Another point of view

Well, I was feeling pretty good about my May editorial, having received a few "atta-boy" calls and an e-mail from the president of a major program group who said he agreed with my assessment of the O'Reilly purchase of CSK. Basically, I said that thi
Well, I was feeling pretty good about my May editorial, having received a few "atta-boy" calls and an e-mail from the president of a major program group who said he agreed with my assessment of the O'Reilly purchase of CSK. Basically, I said that this purchase was not only good for both O'Reilly and CSK but also good for the industry, because it would help instill some efficiencies into an influential but fledgling business. To put it mildly, that notion didn't sit well with Mark Smith, president of Wholesale Auto Parts, Summersville, W.Va., who says that O'Reilly's purchase of CSK is about greed, money and power. "Shame on you for even trying to make your astute readers think that this purchase will somehow benefit all of us," he wrote.

Needless to say, he had me from the word "shame." Although I'm not in agreement with his assessment, I sense that he may not be the only independent jobber who feels this way, so it's important to get the issues on the table. First, Smith warns that this union will flood manufacturers with returns. Moreover, he says the market will be flooded with changeover goods in a distressed market. "Layoffs, higher fuel prices, increased demand for raw product...will escalate the cost of products they (manufacturers) provide even more and affect us all with inflationary pricing."

Smith goes on to say that the manufacturers will feel pressure to lower their prices or provide lucrative terms to O'Reilly due to its increased size. "This in turn," Smith continues, "causes everyone else's prices to increase, spiffs to decrease and inventory terms for growth strategies to become almost unattainable by smaller, yet just as important, players." With O'Reilly's newfound clout, Smith even thinks that manufacturers may have to forgive CSK's debt.

Finally, Smith says that traditionalists might take their business elsewhere. He says jobbers may get so angry at a system that would tolerate such preferential treatment for retailers that they would forsake traditional vendors and seek offshore suppliers even more than they already do.

Judging from some of the past concessions manufacturers have made to retailers, Smith and other jobbers have room for concern. Undoubtedly, even if just some of what Smith cites comes to bear, some independent jobbers could be hurt.

Ultimately, and perhaps ironically, the last reason that Smith cites, in my opinion, will help keep manufacturers on the straight-and-narrow. Manufacturers know they are in a dogfight to retain their current business, as well as add new business, so they would do themselves a disservice if they don't err on the side of providing valued-added services that traditional WDs and jobbers want. Moreover, manufacturers today are much more likely to walk away from businesses that push extreme demands. And most important of all is traditional businesses –– WDs and jobbers –– account for most of the parts sales by far and will continue to do so.

Manufacturers are not going to turn their backs on their bread-and-butter distributors that are directly tied to the repair shops that are performing 70 percent of all automotive repair and maintenance in this country. Besides, the program groups are going to fight tooth-and-nail for their members' fair share. And the reality today is that it is almost impossible to survive without group assistance.

Smith is passionate and emotional about the O'Reilly/CSK issue, as well he should be. He says vehemently that the industry was built by traditional jobbers. That is not in dispute. The issue is that CSK, a weak company, is being taken out of the overall inventory equation and replaced with O'Reilly, a top performer that will eliminate waste. Considering the size and scale of CSK, an inventory cleansing can only help an over-inventoried industry and, yes, in the process, may hurt some pure independents.

Larry Silvey, a 25 year veteran of the automotive aftermarket, is editor-in-chief of Aftermarket Business and Editorial Director for the Advanstar Automotive Group, which consists of Aftermarket Business, Motor Age, ABRN and Styling and Performance.

About the Author

Larry Silvey

Larry Silvey

Larry Silvey is a 26-year veteran of the aftermarket.
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