General Motors Corp.'s accessories unit is delivering significant new revenue source for the auto maker by increasing its business with GM dealers.
“In 2002, we had just under 30% of GM dealers who didn't buy anything from GM Accessories,” Nancy Philippart, executive director-GM Accessories business channel, tells Ward's. “Now, in 2005, it's just a little over 1% not buying anything.”
Yet Philippart says total revenues generated from the sector did not meet her expectations.
“(Dealers) may do a lot of business with (GM), or they might do a little,” she says. “So I'm still not satisfied, because I can look at the dollar category, in terms of how much they buy from (GM), and I still don't think there are enough zeros at the end of it.
“But at least we've demonstrated a compelling enough business for dealers to try us.”
GM Accessories' revenue was up 40% in 2004, far outstripping the 5% averaged annually by the automotive aftermarket industry, GM says. According to the Specialty Equipment Market Assn., the U.S. automotive aftermarket was a $29 billion industry in 2004.
While GM is gaining more consideration from dealers, consumers are spending considerably more money on GM Accessories to customize their new GM car or truck with aftermarket parts.
In 2002, consumers spent roughly $70 on GM Accessories per GM vehicle sold, the auto maker says. “If you remember the Hummer H2 was getting about $1,200-$1,500 per vehicle then. So you can see how many vehicles were getting zero,” Philippart says.
In 2004, consumers spent about $140 GM Accessories per GM vehicle sold.
“So in two years, we've doubled,” Philippart points out. “We passed Ford (Motor Co.) last year and we're within about $30 of (Chrysler Group's) Mopar.”
GM, which continues to lose market share in the U.S. and is struggling financially due to high health-care and pension costs and the declining popularity of its profit-rich fullsize SUVs, is looking for new revenue streams.
GM Accessories' results are improving for many reasons. The unit has shifted its focus to more emotional products such as wheels and in-vehicle video screens. Time to deliver parts ordered by customers has been shortened. Marketing has been stepped up and dealership personnel have been trained.
“We went through a pilot program last year where we trained about 30 stores,” Philippart says. “And we've seen a 130% increase in their accessory sales.”
New Setup Allows for Regional Accessorizing
General Motors Corp. finalizes a 2-year initiative to allow the auto maker to offer more models specifically tailored for certain regions of the U.S.
The program establishes an 85-region network run by contracted wholesale distributors that are assigned to sell more products from GM Accessories to GM dealers.
GM offered a special Escalade model in Los Angeles. After being a minor player in the aftermarket industry for years, GM has intensified efforts this decade to increase revenue at its Service Parts Operations (SPO), which includes GM Accessories, GM Goodwrench and ACDelco.
Each region in the new aftermarket structure includes 40 to more than 120 dealers. Eight regions remain without a contracted distributor, called Accessories Distributor Installer (ADIs)
“When it's done, it'll enable us to do some pretty special things,” says an SPO spokesman.
In 2004, ADIs and GM's dealer local marketing groups (LMG) teamed up to offer 22 promotional vehicles, including the GMC Sierra Z85 pickup exclusively in the Tampa, FL, region and the Cadillac Escalade Grammy Edition SUV only in the Los Angeles area.
Most often the localized models include accessories packages comprised of five or six parts. There were about 80 Escalade Grammy Edition models, featuring chrome wheels, a chrome grille, unique floor mats and an exclusive key chain.
During the first five months of 2005, 40 localized models have been created.
GM Accessories now can sell parts in large quantities to ADIs, which operate warehouses and supply dozens of GM dealers, rather than delivering smaller sets of components to each dealership.
Dealers still can order parts directly from GM if they choose, and install parts without using ADI labor.
With more accessories in stock, ADIs also are satisfying customer orders quicker and can meet specific requests better than before.