CARQUEST Corporation

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CARQUEST Corporation

12596 W. Bayaud Avenue, Suite 400
Lakewood, Colorado 80228
U.S.A.
(303) 984-2000
Fax: (303) 984-2001
Web site: http://www.carquest.com

Private Company
Incorporated: 1974
Employees: 35,000 (est.)
Sales: $1.4 billion (1997 est.)
NAIC: 44131 Automotive Parts & Accessories Stores

CARQUEST Corporation is an alliance of warehouse distributors (WDs) and “jobber-stores” that sell automotive replacement parts to professional technicians and retail buyers. The company’s participation in the automotive aftermarket includes replacement parts for almost all automobile makes and models as well as truck, farm, and recreational vehicles. CARQUEST-brand products are distributed through more than 60 distribution centers and 3,400 stores throughout the United States as well as Canada and Mexico.

Competitive 1970s Activates Alliance

O. Temple Sloan, owner of General Parts Inc. (GPI) in Raleigh, North Carolina, provided the impetus in founding CARQUEST with Joe Hughes of Indiana Parts and Warehouse in Indianapolis and Dan M. Bock of Bobro Products in the Bronx, New York. In 1974 the three auto parts companies joined together in response to competition from high-volume retail stores. Sloan had studied Genuine Parts, the company that initiated the National Automotive Parts Association (NAPA), and decided that programmed distribution through a cooperative alliance would be the most effective means to remain competitive. Programmed distribution connected warehouses and jobbers in a process of automotive parts distribution that would allow overnight delivery of any item. Through this three-step distribution, an alliance of jobber-store affiliates and WDs would provide the best customer service to professional repair shops, commercial users, car fleets, and farmers, as well as Do-It-Yourself (DIY) retail buyers, through accessible, well-stocked distribution centers. The CARQUEST founders agreed that three-step, programmed distribution would be the best strategy in the automotive “aftermarket” of replacement parts, and they were determined to help jobbers get a reasonable share of that market, including DIY retail business.

With 100 auto parts stores selling wholesale replacement parts, tools, and equipment, CARQUEST generated $29 million in sales in its first year of business. As the umbrella company CARQUEST developed private label brands—products not manufactured by the company, but packaged with the company name. CARQUEST-brand name recognition was sought through television advertising with Johnny Rutherford as spokesman and through product catalogs that were produced for wholesale as well as retail use. Within five years CARQUEST had almost 1,500 jobbers successfully retailing auto parts throughout the United States. Straus-Frank Company in San Antonio became a member wholesale distributor in 1976, and A.E. Lottes in St. Louis and Hatch Grinding in Denver joined in 1980.

Sloan, always the ambitious go-getter, was instrumental in much of the growth at CARQUEST. In 1980 the owner of General Trading Company in St. Paul was ready to retire and approached Sloan to purchase his company. The acquisition was the first of more than a dozen such transactions in the following years. In 1983 GPI entered large-scale retail merchandising with the purchase of Valley Motor Supply in Havre, Montana, which included 35 stores in Montana and Wyoming. By 1984 sales for the CARQUEST alliance had reached $600 million.

Expansion of the CARQUEST alliance in the mid-1980s continued under then-president Dan Bock, former owner/president of Bobro Products, which was sold and renamed BWP Distributors in 1984. CARQUEST obtained three new WD memberships: Autoparts Warehouse in Honolulu; Muffler Warehouse in Pocatello, Idaho; and World Supply in Lemont, Illinois. GPI expanded into Kentucky when it acquired a WD in Lexington. In addition, two CARQUEST WD members, Parts Distribution in Memphis and Parts Warehouse in Bay City, Michigan, merged with GPI. By 1990 CARQUEST had 15 member WDs, 2,300 jobbers, 62 distribution centers, and more than 43,000 dealer accounts. CARQUEST sales reached a plateau of approximately $600 million, with a 70 percent professional installer and 30 percent retailer sales distribution.

Mission Renewed in the Late 1980s

CARQUEST sales reached a plateau, and CARQUEST leadership found that the company had lost sight of its tradition of jobber marketing to the professional user. Competition for DIY retail business had diverted the company from its primary customer base in professional repair technicians. In the 1980s inventory requirements proliferated with increased numbers of foreign-made automobiles and the more complex technology in domestic vehicles. These new challenges required individual service and an abundant inventory at each distribution center. CARQUEST responded by improving its relationship with jobbers and by helping jobbers create better relationships with professional repair technicians.

