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MEMA Financial Services Group September 20, 2007 St. Louis, MO. Discussion Outline. 1. Brief Overview of AASA 2. Defining the aftermarket 3. State of the industry 4. Health of the supplier base 5. Open discussion & Questions. AASA Leadership in the Global Automotive Aftermarket.

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Presentation Transcript
slide1
MEMA Financial Services Group
  • September 20, 2007
  • St. Louis, MO
discussion outline
Discussion Outline
  • 1. Brief Overview of AASA
  • 2. Defining the aftermarket
  • 3. State of the industry
  • 4. Health of the supplier base
  • 5. Open discussion & Questions
aasa leadership in the global automotive aftermarket
AASALeadership in the Global Automotive Aftermarket
  • Automotive Aftermarket Suppliers Association
  • Aftermarket Market Segment Association (MSA) of MEMA
    • HDMA, OESA
  • Nearly 300 Member Manufacturers
  • Represent 80% of North American Aftermarket Volume
  • Approximately $154 Billion in Sales
automotive aftermarket suppliers association
Automotive Aftermarket Suppliers Association
  • AASA serves as the voice of the automotive aftermarket suppliers and:
    • is a recognized industry change agent
    • promotes a collaborative industry environment
    • provides a forum to address issues
    • serves as a valued resource for members
aasa value proposition
AASA Value Proposition
  • Government Affairs
  • Image of AASA Member Manufacturers in the Automotive Aftermarket Industry
  • Market Research, Industry Analysis, Benchmarking & Best Practices
  • Manufacturing Standards
  • Industry Collaboration on Issues Important to AASA members
  • Brand Protection and Intellectual Property Rights
  • Global Opportunities and Challenges for AASA Members
  • Education & Training
  • Member recruitment, retention & satisfaction
defining the u s aftermarket 2006
Defining the U.S. Aftermarket2006
  • New vehicle parts market = $193 billion
  • Light vehicle aftermarket sales of products and service $209 billion
  • Sales of Heavy Duty aftermarket products and services $59 billion
  • Combined light/heavy duty aftermarket products and services $268 billion
primary drivers of aftermarket sales volume
Primary Drivers of Aftermarket Sales Volume
  • Vehicles in Service
  • Miles Driven
total light vehicles in use by age
Total Light Vehicles in Use by Age

Automotive Aftermarket Sweet Spot

Source: R.L. Polk

shares of new vehicle sales
Shares of New Vehicle Sales

Source: Ward’s Automotive

aftermarket distributor sales
Aftermarket Distributor Sales

Source: MFSG

* MEMA Est.

u s world parts trade 1998 2006
U.S.-World Parts Trade 1998-2006

Source: U.S. Bureau of the Census

u s eu parts trade 1998 2006
U.S.-EU Parts Trade1998-2006

Source: U.S. Bureau of the Census

slide22
U.S. - China Auto Parts Trade, 1995-2006Since 2000, the auto parts trade deficit with China increased 333%

Source: U.S. Bureau of the Census

state of the industry
State of the Industry
  • Aftermarket large and growing modestly
  • Primary aftermarket drivers—vehicles in use; miles driven—continue positive
  • Significant period of transition and challenge
  • Still a relationship business at the store to buyer level
  • Fundamentals of quality, availability and service still mean something
  • Balance of power has shifted; “power buyers” WD’s and retailers in the driver’s seat
  • Aftermarket mergers and acquisitions continuing at a record pace; transactions first 6 months of 2007: 55; up 28% over 2006
  • Private equity creating churn in the aftermarket; 21 of 55 transactions
  • Service Dealer demand for form, fit and function driving increased SKU count and inventory investment
  • Insistence on lowest invoice price accelerating low cost country sourcing
  • Value-adds being stripped from prices at all levels
supplier jobs midwest focused but moving southeast
Supplier Jobs: Midwest Focused, but Moving Southeast

Source: MEMA, “Motor Vehicle Suppliers: The Foundation of U.S. Manufacturing,” January 2007

health of the supplier base
Health of the Supplier Base
  • Manufacturers are struggling to maintain profitability
  • Margin erosion at all levels
  • Globalization impacting acquisition and sourcing
  • Raw material costs rising
  • Value added suppliers are competing for lowest price business
  • NA manufacturing shifting focus to emerging international markets
  • Little collaboration to address industry issues
  • Many are well under way in transforming themselves into global manufacturers/”provisioners”
slide28

The NA Table of Pain

Business models must survive through . . .

