2013 Q3 Aftermarket Supplier Barometer 2 Contents Executive Summarypg. 3 Special Questions Rising...

Supplier Barometer2013 Q3

2013 Q3 Aftermarket Supplier Barometer

2

Contents

Executive Summary pg. 3

Special Questions Rising Interest Rates and Their Effect

on the Aftermarket Un-tapping Unperformed Maintenance

pg. 9

pg. 18

Detailed Results Market Conditions Outlook Issues

pg. 24pg. 31pg. 37

IMR Repair Shop Survey pg. 40

Appendix Respondents’ Product Segments Full Answers to Selected Questions Methodology

pg. 44pg. 45pg. 50


3

Executive Summary

Key Findings


4

Aftermarket outlook sentiment still positive but declined from the high seen in the second quarter


5

2012 Q1

2012 Q2

2012 Q3

2012 Q4

2013 Q1

2013 Q2

2013 Q3

0.0%1.0%2.0%3.0%4.0%5.0%6.0%

-40%-20%

0%20%40%60%80%

100%

AASA Barometer DashboardMarket Conditions 2013 Q2 2013 Q3 Status Change* Direction

Experienced Growth in Sales 52% 62% +10

Independent Aftermarket Average Growth Rate +1.5% +2.8% +1.3

OE Service (OES) Average Growth Rate +0.2% +0.9% +0.7

Outlook 2013 Q2 2013 Q3 Status Change Direction

Optimistic Towards Business Outlook 50% 40% -10

Adding to Inventories 34% 39% +5

Increase in Production Capacity 39% 38% -1

Companies who are Hiring 47% 47% - -

New Order Volume Average Growth +2.8% +2.2% -0.5

SalesNew order Volume


6

AASA key takeaways: Decreased optimism despite year-over-year growth

Optimism declined slightly with respondents indicating optimism dropping 10 percentage points from Q2 (pg.32). New orders also declined this quarter dropping 0.6 percentage points to an average of 2.2% for the third quarter (pg.36).

However, sales performance increased with 62% reporting growth (pg.25). Both independent and OES average growth rate increased in the third quarter as well, although not to levels seen in previous years (pg.27 – 28).

Deflated optimism despite growing sales reflects the sentiment that the quarter started strong but did not finish at the levels seen in June and early July. With capacity and hiring remaining steady and the decline in new orders, we may face the continued slow growth continuing into the fourth quarter.


7

AASA key takeaway: An interest rate increase will negatively impact the aftermarket

Rising interest rates could challenge the current

supplier – channel partner model

• “Distributors will push harder on manufacturers to ‘carry their inventory’…”

• “…It would create a war between the suppliers and the customers.”

• “Increased friction between customers and suppliers as negotiations begin with regards to sharing these costs.”

As the threat of rising interest rates looms, most agree the outcome will not

be positive for suppliers

• Rising interest rates bring many threats to aftermarket suppliers including• Increased pressure on

smaller suppliers• Impact on cash flow• Increase in prices

However, a minority of supplier respondents

voiced a more positive view

• “I believe the market would stabilize allowing customers, suppliers, channel partners to continue to invest and profitability grow.”

• “A gradual increase will not have a drastic impact…”

See page 10-17 for additional details


8

AASA key takeaway: Respondents indicated the most important initiatives to reduce unperformed maintenance

were awareness campaigns and increasing vehicle inspections

In 2012 it was reported there was $66 billion

dollars in unperformed maintenance.

Most important initiative to reduce unperformed maintenance

40% of

respondent

s believ

e

• Industry-wide campaigns to improve maintenance awareness

29% of

respondent

s believ

e

• Increasing vehicle inspection programs

Note: All responses shown, see page 23 for full results.


9

Special Question:Rising Interest Rates and Their

Effect on the Aftermarket


10

Interest rate increase will negatively impact the aftermarket

There has been a lot of talk lately in the financial press about increasing long-term interest rates and how the next Fed chairman will eventually have to move the U.S. to a normalized interest rate environment. If Fed fund rates returned to a long-

term normal range of 5-6%, what do you think would be the impact on aftermarket suppliers, channel partners, inventory in the aftermarket, payment terms and the aftermarket business model?

