Sometimes, you lead from the rear.
In Visteon's case, leadership in new automotive aftermarket growth is coming from the rear seat, where entertainment units and other electronics innovations give the Ford Motor Co. subsidiary a technology advantage.
Among its hallmark offerings is a rear-seat entertainment console designed to fit a range of minivans. The console includes a 6.4-inch liquid crystal display screen. Shown at last month's Automotive & Transportation Interiors Expo in Detroit, the unit can accept videogame input or play videotapes.
Rear-seat entertainment add-ons may seem a long way from more traditional aftermarket sales of parts such as ball joints, radiators and engine sensors. But Visteon Automotive Systems officials say product recognition in electronics gives them a brand advantage, and the supplier is ready to leverage that advantage to gain share in what it sees as a lucrative, stable market for automotive add-ons and replacement parts.
Visteon expects $1 billion in aftermarket sales this year, after posting $700 million in aftermarket sales in 1998. The five-year goal is $3 billion in aftermarket sales. The bulk of aftermarket business for Visteon so far is in North America, with just over $100 million in sales in Europe.
'The aftermarket is a very solid business,' says David Peace, Visteon vice president for global aftermarket operations. 'It doesn't cycle nearly as much as the OE business. Margins tend to be a little bit nicer, especially if you've got differentiated products and a good marketing story.'
Created in July 1997 by combining the 82 plants and more than 80,000 employees of Ford's automotive parts operations, Visteon inherited some automotive aftermarket business at its inception. The aftermarket pieces were not a unified strategic component of the 'free enterprise' vision used to create Visteon. Instead, they were bundled with other portions of the parts business put under the Visteon umbrella by Ford.
Then Peace came on board in December 1997, leaving a 21-year career at Tenneco Automotive's aftermarket sales and marketing arm to head up a new Visteon aftermarket entity consolidated under its global marketing and sales organization. Today, Visteon offers more than 140 aftermarket product lines.
'Visteon is very strong in technology, especially in powertrain, climate control and chassis,' says Peace. 'What tends to happen is, since we're involved in the original-equipment positions of some of those areas, we have an advantage when it comes to electronic modules and things that we manufacture.'
Visteon intends to go head-to-head with established aftermarket suppliers such as Echlin, Federal-Mogul and Tenneco, but only in higher-end replacement parts. So-called wear items such as brake pads, shock absorbers or mufflers are not a major focus, in part because of relatively low margins but also because Visteon doesn't have a technology advantage in making the parts.
'You would never say never, but those are products we don't participate in right now,' says Peace. 'We're sort of taking a little different twist to it and focusing on things where we're strong: systems and technology.'
As an example, he cites the Visteon acquisition of aftermarket radiator maker ARS Inc. from PABA Inc. to broaden its offerings beyond the original-equipment radiator and heater core products it already made.
'Since we already are one of the largest radiator manufacturers in the world on the OE side, we think we can parlay that advantage. They (ARS) have an all-makes radiator company that we, now, are expanding, integrating and developing the synergies. We've literally doubled the business of that company in one year. That'll be a $300 million business for us this year. That's one example,' says Peace.
He also lists Visteon's Carlite replacement glass business, a $200 million part of the aftermarket gross, as the kind of component the company wants to focus on.
And where Visteon has some key technology advantage, especially in electronics, the parts maker will reach much farther down the aftermarket distribution chain toward the car owner.
Peace and Bruce Weintraub, marketing manager for global aftermarket operations, say that for the rear-seat entertainment center and for higher-end navigation systems, Visteon will distribute products through a group of about 70 specialty distributors, some of which are installing such systems directly while others market to car dealers or other installers.
'We've got lots of products that are going to be identified with Visteon as the brand. It's almost a trust mark,' says Weintraub.
The branded products will primarily be in-car entertainment systems, multimedia products or electronics, with which Visteon can gain exposure as a leading-edge manufacturer.
'Multimedia is something where we've got some interesting advantages. We can start to create a market out there with the early adopters before it starts to go onto the OE vehicle. We think we can take that technology and put it on vehicles right now, start people getting used to it, seeing if it works, gauging whether it's acceptable and interesting to them,' says Weintraub.
High-end aftermarket electronics offer Visteon a chance to lead customer demand for later original-equipment sales. Introduction of an aftermarket entertainment system, for instance, has already led to discussions of a factory-installed system.
'We in the aftermarket have to be committed to getting that next level of technology,' says Weintraub, noting that the supplier product development horizon is 10 to 12 months.
With that nimbleness comes caution, however. The supplier must walk a careful line to avoid upstaging its automaker-customers, Weintraub agrees.
'From a company standpoint, the aftermarket team and an OE team offering technology may just be at different stages of technology,' he says.
More prosaic parts, which rarely are seen by car owners, will be manufactured by Visteon but labeled as private brands specified by the customer. For instance, Ford Customer Service Division, which sells to auto dealers, prefers Ford or Motorcraft labeling.
Visteon also plans to manufacture components to be sold under Ford competitor brands.
'You pick up a private brand product, it could easily be Visteon. Mopar has all-makes capability, as does Motorcraft, as does AC-Delco. We certainly would consider selling to those guys,' said Peace.
The shift to put more focus on aftermarket operations means Visteon is also adopting some new thoughts and operating methods for manufacturing technology. For one, it means a dedication to remanufacturing a number of different product lines, including alternators, starters, rack-and-pinion steering gear, air-conditioning compressors and other assemblies with a durable 'core' to the product.
But Visteon officials also see cost advantages in bringing lean-manufacturing discipline, well developed on the original-equipment supply side, to aftermarket operations overall.
Says Peace: 'We need to do more lean manufacturing, no question about it. In the aftermarket, your ability to do quick changes and short runs is critical to be successful. You don't get long runs.'
Tim Moran is a free-lance reporter in Grosse Pointe Park, Mich.