If you don't know Mort Schwartz, you must be new to or out of touch with this industry.
The word is icon. The person who fits that description is Mort Schwartz.Say "Mort" and everyone knows whom you are talking about. With 40 years of unrelenting service to the automotive aftermarket, he is not only one of the most recognizable people in the industry but also one of the most influential.
Indeed, there are only a few people in the aftermarket that have the knowledge, insight and perspective that Schwartz has. He can speak with authority on any number of companies because he has been an integral part of several leading companies. Moreover, he can speak with authority on any number of aftermarket topics because of the leadership positions he has held and the policies that he has either developed or help developed in those positions.
For instance, who better to ask about how the purchase of Strauss Discount Auto by Japan's Autobacs Seven than the former CEO of Strauss? Or who better to ask about WORLDPAC's global sourcing strategy than a current director of the company?
Truly an industry treasure, Schwartz has touched many lives through his other affiliations. Just for a taste, they include serving as chairman of Automotive Parts and Accessories Association (APAA), Automotive Wholesale Distributors Association (AWDA) and California Arizona Wholesalers Association (CAWA), as well as serving as a director for the Automotive Hall of Fame, Automotive Aftermarket Industry Association (AAIA) and the National Institute for Automotive Service Excellence (ASE). Just for good measure, he has been the chairman of Jarmms Associates since 1990.Besides his stint as Chairman and CEO of Strauss, he led Chanslor & Lyon, Import Parts of America and Thermo King of Northern California. He also served as president of Maremont's Distribution Group.
As a former captain in the U.S. Army Corps of Engineers, he was destined to be a leader. He earned his holds bachelor's and master's degrees from New York University and was an instructor at Rutgers University for a period of time.
During his career, Schwartz has received numerous awards, his recent induction into the Automotive Hall of Fame. In addition, he has received the University of the Aftermarket Foundation Award, AWDA Martin Fromm Lifetime Achievement Award, Alliance of State Automotive Aftermarket Associations (ASAAA) honorary member, Mort Schwartz Fellowship at Northwood University, APAA Executive of the Year, AWDA University Founders Award, Automotive Hall of Fame Distinguished Service Citation, AWDA Man of the Year Award and Motor and Equipment Manufacturers Association (MEMA) Triangle Award. He also received a very rare distinction: an honorary doctorate from Northwood University in 2007.
One of the accomplishments that Schwartz is proudest of is being the founder and long-running chairman off the Global Automotive Aftermarket Symposium (GAAS). Now chairman emeritus of the symposium, he remains active and vocal about the choice of topics, speakers and format. Under his direction in the past and with his ongoing support and input, GAAS is the one and only industry conference where all the major players in the industry gather to learn about the industry's trends. More importantly, the proceeds go to scholarships to students who want to pursue aftermarket careers. And none of it would have happened without Schwarz's vision and commitment.
1. O'Reilly finally has entered into a merger agreement with CSK. What is your outlook for this merger?
It should be good for all parties involved. O'Reilly has a fine track record and are very good operators. The integration will take time, patience and resources. If they can keep the momentum they have in the rest of the country while simultaneously integrating CSK, they will do well.
2. You were Chairman and CEO of Strauss Discount Auto from 1990 to 1998 so the news last April of Autobacs Seven acquisition of Strauss probably piqued your interest. What's your assessment of deal after one year? Does this acquisition provide Autobacs with a springboard to significantly broaden its footprint in the United States? Other than Autobacs, is there any other foreign auto parts entity poised to enter the aftermarket?
I believe it has been good for both Strauss and Autobacs. Strauss has a well established name in their market and Autobacs gives stability to the company. Strauss associates and customers can now have confidence that the company will survive. It provides Autobacs a base to expand and/or make acquisitions. Strauss has an excellent management team headed up by Joe Catalano. Evidently, Autobacs tested a store in California for a few years and must understand the complexities of starting an organization from the ground up without an infrastructure. I do believe that Strauss has a solid infrastructure that geometric growth can be built upon. Autobacs has a well developed model in Japan and I am confident they will embark on market development once they believe the foundation is strong and solid for additional expansion. Autobacs operates in various segments of the aftermarket, which provides a strategic advantage over an organization that focuses on a specific sector. I think it will take some time, but I believe that Autobacs is a potential force to be considered in the U. S. Aftermarket.