Increased Pressure on Smaller Suppliers

Increase in Prices

Impact on Cash Flow

“Consolidation at all levels of the industry will accelerated as

weaker players struggle with bank financing.”

“5 - 6% is manageable but it will impact financially weak

suppliers, WD's and service providers. A lot depends on how quickly the rates go up.”

“Prices throughout the channel will rise”

“Will require changes with their customer programs to reduced

terms or higher prices.”“Decreased cash flow at

all levels with most profound impact on small

suppliers in vendor factoring programs”

“Cash is king, without it the kingdom suffers! All businesses (Small, Medium and Large) are

watching their cash flow reserves evaporate. Increasing interest rates anytime in the near future will further impact these reserves and thus limit growth.”

The question asked:


11

As the threat of rising future interest rates looms, most agree the outcome will not be positive for suppliers“Strategies hooked to cheap money” will no longer be applicable

“I believe there will be financial challenges to businesses in the aftermarket with a rising long-term interest rate environment. Too

many companies have created strategies hooked to cheap money, and that will radically change the cost position in a normalized interest rate environment. The days of free money will eventually go away

and businesses will have to support the real cost of funds in their business models.

Many companies are going to shocked by that cost.”

One supplier respondent summarized the consensus view point well:

AASA encourages you to read through the full range of responses found on the next slides.


12

Rising interest rates could challenge the current supplier - channel partner business model

“Distributors will push harder on manufacturers to "carry their inventory" either through extended payment terms, consigned

inventory and/or shorter replenishment cycles”

“Most companies have already reduced inventory and operating expense and there would be no

way to absorb the additional cost. It would create a war between

the suppliers and the customers.”

“Decreased cash flow at all levels with most

profound impact on small suppliers in vendor

factoring programs.”

“Increased friction between customers and suppliers as negotiations begin with regards to sharing

these costs.”

“Negative, especially payment terms. Customer channel will need to negotiate reduction in

terms or share cost of factoring.”

“Payment terms are unlikely to change as customers view what they have achieved as ‘captured ground.’

The increase in interest rates will have to be negotiated just like raw material increases or other

increased costs of doing business.”


13

However, a minority of supplier respondents voiced a more positive view

“This won't happen until 2015 at the EARLIEST. Suppliers need to negotiate interest rate clauses in their contracts to handle. Any supplier who is damaged

by interest rate increases has only themselves to blame, given the amount of time available to correct the situation.”

“NO Impact - we still have to run the business and maintain production and

inventory levels.”

“Moderate impact.”

“If loan costs increase, new car sales will be negatively impacted, short term gains

for auto-aftermarket.”

“I believe the market would stabilize allowing customers, suppliers, channel

partners to continue to invest and profitably grow.”

“A gradual increase will not have a drastic impact. A sudden return to the old normal would be devastating but is highly

unlikely.”

AASA encourages you to read through the full range of responses found on the next slides.


14

If Fed fund rates returned to a long-term normal range of 5-6%, what do you think would be the impact on aftermarket suppliers, channel partners, inventory in the

aftermarket, payment terms and the aftermarket business model? (1/4)

“1) Prices throughout the channel will rise, 2) Distributors will push harder on manufacturers to "carry their inventory" either through extended payment terms, consigned inventory and/or shorter replenishment cycles. 3) Consolidation at all levels of the industry will accelerated as weaker players struggle with bank financing.”“5 - 6% is manageable but it will impact financially weak suppliers, WD's and service providers. A lot depends on how quickly the rates go up.”“A gradual increase will not have a drastic impact. A sudden return to the old normal would be devastating but is highly unlikely.”“Add to down market”“After the responding to the dynamics of transition to a 5-6% rate range, I believe the market would stabilize allowing customers, suppliers, channel partners to continue to invest and profitably grow.”“Big impact on companies with extended payment programs. Will require changes with their customer programs to reduced terms or higher prices”“Big problem with those who are factoring”“Cash is king, without it the kingdom suffers! All businesses (Small, Medium and Large) are watching their cash flow reserves evaporate. Increasing interest rates anytime in the near future will further impact these reserves and thus limit growth.”