Moreover, the following mission, as reprinted in the April 1996 Automotive Marketing magazine, was created to facilitate renewed focus at CARQUEST: “(1) Establish CARQUEST auto parts stores as the most recognizable supplier of quality products and services to the aftermarket nationwide. (2) Make a total commitment to provide the most complete service, supply, and marketing programs to enable CARQUEST jobbers to effectively compete on a profitable basis. (3) Each WD pledges to commit its total marketing efforts and direction to achieve 100% distribution through CARQUEST jobbers and support CARQUEST programs and products in a unified fashion. (4) Move with practical speed toward CARQUEST branded products.”

CARQUEST sought to create a brand-name product line and new partnership with its jobbers through exclusive distribution of CARQUEST products. Previous to brand development, CARQUEST had offered short line, retail-oriented DIY products, such as oils and filters, under the brand “Proven Value” (PV). The company decided to expand the number of product lines using both PV and CARQUEST for full line coverage, and it added Bravo, a limited product line for the economical buyer. Through regional member councils, CARQUEST gathered information that determined the product lines to be manufactured. In accordance with jobber input, market-based decisions led to the development of several product lines as well as marketing programs to support brand recognition. Areas of strong growth for professional users included rack and pinion steering, emission control, fuel injection, brake systems, temperature control/heating, and air conditioning. Manufacturers included Moog Automotive, Dana, and others.

CARQUEST began to focus its distribution exclusively through CARQUEST Auto Parts Stores. Though the company lost some business to accounts that offered other product lines, the company gained through exclusive distribution at affiliated auto parts stores. With increased competition from large volume retailers, AutoZone in particular, who impinged on sales to professional users, CARQUEST continued to endorse three-step distribution in partnership with store jobbers. Two-step distribution—from manufacturer to retailer to end-user—could not respond to the complex, immediate needs of professional repair mechanics with a large inventory at distribution centers. Exclusive distribution allowed CARQUEST to focus on the traditional aftermarket with well-trained jobbers serving professional installers. CARQUEST prided itself on its ability to supply the hard-to-find part.

CARQUEST initiated the Technician’s Network, or TECH-NET, which sought to improve public respect for automotive repair professionals while it emphasized a code of ethics for quality assurance through high standards of ability, such as Automotive Service Excellence (ASE) certification. TECH-NET provided technical training videos as well as printed materials to improve and update skills of professional installers, aligning quality of product with quality repair service. A toll-free telephone help-line with trained technicians, supported by a database of automotive repair information, offered technical assistance for automotive repair diagnosis. In 1989 more than 2,000 professional automotive repair technicians subscribed to the program.

CARQUEST’s commitment to jobber success led the company to develop four levels of training. The first level was the library of how-to videotapes with more than 100 titles available on loan for two-day checkout through a jobber or distribution center. Through seminars and printed materials, Counterman Training covered technical information as well as customer relations skills. Hands-on technical training was made available for professional installers, and management seminars, the fourth level of training, provided jobbers with a variety of business skills.

CARQUEST supported its new products lines as well as its commitment to jobbers with national and local advertising strategies. Advertising on national television served to establish CARQUEST as a national, brand-name automotive replacement parts distributor. Televisions commercials featured country singer Roy Clark as the company spokesman beginning in 1988. Catalogs of CARQUEST products for the DIY market were made available for local use in direct mail advertising or as newspaper inserts. More than 33 million catalogs per year have been printed for member use. CARQUEST also provided wholesale catalogs as well as farm and agriculture catalogs.

Company Perspectives:

CARQUEST is committed to providing the finest quality parts in the automotive aftermarket. All of the pans in the CARQUEST-brand line are produced to exacting standards of performance and dependability, by the best manufacturer in the industry, to meet or exceed OEM specifications. CARQUEST is committed to the three-step distribution process: moving the product from the manufacturer, to the distribution center, to the CARQUEST Auto Parts Store, for final distribution to automotive technicians and do-it-yourselfers across the country.

