Repco Corporation Ltd.

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Repco Corporation Ltd.

362 Wellington Road
Mulgrave
VIC 3170
Australia
Telephone: +61 3 9566 5444
Fax: +61 3 9561 9538
Web site: http://www.repco.com.au

Public Company
Incorporated: 1922 as Automotive Grinding Company
Employees: 3,600
Sales: AUD 862.3 million ($659.8 million) (2005)
Stock Exchanges: Australian
Ticker Symbol: RCL
NAIC: 441310 Automotive Parts and Accessories Stores

One of the flagships of the Australian manufacturing sector in the mid-20th century, Repco Corporation Ltd. has entered the 21st century as the leading retail reseller of automotive after-market parts and accessories in the Australian and New Zealand markets. The company operates a network of more than 430 branches throughout Australia and New Zealand and expects to boost its chain to more than 500 stores by 2008. The majority of the group's operations come from its Repco auto parts network, with more than 400 stores in Australia and New Zealand. Since 2003, the company, which traditionally targeted the trade market, has begun converting its store network to a dual format targeting both trade and retail customers. As part of that effort, the company also has been relocating many of its branches to more consumer-oriented retail locations. In addition to the Repco store network, Repco includes the Ingram automotive components import and distribution business, and the McLeod's motorcycle accessories business, both acquired from Alesco in December 2004. Another Repco division is Ashdown, which specializes in automotive electrical components, air conditioning, and fuel injection products. Ashdown operates its own network of 19 branches in Australia. In 2000, Repco began targeting the performance market with the creation of Motospecs, which specializes in the import and distribution of high-performance transmission, fuel, four-wheel drive, and other products. Founded in the early 1920s, Repco was part of the PacDun conglomerate (now known as Ansell) through the 1990s, before being spun off in a management buyout in 2001. The company has been listed on the Australian Stock Exchange since 2003. Michael R. Brown serves as company chairman, and Peter Mummery is the group's managing director.

Anticipating the Australian Automotive Market in the 1920s

The origins of Repco lay in the early 1920s, when Geoff Russell returned from service in World War I. Russell had recognized an opportunity for entering the automotive market. At the time, Australia had not yet developed its automobile market, and relied on imports. Yet the limited availability of spare and replacement parts made it difficult to repair the imported cars. Russell entered this market, founding a business reconditioning automobile engines. In 1922, Russell set up shop in a shed in Collinwood, a suburb of Melbourne, calling the business the Automotive Grinding Company.

By 1924, Russell's business had grown enough to enable him to move the company to larger quarters in Carlton. A number of other entrepreneurs had entered the spare parts manufacturing market. At the same time, other companies developed with a specialty in importing spare parts. Yet obtaining parts and components remained difficult through the 1920s. In 1926, therefore, Russell decided to team up with a friend, Bill Ryan, who had been working for a business importing spare parts. The partners founded Replacement Parts Pty. Ltd. (Repco), setting the stage for what was to become one of Australia's manufacturing giants.

The year 1927 marked a new opportunity for the young Repco. In that year, Ford and General Motors came to Australia to set up the country's automotive manufacturing sector. The arrival of the two automotive giants, and the resulting increased availability of automobiles in Australia, provided a strong foundation for Repco's own growth.

In addition to developing their own import operation, Russell and Ryan began establishing a network of shops, eventually expanding to serve the entire Victoria region. The stores not only sold spare parts, but also produced parts in their own workshops. The company grew strongly, especially during the Depression years when many consumers sought to extend the lives of their vehicles rather than purchase new cars. During the 1930s, as well, Repco launched its first advertising campaigns, helping to boost its position in the market.

By the mid-1930s, the company had developed a central position in the Australian automobile market. Boasting more than 500 employees, the company's strong sales network had enabled it to build up its manufacturing wing as well. In the second half of the decade, the company's own production accounted for more than two-thirds of its retail sales. In the late 1930s, Russell bought out partner Ryan's stake in the business. Then, in 1937, Russell combined the group's operations into a single business, Repco Limited, which was then listed on the Melbourne Stock Exchange. Russell himself died in 1946.

Postwar Manufacturing Giant

World War II provided a boost to Repco's manufacturing operations. As the company turned its production to support of the war effort, the company also expanded its production capacity. In 1942, the company constructed new production facilities dedicated to its defense manufacturing business. This increased capacity in turn led the company to seek further expansion of its manufacturing operations, particularly during the postwar period.

Following the end of the war, the company began acquiring a number of other Australian automotive parts companies, such as PBR Corporation, founded by the Paton brothers in the 1920s and specialized in the production of automotive braking systems. The expansion of its manufacturing range placed Repco in position to become a key player in a new development: the creation of the first "Australian" automobile.

