States Automotive Warehouse are coming together in a transaction expected to be completed in August. The deal calls for Tri-States to become a part of Parts Warehouse, to maintain its current company stores and to maintain its warehouse in Marianna, FL.
Tri-States’ automotive distribution center services the panhandle of Florida, as well as southern Alabama and southern Georgia. The company delivers nightly to 20 company-owned Auto Value stores, 60 independent Auto Value associates and 43 other independent auto parts stores.
Tri-States President Kelly Connolly said the move allows Tri-States to operate bigger, stronger and faster, as well as provide better customer service and more parts availability.
Combined, the two companies will serve nine states: Alabama, Arkansas, Florida, Georgia, Louisiana, Missouri, Mississippi, Oklahoma and Texas.
Little Rock, AR-based PWI is a wholly-owned subsidiary of Replacement Parts Inc. (RPI), also operating 177 company stores as Bumper to Bumper Auto Parts Stores/Crow-Burlingame Company and Car Dealer Parts. The company provides parts for hundreds of Bumper to Bumper Certified Service Centers in Alabama, Arkansas, Louisiana, Missouri, Mississippi, Oklahoma and Texas.
“Our shared knowledge, resources and now larger footprint will help us continue to grow and excel at what we do,” said PWI President Fletcher Lord III. “We welcome Tri-States to the team but, more importantly, to our family of families.”
Dan Lelchuk Joins Parts Authority’s Executive Team
Parts Authority (Lake Success, NY) has added Dan Lelchuk as its senior vice president of business development for braking. According to the company, Lelchuk will play a key role in the execution of Parts Authority’s braking strategic plan, focusing on program operation and growth.
Lelchuk was the co-founder, president and CEO of Centric Parts. Over the last few years, he has served on the advisory board and worked in executive support leadership roles at APC Automotive Technologies, AP Exhaust and DAE Systems. Lelchuk’s background also includes leadership roles with Western Automotive Warehouse Distributors, Beck/Arnley, TRW Automotive/Autospecialty and Brembo.
“We are very fortunate to have Dan join the Parts Authority team. He knows the aftermarket industry, he is an experienced leader, and he has the vision to help move our program and organization forward,” said President and CEO Randy Buller. “Dan is simply one of the brightest and sharpest minds I have ever worked with. I know he will be a great addition in many ways.”
Buller added: “We are very lucky to have the opportunity to bring in two great leaders, Dan Lelchuk and Bill Maggs, to join our team in a short period of time.”
US Motor Works To Supply The Group
US Motor Works (Santa Fe Springs, CA) is now a vendor partner of the Automotive Parts & Services Group. The company has been approved for its full line of water pumps, fuel pumps, fan clutches, water pump with fan clutch kits and water pump with timing kits, as well as a full line of performance automotive cooling products.
Advance Auto Parts’ Q1 Comps Declined 9.3%
But Have Sequentially Improved In Q2
For the 16 weeks ended April 18, 2020, Advance Auto Parts reported $43.59 million in net income — a decline of 69.4% when compared to the same period a year ago.
The company’s first-quarter 2020 gross profit declined 10.1% to $1.17 billion, primarily attributable to decreased sales. Gross margin slipped from 44.2% to 43.5% on a year-over-year basis because of supply chain de-leverage, product mix and tariff-related cost increases, according to management.
Advance reported $2.70 billion in net sales for the quarter — a decrease of 8.6%. Comparable-store sales were down 9.3%.
President and CEO Tom Greco told analysts on the company’s May 19 earnings call that, while an extremely warm winter led to a softer start to the quarter, Advance saw sales improvements in early March. “However, as COVID-19 stay-at-home orders were implemented broadly, we experienced significant reductions in both professional car counts and DIY retail traffic beginning in mid-March and impacting the remaining six weeks of the quarter,” Greco said. “This led to fewer miles driven and as a result, our top line meaningfully declined.”
He noted that sales during the week ending April 4 were down 28%. “On a positive note, this represented the low point of the pandemic impact for [Advance] to date, and our sales have been improving sequentially each week,” Greco said on the call. “Through the first four weeks of Q2, our comparable-store sales are approximately in line with the prior year, and our DIY omnichannel business is growing double-digits, significantly outperforming professional.”
REGIONAL DIFFERENCES … The company’s first-quarter performance was heavily impacted in coronavirus hotspots across the Northeast, Mid-Atlantic and Great Lakes regions, which were all down double-digits and particularly challenged in major urban markets.
Analysts with Jefferies LLC wrote in a May 19 report that this is consistent with channel commentary indicating trough national results seen with DIFM customers in Northeast markets, notably New York, Connecticut and New Jersey.
The company’s locations in Puerto Rico, which are operating just six hours per week and in Canada, also experienced large double-digit declines.
Advance’s strongest performance came from the Southeast, Carolinas and Appalachia, which were much less impacted by the virus. For the quarter, the difference between low-performing and high-performing regions was over 1,000 basis points, which Greco called the largest differential in recent memory. Notably, the differential was well over 2,000 basis points during the key impact of the pandemic.
