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CORONAVIRUS AND THE AFTERMARKET

CORONAVIRUS AND THE AFTERMARKET

Note: This article was written in mid February 2020, when the world was a very different place… – Editor

 

You will have heard all about it: the virus that migrated from species to species in China before spreading around the world. Thousands of column inches have been written, mostly about the human cost and how it has affected the way that people meet and travel, but how will it affect the parts supply chain, and more specifically the aftermarket?

Here’s what we know for sure: factories in China closed as usual for the Chinese New Year celebrations, but didn’t reopen for weeks afterwards. When they eventually did start up again, there were reports of many of them having a fraction of the usual number of staff, due in no small part to many being in isolation, be it voluntarily or at the behest of the state.

Then of course the virus spread, with huge tracts of Asia, including South Korea and Japan, implementing an array of preventative measures to control the outbreak. Closer to home, Italy was accused of under-reporting known cases and parts-producing towns in the country’s ‘motor valley’ have been belatedly shut down.

READ: BREMBO SHUTS ITALIAN SITES AMID CORONAVIRUS CRISIS

SHY RESPONSE

Yet when we asked companies who must surely be exposed to supplier shortages, the answers we got were surprisingly coy. Halfords, for example, wouldn’t answer our list of questions, but did respond with the statement: “We are monitoring the Coronavirus situation carefully. To date, the virus has not had a material impact on stock availability but we are continuing to work closely with our partners across the Far East.”

Similarly, Euro Car Parts answered our request with the simple sentence: “To date, we’ve not experienced any issues with stock availability because of the Coronavirus outbreak. We’re aware of the risk of disruption it still poses, and our supply chain team is working on contingency plans and is in regular dialogue with our suppliers to ensure we’re prepared to mitigate against any potential impact.”

Some other companies simply declined to discuss the issue at all. However, the fact that parts and accessory supply chains have, at the very least, been interrupted is not in dispute.

READ: IAAF BOSS: GOVT. MUST HELP THE AFTERMARKET

TYRE SHORTAGE

Tyres are known to be in short supply at the moment, especially budget products which are typically produced in China or Malaysia. The problem has become such a concern that TyreSafe, a body set up by wholesale distributors and tyre dealers, has issued a release advising motorists to fork out a bit of extra cash for mid-range or premium tyres, and not to buy part-worns, of which the organisation has a low opinion, as it has repeatedly voiced.

Stuart Jackson, Chair of TyreSafe, said: “The vast majority of [budget tyres] are imported into the country from China and across South East Asia where the outbreak of Coronavirus has led to governments closing facilities such as schools and factories to limit the spread. As a consequence, the level of supply the UK has become accustomed to for many products has been reduced.

PHOTOGRAPH BY Feature China / Barcroft Media

“Our advice is to seek a good deal on a mid-priced tyre and carry out regular checks to get the best out of that tyre over its full potential lifespan.”

National Tyre Dealer Association Chair Stefan Hay said that most members had a good stock of mid-range tyres, but added: “There can be no doubt that we could see a potential shortage of budget tyres if quarantine and export restrictions are maintained.

“This will affect all manufacturers with an interest in China and other South East Asian countries. For example, I’m aware that production at two of Pirelli’s three factories in China remains suspended in response to the spread of coronavirus. Pirelli has also reported that its entire expat workforce has left the country along with their families. Goodyear Tire and Rubber Co. ‘temporarily’ closed its headquarters and factory in China and the beginning of February and it is uncertain as to how temporary that is.”

Hay added that restrictions in supply can soon bounce back, citing a shortage of tyres a few years ago due to a trade dispute between the EU and China, which was swiftly resolved.

SHUTDOWN

It isn’t just tyres that are affected. The widest range of factory closures is in southern China, which is the heartland for manufacturing electronics, as well as the site of numerous foundries for making hard parts. Murray Silverman, Director of Streetwize Accessories in Manchester, is candid about the impact that factory shutdowns will have on UK business. “ALL businesses will be affected,” he emphasised. “Some might not realise it yet.”

“All suppliers that we have spoken to have advised at least a three week delay as it stands today,” Silverman told us when we spoke in mid February, adding that the date was ‘moveable daily’ and that at the time of speaking, his company could not even contact many of the factories that had not yet returned to work.

A big question mark hanging over the whole situation concerned just how long these delays might become. “Nobody knows how long these delays could go on for,” said Silverman. “We contacted all our customers to advise them that there will be shortages that will escalate during the summer months or earlier and advise them to order whilst we have stocks available. Some customers have reacted but unfortunately there will be those who will realise too late despite warnings.”

One company reacting to the situation is battery charger manufacturer Ctek. “Our suppliers have restarted their production and supply following Chinese New Year,” company spokesperson Stig Mathisen told us. “We are mindful however, that there is a risk that the outbreak could worsen and will continue to monitor the situation closely, introducing contingency plans if there is a requirement to do so.”

