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News from HDAW 2008
The third annual Heavy Duty Aftermarket Week drew about 1,800 attendees to Las Vegas in January for a week of industry panels, product exhibitions and one-on-one distributor-supplier meetings.
According to the Heavy Duty Manufacturers Association, this year’s show featured:
- Attendees from 17 different countries;
- 1,400 pre-scheduled meetings; and
- 227 exhibitors.
Industry economics and issues were presented and discussed during HDAW’s Heavy Duty Aftermarket Forum and Business and Technical Theater sessions. HDAW was preceded by 14th annual Heavy Duty Dialogue.
Following are highlights from Heavy Duty Dialogue and HDAW 2008. For expanded coverage of these events, visit www.truckpartsandservice.com.
Karon, Total Truck Parts Named Truck Parts & Service’s 2007 Distributor of the Year
Marc Karon, president of Total Truck Parts, West Palm Beach, Fla., was named Truck Parts & Service magazine’s 2007 Distributor of the Year during the awards luncheon held at Heavy Duty Aftermarket Week in Las Vegas.
Karon, a former Distributor of the Year finalist, was selected through votes cast by aftermarket representatives from suppliers, distributors, organizations and the editorial staff of Truck Parts & Service.
“We extend our thanks to the editors and publishers of TPS, to our vendor partners who help us every day to achieve our goals and to our people who work hard and have fun succeeding,” says Karon, who accepted the award with Total Truck Parts co-owners Tom Fitzpatrick, Tom Gibson and Jack Wilcosky. “We especially thank our distributor peers and friends in the industry who have helped us along the way and made this award something of indescribable value to us.”
Total Truck Parts was founded in 2002 and has five locations throughout Florida. Its 2006 revenues were in excess of $22 million and the company has nearly 100 employees.
Distributor of the Year finalists were also recognized during the ceremony and presented with framed articles of their profiles that appeared in Truck Parts & Service. Profiles of the winner and finalists are available at www.truckpartsandservice.com.
The 2007 Truck Parts & Service magazine’s Distributor of the Year finalists were:
- Larry Franklin, owner, and Greg Franklin, president, Franklin Truck Parts, Commerce, Calif.;
- John Bzeta, president, Fleet Brake, Calgary, Alberta, Canada;
- Vince Matthews, owner, Capitol Clutch & Brake, Inc., West Sacramento, Calif.; and
- Tom Stewart, president, Carolina Rim and Wheel, Charlotte, N.C.
Economic Forecast Is Gray
The good news is that 95 percent of the time, our economy grows. According to Martin Regalia, vice president and chief economist of the U.S. Chamber of Commerce, over the last 100 quarters, there have been only five in which there was no growth in real GDP.
Unfortunately, that probably will not be true in the short-term and it is unlikely that we will get by without a recession.
There are some significant weak spots in the economy, most notable housing starts and problems caused by sub-prime mortgage issues.
But Regalia is optimistic saying, “There is a light at the end of the tunnel that is not attached to an on-coming train.”
He spoke about a number of issues ranging from the effects consumption rates have on the economy, the potential tax stimulus package and the credit market.
According to Regalia, consumption drives much of the economy and, “as long as we have consumption we usually will be all right.”
The problem in the housing market is not news to anyone and Regalia believes it will be another 10 to 12 months before the housing backlog from repossessions from the sub-prime housing market is cleared up.
On the bright side, commercial construction is good in part because there are resources not being used elsewhere that are available for commercial construction. There will be some slowing down in this area, however, as manufacturers are reluctant to make investments in warehousing and are relying on just-in-time and lean inventory practices.
More specifically to trucking, Regalia says he is seeing some plateauing but no definitive trends. “Shipping is down, but has not fallen off a cliff,” he says.
On the global scene, while the dollar is weak, exports are strong. We make good products here and people in other countries recognize that and want them, according to Regalia.
For the long term, he sees the continued weakening of the dollar, but also sees foreign investment in the U.S. as a constant. “The U.S. still is a good place to invest, but not at yesterday’s exchange rate.”
The bottom line? Near term Regalia sees slow growth of 1 percent to 1.5 percent. Long term, there are issues looming including problems with social security, lack of investment in infrastructure, and others that if combined could form what he calls a Perfect Storm that could lead to an economic downturn that could be worse than the recession of the 1980s. But only if a number of factors come together at the same time and Regalia, among others, is hoping that does not happen.