“Companies would have to get more money for the product or else they would go out of business. With the extended terms given to a large number of aftermarket retailers and others the interest expense would exceed the companies bottom line. Many of the channel partners would not have the funds to reduce the length of the terms and they would be very reluctant to raise prices. Most companies have already reduced inventory and operating expense and there would be no way to absorb the additional cost. It would create a war between the suppliers and the customers.”“Cost of money will increase the cost of inventory and thus a reduction in orders for stock.”“Decreased cash flow at all levels with most profound impact on small suppliers in vendor factoring programs”“Huge backlash on extended terns which are low cost today”“I believe there will be financial challenges to businesses in the aftermarket with a rising long-term interest rate environment. Too many companies have created strategies hooked to cheap money, and that will radically change those cost position in a normalized interest rate environment. They days of free money will eventually go away and businesses will have to support the real cost of funds in their business models. Many companies are going to shocked by that cost.”“If loan costs increase, new car sales will negatively impacted, short term gains for auto-aftermarket, long term losses due to shrinking number of cars in the sweet spot”


15



“Impact would be negative. We would like to see rates remain at current levels.”“Increase cost of goods, payment terms would need to be shorter”“Increased friction between customers and suppliers as negotiations begin with regards to sharing these costs”“Increased pressure on terms”“Inflation”“Inventory in the aftermarket, payment terms”“Inventory risk continues to be pushed to suppliers so the impact on working capital will flow to AR and the push to keep terms lower to ring-fence carrying costs”“It will be very bad for those on factoring programs.”“It will have a major impact to those who have excessive extended terms with factoring”“It will increase costs for those with financed receivables/payables”“It would be a killer no matter how you slice it. Obviously the key issue is how interest rates pertain to factoring. If interest rates go up, one of two things will happen - the house of cards falls and the retailers pay the price. Or the Retailers just pass on the added cost to the manufacturers - which is also not good...”

“It would slow down the economy and the aftermarket business.”“Less borrowing and more extended payment terms. Less investment in new inventories.”“Moderate impact”“More pressure on payment terms, and more emphasis on inventory optimization and tools”“Negative effect on economy overall slowing everyone's business”“Negative, especially payment terms. Customer channel will need to negotiate reduction in terms or share cost of factoring”“NO Impact - we still have to run the business and maintain production and inventory levels.”“NO impact...need to get there to stabilize the economy and stop artificially reducing the value of US currency.”“None”“Not significant at the 5 to 6% range”“Obviously a lot of risk to the business tied up in factoring. Factoring (or easy money) has made us lazy in terms of the amount of inventory in the market.”“Our competitors will weaken. Channel partners will become more demanding. Inventories will shrink, payment terms will become harder to give.”“Payment term requests will increase even more.....”


16



“Payment terms are unlikely to change as customers view what they have achieved as "captured ground." The increase in interest rates will have to be negotiated just like raw material increases or other increased costs of doing business.”“Prices would rise.”“Pricing will have to go up or terms will have to be reduced.”“Purchases at all levels could decline as financing becomes more expensive. Inventories will be reduced further.”“Serious cash flow issues”“Short term inflation within the channel due to extended terms. Manufacturers will have to recoup this direct cost of terms.”“Suppliers will be in a lesser position to fund customer cash needs through extended terms.”“The cost of money will go up and "360 Terms" should tapper-off, but we are assuming the Fed will raise rates, to a "long-term normal range of 5-6%" what if this is the new normal? U6 is at 14%, the lowest participation rate in decades, our economies next recession is getting closer every day.”“The increase in rates would take a lot of margin out of the manufacturers pocket.”