Sourcing products from elsewhere is not an option for many, particularly given that northern Italy, a major European production centre of parts, is arguably in a worse state than China at the time of writing. In any case, for the majority of companies it isn’t simply a case of switching production – new suppliers need to be tested, pricing and quantities have to be agreed and then go through any relevant type approval. “Sourcing product elsewhere is not an option, even if we could find the resource and the pricing was acceptable, it takes time to go through our QC and graphics teams,” explained Murray Silverman, adding that in any case a lot of UK and European-made products would also be in short supply, due to the amount of raw material and components that come from the Far East.

A situation that no-one two months ago could have foreseen is the possibility that UK companies might have to let employees work from home if the number of infections in the UK continues to rise. Quite how this could work for a parts distributor or a service and repair garage is anyone’s guess, but if the outbreak spreads further and there are more fatalities, who knows what might happen in the future?

Inevitably, the world will return to normal, and when this happens a new set of challenges may arise. “Even when factories do return, there are likely to be transport issues from the factory to the port and a lack of vessels to cope,” commented Silverman, adding that: “Another eventuality that may occur is that shipping companies and freight forwarders raise their rates to try to pull back the enormous amount of business they have lost.

“There will be further impact in the future,” he concluded.

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UPDATE: SPARTAN MOTOR FACTORS ENTERS ADMINISTRATION

UPDATE: SPARTAN MOTOR FACTORS ENTERS ADMINISTRATION

***UPDATE: March 19, 14:30. Branches are trading again and CAT understands talks are underway with a potential buyer*** 

 

***UPDATE: Spartan acquired by Motormania holding company ****

 

Cardiff-based Spartan Motor Factors, which operates a number of branches and employs 145 people across South Wales and the west of England, has entered administration.

The administration process will be carried out by Deloitte’s Cardiff office. CAT spoke to a Deloitte representative, who confirmed that the firm was appointed on 13 March.

Deloitte also said there have been no redundancies so far, but was unable to confirm whether Spartan’s Newport head office and 10 additional branches were operating as usual.

READ: GROWTH IN SPARTAN TIMES

Founded in January 2012, Spartan claims to have “one of the largest distribution centres and stockholdings in the South West”, with over 500,000 individual references available to order. A USP of the firm was a two-year guarantee on each parts sold. In its early years, Spartan won CAT’s Independent Factor of the Year award three times, and more recently picked up an award for enterprise from the Welsh government. 

READ: SPARTAN LEAVES PARTS DISTRIBUTION PARTNERSHIP FOR IFA

In 2018, Spartan rapidly expanded, opening two new branches in Blackwood and Swansea, shortly after cutting the ribbon at a new site in Pontypridd and a specialist cooling centre in Abercarn. Director Lee Gratton at the time said: “We are actively looking to expand the Spartan network further into England through either acquisitions or branch openings if the right individuals approach us.”

An official statement from Deloitte is expected to be released imminently. We’ll post it as soon as we have it.  

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FORD TO CLOSE HALF OF UK DEALERSHIPS

FORD TO CLOSE HALF OF UK DEALERSHIPS

Ford is set to close around 50 percent of its UK dealerships as it embarks on a bold strategy to streamline its commercial operations.

The move, which was announced at an investor conference today (26 January), is part of the ‘Ford 2025 dealer plan’ which the brand says hopes will build “a stronger and more sustainably profitable Ford sales and servicing network”. Between 210 and 230 stores are expected to be affected.

It is hoped that the majority of the affected dealers will remain in operation as dedicated aftersales hubs, and the firm anticipates that 90 percent of new car buyers will still be able to reach a dealership within 30 minutes.

Some of Ford’s smaller UK dealerships will be converted into standalone service centres, with Ford claiming that “customers will not be unduly inconvenienced” by the shake-up.

An official Ford statement read: “We are working together in a spirit of partnership with our dealers and their investors to build a stronger and more sustainably profitable Ford sales and servicing network for the future in the UK, which works for the mutual benefit of our businesses and for our commercial and passenger vehicle customers.”

It is the largest consolidation of a VM dealer network in UK to date, and follows similar downsizing initiatives at Honda and Vauxhall. Despite heavy restructuring over the last 20 years, Ford has concluded that “dealer network profitability is still not sustainable”.

READ: SCOTTISH DEALERSHIP SALE SAVES 101 JOBS

Vehicle manufacturers are gradually exploring new ways of selling new cars. Last year saw Volvo launch the ‘UK’s most comprehensive’ online car sales service, while Mercedes activated a new digital showroom this week, which provides real-time stock availability data and a finance quote function.