Analysts See Tough Year, Changes Ahead
Depressed consumer and business spending and other elements of economic softness likely will keep Class 8 sales under 200,000 in 2008, a panel of analysts generally predicted. How far below 200,000 depends on just how weak the U.S. economy is in 2008.
Freight demand will remain sluggish in large part due to decelerating consumer spending owing to inflation, loss of wealth because of declining housing prices, slower employment growth and tighter credit, said Chris Brady, principal of Commercial Motor Vehicle Consulting. Brady expects a gradual upturn in freight in the second half of 2008.
Martin Labbe, president of Martin Labbe Associates, projected Class 8 sales of 178,300 in 2008, adding that his numbers presume there is not a recession. If a broad-based recession does occur – or is occurring – those numbers will be significantly worse, Labbe suggested.
Stu MacKay, president of MacKay & Co., noted that his projections of Class 8 sales at the Heavy Duty Dialogue in January 2006 proved right on the money for 2006 and 2007, but he believes he will be far off on his projection for around 220,000 Class 8 sales in 2008. “It won’t even be close to that,” MacKay said, adding that he mostly subscribes to Labbe’s thinking that sales will come in at about 180,000 to 190,000 trucks. MacKay estimates that the crash in single-family home sales alone has cost the trucking industry about 8 million truckloads.
Kenny Vieth, a partner in A.C.T. Research, expects continued weakness in 2008 that could spill over into 2009. Vieth suggested that a pre-buy leading up to 2010 might not meet expectations because fleets will look to push off the projected 1 cent per mile increase in costs that 2010 trucks would represent.
Liabilities in Selling Non-branded Parts
Many aftermarket distributors think they can’t be held liable for selling counterfeit parts or if a consumer is harmed by a defective component. “That’s a myth,” Sarah Bruno, an associate with Arent Fox and Heavy Duty Manufacturers Association general counsel. “You can be held liable even if you had no knowledge the product was defective.”
In assigning liability, courts consider several factors: where the goods were purchased, whether they were sold with authenticating documentation and whether the quality differs from what’s expected by consumers, Bruno says. Unusual pricing, coding, or language on billing slips are also red flags, she says.
To reduce their liability, Bruno recommends distributors pay attention to details such as packaging slips, part quality and safety standards. Also, check to make sure the country of origin is what you expected and that trademarks and logos are authentic. “If something’s off, call the manufacturer to verify,” she says.
Other steps Bruno recommends distributors take:
- Trust your gut – if something doesn’t seem right, pull it, contact the manufacturer and put them on notice of the problem.
- Protect yourself contractually – have an agreement with the manufacturer that asks them to indemnify you for any claim of infringement.
- Require the part manufacturer to meet safety specs and to warrant the product accordingly.
- Buy brands you trust.
Distributors must take responsibility for the products they sell, says Mark Karon, president and co-owner of Total Truck Parts. “If we sell inferior products and they end in a tragic result that plays into the right-to-repair issue,” he says, referring to the controversy over independents having access to supplier technical information. “We can’t hide behind the idea that it’s not our problem.”
To help lessen liability, “know who you’re doing business with,” recommends Joe McAleese, president and CEO of Bendix Commercial Vehicle Systems. Because of the research, development and testing that goes into them, branded parts are more expensive, but the benefits should outweigh the cost, McAleese says. Troubleshooting assistance, training, “all that improves the economics for you,” he says. That investment is why Bendix has been very aggressive in defending its brand.
Avoid a Global Identity Crisis
Brands, taglines and product names can create precarious consequences in the global economy. A product launch in a new foreign market can turn disastrous, as Schweppes Tonic Water learned after entering Italy where its name translated to: Schweppes Toilet Water.
The global marketplace has companies rethinking their very identities as they work to extend their brands into markets with unfamiliar cultures, languages and economies.
These challenges were the focus of a “Global Branding Trends, Challenges and Possible Solutions” panel.
“No one buys a brand, they buy a reputation,” says John Beering, director, global marketing, Truck Components Group, Eaton Corp., who presented a case study of his company’s branding journey. Beering says Eaton at one time had in excess of 3000 brands worldwide before evaluating and restructuring the company identity into a more manageable portfolio. The company now goes to market with an enterprise name, master brand, family brand and product brand. The approach is successful, he says, and allows Eaton to “leverage brand structure as it goes into new global markets.”
Panelist moderator Sally Staab, vice president of Weyforth Hass Marketing, says the importance of brand cannot be overlooked. “It is so much more than a logo