Source: CAR and OESA at the 2005 Management Briefing Seminar; Updated by OESA through February 2007

Note: Auto accounts for 41% of US steel consumption, 31% of US iron consumption, 32% of US aluminumconsumption and 4% of US plastic consumption (CAR – Fall 2003 economic significance report)

aasa supplier barometer q3 2007
AASA Supplier BarometerQ3 2007
  • Question 4. Accounts receivable activity has been:
aasa supplier barometer q3 20071

5

Q-1

Q-2

Q3

4

3

2

1

Healthcare costs

Availability

and cost

Lack of pricing

Weak sales

Globalization

Labor cost &

Excess inventory

Regulatory &

Product returns

Counterfeit

of raw materials

power

availability

legal issues

products

AASA Supplier BarometerQ3 2007
  • Question 8: How significant are these issues facing your company?

1= Not important 5 = Very important

risks and critical issues
Risks and Critical Issues
  • Rising gasoline prices
  • Counterfeit Automotive Aftermarket Parts
  • Rising Imports
conclusion gas prices the aftermarket
Conclusion:Gas Prices & the Aftermarket
  • Generally speaking, gas prices and aftermarket growth tend to trend positively over time
  • There is a point at which gas prices negatively impact the aftermarket and it appears that the threshold is $2.60 per gallon
  • Over $2.60 per gallon, discretionary spending is curtailed and optional repairs are deferred
counterfeiting industry infringement facts
Counterfeiting: Industry Infringement Facts
  • The automotive industry loses an estimated $12 Billion in revenue annually (75% from Asia) to service parts counterfeiters, $3 Billion in the U.S. alone.
  • Projected to grow to $45 Billion by 2011.
  • Massive increase in global counterfeit activity in last five years.
  • It is estimated that over 250,000 NAFTA automotive manufacturing jobs are lost to counterfeiters diluting the market with counterfeit parts which drives demand down for genuine parts.
  • Counterfeit parts are sold at 50-85% of Genuine pricing and are estimated to deliver at only 20-30% of their value (performance, wear, system integration).
counterfeiting industry infringement facts1
Counterfeiting: Industry Infringement Facts
  • Maintenance & high volume items most often faked
    • Oil filters, air filters, fuel filters
    • Disc brake pads
    • Wheels and tires
    • Spark plugs
    • Shock absorbers
    • Belts and hoses
    • Automotive fluids (motor oil, brake fluid, steering fluid, windshield wiper fluid)
    • Windshields
    • Bearings
    • Gaskets
counterfeiting danger of counterfeit parts
Counterfeiting: Danger of Counterfeit Parts
  • Counterfeit brake pads, made of grass clippings and saw dust, have caused fatal accidents.
  • Counterfeit suspension parts and wheels break when made with substandard materials.
  • Counterfeit vehicle hoods without crumple zones penetrate the passenger compartment.
  • Counterfeit windshields without safety shatterproof glass cause injury or death.
  • Counterfeit oil filters lead to premature engine wear and failure.
  • Federal agents in Queens and Manhattan (New York City) seized unsafe counterfeit brake parts, tail lights and other parts being installed by dealers on taxi cabs.
counterfeit autoparts
Counterfeit Autoparts

2006 was a record year for the number of IPR seizures and domestic value of goods seized. The domestic value of products seized for IPR violations increased by 67% compared to FY 2005.

opportunities for suppliers
Opportunities for Suppliers
  • Collaboration with channel partners
  • Use technology to reduce cost and for competitive edge
  • Low-cost manufacturing strategy
  • Strategic alliances/partnerships
  • Revenue diversification
  • Leading market position (product, technology and process)