General Motors Corp. will continue to diversify its revenue sources beyond its core business of selling cars and trucks by making a strong effort to expand its Service Parts Operations (SPO) business.
SPO General Manager John Smith says the effort will focus on doubling the business of all-makes brand AC Delco during the next few years. It also will do more service work on late model GM vehicles through the automaker’s GM Goodwrench network, which increasingly has lost parts business as vehicles age due to ownership changes and warranties expiring.
“Our goal is to take the business and grow it at a rapid rate,” Mr. Smith tells Ward’s.
SPO may also start up non-GM branded Goodwrench service centers that aren’t exclusive parts shops for the automaker’s models, expand its parts business (accessories, collision parts, restoration parts and performance parts) and continue to develop a fleet of mobile service vans for light maintenance work, such as oil changes, while customers are at work or home.
The goal reportedly is to increase revenue by 30% over the next three years to $12 billion. Mr. Smith skirted around talk regarding specific figures; SPO is not broken out in GM’s financial reports.
The automaker’s focus on SPO may seem odd to the casual observer. 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,” says Mr. Smith. “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.
Among the plans for AC Delco is strengthening its wholesale distribution capabilities. Products and services will be created for GM Goodwrench.
“Today between ourselves 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 Goodwrench stores seem likely to be launched.
A new “collision link” Internet portal is another way for SPO to expand its collision parts business, says Mr. Smith.
“There are 50,000 collision shops in the U.S who typically turn to dealers when looking for parts. It sometimes takes them four different requests before they get exactly what they need. This portal presents to the collision shops a complete list of parts numbers,” he says.