Tom Gallagher


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Protecting the aftermarketTom Gallagher, president and chief operating officer of the Genuine Parts Company, has long championed the rights of the automotive aftermarket. Every few years, American car manufacturers come to loggerheads with the aftermarket industry. Legislative bodies from California to Washington, D.C., tackle issues that include emissions control, vehicle scrapping and warranty regulations, among many others.
Last year, car companies attempted to gain a 10-year monopoly on the development and sale of most automotive parts. Such design protection legislation, as it is called, would in effect put independent car repair facilities out of business. Gallagher took the challenge and won.
In the latest round, Gallagher led a coalition that successfully lobbied California’s Senate Transportation Committee to ensure independent aftermarket industry access to on-board diagnostic systems, which car companies wanted to keep proprietary. Since California passed its Clean Air Act, the state has been a hotbed of automotive legislation.
“The vehicle owner should be the one to decide when, where and how his vehicle gets repaired,” says Gallagher. “It should not be mandated or legislated by the federal or state government. Mandated solutions are most often anti-consumer, anti-small business and anti-competition. All we want is a level playing field.”
Among other operations, Genuine Parts distributes thousands of car parts to 5,800 NAPA Auto Parts stores across the United States, of which 750 are owned by the company. The company also owns UAP in Canada and Auto Todo in Mexico. These stores in turn supply parts, tools, accessories and paints to independent car repair facilities, and sometimes even to dealerships.
The American aftermarket industry is a USD 100 billion annual business that services about 200 million vehicles and small trucks. While Genuine Parts and its Automotive Parts Group, the NAPA brand, are the single biggest independent player in the aftermarket (7 to 8 percent market share), the market is fractured into lots of smaller distributors. For Gallagher, the argument has always been an economic one to protect small businesses and consumers.
For his efforts, Gallagher won three prestigious industry awards in 1999 – the Julian C. Morris/Martin Fromm award presented by the Automotive Parts and Service Alliance, the 1999 Automotive Warehouse Distributors Association Automotive Leader of the Year award, and the Motor & Equipment Manufacturers Association’s Triangle award. It was the first time that these annual awards were won by the same person.
“Tom Gallagher is a no-nonsense leader who gets the job done,” says Jack Creamer, president of Distribution Marketing, an automotive consultancy in Arizona. “He led an incredible grassroots effort and marshalled everyone together to define the problem and present a doable plan. He’s very single-minded when taking on a project he thinks is important.”
An American automobile typically stays under dealership warranty during the first three or four years of its life. “But today, cars are better built, are driven more miles and are kept longer,” Gallagher says. “This pushes up the life cycle of a vehicle in terms of aftermarket sales. Years six and seven are the best years in a vehicle’s life for us.”
While better-built cars could be interpreted as bad news for the aftermarket industry, other trends paint a more positive picture. For one, the “do-it-yourself” market, in which people fix their own cars, has shrunk to 25 percent in 2000 from 31 percent in 1990. At the same time, the “do-it-for me” market has grown to 75 percent from 69 percent. Garages and automotive service facilities are buying more spare parts from the NAPA Auto Parts stores around the country.
“The battle for business is fought at the store level,” Gallagher says. “In the decade of the ’90s we’ve seen an inventory increase in the stores of almost 40 percent, yet prices have gone up less than 1 percent per year. The aftermarket is a slow growing, non-inflationary consolidating industry. The growth we need can only be accomplished by gaining market share.”
The Automotive Parts Group accounts for 51 percent of Genuine Parts’ USD 7.9 billion in annual sales. Genuine Parts has delivered nonstop growth for the past 50 years. The group’s other activities include the distribution of industrial and office products and electrical and electronic materials.
For Genuine Parts and its NAPA brand, gaining market share has meant a lot more than opening up new stores. The increased complexity of vehicles and the fact there are almost 1,000 different car models on the market today, one-third more than in 1994, has required enormous efforts to train staff and develop state-of-the-art inventory management systems.
“Imagine you are driving through Utah in a 15-year-old Chevrolet and your water pump conks out,” says consultant Jack Creamer. “The NAPA network can get you the part in 24 hours. The way they do it is remarkable. In fact, the logistics are staggering when you consider that each store must have access to 215,000 parts in their NAPA inventory system. NAPA’s inventory management system is world class, and they spend heavily perfecting it.”
One of Genuine Parts’ newest ventures, announced in early 2000, was an e-commerce-based alliance with Snap-on Inc., a leading global developer of tool, diagnostic and equipment solutions for professional tool users. Their subsidiary Mitchell Repair Information has more than 35,000 electronic subscribers who regularly access parts and labour information for vehicle repair.
The intention is to integrate Mitchell Repair Information into Genuine Parts’ ordering and delivery systems to provide the company with a competitive edge in their business-to-business and business-to-consumer e-commerce initiatives.
Given Genuine Parts’ expertise with inventory management and distribution logistics, Tom Gallagher is often asked why the company doesn’t make inroads into the European aftermarket business. In fact, Gallagher, now 52, was general manager of the company’s European operations in the late 1970s, after starting with Genuine Parts as a management trainee in 1970. The European operations were subsequently divested in part because the company had acquired two American companies, S.P Richards and Motion Industries, each of which offered significant growth in their respective industries. But the European market was also less unified than it is today. In the meantime, Gallagher and Genuine Parts have plenty to do on the domestic front.
Protecting the aftermarket business in the legislative arena was one pressing challenge. In a statement, the Automotive Warehouse Distributors Association hailed Gallagher because he “has found time to do what is necessary for his company and for the industry. All of this work he has done not because he sought recognition or the spotlight, but because it was the right thing to do.”
It seems as if the car manufacturers have realised this as well. “They acquiesced a little bit,” says Creamer. “If you are Ford, and you have a 10-year old-car out there that needs to be fixed, and the dealership is all booked up, it is still in your best interest to get that car back on the road again as fast as possible. You want a car owner to be happy. You want him to come back.”

Alexander Farnsworth
a feature writer based in Stockholm
photo Genuine Parts Company


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