At the beginning of 2019, Ford revealed the first details of its overhauled European business strategy as part of a $14bn drive to cut costs globally.

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HONESTJOHN.CO.UK BOUGHT OUT OF ADMINISTRATION

Motoring website honestjohn.co.uk has been bought out of administration by used car buying platform Heycar.

The deal was led by Miles Needham and Simon Carvill-Biggs, partners at specialist business advisory firm FRP in St Albans, following their appointment as Joint Administrators on January 7th . Terms have not been announced. 

The new owner insists that readers of honestjohn need not be alarmed by developments. “The independence and strong reputation has been earned through the years and brings great value – just some of the many reasons that this was such an attractive opportunity” said Matt Moakes, CEO of Heycar UK.

“We will maintain this independence through the formation of a clear editorial code between the two brands, continuing the impartial tone the millions of website visitors and tens of thousands of newsletter subscribers expect. Users of the Honest John forum will not notice any difference.”

 

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HAYNES PUBLISHING ACQUIRED BY INFOPRO DIGITAL

HAYNES PUBLISHING ACQUIRED BY INFOPRO DIGITAL

Technical data company InfoPro Digital has reached a deal to acquire Haynes Publishing Group for cash. 

The transaction is valued at £114.5m with shareholders to receive 700p per share. Haynes put itself up for sale last November, with Eddie Bell, Chairman of the Haynes Board, saying: “The Board now believes our future will be best secured by the whole Group becoming part of an organisation with the financial resources to invest for future expansion and take the Company through to the next 60 years of success.”

READ: FULL MARKET STATEMENT

Commenting on the acquisition this morning, Eddie Bell said: “Haynes has made a highly successful strategic transition to become one of the leading suppliers of content, data and innovative workflow solutions for the automotive industry and motorists. Its strategy and operational execution over the past five years have translated into strong financial performance and shareholder value creation. The Haynes Board believes that the markets it serves have great potential for Haynes’ future growth and development, and that a combination with Infopro Digital will provide Haynes with the scale, capabilities and resources to ensure that it stays at the forefront of these markets and maximises its potential. The proposal from Infopro Digital reflects these opportunities and represents an attractive opportunity for Haynes Shareholders to crystallise an immediate and certain value in cash for their shareholdings, at a significant premium to current and historical share price trading levels.”

READ: HAYNES PUT UP FOR SALE

Commenting on the Acquisition, Christophe Czajka, Founder and Executive Chairman of Infopro Digital, said: “At Infopro Digital we have long respected Haynes’ spirit of innovation and its reputation for excellence. With a deeply complementary product set and geographic footprint, the combined companies have an opportunity to serve our clients more effectively and to build on both organisations’ history of creating innovative, transformative products that the automotive industry has come to value. We are committed to working together to create a company that will continue to help define the future of automotive data.”

Shareholders will vote on the proposed deal in meetings to be held in March and April.

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BORGWARNER ACQUIRES DELPHI TECHNOLOGIES

BORGWARNER ACQUIRES DELPHI TECHNOLOGIES

Engineering giant BorgWarner is to acquire components manufacturer Delphi Technologies in a takeover deal worth $3.3 billion (£2.52 billion).

The move had a profound impact on both companies’ share prices immediately following the announcement earlier this month; shares in Delphi soared 61.95 percent to $15.86 on the NYSE immediately following the announcement, but BorgWarner shares slumped 7.76% to $35.38, as investors seemed nervous about the company investing in a company best known for diesel technology.

Speaking to investment journal Barrons, Research Analyst David Leiker commented: “For BorgWarner shareholders, we understand a view that this doesn’t reduce exposure to internal combustion engines.” Delphi Technologies’ stock tends to trade at a lower price to its rivals, given the company’s exposure to now-unfashionable fuel system parts.

Delphi Technologies was formed in 2017 when the original company split into two parts. Aptiv PLC has the automotive electronics and software side of the business, while Delphi Technologies has powertrain and aftermarket components.

Frederic Warner, CEO of BorgWarner, explained what drew the company to Delphi: “We were impressed by the electronics know-how overall and the scale…and the talent, the capabilities of the electronics. Delphi Technologies is really ahead of the curve. I think they’re a year more advanced than others.”

In 2019, Delphi Technologies generated $4.36 billion of net sales, while BorgWarner $10.17 billion.

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HELLA RECORDS SHARP SALES DROP IN 2019

HELLA RECORDS SHARP SALES DROP IN 2019

Component firm Hella has released its financial figures for the first half of the financial year, revealing a significant drop in sales and earnings. 

From 1 June to 30 November 2019, Hella recorded a decline of 3.2 percent in currency and portfolio sales, and 6.7 percent in reported consolidated sales – a drop it attributes to the sale of its wholesale arm in 2018.

