The price of underestimating

Jan. 1, 2020
International service providers are gladly ringing up the profits they make from offshore parts.

The industry owes Terry McCormack, president & CEO of the Affinia Group, a debt of gratitude because he stood up in front of 500 colleagues and said what they’ve been thinking — and stewing about —  for quite some time.

Basically, what he said in a speech at the Automotive Aftermarket Suppliers Association Executive Breakfast (held during the Automotive Aftermarket Products Expo) is that we underestimated the offshore manufacturers and misunderstood the real needs of professional customers.

We underestimated them by thinking they couldn’t match our quality. (Isn’t this the Japanese OEM story as retold by the Chinese?) And worse, we misunderstood our professional customers by thinking that they would be true to suppliers who not only offered quality parts, but a slew of value-added services ranging from extensive technical support to lenient return privileges. Oops.

As we all know, the quality of parts coming from overseas, depending on the product line, is at least acceptable. And as we have discovered in preparing previous offshore articles, independent service providers (ISPs) don’t have to be shanghaied to buy and install offshore parts. They are gladly ringing up the profits produced from offshore products that can be sold at half the cost of traditional aftermarket parts.

Although offshore parts are often described as value lines, they’re better described as value free, or at the very least economical. And both distributors and ISPs have a thirst for economical parts, citing that without them their businesses would dry up. That may not have been the case when they started selling these parts but at this point, they may not have a choice due to the fact that their competitors are selling these parts too.

What do consumers think about offshore automotive products? With everything from electronics to textiles coming in from all around the world, consumers may be so conditioned to foreign-made products that they probably wouldn’t even flinch to find out that their brakes were made in China. We in the industry know the history of offshore parts, but consumers have no reference point. Unless they experience problems, they probably could care less where parts are made. And, ultimately, aren’t the consumers the ones we have to please?

One of the wisest men I know in the market is Jack Creamer, president of Distribution Marketing Services and an Editorial Advisory Board member. When I asked his opinion on this subject, he said, “It’s one thing for a manufacturer to go overseas and develop Chinese sources for product, particularly product that has high cost to the manufacturer. But it’s another (for distributors) to go over there (to Asia) and take on offshore vendors and bring them in to replace perfectly good vendors...”

In an ideal world, that is the ideal answer. In what writer Tom Friedman calls a “flat world,” where globalization helps small firms do business with anyone in the world, it would take a miracle to get the genie back in the bottle.