3. Clearly, the industry is headed to be a more DIFM market. This must be good news for WORLDPAC, in which you are a director. Please comment if you will. Also, the WORLDPAC business model eliminates the distribution factor. How does this work in harmony with owner CARQUEST, which is a distributor focused on commercial customers?
I agree with your point about the DIFM market. Both WORLDPAC and CARQUEST are well positioned to support growth in this area. In comparing both organizations, the business models are somewhat different, which necessitates different distribution models. WORLDPAC does not sell to the public and thus have no retail type locations. They cater to the import vehicle repair specialists. They have a distribution system which involves small DC type locations. CARQUEST, on the other hand, has locations with walk-in traffic and sells retail items. That requires more frequent replenishment cycles involving larger DC's.
4. What kind of training does Worldpac offer its customers?
WORLDPAC offers diagnostic training, business training, speedDIAL support and a host of other programs designed to meet the needs of their customer base.
5. On a broader scale, what kind of training is needed at both the shop level and distributor level?
Training has always been an important part of the aftermarket, but more so than ever before. Changes under the hood are coming at a rapid pace. Technicians have to be updated constantly to be able to properly diagnose and repair vehicles. The days of long production runs where a vehicle manufacturer uses the same product for a number of model years are long gone. Technicians can no longer count on past experience to familiarize themselves with what's going on under the hood. From the business end, it keeps getting harder and harder for small businessmen to survive in almost any business, let alone the automotive service business. Constant business training is critical. Programs are required to assist the independent shop owner on how to deal with higher operating costs, help with dealing with state and government regulations, how to attract technicians and to compete with large service chains and car dealers.
6. Sourcing abroad continues to be a major topic. With WORLDPAC acquiring parts globally, how does the company avoid some of the common pitfalls associated with the practice?
WORLDPAC has a long history of importing parts from Europe and Asia from Tier 1 OE suppliers. Global sourcing requires a rigorous and continuous process of in-depth vendor selection evaluations. That is followed by an ongoing quality assurance monitoring so standards are upheld and quality remains consistent. It is a far more complex task than sourcing domestically. You mentioned pitfalls, and one of the major mistakes organizations make in their quest for global sourcing is that they go after the lowest price. Many times the lowest prices also leads to increased costs in other areas, usually related to quality issues, the inability to effectively forecast manufacturing, or impediments in the distribution process. Dealing with a reliable supplier that has a proven record may not be the cheapest guy in town, but may be the best value. I believe WORLDPAC is savvy when it comes to looking at the entire picture and will not compromise strict evaluation procedures for what may be phantom savings. Those who look for shortcuts are the ones who get in trouble.
7. The question about brand importance is tied to sourcing. In many cases, it seems that brands are slipping. Please give us your opinion in general about the importance of brands, and in particular, their importance to WORLDPAC.
Brand is and will always be important. The key is whether a brand has consistency of quality, acceptance at the installer level, and relative competitive pricing. We have to distinguish between the label on the box and what is "in" the box. Technicians look to "brands" they know they can rely on....business owners want "suppliers" they know stand behind the "brands" and the ability to generate profitable margins...and consumers want to know they are getting value. Any fall down in any of these aspects provides the opening for non-brand products.
A good portion of the burden to maintain brand recognition falls on the vendor. Brand identity is not an easy undertaking, and requires a relentless marketing effort. In the household and consumer products arena, private label has never been bigger, but neither have the brands. The middle guys have been squeezed, and the super brands still remain strong. They spend a lot of marketing and promotional money convincing the consumer that they are a better mousetrap. Non-brands offer the consumer a choice and customers vote by purchasing. In the automotive aftermarket, our branded suppliers must continue to build their brand and offer real reasons for consumers to spend their hard earned dollars, for not only something that they believe is better, but really is better.