The sales shortfall resulted in a loss of €39 million (£33 million) year-on-year, with pre-tax earnings posted at €257 million (£220 million). Hella said: “This substantial reduction is largely due to extraordinary income booked in the prior year from the sale of the wholesale business.” 

READ: NEIL GRANT IS NEW MD AT HELLA

Another factor was a global reduction in new vehicle output. Hella sold 1.6 percent less products to vehicle manufacturers compared with the same period in 2019, but notes that it still “managed to outperform the broader market primarily based on strong demand for electronic products, particularly in energy management and sensors, and on strong business in the American market”.

The firm’s aftermarket division also suffered last year, with weakened demand in South West Europe and the Middle East contributing to a €13 million drop in reported sales. Sales to workshops were down as well, although the company considers this a result of especially strong sales in 2018, when a wave of new regulation was introduced.

Profitablity in the aftermarket was, however, improved, with cost optimisation strategies bringing pre-taxearnings up to €29 million from 2018’s €25 million. The operating profit margin was 9 percent, compared to 7.6 percent the year before.

READ: MAHLE AFTERMARKET ACQUIRES BEHR HELLA SERVICE

Commenting on the report, Hella CEO Dr Rolf Breidenbach predicted that recovery will be a long process. “The market environment remains very challenging. A strong, sustained recovery is not likely to emerge in 2020,” he said.

“However, we are still reaffirming our annual targets. We will vigorously capitalize on the current phase of market weakness to improve our competitiveness and continue investing in innovative solutions for the market trends of electrification and autonomous driving.”

 

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40 JOBS LOST AS TRICO CLOSES PONTYPOOL HUB

40 JOBS LOST AS TRICO CLOSES PONTYPOOL HUB

Windscreen wiper firm Trico is to close its Pontypool rework and distribution hub, marking the end of a near-100-year presence in the UK.

The closure leaves around 40 people out of a job, with the firm moving central distribution to Puurs in Belgium. General Manager for Trico Group Europe Eduardo Sanz said: “This was, of course, not an easy decision; however, we have to make strategic plans that are in the best interests of our

Skewfields site is now empty

customers and the future growth and sustainability of our business.”

READ: BREXIT: RHINO PRODUCTS OPENS EUROPEAN DISTRIBUTION CENTRE

He added that moving to Belgium will ‘help to centralise’ distribution, and thanked the firm’s Pontypool workers for ‘their fantastic service’.

The Welsh site opened as a production facility in 1992, but has been used mainly for packing and rework for European products since 2006, when Trico downscaled its Wales operations as part of a cost-cutting initiative.

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LEVEN CARS GROUP CALLS IN THE ADMINISTRATORS

LEVEN CARS GROUP CALLS IN THE ADMINISTRATORS

Edinburgh-based dealership Leven Cars has gone bust following two years of ‘difficult trading conditions’.

Leven Cars endured ‘difficult trading conditions’

Stuart Robb and Michelle Elliot – of Leonard Curtis – were appointed Joint Administrators of Leven Cars Group Limited  on Tuesday 7th January.

The company which was incorporated in January 2014, has multiple car dealerships based in Edinburgh and Selkirk, including Rolls Royce, Aston Martin, Lotus, Kia, Suzuki, Mitsubishi and Caterham.

The Company, which employs 139 staff across its four dealerships, has ceased trading.  At this stage, none of the Company’s employees have been made redundant whilst the Administrators assess the Company’s financial position and explore the possibility of finding a buyer for all or parts of the business.

The Company will continue to maintain a presence at the Company’s dealerships for a short period of time to ensure that any customer queries can be addressed.

Joint Administrator, Stuart Robb commented: “We are currently assessing the Company’s financial position with a view to seeking a buyer for all or parts of the business.  This is a unique opportunity to acquire a business with a strong reputation, excellent customer base, and a highly knowledgeable and loyal workforce.”

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ROMAC ACQUIRED BY SUTTON AUTO FACTORS

ROMAC ACQUIRED BY SUTTON AUTO FACTORS

Romac branches feature traditional shop fronts

Parts distributor Sutton Auto Factors has acquired the four-branch Romac chain. Terms of the deal have not been disclosed.

The four Romac stores in Heanor, Ripley, Spondon and Mickleover will continue, with no impact to the existing staff or customers, according to the new owner.

“Customers can expect to see the same faces, levels of service and customer care along with added value in choice, availability, quality and affordability”, says Andrew Wells, SAF General Manager. “We are delighted to welcome Romac into Sutton Auto Factors as we aim to achieve our goal of growth through offering the best available parts at the most competitive price.”

 The four Romac branches are traditional customer facing shop fronts. They join the existing network of SAF stores in Ilkeston, Sutton-in-Ashfield, Long Eaton, Bulwell, Colwick, Bingham and Ollerton.

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