Auto Service World
Feature   December 1, 2004   by John G. Smith

Power Plays Dominating Remanufactured Electrics

Remanufacturers are facing growing pressure from low-cost imports

Companies that remanufacture rotating electrics must be pining for the good old days. Starter and alternator designs that were once used for a decade or more are now being upgraded in as little as two years, limiting the supply of cores; Asian manufacturers are now able to supply the aftermarket with inexpensive parts that are fresh out of the box; and late-model designs of these spinning marvels are becoming more difficult to rebuild with every passing year.

Consider some of the fundamental changes that have been made in the last decade alone. Some of today’s starters and alternators weigh half as much as their predecessors, despite the demand for higher outputs for a growing list of vehicle options ranging from heated seats to defrosting systems.

“Though annual price reductions are expected for the aftermarket [as suppliers look to secure business], the average unit price will keep increasing due to more sophisticated products,” a Frost and Sullivan analyst recently concluded when studying the business. “Original equipment suppliers are improving their performance and redesigning products every four to six years, with new models carrying higher price tags.”

The trend hasn’t escaped the notice of Car Care Automotive Supply manager Gord Krysa. Alternators and starters built to fit older vehicles can cost $60, compared to the wholesale costs of $150 to $160 for the latest generation of components equipped with gear reduction, he says. Still, it has yet to affect his daily business. The parts associated with early model years continue to dominate related sales at his Edmonton facility, which moves about four starters and alternators every day.

One of the biggest challenges associated with the growing selection of designs is to keep enough in stock, he says. “You try to turn them three to four times a year, minimum.” But that can be a challenge when choosing whether to stock parts that can be fit into a limited number of vehicles.

Supplying that market as a whole has become a challenge of its own. While remanufacturers are having trouble sourcing the necessary cores, many Asian manufacturers are sticking to limited product lines, focusing on the most popular sizes that offer the safest harbour for their investments.

“We are seeing some of the offshore units coming in, but not to the extent of other product lines–for example, clutches,” says Cameron Young of Robert Bosch. “It’s probably going to be a few more years down the line [before we] see more complete programs than what’s on the table today.

“The assortment of units right now is too hard for many of these offshore manufacturers to tool up for.”

Domestic remanufacturers, meanwhile, have been able to avoid some of the longer waiting periods associated with new parts that are built offshore, says Bob Sinclair, based in Red Deer, Alta., for Dixie Electric. “They have such a time lapse to get it from Asia into Canada, that when they’re out a popular [part] number, they’re out of that number for a while.”

It’s not the only challenge for those who choose to stock lower-priced Asian parts instead of remanufactured models, says Car Care’s Krysa, referring to warranty claims. “As soon as you have a warranty [claim], you’re waiting for your money back from the supplier. The $20 difference in the price of the part? We spend that in shipping.”

About 15% of his alternator and starter sales involve comebacks, although less than two-thirds of those turn out to be legitimate warranty claims.

Hank Erickson of Erickson Automotive Supplies in Wynyard, Sask., soured on the idea of stocking Asian rebuilds about four years ago, even though they were about 10% cheaper. “It was unreal,” he says of the comebacks. “I was scared to see [the buyers] come back in the shop.”

But it’s dangerous to lump offshore supplies into one category, says Chuck Hanners, Eastern Sales Manager at NSA. “It’s true that there are some very low-priced units being sourced from third-world countries. At the same time, there are some very sophisticated products being produced by a few offshore manufacturers.”

Since the products are brand new, they can also have fewer related comebacks than their remanufactured counterparts, he counters.

How can remanufacturers compete? “Over the long term, I don’t know that they can,” Hanners says. “In fact, we’re already seeing remanufacturers add new units to their product lines to address the growing demand for brand-new starters and alternators. Reman simply represents too many unknowns.”

Even plentiful early-model units are facing some core issues because supplies have been remanufactured so many times, Sinclair says, referring to old Chevy 350s as an example. And remanufacturers have to meet the shortage of cores for 2003-2005 vehicles by seeding stocks with new units.

Joe Rinaldi, president of Armature DNS, suggests that the growing availability of low-cost Asian components could change the very nature of Canada’s remanufacturing industry. “It’s going to eventually force a lot of people not to rebuild some units in mass quantities,” he says, referring to high-volume Big 3 designs and popular Japanese models such as Toyota Corollas.

Chinese manufacturers can pay wages that are a tenth of his rates, which range between $12 to $15 per hour, and they don’t face the same legal requirements, ranging from Worker’s Compensation to HazMat rules, he says. His energy costs alone have increased three-fold in just five to six years, leaving him with an annual utility bill that approaches $100,000.

Still, Rinaldi suggests the shift to cheaper Asian-built products may simply be part of a natural evolution, and he likens it to the way that manufacturers began to absorb some of the remanufacturing business relating to water pumps.

“The distributors are buying new [water pumps] because it’s cheaper and there’s no upkeep,” he says. “The older American pumps, the bigger pumps, were more expensive to produce. The cost of buying, dismantling, and cleaning [late-model designs] is almost the cost of buying a new one.”

Meanwhile, the list of manufacturers capable of rebuilding starters and alternators continues to shrink.

“Every little rebuilder is rebuilding the old 10SI alternator,” Sinclair says. “Some of them don’t build the newer units coming out.”

One of the reasons is the cost of related test equipment, he says. “You can test them with a furnace motor, but ‘accurately’? The newer units today are a lot more complicated than they were 15 years ago.”

The starters in late-model vehicles work in an entirely different way, Rinaldi says, referring to the electronic controls.

Hugh Young, owner-operator of Northside Auto Plus, a Uni-Select member in Fredericton, N.B., says it might be several years yet until the late-model designs begin to affect his business. “The dealers carry such a warranty now, and do such a [high] percentage of leasing,” he says, “that takes care of the first three or four years.”

Meanwhile, you could say that they aren’t building them like they used to. While starters and alternators are built to fit shorter ranges of model years, Krysa wonders if lighter models will last as long as their predecessors. “It’s not like your old Chevy, where you could crank it for five minutes if you have a carburetor problem,” he says.

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