“The OES part of the Pie will increase, as Aftermarket Resellers will trim inventory at the DC, and smaller resellers will go out of business, although the response of the lending community could soften making it easier to obtain loans. That would be the only saving grace. I don't see this happening however, especially for smaller businesses.”“There will be a big impact on retail auto with extended terms. Higher interest rates will increase costs to their vendor who will then seek price increases.”“They're screwed. They should have never adopted this model of extended terms.”“This won't happen until 2015 at the EARLIEST. Suppliers need to negotiate interest rate clauses in their contracts to handle. Any supplier who is damaged by interest rate increases has only themselves to blame, given the amount of time available to correct the situation.”“This would greatly affect the extended terms situation. Factoring would dry up and there would be an immediate pull-back on inventory levels.”“Troubling given the extended terms tied to LIBOR ---- will get very difficult to continue to support Factoring type offerings.”“Unknown”“We will an overall constriction of business, lower inventory levels to improve cash flow, more customers requesting longer payment terms”


17



“While business models may vary among channel partners, the cost of capital is usually a factor in investment options like level of inventory that is practical. As interest rates rise, payment terms and inventory levels will adjust over time to accommodate those shifts.”“Will create difficult transitional period for the aftermarket, including higher costs of factoring programs.”“With the crazy terms that some customers require, a rise in interest rates could be the end of some companies”“Working capital cost will soar”


18

Special Questions:Un-tapping Unperformed

Maintenance


19

In 2012, unperformed maintenance in the automotive aftermarket totaled $66 billion dollars

Although a slight decline from 2011, unperformed maintenance has totaled over $60 billion for the third year in a row


20

For 66% of supplier respondents the opportunity of reducing unperformed maintenance is an important issue

66%


21

Respondents believe the best way to reduce unperformed maintenance is to create end consumer awareness of the

dangers of not performing regular maintenance

What should the aftermarket as a whole, individual companies, and aftermarket associations, be doing to reduce unperformed maintenance?

“Continue educating end consumers about the importance of maintenance…”

“Create a communications plan "We've got your back", where the repair garage is an extension of the

security that a family feels instead of an adversary.”

“Educate, educate, educate: regular maintenance = longer car life (i.e.. best

consumer value) - the more "outlets" banging the drum is good for all.”

“Help push the message down to the consumer via informative platforms within mainstream media outlets.”

“Education of consumers.”

“Communicate the negative impacts (safety, costs concerns) of unperformed

maintenance.”

Note: All answers reflected this sentiment, but the majority did

For full results, see Appendix


22

However, 40% of supplier respondents indicated that “None” of their marketing budget was dedicated to reducing

unperformed maintenance

For 21% of respondents, 10% or more of their marketing budget is

dedicated to reducing unperformed maintenance.


23

Respondents indicated that the most important initiatives to reduce unperformed maintenance were awareness

campaigns and increasing vehicle inspections

AASA supports addressing the issue of unperformed / underperformed maintenance through continued

consumer education and through reasonable, safety-friendly and cost-effective vehicle inspection programs

throughout the country.


24

Detailed Results: Market Conditions


25

Sales performance experienced an incline with 62% of supplier respondents enjoying growth

Only a fifth of respondents reported declines, lowest in five quarters

De

cli

ne

Gro

wth

Note: “No change” is shown as neutral (as a zero value) on the chart to allow a visual depiction of trendsBase: n = 92


26

Majority of respondents (58%) expect growth in sales in the fourth quarter of 2013

Only 9% expect declines

Base: n = 90

Expect declines: 9%

Expect increases: 58%


27

Respondents’ independent aftermarket sales grew on average by 2.8%, an increase from Q2

Although majority, 65%, reported an increase from 2012, nearly a quarter of respondents reported declines

Base: n = 88

Average:+2.8%

Quarter Average Growth

2012 Q4 +1.9%

2013 Q1 +2.3%

2013 Q2 +1.5%

2013 Q3 +2.8%


28

OES average growth rate increased to +0.9%41% indicated increases from 2012, but still not at levels seen in Q4 of 2012

Base: n=82

Average:+0.9%

Quarter Average Growth

2012 Q4 +1.7%

2013 Q1 +0.5%

2013 Q2 +0.2%

2013 Q3 +0.9%


29

Q2 pricing environment improved as 27% increased prices and 8% decreased

Although the pricing environment is still increasing, it did slow from Q1 with those reporting an increase dropping 10 percentage points

Note: “No change” is shown as neutral (as a zero value) on the chart to allow a visual depiction of trends. Price is delayed a quarter due to privacy laws.