PROFESSIONAL … Greco told analysts that Advance’s professional business was up heading into mid-March; however, as the quarter progressed, the segment experienced extreme pressure from stay-at-home orders. “Our WORLDPAC and Autopart International businesses are 100% professional and tend to be in more urban areas,” he said. “This contributed to drastic reductions in customer car counts.”
More recently, the professional business has been improving, with last week the best management has seen, according to Greco. “Once shelter-in-place comes off, I think we will see a recovery on the professional side of the business — the degree of which is still unknown, but we do expect it to improve from here,” he said.
DIY OMNICHANNEL … Advance’s DIY omnichannel business performed better, with significant growth in e-commerce business, according to management.
“Our team accelerated existing DIY omnichannel initiatives and several new ones to better serve our customers, both online and in-store,” Greco pointed out during the call. “Consistent with our plan announced in February, we launched our new mobile app that is getting great reviews and feedback from customers.
“As an example of the team’s agility, in March we launched a suite of services rebranded as Advance Same Day. This includes in-store pickup, curbside and enhanced same-day delivery, also offering contact-free fulfillment options. These initiatives were rapidly accelerated and include a fully integrated marketing plan to let customers know we are here for them.”
He told analysts: “I think you’re seeing customers are really up for grabs across broader retail. Whether it’s lucky or timely, our advertising hit at the right time for us. I think we’ve got a lot of good initiatives on the DIY side, and I think the industry should perform well there.”
Greco also said that, because of the pandemic, management has worked to prioritize initiatives believed to offer the potential for the best returns. “One of those initiatives is the launch of the iconic DieHard brand, which is on-track for this summer. We believe DieHard is a differentiator for Advance, and we already have customers asking for it,” he stated. “As customers literally restart their engines in the coming months, many will find they need a new battery. As the most trusted brand in the category, we believe DieHard will drive incremental growth across all channels.”
The team from Jefferies noted in their report that, while the strength in omnichannel DIY could be correlated to stimulus payments, “we are encouraged that trends have continued to improve each week following the initial stimulus payments, potentially indicating a more ‘sticky’ demand recovery versus a brief ‘sugar’ high,” analysts Bret Jordan, Mark Jordan and Ethan Huntley wrote. “We are currently modeling Q2 comparable-store sales of down 5% year-over-year, which compares to our prior estimate of down 20%.”
MISCELLANEOUS … Other items of interest from Advance’s first-quarter earnings report and conference call …
• Greco said Advance continues to see improvement in Speed Perks transactions. “Through our new app, Speed Perks members can quickly view their points and available rewards and get exclusive deals and check out faster,” he noted. “We are also excited that, despite our lower sales volume, we saw double-digit increases in Speed Perks sign-ups year-over-year. At the end of Q1, we had more than 13 million active members — an increase of over 20% year-over-year.”
• Advance is continuing with management’s cross-banner replenishment initiative. Greco indicated that the program was temporarily slowed in the first quarter but not stopped. “We remain on track to complete this initiative by mid-2021,” he said.
• While the company was able to implement its new warehouse management system in one of Advance’s largest DCs earlier this year, management has delayed converting other DCs for now due, in part, to travel restrictions. “Our team is focused on how we can further improve this process when the time comes to ramp conversions back up and complete this component of our transformation agenda,” Greco said.
• Greco stated that a new pricing optimization tool is on track to launch mid-year. “Once completed, we expect this to give us much greater flexibility and agility, resulting in more effective and efficient management of pricing,” he told analysts.
• During the 16 weeks ended April 18, 2020, Advance opened two stores and branches, and closed or consolidated 28 stores — all of which were planned prior to the onset of the pandemic, according to Greco. This gave the company a total of 5,011 stores and branches.
• On May 15, the company declared a regular cash dividend of $0.25 per share to be paid July 3 to all common stockholders of record as of June 19. “We remain committed to improving total shareholder return over time through a balanced approach of investing in our business and returning cash to our shareholders while continuing to strengthen our liquidity position,” said Executive Vice President and CFO Jeff Shepherd.
• During the first quarter, the company repurchased 200,000 shares of Advance common stock at an aggregate amount of $29 million, or an average price of $128.36 per share, in connection with the board of directors’ share repurchase program. Advance has since suspended activity under its share repurchase program. — Marc Vincent
Turn 14 Is Buying Motovicity
Turn 14 Distribution has reached a definitive agreement to acquire substantially all the assets of Motovicity Distribution, a regional distributor of high-performance parts and accessories for a range of passenger cars and race vehicles. Based in Madison Heights, MI, Motovicity was the 2013 SEMA Warehouse Distributor of the Year.
According to an announcement dated May 20, Turn 14 will extend employment offers to a majority of Motovicity’s employees, and Motovicity will operate exclusively under the name Turn 14 Distribution going forward.
Turn 14 of Horsham, PA is a distributor of high-performance parts and accessories for passenger cars, light trucks and race vehicles. The company has distribution centers in Pennsylvania, Nevada and Texas. Turn 14 is privately owned and operated.
Financial terms of the deal have not been disclosed.
GM Performance Vet To Lead PRI
General Motors veteran Jamie Meyer is the new president of the Performance Racing Industry (PRI) trade show and media company.