Encouraged by the Australian government, which had been seeking to stimulate a homegrown automotive industry since the 1930s, General Motors Holden announced plans in 1944 to develop an automobile designed in Australia. More than 90 percent of the components for the mid-sized, affordable car were also to be manufactured in Australia. Repco and its subsidiaries quickly joined the Holden project as a major provider of components and systems for the automobile design. The Holden project also meant that for the first time Repco was not merely producing replacement parts. Instead, the company became responsible for the design and development of a number of Holden components, such as its pistons and cables, as well as a number of engine and brake components. Through its own growth and its acquisitions, the company's manufacturing base grew strongly. By the beginning of the 1960s, Repco controlled some 14 factories.

Repco's entry into original design manufacturing led the company into a new and exciting area in the 1950s. In 1954, one of the company's engineers, Charlie Dean, led a team in designing and building the Maybach race car. The Maybach was purchased and driven by a noted racing driver of the time, Stan Jones, who won the New Zealand Grand Prix with the car that year.

Recognizing the advertising potential in developing a racing car division, Repco became one of the sponsors for the Phillip Island Racing Club in 1955. The next major step in Repco's racing career came in 1958, when the company was approached by an up-and-coming Australian driver, Jack Brabham. Repco initially provided technical assistance to Brabham, who founded his own company, Motor Racing Developments, in England, to build cars for the Formula One circuit. The partnership helped Brabham win the Formula One World Championship twice, in 1959 and 1960.

The company's partnership with Brabham strengthened in the early 1960s, when Repco and Brabham collaborated on the design of a new vehicle, called the Repco Brabham. By the mid-1960s, the Repco Brabham had begun winning races, and in 1966 Brabham became the first driver to win the Formula One World Championship in a car bearing his own name. The Repco-designed engine was also the first Australian engine to win a world championship.

Repco's involvement in international racing was short-lived. By the end of the 1960s, the increasing professionalism of international racing circuits, as well as rapidly developing technological improvements in racing car design, had driven up the cost of participation. The arrival of a new engine design, the Cosgrove, in 1968 meant that Repco too would have to design and build a completely new engine to remain competitive. Repco decided that the cost of building a new engine was too high, and decided to exit Formula One racing. By the early 1970s, the company had abandoned racing altogether.

Nonetheless, racing had enabled Repco to build an international reputation. The success of the Repco Brabham—and the steadily growing popularity of racing in general—enabled the company and its subsidiaries to being targeting the export market, a rarity for Australian manufacturers of the time. The company continued acquiring other car parts manufacturers during the 1960s, and opened a number of new production facilities as well. The period saw Repco develop expertise in a number of related areas, such as compressed air systems, hydraulic hoses and systems, and control valves. By the end of the decade, Repco operated nearly 40 factories across Australia and had become one of the country's top manufacturing icons.

Company Perspectives:

Repco Limited is Australia and New Zealand's largest reseller and supplier in the automotive parts and accessories aftermarket with sales in excess of $787 million.

With over 420 stores and a team of over 3,600 very talented people we satisfy the needs of over 36,000 trade customers and tens of thousands of retail customers who love cars as much as we do. Our mission: to be the reseller of choice.

Retail Focus in the 1980s

The boom in the automotive market came to an abrupt halt in the early 1970s. The sudden increase of oil prices in 1973 caught the industry—and most of the industrialized world's economy—off guard. In addition, Repco was hit by a string of management changes during the period. At the same time, Repco launched a new diversification strategy, which led the company into disparate sectors such as hardware, finance, manufacturing batteries, air-conditioning systems, and even management of gymnasiums.

Yet the company failed in its efforts to recapture its former growth rate. Investor confidence also was falling, amid continued management changes and structural reorganizations, including the creation of a new holding company, Repco Corporation Ltd., to oversee the now highly diversified group. The company's lagging share price left it vulnerable in the early 1980s to a newly developing trend in the international investment community—that of the appearance of a number of flamboyant and highly aggressive corporate raiders. In 1981, Repco entered New Zealand, establishing its first store there.

Repco sought to protect itself, and boost its share price, by launching a sell-off of a number of its underperforming and noncore holdings. The company's efforts were not enough, however, and in 1985 the company fell prey to investment group Ariadne. Under Ariadne, Repco's breakup was accelerated. By 1986, Repco had shed its manufacturing operations altogether and was regrouped around its automotive parts distribution network. Those operations had by then expand to cover all of Australia.