Base: n= 87

Please note that survey responses

regarding price and GM are

delayed by one quarter in order to comply with antitrust ‘safe

harbor’ guidelines

Pri

ce

Cu

tsP

ric

e I

nc

rea

se

s


30

Gross margin performance decreased slightly in Q2Those indicating gross margin growth decreased from 29% to 24%; while those

indicating declines remained steady at 22%

Note: “No change” is shown as neutral (as a zero value) on the chart to allow an effective visual depiction of conditions. Gross Margin was a new question in 2011 Q2, therefore only limited historical data is available

De

cli

ne

Inc

rea

se

Base: n=87

Please note that survey responses

regarding price and GM are

delayed by one quarter in order to comply with antitrust ‘safe

harbor’ guidelines


31

Detailed Results:Outlook


32

Respondent’s outlook steadied with most (47%) indicating “No change”

Respondents who indicated optimism in Q3 decreased 10 percentage points

Ne

ga

tiv

eP

os

itiv

e

Base: n = 88Note: “No change” is shown as neutral (as a zero value)

on the chart to allow a visual depiction of trends


33

Respondents indicated a slight increase in inventory additions in Q3 versus Q2

39% added to inventories while 22% cut

Cu

tsA

dd

itio

ns



34

Capacity trends have remained steady over the past six quarters

More (38%) added to production capacity in Q3

Cu

tsIn

cre

as

e



35

Hiring was steady with 47% indicating growth from Q2Only 5% of respondents indicated “Job Cuts”

Jo

b C

uts

Hir

ing

Base: n=92


36

New orders average growth decreased year-over-year, dropping from +2.5% in 2012 Q3 to +2.2% in 2013 Q3

New orders are still relatively low with a decline of 0.6 percentage points from 2013 Q2

Note: “No change” is shown as neutral (as a zero value) on the chart to allow a visual depiction of trendsBase: n=86


37

Detailed Results:Issues


38

“Extended payment / terms of sale” moves to top issue for 2013 Q3

“Economic conditions” and “Aftermarket Demand Drivers” emerge as other top issues for the quarter

More Importan

t

Less Important

Note: Top Issues in 2013 Q2

1. Lack of pricing power

2. Weak Sales

3. Extended payment / terms of sale


39

Increased competition from low cost suppliers, economic uncertainty and rise in gas/oil prices impacted suppliers

business in the past quarter

Issues with Customers

“Consolidation of some customers…”

“Customers changing their procurement process and subjecting the suppliers to annual auctions.”

“Customers managing their inventory more tightly.”

“Retailers cutting back on purchases versus prior.”

What events or changes have impacted your business in the past three months? (Open-ended)

Economic Uncertainty & Weak Sales

“Economic Conditions.”

“Economic conditions remain soft. Fuel prices rising.”

“Weaker Sales resulting in overall weaker demand for Performance Chemicals in the aftermarket…”

“Weaker retail sales.”

“The Retail segment being down or flat. Growth was projected. Having to make up for it elsewhere.”

“The economy is still weak.”

Weather

“Weaker sales resulting in overall weaker demand for Performance Chemicals in the aftermarket.”

“WEATHER- Lack of heat!”

“Climate!! A cooler than normal Summer killed our A/C service business...”For full results, see Appendix


40

IMR Repair ShopSurvey


41

Shop sales increased quarter-over-quarter


42

Channels purchased from in past 12 months

Retail WDs Dealers/OES

Note: The information in this section comes from IMR’s monthly Repair Shop survey research. IMR’s data includes significantly more on shop insights, category insights and shop demographics. IMR offers a 10% discount on their services to AASA members. See www.automotiveresearch.com for more information.

Note: Respondents could pick multiple categories; therefore, total will add up to more than 100%

http://www.automotiveresearch.com/


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Appendix

• Respondent’s Product Categories• Full Answers to Selected Questions

• Barometer Methodology


44

Respondents’ product categories

Base: n = 86Note: Respondents could pick multiple categories; therefore, total will add up to more than 100%


45

What should the aftermarket as a whole, individual companies, and aftermarket associations, be doing to reduce

unperformed maintenance? (1/3)“Advertise”“Advertising and CSA education”“Best is Vehicle Inspections, Regulatory requirements to have a safe/repaired vehicle on the road”“Better planning”“Communicate the negative impacts (safety, costs concerns)of unperformed maintenance”“Communication thru media, ads, public service announcements, thru the retailers to encourage people to repair their vehicles so they last longer etc.”“Consumer education”“Consumer education”“Continue car care awareness campaigns”“Continue educating end consumers about the importance of maintenance. Provide improved tools for consumers to better understand maintenance procedures and why they are important.”“Continue education and training”“Develop Public Service Announcements (TV commercials, radio scripts, print and e-copy) covering safety implications of NOT doing maintenance. Idea would be to get FREE placement in media since it would be a Public Service. Inspection programs are NOT that effective.”