Based in Indianapolis, Meyer will lead efforts to establish a new office and permanent presence in the area as he serves and engages the racing community, develops programs and services for the motorsports industry, and continues to lead the PRI trade show.
“In addition to providing the industry with world-class trade events and publications, PRI is committed to enhancing resources, advocacy and representation for the motorsports industry,” said Chris Kersting, president and CEO of SEMA. “Dr. Jamie Meyer will be instrumental in leading the team. He has great knowledge and understanding of racing businesses, teams and drivers, and he will be a valued leader to help motorsports and the industry grow.”
Meyer has spent 15 years with GM, including time leading the planning and development of the performance parts and performance accessories portfolio for Chevrolet, Cadillac, Buick and GMC. This included setting the strategy for all future vehicle-specific performance parts at GM.
BB&T Auto Aftermarket Investment Banking Team Moves To Stifel Financial Corp.
When it comes to making career moves, sometimes it’s all about the timing. Such was the case earlier this year when an investment team specializing in the automotive aftermarket left BB&T Capital Markets Investment and joined St. Louis-based Stifel Financial Corp. in its Consumer Investment Banking Group.
The team, headed by Joe Sparacino, was with BB&T for nine years but saw an opportunity to expand its capabilities and offerings with the move to Stifel. Their decision also was facilitated by the 2019 merger of BB&T and SunTrust into Truist Bank, now one of the nation’s largest banks.
“At that point, we were open to considering other places,” he said of the merger. “We did some homework around it and we had held some conversations with Stifel prior to that and, in the end, we found Stifel to be the ideal home for our team.”
A key aspect in their decision to move hinged on Stifel’s need for his team’s expertise, said Sparacino, now managing director of automotive aftermarket, an area he has specialized in for the last 12 years.
“The stars aligned,” said Sparacino. “They were looking to fill a hole in automotive aftermarket, and we were looking to add more product capabilities. Stifel’s product breadth was a key piece of it. Their global footprint was another. Stifel has offices all over the world.”
In all, nine people came over from BB&T and extended Stifel’s consumer franchise into food and agribusiness as well as the automotive aftermarket.
“Over the past two years, we have made significant investments in our Consumer Group, which we view as a key vertical with tremendous opportunity throughout market cycles,” said Brad Raymond, global head of investment banking at Stifel. “Bringing in this team of experienced professionals further expands our coverage in core consumer growth sectors with significant strategic and financial sponsor activity.”
In addition to Sparacino, Robert Haile and KC Hazarika came from BB&T and joined Stifel as managing directors of other consumer areas. All three men are based in Boston.
The team brings experience in many aspects of consumer investments, according to Sparacino.
“Our background is in mergers and acquisitions,” he said. “We brought over a pretty strong sheet of active mandates. We represent sellers to raise capital or fully sell their company. We have also been working on public equity opportunities and several IPOs, in addition to restructuring and debt advisory.”
As for the financial effects from the coronavirus and subsequent shelter-in-place mandates, Sparacino said he believes the worst is over and that the automotive aftermarket fared better than most consumer businesses during the crisis.
“The aftermarket has been wounded but not mortally wounded,” Sparacino said. “We’re hopeful that we’ve seen the worst of it and the uptick in miles driven will occur gradually over the rest of the year. We have actually seen an immediate rebound in enthusiast-related business and a lot more people are purchasing through e-commerce than ever before. I would say we are bullish on the rest of the year.” — Susan Pappas
Battery Maker Hires New Chief Executive, Completes $500-Million Notes Offering
Mark Wallace is now the president and CEO of Clarios, the former Johnson Controls Power Solutions Group, which is one of the world’s largest producers of car batteries. Wallace comes to Clarios from Dana Inc., where he was an executive vice president and president of the company’s commercial vehicle drive and motion systems operations.
Wallace succeeds Interim CEO John Barkhouse, who will continue as Clarios’ chairman of the board.
“Mark has a demonstrated history of driving revenue growth and improving profit margins,” Barkhouse said. “His experience as a leader with extensive knowledge of the OE and aftermarket industries ensures Clarios and its customers are in good hands, and our strategic plan will continue to advance globally.”
Wallace’s background includes various leadership roles for Webasto, including time as the president and CEO of Webasto Product North America. He also has worked for Magna International and Cooper Automotive.
In related news, Clarios Global LP and the Clarios US Finance Company have completed an offering of $500 million in 6.75% senior secured notes due 2025 at an issue price of 100%, according to a May 20 announcement from the Milwaukee-based company. Net proceeds from the offering are to be used for general corporate purposes.
The notes are guaranteed by Clarios International LP, which owns all of the equity interests of the issuers and each of the company’s subsidiaries that are guarantors under the company’s credit agreements.
Following the closing of the notes offering, Clarios’ liquidity position stood at roughly $1.70 billion, according to the announcement.
Dana Expands Dan Griffin’s Leadership Role
Dana Inc. has announced an expanded leadership role for Dan Griffin, who has served as senior director of strategy, product planning, and program management for commercial vehicle drive and motion systems and the aftermarket.
Now, as senior director of aftermarket and digital solutions, Griffin will lead Dana’s global aftermarket business units. He is responsible for operations, sales and marketing, product planning, e-commerce, data analytics and the development of growth strategies. Key areas of focus include vehicle electrification and Dana’s e-commerce platform, DanaAftermarket.com.
