Remanufactured auto parts: A good business gets better
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Click to Enlarge - During the restoration of the author’s 1981 Chevy pickup, many rebuilt parts were utilized. Rebuilt and remanufactured parts are key to keeping maintenance costs down for older cars.

Americans are keeping their cars on the road longer than ever before. This was confirmed in March in a study by R.L. Polk & Co, a provider of global automotive information. According to Polk, the median age of passenger cars in operation in 2008 was 9.4 years, a record high. That means if a new car was bought and driven 12,000 miles per year (about average), Americans are clocking an average of 112,800 miles before selling or trading.

“The current economic environment, coupled with high gas prices last spring and summer, have resulted in consumers delaying purchases of vehicles because their discretionary income has fallen,” said Dave Goebel of Polk’s aftermarket team. “Based on the uncertainty of what the future holds, consumers are trying to keep their current vehicles running longer, until their confidence improves.”

Polk analysts also anticipate that in bad economic times, the threshold of repair costs may increase. Consumers could feel as though paying a repair expense to keep the vehicle going for a year is more sensible or affordable than a monthly vehicle payment over an extended period of time.

Americans may be addicted to that new car smell, but hanging on to the old one and keeping it in good, safe running order is a smart way to stretch a budget, regardless of the economy. If properly maintained, vehicles can run for hundreds of thousands of miles and rebuilt parts are crucial to longevity.

No one actually knows the size of the domestic rebuilt or remanufactured parts industry, words that are interchangeably used to describe it. The last and perhaps only formal survey was conducted by Boston University in 1996. It indicated the United States market at a total of $52 billion, of which $36 billion was automotive parts. “Some people estimate that the entire United States remanufacturing industry today may be $75 to $100 billion, with automotive being two-thirds of that,” said Bill Gager, president of the Automotive Parts Remanufacturers Association (APRA). APRA is a non-profit international trade association of over 1,000 members that rebuild or remanufacture most of the hard parts for car, truck, off-road, marine and industrial equipment applications.

According to Gager, his industry has changed dramatically over the past dozen years as illustrated by the size and composition of APRA’s membership. Through numerous consolidations over that time, APRA membership has gone from over 2,000 to a little over 1,000 today. This happened for a number of reasons. Many rebuilders were small, privately owned family operations and when owners retired they sold off to larger companies. Secondly, as the industry grew and became more sophisticated, larger companies offered the benefits of broader market coverage and the economies of larger scale operations that made them more cost and service competitive than smaller ones. “Our association is about half the size it used to be in terms of numbers of members, but those fewer members are much larger operations,” Gager explained.

Today, the rebuilding business is good, and even flourishing in certain areas. “The people who are doing well these days are the independents that are servicing vehicles because consumers are not buying new,” said Gager. “Conversely, things are slow for those remanufacturing for the car companies because new cars are not selling. They may be doing the service work, but things are in turmoil there. Some are not getting paid in a timely fashion because of the mess going on with Chrysler and GM. Part of our industry is doing great and the other part is doing fair.”

A good example of a local, independent automotive rebuilder is Rayelco Generator Company in Lodi, New Jersey.

At one time, Rayelco provided rebuilt parts for over 40 auto parts stores, but as local, independent parts dealers were bought out or driven out of business by large national chains, that business disappeared for Rayelco. “What’s happened in our business is you can sell less and make as much. People like us don’t need the auto parts stores anymore. If an auto parts store came to me and asked me to do their work, I’d say I’d like to help but I can’t do it. I would have to give a wholesale price, absorb the costs of pickups and deliveries and I make nothing,” Hugh said. Today, over-the-counter to the general public, gas stations, mechanics, repair shops and garages are Rayelco’s primary customers.

Since the financial meltdown last fall, Rayelco’s business has been off, but it has picked up since then as a lot more individuals are coming through the door. “I think it’s going to continue in that direction only because they are not buying new cars, they have to fix their vehicles and they have to come to us. Where else are they going to go?” Hugh wondered.

“The electronic side of our business is really mushrooming…all the electronic components and megatronics that go on a vehicle,” said Bill Gager of APRA.

Every model year there are more and increasingly complex electronics being incorporated into vehicles. “They are so expensive new and in many cases we will see a future where remanufacturing is the only option because OEM’s are not going to keep all those parts around for the next five or ten years. They are just not going to do it because it will be too expensive,” Gager predicted.

Consider that the average vehicle may have anywhere from 10 to 15 electronic modules, and luxury vehicles may have up to 60. These components often have to be reprogrammed in order to function as a replacement.

“The new BMWs have almost 100 different electronic control modules communicating with each other,” said Lesia Defelice, CEO of ProgRama in Boca Raton, Florida. Her company remanufactures electronic control units for BMW, Mercedes Benz, Volvo, Porsche and Saab. ProgRama works through a number of distributors around the world that service independent repair shops. “The state of our business is very healthy and we expect the trend to proceed as cars are staying on the road longer. And, as we become familiar with the new technology we expect substantial growth,” she said.

“We offer about 10 percent more in new products every year,” said Defelice. In order to remanufacture over 150 part numbers, ProgRama had to make an investment in each one. First it has to reverse-engineer the schematics of the unit. Next it has to repair several sample units to establish a repair procedure that is documented by ISO standards. And before shipping, they have to test every possible function of each control unit.

“The energy saved by using a remanufactured product over a new product is about 85 percent and collectively that can be a huge number, millions of barrels of oil,” said Bill Gager of APRA. “This is an important, synergistic aspect of recycling automotive parts: we avoid mining, transporting, smelting and manufacturing millions of parts while significantly extending the lifespan of our vehicles. In addition to the conservation of energy, raw materials and land fill space, remanufacturing automotive parts is labor intensive and creates jobs.”