When Bob McKenna talks about the aftermarket industry, people listen. That’s especially true when he issues a warning about the direction the industry is heading, as he did May 20 when he delivered the keynote address, “Looking Back, Looking Forward: a Veteran’s Perspective on the Connected Aftermarket,” at the Global Aftermarket Automotive Symposium (GAAS) in suburban Chicago.
McKenna, a 44-year industry veteran and retired president and CEO of the Motor & Equipment Manufacturers Association, professed his love for the industry, not just for what it did for his career, but what it does for others.
“This industry has been very, very good to me,” he said. “I love this industry and what it stands for – providing true value for our customers. It brings great value to our society.”
But he has some concerns about the industry’s future.
“I am concerned about the overall viability of the aftermarket industry,” said McKenna, a former NAPA chairman. “A chain is only as strong as its weakest link. I am concerned that we have too many stores and too many distribution points. There is too much inventory in the system. The playing field is not level and there are too many losers in the industry.”
He likened the state of the aftermarket to the state of auto manufacturing before the 2008 recession.
“The huge auto industry was almost brought down by weaknesses in several areas,” McKenna said. “If not for the intervention of the federal government and the extreme haircut that many bond holders took, it would have been disastrous.”
Extreme overcapacity was part of the cause of the 2008-2009 auto industry crisis, he said. The automakers were geared to make 16 million vehicles a year and demand plummeted to nine million.
“Similarly we have too many warehouses and stores based on growth prospects. That is the equivalent of OEM overcapacity. It is all about net income and return on investment. As interest rates go up – and they will – investments in inventory have to pay for themselves.”
An unlevel playing field places critical partners at a disadvantage, he said.
“For a chain as interdependent as the aftermarket, there cannot be winners and losers. We need to make real supply chain partnerships. The OEMs were out of balance in 2008-9 and they acknowledge that. Today, the aftermarket industry is out of balance more than I’ve seen in my 44-year career. There needs to be more balance so all levels can make adequate returns on their investment.
“I call on all supply chain partners to work to ensure that every part of the chain has the opportunity to be successful. I don’t mean to deter competition, but for all to have the chance to be strong.”
McKenna also addressed supplier terms, returns, store count and inventory.
“When it come to terms, we cannot stay on an unsustainable path,” he said. “Returns are the biggest problem because the industry can’t afford to constantly ship product back and forth.
“Store count will eventually take care of itself. Too many owners have their net worth tied up in their store. Regarding inventory, we need to find a more efficient way to get the right parts to the right place at the right cost at the right time. The strongest members of the supply chain need to make sure other parts of the chain can grow and prosper. The key to the future is to have all parts of the supply chain not just survive, but prosper.”
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