Griffin has more than 20 years of experience in sales, business development, program management and operations. He joined Dana in 2016 as vice president and general manager of Dongfeng Dana Axle Corp. and was subsequently named director of the global aftermarket.
DMA Bolsters Its Sales Team
DMA Sales LLC (Loris, SC) has added Dave Amato as its vice president of sales and marketing for heavy-duty products. Reporting to CEO John Treece, Amato is responsible for establishing the strategic sales direction for the company’s new Bulldog HD suspension product program. This includes cultivating and establishing new customers within the heavy-duty vehicle market, as well as serving in both a strategic sales planning capacity and in a cross-functional leadership role.
Amato has worked for Baldwin Filters since 1990, including time as the director of marketing and vice president of sales for the United States and Canada.
DMA Sales also has added Will Henderson as strategic sales account manager, also reporting to Treece. Henderson is a recent graduate of Coastal Carolina University with a Master of Business Administration.
He is responsible for building and maintaining relationships with the company’s significant strategic customers, identifying opportunities to increase sales within existing strategic accounts, and prospecting and developing new account relationships.
New AAPEX Venue Will Showcase Tools And Equipment In Action
AAPEX 2020 attendees will have the opportunity to see demonstrations of new tools and equipment in Joe’s Garage, a shop setup that will feature six service bays, lifts, vehicles and a source capture vehicle exhaust extraction system. According to event organizers, this new addition to the show already has the participation of the following exhibitors …
• BG Products, with demonstrations of its fluid service chemicals for cleaning, sanitizing and AC; fuel and oil change; coolant; and transmission.
• Robert Bosch, with demonstrations of its ADAS calibration equipment.
• John Dow Industries/EuroVent, with its vehicle exhaust extraction equipment, as well as fluid handling, LED lights, hose reels and other shop support equipment.
• Hunter Engineering, with demonstrations of its alignment equipment.
• NAPA, with a built-out NAPA AutoCare service bay including tools and equipment.
Joe’s Garage will be part of the new Repair Shop HQ located on Level 1 of the Sands Expo. This venue — dedicated specifically to vehicle service and repair — also will include …
• Two new training theaters.
• A new tire section.
• Sections for alternative fuels, diagnostics and telematics.
• A revamped tool and equipment section.
• The mobile heat transfer, heating and air conditioning section.
At this time, plans are to proceed with AAPEX 2020 as scheduled Nov. 3-5 at the Sands Expo and Caesars Forum Conference Center in Las Vegas. For more information or to register, visit aapexshow.com.
2020 Automotive Hall Of Fame Induction Ceremony Canceled
The Automotive Hall of Fame has canceled its annual induction ceremony because of the coronavirus pandemic. The event was scheduled for July 23.
Next year’s ceremony in July 2021 will honor all 2020 inductees and awardees. This will include Tom Gallagher, former CEO of the Genuine Parts Company; Jay Leno, an entertainer, auto enthusiast and host of Jay Leno’s Garage; and Mong-Koo Chung, chairman and CEO of the Hyundai Motor Company.
2020 Instructor Training Conference Canceled
Because of ongoing concerns surrounding the coronavirus pandemic, the ASE Education Foundation has canceled its 2020 Instructor Training Conference, which was scheduled for July 14-17 in Frisco, TX. The annual event provides training to hundreds of high school and college instructors from auto, truck and collision repair programs nationwide.
Next year’s ASE Instructor Training Conference is slated for July 26-29, 2021 in Concord, NC.
The Network Announces Partnership With Repair Shop Coach
The Automotive Distribution Network is adding video training programs from Repair Shop Coach to The Network Academy, its training resource for shop owners, technicians, service advisers and parts professionals.
Repair Shop Coach is a Cincinnati-based company that is owned and staffed by shop owners. Its president, Ron Ipach, is known in the industry as “Captain Car Count” because of his work helping shop owners attract and keep quality customers using low-cost and free marketing strategies.
The four training programs coming to The Network Academy are …
• More Money Now: A financial training course designed to help shop owners understand a shop’s key metrics and how they affect the profitability of the business.
• Leadership Now: A guide on hiring, training and leading employees, as well as operating a smooth-running shop.
• Car Count Now: A system for attracting and keeping high-quality customers.
• Sales Now: A system for increasing ticket averages and selling more services.
Ipach will kick off Repair Shop Coach’s inclusion in The Network Academy by hosting free online training webinars June 3 at 9 a.m. (CDT) and 2 p.m. (CDT). His presentations will address marketing that can keep car counts up during the coronavirus pandemic.
Federated Expands Car Care Program
Federated Auto Parts (Staunton, VA) has announced a series of additions to its Federated Car Care program. They include …
• Labor Assurance: A program that covers labor reimbursement inside the 25-mile radius of the Federated Nationwide Warranty Program. Claims are administered by Automotive Business Solutions, the provider of Federated’s national warranty, roadside assistance and road hazard programs.
• Car Care Insurance: A program from Lockton Affinity that offers a variety of insurance options for Car Care Centers. Lockton has more than 50 years of experience providing specialized insurance coverage for automotive businesses.