“Continue the message concerning Preventive Maintenance to the Shop Owner/Technician Level. Too many shops are still focused on repair because they believe the car owner can't afford or won't pay for preventive maintenance.”“Continued education”“Create a communications plan "We've got your back", where the repair garage is an extension of the security that a family feels instead of an adversary.”“Determine and communicate the economic impact to consumers for the underperformed maintenance- if they as a whole have not performed s significant $ of work for the last 15 years is that maintenance cost effective?”“Doing all the right things.”“Educate consumers on the long term costs of underperformed maintenance. If a consumer does not perform the routine maintenance to avoid near term costs, what will the future costs be?”“Educate the service technicians and explain the risk/cost of underperformed maintenance.”“Educate, educate, educate: regular maintenance = longer car life (i.e.. best consumer value) - the more "outlets" banging the drum is good for all”“Education of consumers”


46


unperformed maintenance? (2/3)“Even if you offered free repairs, you aren’t going to get most of that business, its like the dentist or doctor, we are all suppose to go once or twice a year, but many don’t. Anything beyond a modest effort in the form of awareness is a waste of money.”“Gaining legislation for federal and/or state vehicle inspection programs”“Get aftermarket customers, even if they order e-tail, to create a system to track maintenance.”“Help push the message down to the consumer via informative platforms within mainstream media outlets.”“Increase consumer awareness from an industry standpoint”“Industry wide focus/promotion of the downside of unperformed maintenance”“It is difficult to do anything in light of eroding margins. We must first restore margins and then funds may be available.”“Keep talking about it to all channel levels”“Make the installer aware to do a more complete job of inspection. Advertise the underperformed maintenance as a safety issue for all Americans.”“Media campaigns.”“National Ad Campaigns”“Negative impact of postponing repairs”“Not sure”“Not sure......”

“Plan the budget for the unperformed maintenance.”“Promote safety and long-term savings.”“Promotion of impact of underperformed maintenance”“Remember that, while maybe directionally a good thing, reducing unperformed maintenance has the potential to reduce parts sales... And that sales related to unperformed maintenance are potentially a one time gain.”“Revisit or consider a regulatory requirement for inspection and maintenance”“Simple awareness of why maintenance is important and in the long run can save money and possible inconvenience from a mechanical breakdown.”“Social media education”“Spread the word!”“Start with educating the consumer on low cost things that he can do to keep her/his vehicle maintained - get back to the basics, and then build from there. With the consumer strapped for cash - he's avoiding anything that he can put off.”“Stress the importance of general maintenance and the cost of unscheduled maintenance.”“Stressing the importance of preventative maintenance”“Stressing the safety aspect of not doing the repairs.”


47


unperformed maintenance? (3/3)“This needs to be driven at the Association level. "Soup is good food" only works if you're Campbell's. A filter company that is not the market leader is only benefiting the Market Leader if it is touting to pay attention to proper vehicle maintenance.”“Training service providers on selling [preventative maintenance]”“Unsure”“Well, oddly enough, unperformed maintenance can actually help our business.”“Work closer with OEMs instead of against them.”“Work with OE manufacturers to set up standards for vehicle maintenance.”


48

What events or changes have most impacted your business or business conditions in the past three months? (1/2)

“Availability of raw materials.”“Availability of technical resources (Engineering, Sales, Quality)”“Bankruptcies and additions of competitor manufacturing capacity are putting price pressure on our business”“Big increases in Chinese imports”“Climate!! A cooler than normal Summer killed our A/C service business...”“Competition stepping up aggressive programs”“Competitor price reductions”“Consolidation of some customers; lack of increase in South America and Mexico”“Continued cyclical downturn of OE HD Mining industry demand”“Continued expansion of the acceptance of overseas "knock-offs", and the continued price erosion that has resulted.”“Customer acquisitions/consolidations. Program group membership changes.”“Customers changing their procurement process and subjecting the suppliers to annual auctions.”“Customers managing their inventory more tightly”“Economic Conditions”“Economic conditions remain soft. Fuel prices rising.”“Extended payment term requests”“Extended Payment Terms and Late Payments.”