Ariadne itself fell victim to the collapse of the corporate raider market in the late 1980s. As a result, Repco itself was sold to Pacific Dunlop, more familiarly known as PacDun, in 1988. Under PacDun, Repco's name was changed to Pacific Automotive, with Repco becoming the company's core brand. Under PacDun, Pacific Automotive grew to include a number of prominent auto parts distribution businesses, including Ashdown, acquired in 1991. That company focused on the distribution of electrical components, later building up a network of nearly 20 trade-oriented stores by the beginning of the 2000s. PacDun also built up a second business, specialized in automotive tires, called South Pacific Tyres.

Under PacDun, the company continued to build up its auto parts distribution activities, focusing especially on its chain of Repco stores. Traditionally, the company had targeted the market for trade professionals. As such, the group's stores generally were located away from consumer retail areas. In 1988, however, the company developed a new dual-format store, designed to appeal to both professionals and the consumer retail market. The first dual-format store opened in New Zealand.

By 1996, the company had decided to expand the dual-format store concept to its Australian operations, in part to counter the increasing strength of a number of its competitors. The company also sought to expand its operations through acquisition, notably with the purchase of the Appco network of trade-oriented auto parts shops in New Zealand in 1998. The company formed an auto parts wholesaling joint venture with Atkins Carlyle, called CarParts. In 2000, Pacific Automotive launched Motospecs, specialized in the distribution of high-performance aftermarket parts and accessories.

In the late 1990s and into the 2000s, however, PacDun had begun to struggle to maintain profitability. With its share price slipping—dropping as low as AUD 1.25 per share by 2001—PacDun found a new major shareholder in U.S.-based investment fund Shamrock Holdings. By 2001, Shamrock forced PacDun to undergo its own restructuring, and in May of that year PacDun announced its intention to sell off both Pacific Automotive and South Pacific Tyres. By the end of that year, the company had completed the sell-off, in a management buyout backed by several private equity groups, worth AUD 270 million.

Following the buyout, the company changed its name, becoming Automotive Parts Group. In 2002, the company decided to focus on its trade and retail distribution operations, selling off its 50 percent of CarParts. The company, which had been restructuring its core Repco business, then launched a new expansion strategy, calling for an increase in its number of stores to 500 by 2008, and the conversion of all of its Repco stores to the dual format. That operation required an extensive investment, in large part in order to relocate its centers to more retail-oriented locations.

Key Dates:

1922:: Geoff Russell founds the Automotive Grinding Company in Collingwood, near Melbourne.
1926:: Russell joins with Bill Ryan and sets up Replacement Parts Pty., opening their first parts shop.
1937:: The company goes public as Repco Limited.
1947:: The company joins in the design and production of the Holden, the first Australian-designed automobile.
1954:: A Repco engineering team builds its first racing car.
1960:: Repco controls 14 factories.
1968:: The company begins its exit from the racing circuit.
1981:: After a diversification drive during the 1970s, the company restructures under the new Repco Corporation Ltd.; the company opens its first store in New Zealand.
1985:: Corporate raider Ariadne acquires Repco.
1986:: Repco exits manufacturing to focus exclusively on distribution.
1988:: Pacific Dunlop acquires Repco and changes its name to Pacific Automotive; the first dual-format store is launched in New Zealand.
1991:: The company acquires Ashdown, an electrical parts specialist.
1996:: The company launches its first dual-format store in Australia.
1998:: The Appco network in New Zealand is acquired.
2000:: The company launches high-performance parts specialist Motospecs.
2001:: Pacific Dunlop sells off Pacific Automotive to a management buyout.
2003:: The company is renamed Repco and launches a new public offering.

To back its new strategy, the company regrouped its businesses under a new name, Repco, and then returned to the stock market, launching its public offering in October 2003. The new Repco counted on remaining Australia's automotive parts distribution leader, and began preparing an acquisition drive. This led the company to seek out purchases of smaller and independent businesses. Yet the company also targeted larger operations, such as its December 2004 purchase of Ingram, a leading distributor of electrical car parts, and McLeod's, a specialist in motorcycle accessories, from Alesco for AUD 90.5 million. These purchases helped boost Repco's share of the Australian electrical car parts segment to 50 percent, and the company's sales grew to more than AUD 860 million ($660 million) by 2005. After more than 80 years, Repco remained a fixture in the Australian automotive industry.

Principal Divisions

Repco; Ashdown; Motospecs; Ingram; McLeod Accessories.

Principal Competitors

Coles Myer Ltd.; Super Cheap Auto Proprietary Ltd.; Strathfield Group Ltd.; Auto One Proprietary Ltd.; Burson Automotive Proprietary Ltd.; Tyrepower Ltd.