• The Group Training Academy: An online training platform for automotive service professionals. Training is available for all shop staff members.
Oil Change Provider Expanding Into New States
Strickland Brothers 10 Minute Oil Change has announced area development agreements that will expand its presence into new states. New franchisee Kevin Hayes has agreed to open three shops in the Denver area, near Parker, CO, while new franchisee MG Spanial has agreed to open three shops in the Austin, TX area near Round Rock and Hutto.
Strickland Brothers currently has shops in North Carolina, South Carolina, Virginia and West Virginia.
Openbay Launches New App
Openbay Inc. has launched a new app for consumers and business fleet owners. Features include the ability to request vehicle service by category or keyword, factory-recommended service schedules, the capability to locate nearby automotive service professionals, the ability to get detailed estimates, appointment scheduling, and the capability to pay for services via credit card or Apple Pay.
Bolt On Technology Extends SiriusXM Partnership To Canada
Bolt On Technology, a supplier of software for auto repair shops, has announced a partnership with SiriusXM Canada. Shops in Canada that use Bolt On’s digital communications software and are enrolled in the SiriusXM Service Lane for Shops program can now offer eligible customers a complimentary three-month, all-access subscription to SiriusXM at no additional cost to the shop.
AutoNation Reports Slight Dip In Q1 Same-Store Parts, Service Gross Profit
AutoNation Inc. reported $876.30 million in Customer Care (parts and service) revenue for the first quarter of 2020, which was down less than 0.1% when compared to the same period a year ago. Same-store Customer Care revenue increased 1.7%.
Customer Care gross profit decreased 2.5% to $388.80 million. As a percentage of sales, Customer Care gross profit declined from 45.5% to 44.4% on a year-over-year basis.
Same-store gross profit decreased by $2.90 million (or 0.7%), primarily because of a $3.10 million decrease in gross profit associated with customer-pay service, a $2.50-million decline in warranty gross profit and a $2.00 million dip in wholesale parts gross profit. This was partially offset by a $3.30-million increase in gross profit associated with the preparation of vehicles for sale and a $1.80 million uptick in collision business gross profit.
According to management, customer-pay gross profit and warranty gross profit were adversely impacted by a decrease in volume during the last two weeks of March 2020 as a result of the coronavirus pandemic and related stay-at-home orders, which led to the company’s parts and service business operating below full capacity. However, the decrease in customer-pay volume was partially offset by higher-value repair orders and price increases.
Gross profit associated with wholesale parts decreased because of inventory write-downs. Collision business gross profit benefited from an increase in volume, higher-value repair orders, and an increase in gross profit associated with service work outsourced to third parties, according to management.
Chairman and CEO Mike Jackson told analysts on the company’s May 11 earnings call that the company has begun seeing customers return to its service lanes. Jackson noted that, at the beginning of April, AutoNation’s customer repair orders were down approximately 50%. By the end of the month, repair orders were down roughly 30%. And in early May, they were down in the high 20% range.
Fort Lauderdale, FL-based AutoNation is billed as the largest U.S. automotive retailer with more than 325 locations coast-to-coast as of March 31, 2020.
Penske Reports 6.5% Drop In Service, Parts Revenue From U.S. Car Dealers
For the first quarter of 2020, the Penske Automotive Group reported $513.30 million in service and parts revenue from its retail automotive dealerships — a decrease of 8.3% when compared to the same period a year ago, with a decrease of 6.5% in the United States and a decline of 11.7% internationally. Management attributed the decrease in service and parts revenue primarily to a significant decline in business in March resulting from the coronavirus pandemic.
Excluding unfavorable foreign currency fluctuations, same-store service and parts revenue decreased 5.6%, with customer-pay revenue down 5.0%, warranty revenue down 10.7%, and vehicle preparation and body shop revenue down 0.3%.
For the first two months of 2020 (prior to the pandemic), Penske’s retail automotive same-store service and parts revenue was up. This trend continued into early March, then progressively declined as shelter-in-place policies were established impacting many of the company’s locations.
In the United States, shelter-in-place rules in many states either required that Penske close its dealerships or limit its automotive dealership operations to essential services. While its service departments remained open, service and parts revenue declined 21.2% in March.
It’s worth noting that the company has seen sequential increases in the United States of about 9% per week in its parts and service business over the last couple of weeks.
Penske’s first-quarter 2020 retail automotive dealership service and parts gross profit declined 8.4% to $303.70 million, yet its gross margin of 59.2% was unchanged year-over-year. On a same-store basis, service and parts gross profit decreased 6.3% (down 5.8% excluding foreign currency), with customer-pay gross profit down 6.1%, warranty gross profit down 10.8%, and vehicle preparation and body shop gross profit down 2.0%.
As of March 31, 2020, Penske had 317 retail automotive franchises, of which 145 franchises were located in the United States and 172 franchises were located overseas, primarily in the United Kingdom.
Lithia Motors Generates Service, Body And Parts Revenue Growth In Q1
Lithia Motors’ first-quarter 2020 service, body and parts revenue increased 3.9% to $329.90 million. Same-store revenue was up 0.5%, attributable to an increase in body shop work (4.2%) and customer-pay work (up 0.4%), as well as more late-model units in operation. Same-store warranty revenue grew 0.5%, while parts wholesale revenue decreased 0.7% compared to the same period of 2019.