In 1990 CARQUEST began to advertise during car-related events on ESPN, such as NASCAR and USAC auto racing competitions, to stimulate brand recognition and brand support among the general public. CARQUEST’s sponsorship agreement for the 1991 USAC Prime Thunder Series provided a mini-camera installed in race cars. Televised filming from inside the race cars featured the CARQUEST logo, as “CARQUEST Auto Parts Stores Cage Cam” appeared on television screens. In 1992 CARQUEST sponsorship of the race included two mini-cameras. On the local level CARQUEST members also promoted the company through sponsorship of racing and other motor sports events and auto shows. In Boston, Virginia CARQUEST Auto Parts stores distributed discount coupons to racing fans for the CARQUEST Autoparts Stores 300. The CARQUEST Bowl, a collegiate postseason football game, stagnated under the shadow of better known and more popular bowl games, however.

Overall, the company’s activities supported its four goals, and by 1993 CARQUEST brand sales had increased to 40 percent of sales, up from 20 percent to 25 percent of sales in 1980s. In 1994 the company’s fourth goal was reworded as: “Continually improve the quality, coverage, and competitive position of CARQUEST branded products.” By April 1996 CARQUEST had developed 31 product lines and CARQUEST-brand sales had risen to more than 70 percent of the total. CARQUEST directed its marketing programs to specific CARQUEST products and vendors. The company remained committed to programmed distribution, which the leadership believed allowed for better customer service and sustained the company’s competitive standing in the auto parts market.

Consolidation and Mergers in the 1990s

Much of the growth and change at CARQUEST in the first years of the 1990s can be attributed to competitive forces that made consolidation, mergers, and acquisitions an automotive aftermarket trend. New WD members at CARQUEST included PSC in Phoenix and Parts Wholesalers in Bangor, which joined in 1989 and later merged with GPL CAP Warehouse in Las Vegas joined in 1991, extending CARQUEST’s reach to a region of rapid growth. Pacific Wholesalers in Portland, Oregon joined in 1990 and merged with GPI the same year. Service Parts in Albany, Georgia merged with GPI in 1990; CARQUEST member World Supply merged with GPI in 1991 as did founding member Indiana Parts and Warehouse. CARQUEST member Straus-Frank Co. purchased the Pettigrew-Smith chain of 27 auto parts stores in Houston in 1992. Automotive Parts Wholesale in Bakersfield joined in 1993. Mergers with GPI also included Freemont Electric in Seattle in 1993 and ADI in St. Louis in 1994. In 1996 WD member Sussen of Cleveland, which had merged with Buffalo, New York member Avro earlier, merged with GPI.

Leadership changes at CARQUEST intertwined with changes in the aftermarket. Mergers and bankruptcies reduced the number of member WDs from 18 in 1986 to ten in 1996, also reducing the Board of Directors to ten members. Peter Kornafel, owner and president of Denver CARQUEST member WD, Hatch Grinding, became president of CARQUEST in 1996. Hatch Grinding, which had been family-owned and -operated since 1951 and served 110 CARQUEST jobbers in the Rocky Mountain Region, merged with GPI the same year. Kornafel based his decision to merge as the best strategy for growth at Hatch Grinding. As president, Kornafel pinpointed jobber success as the sole mission of CARQUEST. In correlation with change of leadership, CARQUEST relocated its headquarters from Tarrytown, New York to Lakewood, Colorado, a suburb of Denver. The company streamlined and restructured operations for more effective communication between departments with functions more clearly delineated.

CARQUEST’s stated goals proved to be in alignment with the automotive aftermarket trend toward affiliation and consolidation. Independent jobbers increasingly became members of programmed distribution companies such as CARQUEST. Although CARQUEST’s member WDs tended to own more auto parts stores than in the past, approximately two thirds of CARQUEST jobber-stores were independent sellers. The benefits of affiliation were similar to those enjoyed by chain stores, such as national and regional advertising, brand recognition, and training. In 1996 CARQUEST disseminated an eight-page brochure describing its training program through automotive trade publications. That the strong response required a reprint of the brochure demonstrated the demand for training to update skills with new automobile technologies.

GPI Continued To Lead in the Late 1990s

As the largest member of the CARQUEST alliance GPI continued to provide the buttress for a national network of distribution. In May 1997 GPI expanded into Canada through the partial purchase of Acktion Corporation, a joint venture in which GPI acquired four distribution centers in eastern Canada. GPI acquired 15 Art’s Auto Parts stores in eastern Nebraska and western Iowa in July 1997. Assets of Big A Auto Parts Warehouse in Omaha were acquired by GPI and CARQUEST member BWP Distributors in September 1998. While going through bankruptcy proceedings, Big A Auto Parts sold eight distribution centers and the Omaha warehouse to GPI, along with assets of 125 Big A Auto Parts stores that those distribution centers served. Through the transaction GPI expanded into Albuquerque, Denver, Phoenix, Salt Lake City, and other cities. Later, in October 1998, GPI purchased two Colorado Springs stores from Big A Auto Parts stores.

