By Clifford Webb
British Leyland is planning extensive reorganization of its £200m a-year spare parts business. It includes fundamental changes for the whole of the 3,700-strong distributor dealer network and will almost certainly lead to tighter prices from its component suppliers. No official announcement has yet been made but it is understood that details of the first phase will be revealed to the trade in a few weeks’ time. The decision to go ahead with the reorganization results from dramatic improvements which followed the integration of the corporation’s specialist car parts operations.
Reliable sources report that in the past 18 months profits from the sale of Jaguar, Rover and Triumph parts have more than doubled. At the same time there has been a substantial improvement in the service offered by dealers. It is not without significance that the man responsible for this, Mr John Egan, a former General Motors employee, has been promoted to the key position of marketing director in the newly created Parts and KD Division. This now covers the corporation’s world wide parts activities.
Yesterday Mr Allen Sheppard, the division’s managing director and himself a former Ford and Chrysler parts executive, said: “I am not yet in a position to reveal details. I can say however that preliminary discussions have taken place with network representatives and their reactions are very favourable. We intend to take on more of the responsibility for organizing more of the distributors and dealers parts departments. It will mean more staff for the corporation and less for dealers but the end result will be more profit for both sides and a better service to motorists.”
A reappraisal of the 180,000 different parts in the corporation’s vast range is now being carried out with two aims in mind, to reduce the parts inventory and to renegotiate purchase prices. There is plenty of scope for improvement here. For instance, Renault, with roughly the same car production has only 60,000 parts in its range. The sale of parts is by far the biggest profit earner for motor manufacturers. As much as 70 per cent of the industry’s profits come from this one source.
Component manufacturers traditionally sell parts for new vehicles (original equipment) at break-even prices, relying on the much higher prices which apply in the after-sales market for the bulk of their profits. But last night Mr Sheppard hinted at changes in this long established relationship between original equipment and after sales.
He told Business News: “There must be a re-balancing of the scales between original equipment and replacement parts. It may be that new cars will have to cost a little more to bring about sharper replacement prices. British Leyland has a lot of muscle to push this through. Until the Parts and KD Division was created five months ago we were not aware of our strength. If I tell you we must be responsible for Â£200m of parts sales worldwide you will realize what I mean.”
He also intends to make it more difficult for the so-called pirate companies to manufacture copies of British Leyland parts. “We are tightening up on copyright everywhere. All new parts are now automatically scrutinized”, he said.