“Extended Terms”“Extreme price pressure at the service providers. Consumers are also tight with spending due to higher fuel prices and economic slump.”“Fed quantitative easing continues to lift confidence and spending above what would have been the case. Gas prices down helps too. Still consumers very cautious - "recovery" insufficient”“General political and economic instability in the Middle East and Venezuela is negatively impacting sales.”“Government Regulations/Health Care Slow recovery”“Imports”“Inconsistent order patterns have continued throughout 2013. Additional consolidation of WDs and jobbers will have a much greater impact on the aftermarket as available cash becomes tight.”“Increased cost of crude oil and extended payment terms”“Increased demand causing order fill performance to suffer”“Increased demand for quality products”“Industry consolidations, overseas competition”“Inflation, medical expenses, mix changes.”“Internal system upgrades”“Lack of a key component in order to produce a finished product.”


49

What events or changes have most impacted your business or business conditions in the past three months? (2/2)

“Low cost country products, economic conditions that impact consumer confidence and spending and that cause delays in performing maintenance”“Lower comp sales than expected”“Margin erosion and mediocre sales”“More aggressive terms from our customers.”“Need a good sale person”“New products are driving sales increases”“Nothing significant”“Obama Care Issues”“OE production demand is using up a lot of the supplier and OE production manufacturing capacity. No capacity to make aftermarket product.”“Offshore competitors”“Positive economical market environment.”“Price cutting in the market”“Regulations and potential increases in healthcare cost”“Retailers cutting back on purchases versus prior.”“Secured national distribution customer. OES sourcing strategies.”“Soft demand”“Soft market, weather”“Summer driving activity seems to have impacted automotive aftermarket favorably.”“The economy is still weak.”

“The increase in large consulting companies doing business in the aftermarket”“The loss of key people going to competitors, and nobody within the organization with the capacity to replace them has the potential to be detrimental to our business.”“The Retail segment being down or flat. Growth was projected. Having to make up for it elsewhere.”“Unpredicted and unanticipated sales spikes in certain product categories. Competitor exited the marketplace”“Weaker retail sales”“Weaker Sales resulting in overall weaker demand for Performance Chemicals in the aftermarket. In addition, inventory management practices of customers has intentionally reduced inventory in the supply chain.”“Weather”“Weather conditions, rain”“WEATHER- Lack of Heat!”


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AASA Supplier Barometer methodology notes

• The AASA Supplier Barometer survey presents the latest information on aftermarket supplier sentiments and market trends.

• The purpose of the survey is to provide members with general information on business conditions and market trends and to allow high-level benchmarking of sector performance. The information and opinions contained in this report are for general information purposes only.

• Participation is only available to AASA supplier members. There were 94 survey responses in this quarter’s report.

• Comments are edited only for spelling and diction and may contain grammatical errors due to their verbatim nature.

• Note that responses to questions related to price and gross margin trends are delayed by one quarter to comply with anti-trust safe harbor guidelines.

• Responses to this survey are confidential. Therefore, only aggregated results will be reported. Individual responses will not be released and will be destroyed after results are compiled.


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AASA | Automotive Aftermarket Suppliers Association

10 Laboratory Drive | Research Triangle Park | NC | 27709 | USA

www.aftermarketsuppliers.org

Contact Information

Paul McCarthyVice President

Industry Analysis, Planning and Member ServicesOffice: +1 919.406.8812 | Mobile: +1 248.914.2567

Email: [email protected]

Bailey L. W. OvermanAnalyst/Coordinator

Industry Analysis and Member ServicesOffice: +1 919.406.8823

Email: [email protected]

2013 Q3 Aftermarket Supplier Barometer 2 Contents Executive Summarypg. 3 Special Questions Rising...

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