8. On a broader scale, what is your opinion on consolidation at the distribution level? At the manufacturer level? If this pattern continues, how will the aftermarket be affected for the long term? What does it mean for the consumer?
Consolidation at both the manufacturer and distribution levels has been around for as long as I have been in the business...and that's a long time! Those who have the vision to navigate the obstacles adapt to changing environments and stress efficiencies are survivors...and that trend will continue. There are fewer players servicing more cars, but we still have a vibrant industry. New players will emerge as opportunities arise. Take the case of more hybrids coming into the aftermarket cycle...Who will fill the needs when those cars require service? Consumers will always have choices as long as the independent aftermarket players adapt.
9. Parts proliferation certainly makes the aftermarket more complex. Who stands to benefit, and who is burdened by this phenomenon? All things considered, is it good or bad for the aftermarket?
Whether parts proliferation is good or bad is immaterial...it's a fact of life. Sure, it makes business more complex, but it has to be attacked aggressively. Keeping up with new numbers has to be a passion in order to be in front of competition. Customers will seek those they know will be able to service their vehicles.
10. What's your assessment of how the aftermarket is using technology?
For all the talk of standards it is sometimes surprising how little adoption we have really achieved. A few very big companies and a number of visionary companies have said, "it's the right thing ... let's just do it". And I believe they've seen return on their investment and found surprisingly positive results. But many more companies are held back by their existing technology (Legacy systems). I've been convinced for a long time that standards-based technology is something that enables the kindof transformations in efficiency that our industry desperately needs. I also feel that we are at a tipping point, and with the "encouragement" of some of the large retail and wholesale chains, suppliers are beginning to invest in a new generation of technology. I'm very encouraged and think the rate of change is accelerating.
11. The industry seems to be at a stalemate with the OEMs over the Right to Repair proposal. Do you want to take a stab at what the eventual shakeout will be concerning this issue?
We need to keep the pressure for open access from OEMs ongoing. Without the threat of legislation, I don't believe car manufacturers would provide all the information voluntarily. Car manufacturers are all big companies. My experience has been that the person who in good faith makes commitments today will not be there in a few years. He will be promoted up or out. The successor executive will seeks ways to improve the value of the car franchise...that's the nature of that business. We heard Jim Press, when he was with Toyota, talk at GAAS (the Gobal Automotive Aftermarket Symposium about their need to have a strong independent aftermarket to properly repair their cars. Not many other car executives stood before an aftermarket audience and said the same thing. Now we have to see if Mr. Press's successor feels the same way. Time will tell.
12. The industry owes you big thanks for founding and chairing the Global Automotive Aftermarket Symposium. Even though you have stepped down from the GAAS chairmanship a couple years ago, you remain very much involved. What's next for GAAS and what else can be done to get more young people to choose the aftermarket as a career?
Under the leadership of Dave Caracci, GAAS will continue to address the critical issues facing the industry. We have always attempted to look five years down the road. If one goes back to earlier presentations, it's amazing to see how many predictions have come true. It is reassuring to know we now have the finest industry conference. Our greatest achievement, however, has been the scholarship program. Pete Kornafel is doing an amazing job running the GAAS Scholarship program. We now have over 1,300 young men and women who received scholarships. In past surveys, Pete has found that 75 perent of our recipients entered the automotive industry. Wow, what better way to give back to the industry.
13. What's the future look like for the aftermarket from where you sit? And what's next for Mort Schwartz?
"There are those who will eat the dust and those who will create the dust." I can understand the frustration many feel about the obstacles facing everyone in the industry. From telematics to access under the hood to attracting technicians to competition from car dealers and the list goes on. I see opportunities to service the ongoing needs of car owners with systems, innovation, bright people, partnering and plain old fashioned hard work.