State of the Aftermarket: Mid-year turnaround

This is the fourth of a multi-part series that looks at the state of the heavy-duty aftermarket that will publish throughout the month of January. The first article, which looks at moving the aftermarket forward in 2014, can be found here. The second, a look at how political turmoil had an impact on business, can be found here. The third, detail on changing business channels, can be found here

An economic rebound was the biggest change mid-2013. The political questions lingering over the economy in the early months of 2013 were answered, and when Congress returned to work in the spring questions over the 2012 election’s impact were resolved.

Not every shift benefited the economy, but just having answers to so many long-unanswered questions proved to be a positive. For the first time in months, businesses nationwide could reasonably predict what was ahead of them. Don Reimondo, president and CEO at HDA Truck Pride, says that assurance alone was enough to finally kick start growth.

“I think all marketplaces reach a comfortable level and we were able to get there,” he says. “Do I think everyone likes where we are from an economic status? No. But at least now people have an idea of where we are and where we’re going.”

The business climate in general became stronger as the year progressed, adds Jim Pascale, president at Pascale Service Corporation. “I think we cleared a few financial hurdles [during the year] and that made a big difference.”

According to a Truck Parts & Service reader survey, more than 81 percent of aftermarket businesses posted sales in 2013 equal to or greater than 2012, and nearly 70 percent of businesses reached or surpassed their 2013 sales goals.

From a supplier perspective, Eaton’s Amy Kartch says the aftermarket rebounded nicely in 2013 considering its slow start.

“I would say our aftermarket business has performed well given overall industry performance,” says Kartch, who serves as Eaton’s global director for its aftermarket vehicle group.

Kartch adds Eaton was able to identify the economic factors limiting the market before the year and planned accordingly. And while the company is “always optimistic” regarding growth, she says it understood the sluggish activity early in the year would impact the speed in which the aftermarket grew.

“We’re pleased with our sales in the context of the market,” she says.

“The first quarter was felt by all,” adds Mark Chung, global marketing director at Cummins Filtration. “As the year progressed it really picked up.”

HDMA President and COO Tim Kraus says aftermarket suppliers joined in the activity once positive trends were established. Freight levels started to rise and as more parts were needed, suppliers actively increased inventory to serve the growing marketplace.

“[Suppliers] don’t add to inventory in today’s environment unless they have a solid indication of trends they see in the marketplace that it is improving,” he says. “At first we saw some refill demand, but now we’re back up to acceptable levels and the indications we see now are that we’re in a period of true growth.”

The aftermarket also was able to respond as utilization picked up during the year.

“The late fall and winter months have been abnormally active,” says Brian VanCamp, segment manager – aftermarket at Hendrickson. “Customers in all regions are reporting growth in part and service labor sales as we finish the year.”

Things were even better in Canada, where Kevin Hopton, president at CBS Parts, says his business was able to post one of the strongest sales years in its history.

Insulated from the depths of the U.S. recession in British Columbia, Hopton says CBS Parts was able to use strong years in 2011 and 2012 as a springboard into 2013.

Engine and powertrain components were among the company’s strongest product categories, which John Blodgett, vice president, sales and marketing at MacKay & Company, attributes to an aging fleet population.

“There are a lot of trucks out there from 2005 to 2007,” he says.

In California, where engine regulations are the most extreme, Capitol Clutch & Brake President Vince Mathews says his business turned to alternative product lines to keep business flowing in 2013.

“California is a little bit different than the rest of the country in that [the state is] forcing a lot of the older trucks off the road,” he says. “We tend to concentrate on items that are harder to find and slower moving but appeal to a wider range of customers.”

Putting a stop to consolidation helped the market as well, says Walt Sherbourne, senior director, field sales and training, North America for Meritor’s aftermarket division. Stabilizing the distribution channel helped strengthen customer relationships, Sherbourne says, which allowed distributors and their supplier partners to work together to improve their aftermarket product offering.

More than 93 percent of responders to TP&S’s reader survey say their supplier relationships remained stable or improved in 2013.

Meritor enhanced its relationships by personally sitting down with its distributor partners and creating plans for growing together in 2013. Sherbourne says when the market turned north in the spring that was a key contributor to Meritor’s sales growth.

Looking ahead, Sherbourne says Meritor is optimistic the aftermarket can build on its strong 2013 close in the coming year. “We see steady sales growth moving forward,” he says. “We’re gearing up.”

PART 5: Navigating growth in 2014

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