Domestic segment service, body and parts revenue increased 1.6% to $117.20 million. Lithia’s domestic segment is composed of retail automotive franchises that sell new vehicles manufactured by Chrysler, General Motors and Ford.
Import segment service, body and parts revenue rose 6.0% to $124.80 million. The company’s import segment is made up of retail automotive franchises that sell new vehicles manufactured primarily by Honda, Toyota, Subaru, Nissan and Volkswagen.
Luxury segment service, parts and body revenue grew 5.4% to $83.40 million. This segment is composed of retail automotive franchises that sell new vehicles manufactured primarily by BMW, Mercedes-Benz and Lexus.
It’s worth noting that through February, Lithia’s overall service, body and parts revenue increased approximately 6.0%, only to decline about 9.0% in March as stay-at-home orders rolled out across many of the company’s markets in response to the coronavirus pandemic.
COO Chris Holzshu told analysts on Lithia’s April 22 quarterly report conference call that service, body and parts sales in the second half of March declined approximately 30%. He said regional declines in service during that period varied between 10% and 50%, with Nevada and Texas being the strongest and the Northeast being the weakest, as it had some of the strictest shelter-in-place orders.
Lithia’s overall service, body and parts gross profit rose 5.4% to $168.10 million in the first quarter of 2020. Same-store service, body and parts gross profit was up 1.7%, while same-store gross margin increased 60 basis points to 51.0% as the company’s mix has shifted toward customer-pay work, which has higher margins than other service work.
As of March 31, 2020, Medford, OR-based Lithia operated 189 stores representing 30 brands across 20 states.
Sonic Reports Improved Same-Store Fixed Operations Gross Profit, Revenue
For the first quarter of 2020, Sonic Automotive reported $334.68 million in consolidated fixed operations (parts, service and collision repair) revenue — a decrease of 2.0% when compared to the same period a year ago. However, same-store fixed operations revenue was up 2.8%.
On a same-store basis, customer-pay revenue rose 2.9% to $137.15 million, warranty revenue declined 6.4% to $61.31 million and wholesale parts revenue increased 1.4% to $38.71 million.
For the 2020 first quarter, Sonic’s consolidated fixed operations gross profit declined 3.3% to $157.90 million, while its gross margin decreased 40 basis points to 47.2% on a year-over-year basis.
On a same-store basis, consolidated fixed operations gross profit increased 2.1%. Same-store customer-pay gross profit rose 5.3% to $75.73 million, warranty gross profit declined 7.2% to $33.91 million and wholesale parts gross profit increased 1.6% to $6.67 million.
In January and February, Sonic’s overall fixed operations gross profit was up roughly 8%, with customer-pay gross profit up approximately 12%. However, over the final couple of weeks of the quarter — as stay-at-home measures were enacted across most of the United States — customer-pay parts and service gross profit decreased 15%, according to management. This was followed by 40% year-over-year declines in early April.
Management on May 19 provided an update reflecting results in April and May month-to-date. CEO David Smith indicated that over the past few weeks, the company has seen increasing consumer activity in the majority of its markets, as stay-at-home orders have been gradually relaxed.
“Our new and used vehicle sales volume and fixed operations gross profit have performed at or above our expectations and continue to improve week-by-week,” Smith said. “We believe the strategic actions we took at the onset of the pandemic have strengthened our business and positioned us to take advantage of opportunities in the second half of 2020 and beyond.”
Same-store fixed operations gross profit is recovering — down less than 30% in May month-to-date compared to the prior-year period, according to President Jeff Dyke.
As of March 31, 2020, Charlotte-based Sonic had 86 stores in its franchised dealerships segment and nine stores in its EchoPark segment. The franchised dealerships segment consists of 99 new vehicle franchises representing 21 brands of cars and light trucks and 15 collision repair shops across 12 states.
Asbury Automotive’s Q1 Parts And Service Gross Profit Declined
The Asbury Automotive Group’s first-quarter 2020 parts and service revenue increased 1.8% to $221.60 million when compared to the same period in 2019, with customer-pay revenue up approximately 2.0% and warranty revenue up roughly 3.0%. Wholesale parts revenue was down about 1.0% for the quarter.
On a same-store basis, the company’s parts and service revenue decreased 0.5% to $203.50 million due, in part, to customers observing shelter-in-place orders issued in March in response to the coronavirus pandemic. Additionally, several of Asbury’s highest-volume locations were shut down for as many as two weeks because of positive coronavirus tests, according to management.
The company’s first-quarter 2020 parts and service gross profit decreased 0.3% to $134.90 million, and its same-store gross profit declined 2.6% to $124.10 million. A closer look shows that same-store customer-pay gross profit decreased 1.1% to $72.50 million, same-store warranty gross profit declined 4.4% to $19.70 million and same-store wholesale gross profit fell 16.4% to $4.60 million.
On Asbury’s May 6 quarterly report conference call, Senior Vice President of Operations Dan Clara said that gross profit was impacted by management’s decision to not furlough any of its “A” and “B” technicians during the pandemic. Although some techs have taken personal leaves of absence, Clara admitted.
