When John F. Smith was named general manager of General Motors Corp.'s Service Parts Operations unit in February of last year, it seemed to be an odd move for a fast rising executive to the company's backwater operations.
Mr. Smith had spent the previous three years in a high-profile role as Cadillac's general manager. GM insisted at the time that the move to SPO actually would be beneficial to Mr. Smith.
SPO has 3,300 suppliers and it employs more than 12,000 workers at 69 locations around the globe. Compare that to a Cadillac staff of about 60, and it was obvious Mr. Smith was going to gather some valuable experience for a future that someday could see him ascend to president of GM North America, or another high-ranking position. What wasn't so obvious was that Mr. Smith was being sent to SPO for reasons other than resumé building.
GM has aggressive growth goals for SPO, so it sent in a well-decorated corporate solider. Mr. Smith has become an agent of change at GM. He took over as president of Allison Transmission in early 1994 when GM had been trying to sell the gearbox-making business for two years. Mr. Smith helped stitch Allison back into the fabric of GM before moving on to Cadillac in February 1997. Embattled by imports, Mr. Smith molded a comeback strategy for the division that included a radical design and product overhaul.
Now Mr. Smith is rolling up his sleeves at SPO. Former SPO general manager and current Group Vice President of Sales, Service and Marketing Bill Lovejoy had “built quite a solid foundation for Service Parts Operations, and business is quite good for General Motors,” explains Mr. Smith.
The goal is to make business very good for GM. And do that very fast. Efforts will focus on doubling the business of all-makes brand AC Delco during the “next couple of years,” Mr. Smith says. It also involves performing more service work on older GM vehicles through the automaker's GM Goodwrench network, which increasingly loses parts business as vehicles age due to ownership changes and expiring warranties.
“Our goal is to take the business and grow it at a rapid rate,” Mr. Smith tells WAW.
The strategy for SPO potentially also includes starting up non-GM branded Goodwrench service centers, expanding its parts business and continuing to develop a fleet of mobile service vans that travel to the customer for light maintenance work such as oil changes. The goal reportedly is to increase revenue by 30% over the next three years to $12 billion.
The automaker's focus on SPO may seem odd. But the aftermarket is a growing segment where GM is well positioned with strong brands, and the profit margins are fatter than vehicle retailing. “It's quite an attractive business. And because it is quite attractive, the senior leadership of this company sees an opportunity to grow it perhaps more quickly than the rest of the business,” Mr. Smith says. “And if we can be successful doing that, we think there can be some beneficial impact on GM's overall bottom line.”
The global aftermarket's annual value is $540 billion at retail. SPO is the largest competitor in the sector. “And we have a pittance of that $540 billion,” says Mr. Smith.
Some details: Among the plans for AC Delco is strengthening its wholesale distribution capabilities. Products and services will be created for GM Goodwrench. “Today between (SPO) and GM dealers, we probably get about 30% of the GM vehicle-related service train over a GM vehicle's lifetime,” explains Mr. Smith. “Vehicles typically last 10 years. We do really well the first three or four years — first owner or lessee. But once the vehicle goes out of warranty or ownership changes hands, there's a lot of different service providers out there.”
Mr. Smith wants to increase SPO's service rate from 30% to 45%.
Also, non-GM branded Good-wrench stores seem likely to be launched because Mr. Smith says pilot stores have been successful getting older GM models and competitive makes. He wants to work closer with brand teams to develop and have more accessories ready at product launch. A new “collision link” Internet portal introduced in December provides another significant opportunity for SPO to grow its collision parts business. There are 50,000 collision shops in the U.S., explains Mr. Smith, and it sometimes takes four different requests to find the correct part. “This portal presents to the collision shops a complete list of parts numbers,” Mr. Smith says.
He's patched up Allison and Cadillac, now it's time for actual sheet metal.