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Weekly UpdatesThe rebuilt transmission and engine aftermarket industry generated revenues close to $4 billion in 2000 and is projected to reach more than $5 billion by 2007, according to a new study. The study from Frost & Sullivan, North American Rebuilt Transmission and Engine Aftermarket, indicates that the demand for remanufactured engines will increase as the number of vehicles in operation increases.
Transmissions and engines rebuilt and remanufactured by volume transmission rebuilders and production engine remanufacturers are the component groups covered by the study. A rebuilt transmission is disassembled, cleaned, inspected, and rebuilt with the failed parts replaced. A remanufactured transmission is defined as one that has been disassembled, thoroughly cleaned, inspected, and rebuilt with all major parts replaced. A remanufactured engine is disassembled, cleaned, inspected, machined, and then assembled with new or remanufactured engine parts.
The North American rebuilt transmission and engine aftermarket is forecast to grow at a compound annual growth rate of 4.5 percent for the period of 2000 to 2007, according to Frost & Sullivan. Revenues in 2007 are forecast to reach $5.55 billion generated by 4.66 million unit shipments. The revenues are forecast to grow because of higher unit shipments and average prices. Unit shipments are forecast to increase mainly because of the rising number of vehicles operation in North America. In 2000, there were 225.7 million vehicles in operation in the U.S. and Canada. It is forecast that by 2007 there will be approximately 252.3 million vehicles in operation.
Increasing average miles driven per year will wear the transmissions and engines to cause replacement. The increasing complexity of transmissions is causing more replacement instead of repair, the study found. The higher prices of new vehicles and the softening North American economy will lead to consumers keeping their vehicles longer. The average price of rebuilt and remanufactured transmissions and remanufactured engines is forecast to rise because of the increasing complexity of transmission and engines. Transmissions are becoming more complex and compact, according to the study. Engines are also becoming more complex with features such as overhead cams, multi-valve cylinder heads, and aluminum cylinder heads. The complexity of transmissions and engines increases the difficulty in rebuilding and remanufacturing which requires additional equipment that raise the prices. The average price is forecast by Frost & Sullivan to grow at a compound annual growth rate of 2.1 percent during 2000 to 2007.
"With prices of new replacement parts continuing to rise, consumers are more willing to invest in a remanufactured engine or transmission to lengthen the life of their vehicle," according to Frost & Sullivan's automotive analysts. Though there has been a definite increase in the number of individuals willing to purchase rebuilt engines or transmissions, drivers are demanding assurance that rebuilt parts will be consistently reliable.
Technological advancements have allowed for refined remanufacturing techniques, and production engine remanufacturers have responded by improving warranty coverage as a symbol of faith in their product. "In most cases, warranty coverage on rebuilt and remanufactured transmissions and engines matches or exceeds that of new parts, indicating the enhanced quality of reconstructed parts," states Frost & Sullivan. "With longer warranty coverage, consumers will be confident that overhauled components have features comparable to a new unit, and this added security is driving sales."
The North American rebuilt transmission and engine aftermarket is very fragmented. There are over ten thousand transmission and engine rebuilders in North America. A volume transmission rebuilder is defined by Frost & Sullivan as one that rebuilds more than 1,800 transmissions per year. It is estimated that in 2000 there was approximately 350 VTRs in Canada and the United States. A volume engine remanufacturer is defined as one that remanufactures more than 1,200 engines per year. In 2000, there were approximately 125 of these companies in North America.
The competitiveness of the rebuilt and remanufactured transmission and engine aftermarket in North America has lead to closure of some of the larger transmission and engine remanufacturers. A recent market exit of an engine remanufacturer was California-based Bonded Motors, Inc. in 2000. Bonded Motors remanufactured engines for national auto parts retailers including Genuine Parts Co. and NAPA. Also in 2000, Fred Jones Enterprise sold all of its factories and is now just a distributor.
The competitiveness has also lead to mergers, acquisitions, alliances, and reorganization. Delco Remy International Inc. was acquired by Citicorp Venture Capital in March 2001 and became a privately held company. Delco Remy is the most active in acquiring transmission and engine remanufacturers in North America. In July 2001, Delco Remy International acquired the transmission and rotary engine remanufacturing business of Mazda North American Operations in Florida. Delco Remy acquired Engine Rebuilder Ltd. in 1999, Engine Master in 1999, William Technologies, Inc. in 1998, and Atlantic Reman Limited in 1998.
In 1994, Aftermarket Technology Corp., under the direction of Aurora Capital Group, acquired Aaron's Automotive Products and acquired several parts and remanufacturing companies later. Some of the acquisitions include Component Remanufacturing Specialists, Inc. and Autocraft Industries, Inc. Aftermarket Technology Corp. later merged all it parts companies and referred to the merged group of companies as the Distribution group. In 2000, Aftermarket Technology sold the Distribution Group and adopted a plan to discontinue the independent aftermarket segment of its business, which contained the distribution group and its remanufactured engine business. However in July 2001 Aftermarket Technology announced it made the engine remanufacturing business profitable though restructuring and no longer plans to divest it. Aftermarket Technology Corp. will continue the engine remanufacturing business, but will focus on remanufacturing transmissions under warranty contract for vehicle manufacturers including Chrysler, Ford, General Motors, Hyundai, Saab, and Subaru.
In 1999, Jasper Engines and Transmission formed an alliance with Yamato Engine Specialist Ltd., a remanufacturer of Japanese engines. Under the alliance, Jasper Engines and Transmissions looks after the selling, marketing, and warranty of the engines. Yamato simply remanufactures the Japanese engines exclusively for Jasper Engines and Transmissions.
Some the more notable companies in this industry include: Accurate Transmissions, Inc.; AER Manufacturing; Aftermarket Technology Corp.; American & Import Engines; ATK North America; Cummins, Inc.; Delco Remy International Inc.; Consolidated Manufacturing; Four Star Engines & Parts; Fred Jones Enterprises LLC; General Motors Service Parts Operations; H & A Transmissions, Inc.; Howard Engineering Corp.; Jasper Engine & Transmission; K. Watanabe Corp.; Karway Remanufactured Transmission; Marshall Engines; Precision Engine Rebuilders; Recon Automotive Manufacturing, Inc.; Springfield Remanufacturing Corp.; Top Line Automotive Engineering, Inc.; Transmission Exchange Co.; and Yamato Engine Specialists.
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