“Guaranteeing the technicians’ pay and not furloughing the ‘A’ and ‘B’ level techs, that word has gotten out in a lot of markets, and we have actually been hiring some techs in the last 30 days that heard about what we’re doing for our techs,” President and CEO David Hult said on the call, adding that downturns provide a good opportunity to add techs.
“We’re happy to bring these technicians on now and pay them, even though we might not necessarily have the work for them,” he stated, pointing out that business will come back because of pent-up demand.
Hult told analysts that Asbury’s same-store revenue declined approximately 35% in April. “We started out the month very slow with sales and service off between 50% and 60%; however, each week in April improved, with the last week being off about 25% in sales and 30% in parts and service,” he said. “We believe our May business will grow 20% incrementally over April.”
As of March 31, 2020, Duluth, GA-based Asbury had 102 new vehicle franchises (83 dealership locations) representing 31 brands of automobiles, as well as 24 collision repair shops, in 16 metropolitan markets across nine states.
Group 1 Reports 1.6% Increase In Same-Store Parts And Service Sales
For the first quarter of 2020, Group 1 Automotive reported $370.60 million in consolidated parts and service sales — an increase of 0.4% compared to the same period of 2019. Excluding foreign currency translation, the company’s consolidated parts and service sales were up 1.0%. And, on a same-store basis, consolidated parts and service sales decreased 0.8% (down 0.1% excluding currency).
U.S. same-store parts and service sales increased 1.6% to $298.40 million, as wholesale parts revenue was up 5.4%, collision revenue was up 5.0%, customer-pay revenue was up 2.8% and warranty revenue was down 6.9%.
It’s worth noting that Group 1’s U.S. parts and service same-store sales were up through February but were dampened by the impacts of the coronavirus pandemic starting in March. While the company’s service departments have generally remained open since the pandemic hit, traffic flow has been down 40% to 50%, according to management, because of shelter-in-place orders.
U.S. same-store parts and service gross profit increased 0.9% to $160.00 million, yet its gross margin slipped from 54.0% a year ago to 53.6% for the three months ended March 31, 2020.
According to management, U.S. service revenue was about 30% lower than prior-year levels by the end of April, which marked an increase in momentum compared to early in the month.
“With sales and service beginning to recover from the lows we experienced at the start of April, we are starting to call back some of our furloughed employees in the U.S. and anticipate being able to add back approximately 500 U.S. employees by June,” President and CEO Earl Hesterberg said on Group 1’s May 5 earnings call. “We will continue to monitor sales levels and adjust staffing levels as necessary. We can see some level of pent-up demand, especially in service, but it’s not yet possible to quantify what that might be over the course of the coming months.”
Houston-based Group 1 had 186 automotive dealerships (242 franchises) and 49 collision repair centers in the United States, United Kingdom and Brazil as of March 31, 2020.
New Dealer-FX Offering Targets Appointment Scheduling, Check-In
Dealer-FX, a customer experience management provider to automotive retailers and OEMs, has launched a new appointment scheduling, service check-in, appointment management and customer communications tool called Experience. The technology, which was designed to help with social distancing, is being offered to dealers at no charge for the first three months.
Experience includes a way for customers to schedule appointments and for dealerships to manage appointment availability and transportation options. It also offers contactless check-in for customers, including the option to select additional services and to provide a digital signature for approval. Additionally, Experience includes text, email and call outreach tools for dealers.
According to Dealer-FX, Experience integrates with various DMS providers and runs on the company’s own ONE Platform.
NASCAR Expands Partnership With Clean Harbors
NASCAR has expanded its partnership with Clean Harbors, parent company to Safety-Kleen, to handle infectious disease prevention and decontamination work at its facilities. This includes efforts to prepare venues including Darlington Raceway and Charlotte Motor Speedway by deep-cleaning all key sections of the facilities, as well as all inbound trailers and equipment involved in races.
AAA Expects Record-Low Memorial Day Travel
For the first time in 20 years, AAA did not issue a Memorial Day travel forecast, noting the accuracy of the economic data used to create the forecast has been undermined by the coronavirus pandemic.
Last year, 43 million Americans traveled for Memorial Day weekend — the second-highest travel volume on record since AAA began tracking holiday travel in 2000. However, with social distancing guidelines still in practice, the 2020 holiday weekend’s travel volume is likely to set a record low, according to the motoring club.
Up until now, Memorial Day weekend 2009 held the record for the lowest travel volume at nearly 31 million people. That holiday weekend, which came toward the end of the Great Recession, saw 26.40 million Americans travel by car, 2.10 million by plane and nearly 2 million by other forms of transportation.
AAA expects to make travel projections for the late summer and fall, assuming states ease travel restrictions and businesses reopen.
Summer Road Trips Drop 44%
Only 31% of Americans plan to take at least one summer road trip this year, according to a summer travel survey conducted by GasBuddy. This is down 44% from 2019. The main reason was the coronavirus, cited by 72% of GasBuddy users.
For those who plan to travel by car, 60% plan to visit friends and family, 38% intend to go to a beach or lake, and 24% expect to visit a National Park.