BWP established a CARQUEST market in Pennsylvania with two acquisitions. From Big A Auto Parts, BWP acquired a warehouse in Philadelphia and assets of the 17 stores it supplies. About the same time, in September 1998, BWP Distributors acquired warehouses in Philadelphia from Motor Masters, which added $25 million value in annual sales and established CARQUEST in the automotive parts aftermarket in Philadelphia and southeastern Pennsylvania.

In November 1998 GPI purchased Republic Automotive Parts, Inc. from Keystone Automotive Industries. The acquisition included mechanical parts operations and nine warehouse distribution centers. The 88 auto parts stores included in the deal generated $110 million in revenue in 1997, revenue that would become CARQUEST revenue in the years that followed. The stores were located in Alaska, Arizona, California, Iowa, Illinois, Indiana, Michigan, Mississippi, and Pennsylvania. In March 1999, The Parts Source, Inc. merged with GPI. That transaction affected 41 stores and a distribution center in Ocala, Florida. At $3 per share and 3.4 million outstanding shares of common stock, the merger cost GPI $10.2 million. With 27 distribution centers in the United States and four in Canada, CARQUEST sales under GPI alone amounted to approximately $1 billion in annual sales in the late 1990s.

Programmed Distribution Refined in the Late 1990s

With national expansion through CARQUEST jobber-stores and distribution centers, CARQUEST continued to provide the benefits of affiliation to its members. CARQUEST supported jobber success in its efforts to build name-brand support through sponsorship of sporting events. In 1998 CARQUEST entered a three-year agreement with the Grand Prix Association-Long Beach to be the title sponsor to the NASCAR Busch Series Grand National Division at Gateway International Raceway in St. Louis. The CARQUEST Auto Parts 250 would be nationally televised on CBS. Also under CARQUEST sponsorship, Paul Romine won the IHRA Top Fuel Dragster World Championship in 1997 and 1998; CARQUEST renewed its sponsorship for 1999. Paul Romine and CARQUEST also cooperated to raise funding for the 1999 Special Olympics World Games held in major cities in North Carolina. Local GPI involvement included volunteers and transportation support. In addition, CARQUEST was involved in The History Channel Great Race, a 14-day, pre-1951 vintage car rally race, traveling through 40 cities coast-to-coast in 1999. CARQUEST provided stopover points for race participants.

CARQUEST continued to apply its formula for jobber success through a focus on the success of the professional technician. TECH-NET evolved to include financial assistance and advice, and an annual Excellence Award, which would be granted to foremost repair facilities with prizes valued at $15,000. A Technical Advisory Council comprising award winners and finalists participated in the formulation of CARQUEST programs. Up-to-date technician training developed with on-site manufacturer clinics that covered specific car part systems such as a brake system or fuel injection system. The training video library grew to more than 150 titles, and CD ROM training was being discussed.

In 1998 CARQUEST launched the TECH-NET Professional Auto Service Program, a complete marketing program for automotive repair professionals, with the goal to enhance the experience of automotive repair for consumers. More than 1,200 automotive repair businesses enrolled in the program. In connection with the marketing program CARQUEST also introduced the CARQUEST Credit Card program, which offered 90 days’ same as cash and no annual fee to individuals and repair shops. CARQUEST offered repair shops the opportunity to have their business name on the card as well to encourage repeat business and name recognition.

CARQUEST leaders found that three-step distribution continued to support the immediate and broad needs of the professional repair facility. Complex vehicle technology and more female car owners shifted the automotive aftermarket away from DIY retail toward greater reliance on professional repair facilities. Sales to national dealer accounts rose to $100 million in 1998, up from $34 million in 1996. CARQUEST gained 30 new national accounts in 1998 and CARQUEST products experienced sales growth at approximately double the automotive aftermarket industry average in 1998.

Principal Operating Units

CARQUEST Warehouse Distributor Members: Auto Parts Wholesale; Automotive Warehouse, Inc.; BWP Distributors, Inc.; CAP Warehouse; CARQUEST Canada, Ltd.; General Parts, Inc.; A.E. Lottes Company; Muffler Warehouse; Straus-Frank Company.