Purchases Made On Amazon Can Fund Industry Scholarships
The University of the Aftermarket Foundation reminds industry professionals that everyday purchases made on Amazon can help provide scholarships and educational opportunities to students seeking a career in the automotive aftermarket. To participate, visit smile.amazon.com and enter University of the Aftermarket Foundation in the “pick your own charitable foundation” box. Each time you access Amazon through smile.amazon.com and make a purchase, Amazon will make a contribution to the foundation on your behalf.
AASA Offers Networking Membership For Those Out Of Work
AASA has created a new membership category for aftermarket professionals in transition. Anyone recently laid off from an automotive aftermarket industry job with an AASA member company because of the impact of the coronavirus pandemic is eligible for an AASA Networking Membership. This special membership includes …
• Access to AASA newsletters.
• Discounted rates on AASA events.
• Access to AASA webinars.
• Access to the AASA member center at AAPEX.
The cost is $60 annually. Click here for more information.
The Greensheet Can Help During Your Job Search
We offer aftermarket professionals seeking work the opportunity to get the word out through a free Job Mart listing in The Greensheet. This provides job seekers with a chance to let the industry know they are looking for new opportunities through a short write-up in an upcoming issue of the newsletter. If you or somebody you know is interested in a Job Mart listing, contact firstname.lastname@example.org for additional information.
Additionally, as has been our policy for decades, free six-month subscriptions to The Greensheet are available to aftermarket professionals who find themselves out of work and looking for new opportunities. If you or a colleague become separated from your job, email email@example.com to inquire about a free six-month subscription to The Greensheet.
Job Mart 5/26/20
Experienced International Sales Director seeking a new opportunity within the Automotive Industry. Demonstrated history in business development, market analysis, forecasting, business planning, account management, performance tracking and operations. Extremely successful at providing high levels of customer satisfaction in domestic and international markets and with all types of customers from B2B and B2C. Contact Kevin Floody at firstname.lastname@example.org.
News Briefs 5/26/20
• Raybestos received a “Content Excellence Award” for its catalog data during the recent Automotive Content Professionals Network Knowledge Exchange virtual conference. WHI Solutions and eBay Motors presented the award to Raybestos.
• The Trico Group has introduced a full line of new Carter Water Pumps.
• Bridgestone has reached a deal to acquire REIFF Reifen und Autotechnik GmbH, a chain of 42 retail shops across southern Germany that operates under the brands Reiff, Netto and ABS. Closing is expected June 1. Financial details of the transaction have not been disclosed.
• To accommodate disruptions caused by the coronavirus pandemic, Standard Motor Products has extended the application deadline to June 30 for its automotive scholarship contests — the Blue Streak “Stronger Than Ever,” Standard “Bigger, Better Diesel“ and Intermotor “Import Leader“ programs — which will award 12 students with $5,000 each.
• Valvoline Inc. has launched an initiative titled “Thanks to Truckers” to honor big rig truckers, delivery carriers and waste management professionals for providing essential services during the coronavirus pandemic. The campaign will include distributing 7,500 care packages for drivers in various fleets. The packages will contain hand sanitizer, masks, snacks, beverages and thank you cards.
• In response to shortages of these products, Mighty Auto Parts has made its cleaning and personal protection supplies available to businesses outside of the automotive industry and to the general public.
• Champion Oil on May 19 announced a price decrease specifically for its master warehouse distributors (MWD) of branded motor oil, compressor oil, transmission fluid, gear oils, greases and more.
• To assist instructors who have moved to distance learning this spring, the ASE Education Foundation has compiled a list of free e-learning resources provided by more than 30 industry partners. Instructors at ASE-accredited programs may apply as many of five hours of training on effectively delivering distance learning toward this year’s 20-hour training requirement.
• NASTF plans to launch the first phase of its new website in early June. Users will be able to navigate by brand rather than type of information, and all of a manufacturer’s information will be displayed on a single page. Additionally, the site will be compatible with phones, tablets and other mobile devices.
• The Original Equipment Suppliers Association (OESA) has launched a new mobile app for Apple and Android devices. Click here for additional information, or to download, the app.
Event & Trade Show Briefs 5/26/20
• The University of the Aftermarket has postponed Leadership 2.0 Class of 2020-21. Dates to resume this longstanding program (now in its 26th year) have not been announced.
• The Automotive Oil Change Association (AOCA) has scheduled iFLEX 2021 for June 7-9, 2021 at the Las Vegas Convention Center.
• The Auto Care Association will host a webinar Thursday, May 28 featuring Bill Russo, founder and CEO of Automobility Ltd and AmCham Shanghai’s automotive committee chair. He will provide an update on China’s automotive market and an overview of the country’s automotive aftermarket, as well as address how China is a leading indicator of emerging trends in the aftermarket, how the coronavirus pandemic influences consumer behavior and emerging opportunities in the aftermarket. Click here for more information on the webinar.
• The Auto Care Association’s Import Vehicle Community has debuted an educational audio series titled Coffee and Conversation. The goal is to address the issues and challenges facing not only its members but the automotive aftermarket as a whole. The first presentation is on manufacturing shutdowns in Mexico and the impacts they are having on the supply chain. Click here to listen.